Trade Mirage?

Thats one hell of a Yao Ming

I'm somewhat skeptical about this short brief on The Economist on how emerging economies will be importing more than developed countries (forecasted to take place 2012 / 2013). Referring to the chart below, we can see that ever since the end of 1990s / start of 2000, emerging markets continue to increase their stake in the share of world imports. My first question would be - is the percentage valued in Unit Volume or Value? It is kind of a stupid question but there are different intepretation results; although I think that it is highly unlikely that they used Unit Volume to represent the graph.

Second of all one must understand this set of statistics takes into account manufactured goods, commodities and raw materials - to which without a doubt the emerging economy is eating up; therefore somewhat misleading. Increases in imports could mean massive increases in capital goods and intermediate goods for further use in production and does not necessitate that the domestic consumption in emerging economies is larger than that of developed countries. Just because the West are importing less, does not mean that they're losing out - we still haven't factored in or do a cross-comparison on imports and exports of services to which the West still has a global presence.

Lastly, we need to understand that most of the imports done by emerging markets are probably for the purpose of investment, with a higher probability for re-exports purposes. Its too apparent, even in the article in which I wrote about in my last post, countries like China are still saving up - preferring to mediate growth through savings rather than enjoy the wealth they have gained thus far. I believe the graph is far for complete - if a comparisson of imports is to be made they should also include the types of products in which each of the two sides do. There must be a movement - one would import more of something whereas the other would import less; the question is, what?

Looking forward to see the actual trend next year.

The Chinese Government; Keeping the World in the Dark

Gotta love them pandas

I recently came across this 10 page article (if you print it out) about how the Chinese Government controls certain economic and political aspects of the country. As I read through two things started to happen; I become more and more curious, at the same time even more clueless about what they are doing - a total paradox. But keeping to the point, let me just elaborat on what they're doing as of now;

Now to put it in simple terms, the Chinese Government has a policy where, for transactions conducted in US Dollars, all the money has to be forwaded to their Central Bank, which is then to be exchanged with the Yuan Renmibi - this is apparently a must as they treat dollars as contrabands! Now what do they do with the money? They buy US Dollar denominatd government bonds. Now, if the buying of bonds were only limited to millions, I can understand, but apparently it runs in the billions (refer to chart below).

This is the prime reason why some governments are crying foul play; as this is the prime reason why their currency is undervaluated - to a point where the American Congress nearly went through the Exchange Control Act, and could be the reason why they've been targeted for Trade Protectionist Policies. If you look at their exchange rate, for a period of two years - there have been miniscule if not no major volatility against their exchange rate with the USD, even during the 08/09 financial crisis.

So what does this show? Clearly, a sign of government intervention. Many had hoped for the Chinese Government to change after their ascension into WTO - but apparently based on two articles from the Economist; much of their economic policies and political structure remains the same despite a significant amount of pressure to become "Westernize" and open up their market. This system apparently is much resented by the Chinese Government who prefers to have a stake (even a small one) in all if not the majority of the private entities running in China; for the sole purpose of control.

Now, in actuality, what the world is concerned about is their transparency - What do they plan on doing with the bond? There have been speculations that once reaching a certain threshold, they would do a firesale - but this would in turn hurt them as well as a healthy American economy would be essential to their Export-Driven economy, to which America is a big customer. So if this isn't the case, why don't they spend the money domestically? Why bother buy bonds when you can build infastructure? Well the answer to this is apparently as they build more and more manufacturing plants, major constructions shifts to public utilities would drive their inflation rate to the moon - and when that happens, a global rise in inflation would eventually come.

I believe that this is something long term - my experience which Chinese people, regardless of where they are born is that they have two distinct characteristics; the natural ability to make money and a very good long term vision. So whatever most pundits perdict in the moment is particularly off track - only the Chinese would know, and I'm pretty sure its something more which would develop within the following decades rather than years.  

In any case, keeping the world in the dark would only result in the Chinese Government open to scrutinization by the Western Media and Government. What I can see is definitely, a clash of ideologies from the Capitalist West, to the Communist / Socialist East. Within the coming decades, we would probably see a second Cold War; using not spies as weapons but rather dollars, purchasing power and economic influence.

Thats something new to look forward to.

Bloody British

Meeeeeeeeeee

How come the Brits are always selfish? Can they not see the benefits of an integrated economy? This would be the best time / opportunity to be supportive of the entire EU system. But no - they just have to be the eccentric one (like they always have) in the entire bunch. Bloody brits!

Trade Protectionism On The Rise?

Where do we go from here?

I read this article a couple of weeks ago on the rising number of Trade Defense / Protectionist Measures being taken by policymakers around the world to protect their domestic industry. When I opened People's Daily today - apparently One-Third of Chinese companies are being affected by the defense measures being taken by most of the EU Countries. Obviously not a good thing. Take a look at the map below which I scored from Global Trade Alert;

To put it simply - the bigger the red dot, the more defensive measures its taking. Its obvious that its been mushrooming in Europe, China, North & South America. So in our case, when all of our customers are closing their doors, where do we export the rest of the shit that we keep producing? Another report prepared by GTA showed that we must also take into account that these are the measures enforeceable now; and the figures are prone to lags between the time it takes for policies to be reviewed up to the point where its published in the papers. I'm aware of Argentina's adoption of more Protectionist-measures since 3rd Quarter this yea but didn't expect to see EU propping up like mushrooms.

The way things are going - doesn't seem like 2012 will be a good year.

Japanization

Soon my friend, soon enough ...

An article I found on Japan; despite all of its accumulated wealth, the country still lacks maturity, and unwillingness to "grow up". A bit confusing, but still interesting nonetheless.

Is Japan Changing?

But didn't the Americans already do that in WW2?

This morning, I suddenly recalled this article which I read on Choosun Ilbo - which pretty much explains on what we can learn from Japan from South Korea's perspective. Out of all the things being discussed and elaborated in the article, I found one to be most agreeable - Japan's inability to change and adapt to modern times, in essence, failure to ride the wave of globalization. Now yes, I know, how can say such a thing for a country whose manufacturing goods are all over the place? If you look closely, they're not anymore. You want to talk about TVs? Samsung is now the world's largest TV maker, and Hyundai overtook Toyota in America's market. They're still up there, but they're not as dominant as they were during the 1980s and 1990s. South Korea has started to take up their fair shair of the world, even their music industry is starting to shine brighter than Japan's J-Pop.

Now I can give hundreds of reasons why (too nationalistic, their attitude being less inclined to learn English compared to South Korea, and there's also the factor where they have such an advanced robotics industry, losing ground in the automotive and electronics industry may not seem to be such a big deal) they are falling behind against their Korean rivals - maybe I'll do another post on that later. But for now the question is, are they changing? Are they reacting positively to these signs? Seems like like they are.

Ex-CEO of Olympus - Michael Woodford

Let's start of with the Woodford Olympus Controversy - the first Non-Japanese to become the CEO of a Japanese corporation, only to be fired 6 months into the job for investigating what seemed to be a potential (okay, maybe the appropriate word would be apparent) coverup by the directors. For being a whistleblower, he was fired. But now since the issue went to headlines, and after much pressure from the public, he was invited to attend a Board Meeting this week, which he accepted. This is definitely fresh and different to how the old-school hard headed Japanese would normally handle things - cover up with your superiority in rank and lobby the media and politicians.

Hiroshi Mikitani - CEO of Rakuten

In another two cases, Yamada Denki, Japan's largest electronic retail chain decided that they will now sell more foreign brands in their stores in a response to an increasing demand and interest for Samsung and LG products. They recently opened a procurement office in China - something which Japanese companies would not normally do. The CEO of Rakuten, one of Japan's largest online retailer, shocked the media by giving a press conference in English - and in response to fears in losing their Jobs, more and more Japanese are taking English lessons to justify / exert their importance in their respective companies.

This is, without a doubt, signs of change - from their inclinedness to learn English, to the way they run companies. However, one key area which still requires improvements is their political system; they need a strong and visionary leader to take them out of this trap. These are good signs - they're probably 10 years behind South Korea now, but that does not mean that they won't be able to catch up. Knowing the level of rivalry between them, and the advantage that Japan has in certain industries, I'm very confident that Japan can pick themselves up again - maybe not to a point as high as where they were, but to the least, high enough to ride the tide of total globalization.

The only question is - how long will it take?

Diasporas; Benefits on Having Immigrants

I used to work as a Hooker - as in a person who hooks things.

I love how they titled the topic of the article which I was reading - magic indeed. Based on the article I was reading, migrants to a foreign country can actually be beneficial based on several key reasons ( map source can be seen here ) ;

1. The "diaspora network" - where one could actually benefit in terms of the networks in which the migrant has to his/her country of origin. In other words, companies/institutions hiring them may not be limited to local networks alone but also be given the opportunity to expand its operations outwards.
2. Spreading money - it is a fact that in general the migrants will be earning more than they would compared to working back home; repatriation of their monies to their homeland therefore would benefit both the domestic and foreign country.
3. Innovation carriage - upon returning to their country of origin, apparently many would set up companies carrying with them the knowledge and experience in which they have gained overseas; allowing their countries to develop.

If we were to exclude Hong Kong (although they have that two government one country thing) from the map; Malaysia would have the second highest number of Chinese emigrants overseas. Although technically speaking, this is entirely wrong - its too apparent that these figures take into account Malaysian-born Chinese (but in reality, as a result of having a large number of dumb Malay politicians they're still treated as China-born Chinese).

But to be fair bringing immigrants into a country is not all that well - if you examine the article earlier, it talks mostly about high skilled immigrants, and by right they would benefit any country they go to. What I believe is meant to be of much more concern is low-skilled immigrants (particularly evident for Malaysia) and how it depresses local wages for works in similiar category, carrying market distortion effects. How would labors of this category be beneficial overall for a country? Repatriation of wages back to their home country is applicable, but what about carrying valuable contacts, innovation or creativity? Even if there were to be any, the amount would be minimal.

High tide for change?

TPP : Japan is in the Bandwagon

Picture unrelated - was meant to be Japan kkk

So now we have Japan trying to join in talks for the Trans-Pacific Partnership thingy - an issue which has definitely left its Mr. Noda in a tough spot; receiving both support and protests from his own people. I have been reading much about this TPP every morning during my Asahi scans. It seems that as much as a number the public try to push Mr. Noda in joining the talks - it is apparent that other industries such as agriculture fear that liberalizing its barriers would result in them having to fight for their lives (even though they pretty much are fighting for their lives in their economy's current state). Here we have some the concerns in which other countries like America have on Japan joining the talks; in short they fear that Japan will be asking for more than they are willing to give.

If you were to ask me I think its high time that Japan starts to shift away from its export-minded economy. Domestic consumption (albeit near ZERO interest rate) is still not up to par as other developed countries. Much of the countries' income is based on manufactured-exports, where technically they should be more skewed towards high-income service based exports by now. This is probably one of the reason which I believe why they're still stuck in the same spot for what, the last 20 years? Actually, to be frank I think this might have something to do with their reluctance to adapt and learn this one language; English. Sure they've got the goods to sell, but if you want to sell a service, you'll need to speak a global language (although there has been reports that this might change in the future).

So what now Japan?

Resource-rich Countries; Cursed or Blessed?

True - at least, at the rate we're going.

In a blog post at one of my favorite blogs / author, a recent study was conducted to refute a research paper claiming that countries with natural resources tends to result in slower economic growth compared to those which are lacking in natural resources. The so called Resource Curse (not to be compared to Dutch Disease) claims that the abundance or availability of natural resources within a country would eventually lead to unfavorable economic outcomes compared to countries which are bare stripped. Since I have yet to find the time to read both papers (will probably write up a summary plus my own personal opinion into it), I'll start by analysing both the Resource Curse and Dutch Disease terms to see whether both of them are justified.

Resource Curse essentially states that countries rich in natural resource tend to grow much slower than countries without them. Based on my readings, the curse is meant to affect a country in several ways;

1. Ineffecient Government System - Revenues from natural resources tends to place the government in a complacent position, in addition to not needing to develop an effecient taxation system (therefore, the public will not scrutinize the government as they pay a miniscule amount of tax). Naturally, arguments over budget allocations would also ensue between each government departments and agencies resulting in a further ineffecient system; emphasizing on one's needs rather than the people.
2. Revenue Volatility - During peaks of commodity prices, both the government and private sector will attempt more aggressive and expansionary policies; borrowing excessively without any proper justifications or evaluations. This may result in bankruptcy or large amounts of debts due as a result of the illusion from the high price of natural resource.
3. Non-diverse Economy & Human Capital - Naturally, the country's economy and human capital would encircle around the natural resource due to the high revenue it which it brings in. There are also claims that this would eventually result in the country neglecting its education-infrastructure, as resource-extraction does not require a large number of highly skilled and talented workforce.

On the other hand, the Dutch Disease refers to the relationship between increase in dependance of natural resource exports resulting in a decline within the manufacturing sector. Essentially, the term refers to the shifts from the manufacturing sector, to both the natural resource sector (be it in the form of raw, manufactured goods or service related) in what is coined as both direct (manufactured) and indirect (services)deindustrialization. In order to minimize the effect, the revenues should be stored or invested abroad (through soverign wealth funds for example) and then revenues brought back over time in order to allow a more stable flow of income (something which I think Brunei is doing; rich, prosperous, and definitely resource dependant - they even have their currency pegged to the Singapore Dollar).

So.

What does all of this tell us? That at the end of the day, essentially (the way I see it) is just how you manage your resource. Now apparently the newer paper does not find any correlation or links between natural resource and economic growth (at least not negative; in fact they found some positive relationships). You can either go with a capitalistic approach (Netherlands, America) or a more socialist approach (Brunei) however at the end of the day, its the corruption-free and effecient management that truly matters. Despite America's criticism over Hugo Chaves' move to nationalize their state-owned oil company, if corruption still runs rampat; it would not pay its fair share on the toll. In any case, until I read both of the papers seperately, I can't really jump to a conclusion on this matter.

But I'm really curious as to which of the two I'll end up supporting.

Capitalism 4.0

Damn Socialists 4.0!

An article I found on Chosun Ilbo (my new favorite English-based Korean newspaper) on how Korea is meant to be a model for a new type of Capitalism (hence, Capitalism 4.0). If so, who were meant to be the holders of the previous versions?

Kinda makes me curious now.

Japanese Yen; Up And Away

Exactly what Japan needs to kickstart

Further to my previous post, it seems like the Japanese Yen is continuing its upward trend against the US Dollar. Many see this as a reaction to the financial volatility in the EU and US, opting to use or conduct transactions in Japanese Yen as they're considered to be safer (although in reality, Japan has a much higher Debt-to-GDP Ratio compared to any country in the world) - and many analysts has describe the sudden rise to be abnormal as the actual exchange rate does not reflect the market price. Further to BOJ's efforts by increasing credit easing scheme by a further 5 million yen, the government hopes to stabilize the price and prevent it from going up further, hurting the south heading export-dependant economy. As seen in the picture below ( taken from http://www.xe.com/ ), the Japanese Yen was stable for much of the year until fears on the American Debt ceiling broke out by July / August 2011.

Despite the additional monetary easing planned by Bank of Japan, I doubt that it would carry much effect since the Yen is the 3rd Largest Traded currency in the world, and adding another 5 Trillion yen to the initial 50 Trillion Yen would not be enough to hold the exchange rate still. As much as the government promotes purchasing overseas companies in US Dollars, the exchange rate remains at a still. I think the major issue would be for the massive panic and loss of confidence with the Dollar and Euro - rather than focusing on credit easing, they should be more focused on buying the Dollar or Euro; but the American government is keen on keeping their currency low in order to promote exports (something they should've done before China's rise).

As much as this has turned out to be a disaster for the Japanese, it could bear some fruit in other ways - particularly in terms of overseas investments and cheap prices of imports (domestic consumption). Personally I've always thought that despite the high standards of living, their level of domestic consumption has not been on par with other advanced countries in the West. The Japanese should also learn to stop being such an export dependant country and view other countries as potential markets (much like how Korea has focused on ASEAN and China focusing in Africa). Their failure to change and adopt to new times (particularly in business) was reflected perfectly in a Korean-based newspaper I found the other day.

So where do we go from here?

Export-led Investments; Beneficial?

On the contrary; he's running because of knobheads like you

I found this interesting piece on my new favorite website on how Export-led Investments not only seems to raise living standards in any developing country but also upgrades export quality. Another outcome found by the paper was that there was a positive correlation between FDI and higher unit value of exports. Based on what I read from the paper, Export-led Investments carries the following plus points;

1. Boost exports of mediums killed sectors in developing countries. Apparently the bulk of investments done by companies are more than just low skilled manunfacturing, but more skewed towards medium skilled products (automotive parts, electronics and electricals etc). These form of investments are 14 times higher than low skilled manufacturing.
2. Results in upgrading within the sectors. Done through MNC's superiority - resulting in higher unit values of exports, where local companies can also learn from their operations. Productivity spillovers results in the abundance of higher quality inputs therefore benefiting indigenous producers of final goods.

However, export complexity / structure remains unchanged, and there are tendencies where FDI brought into more advanced / developed countries carries minimal impact on export quality. Now my problem is not that I don't believe this - I just still dont think that export-led investments are the way to go for any developing country wishing to catapult itself into a high-income nation, for instance, Malaysia.

Electrical & Electronics components plays a significant role in the country's exports - and although the foreign companies in Malaysia only amounts to half of the total players, they control over 90% of the exports. As a result, local indigenous players are being squeezed out. They can learn from the MNCs but they will never be as good as them as the MNCs will keep some of the secrets to themselves too. What Malaysia fails to see is in the long term - is that it doesnt help elevating Malaysia to high income status. To me, the matter of repatriation of profit done by these foreign MNCs would also result in a loss from Malaysia; we're pretty much being 'used' by these capitalistic people.

Now I can understand the nature; actually its beneficial to both sides but we could do better by actually learning from them rather than letting them use Malaysia as a temporary base for their operations. Without a strong global domestic company like we see in Korea and Japan, we will never be able to advance to a more developed economy. The key is specialization, protectionism and differentiation from our other Asian counterparts, not by blindly attracting FDI for short to mid term gains and attempting to go all rounder when developing our industrial base; there are no "jack of all trade" millionaires.

So its about damn time we wake up.

Antidumping Measures During Financial Crisis

I dont think its THAT free

Here we have an article from this new website I found on how South Korea uses antidumping measures when protecting its domestic market during financial crisises. I don't really feel like writing anything in depth until later on this week since I was too pre-occupied doing other things, hopefully I can catch up on my readings within the coming days.

As for today, its time to relax!

Ease of Doing Business 2011



Thats what I call ease of doing business.

I was really impressed when Malaysian Insider reported that Malaysia has risen ranks to number 18th on World Bank's Ease of Doing Business Report for 2011. But this was somehow shattered when I saw 113th for the "Dealing with Construction Permits" category, and took another level when they ranked 1st for "Getting Credit" category, along with countries such as United Kingdom, and ironically, South Afirica. Recalling my previous post on rising household debt, I don't know whether I should see our position in being number one in getting credit as a positive thing.

Korea & Japan ranked 8th and 20th respectively; I was rather dumbfounded to see Japan being ranked below Malaysia. It seems that South Korea had a major advantage in ranking when it comes to Enforcing Contracts, whereas Japan was ranked well below in terms of Paying Taxes. Also surprisingly, Malaysia was seen as a better place compared to both of the countries in terms of protecting investors - something which a country still short of high income status really needs (capital investments in particular). All in all, aside from the Getting Credit category, I think there is still much room for improvement in Malaysia's rankings.

Looking forward to next year's rankings.

China; Inflating Asia Pacific

Its because the west wants it!

Here we have an article explaining the effects of China's rate of inflation; for every 1% increase in rate of inflation in China, this would gradually lead to an increase in inflation of 25 to 50 basis points in the Asia Pacific Region - worse could even drive global commodity prices by 5%. Referring to my previous post (see Assumption 3), I expected for such a thing to happen. See? I told you!

Damn I'm good!

Shared Growth; Enhancing Economic Development

Now thats what I call true teamwork.

Further to my previous article on shared-growth, here we have an article addressing the issue of the declining middle income group in South Korea. Let's give this a thought for a moment; the decline could be caused by;

1) The growth of either class outpacing each other or;

2) The substantial decline in the population growth of the middle class group.

But logically, I find reason 1) to make more sense in this case as we have large conglomerates moving their operations overseas - depriving the middle income group of growth. Can we blame them for doing so for the sake of higher profitability and productivity? The public might throw a fit; why dont they explain it to the shareholders of the companies then.

But one thing I really liked about the article was how it mentioned that Korea has developed this perception that "money would bring happiness"; prevalent in its society due to long working hours and high suicide rates, disregarding any other values which would contribute to an overall better and higher quality of living. I couldn't agree more on this. Their substantial economic growth has indeed resulted in them becoming money grubbing people; a philosophy they have picked up from the Yanks.

Coming back to shared growth, it seems that there are a number of companies who have started to adopt this policy, as can be seen in this article. The importance of SMEs or Trading Companies in the economy of Japan can be seen through their stringent regulations in protecting them from larger corporations, resulting the birth of the term Sogo Shosha - relfecting how the people and government view these small players as an integral part of the econonmy, unlike South Korea.

So in essence, developing pro-shared growth policies without a doubt would foster the economic growth of a country, creating a symbiotic win-win relationship between the smaller companies and their larger counterparts. But as I mentioned in my earlier article; would it be possible to implement? Implementing is one thing, changing people's mind is another.

Bottom line, we'll just have to wait and see.

Household Debts; A Major Concern?

So how long will it take until it goes boom?

There seems to be some concerns by economists after the Budget anouncement; that the government seems to be spending their coffers without taking into account the global conditions - in other words, they're being too optimistic. Economists are concerned about the rising household debt in Malaysia, apparently walking on a trend similiar to the 2008 financial crisis. Apparently the rising debt is attributed to repayment of loans (housing and car) as well as private consumption. Let me just touch on the two; repayment of housing and car loans.

For housing loans, I think its quite evident that the majority of the snowballing rise is attributed to owners purchasing their 2nd or even 3rd house ; leaving to the younger first house buyers outside of the loop. The reasoning? Pure investment. But many people fail to realize that once the market moves into a purchasing frenzy through, driven by pure investment rather than consumption, this could flow into a housing bubble. The result? Those with vision (too much vision) and considerable income have no liquidity; whereas the young ones end up homeless and fighting for a good space. As for car loans, its simply pure manipulation; the government actually wants people to get car loans - to help Proton, much like how they subsidize fuel to keep it cheap, to help Petronas. These two factors inarguably results in citizens not pressuring the government enough to develop a world class effecient public transportation system.

Now apparently, the same problem is happening in Korea, but it is slightly different in the case of Koreans. Based on my readings and observations, the rise in debt is mostly attributed to Jeonse Loans, and unlike Malaysia, they have limited land and twice the number of people. What is similiar to Malaysia is the rising debt is attributed to rising living expenses however there is no market distortion in Korea; no subsidies, no manipulation of preferences - creating a competitive and effecient market driven system. The Korean government was even forced to take measures such as increasing interest rates, with a more extreme method of blocking personal loans. To the least, the government recognizes this issue and is actually formulating a plan to combat and reduce the household debt in the country. What about Malaysia's Government?

Now I hate banks even more.

The Second Plaza Accord

Be smart; Why not have both?

Recently, America has been developing a bill called the Currency Exchange Control Act to penalize China for undervaluing its yuan - and the Chinese are not happy with it. Although a number of Senators agree on imposing the act, others on the other hand, are much more skeptical if not oppposed to it. The funny thing I find about this whole drama is that America claims that the undervalued Yuan (see how Chinese & Indian government undervalues their currency) has resulted in the loss of jobs, in addition to the widening trade deficit between US and China. Some are claiming that America is indirectly trying to push China into the same position it did to Japan through the signing of the Plaza Accord; resulting in a devastating deflationary spiral in which Japan has been suffering over the past 20 - 30 years.

Now to be frank, I couldn't agree more on how America is playing the dirty game again. They did it to Japan under the banner that it would reduce trade deficit but it is nothing more than just a political ploy. What I think the American government is trying to do is push the attention away from them by using external distractions. Despite all the calls on how Chinese yuan is undervalued, the new Big Mac Index suggested that the Chinese Yuan is not severely undervalued as it is claimed to be (although this itself has its own limitations). Another key point which was mentioned is that the passing of the bill may have more harm on America's exports to China than imports; fits the bill - neither benefiting  both parties.

Its funny how despite strong indications that the global economy is heading towards a double dip recession, we have countries like America (as well as Argentina and Brazil) trying to enforce trade protectionism policies, claiming that it would help put their economy back on tack where in fact, the risks of it backfiring is apparent. But like all of the things the American Government has been doing for the past 10 years; its nothing more than a political ploy. It seems that they're much more encapsulated in trying to find an external explanation to the public rather than taking the blame themselves, and rather than thinking about the American public they have been selfish; affecting the entire world at the same time.

I hope they're happy with what they're doing.

Why Would Anyone Agree With You?

Winning! Tiger blood!

Where identifying challenges is the first step to creating a solid corporate strategy, the next definite step would be to question yourselves why did you set that strategy. I know this sounds ridiculous when you put both of those two back to back; to put it simply, once you've identified the challenges and developed a strategy - you need to ask yourself why would anyone agree with me on this?

Is what the article is trying to say, at first I thought.

But upon reading deeper into it, it turns out that the article is more focused on "looking outside the box". So once you have a strategy in place; think about how outsiders would see it. Would they agree with you? Is there something amiss? It's relatively easy to identify challenges and plot a strategic roadmap on your own but it is much tougher to convince your colleagues (particularly outsiders) that what you've developed is actually realistic and relevant.

Oh, time for my morning coffee!

Miracle of The Han River; South Korea

I dont think that'll be enough for him

This is mainly a compilation article about some of the interesting articles I've found about South Korea. We'll start with the latest one I found off of a Korean Newspaper. This was relating to the current level of debt being taken out by individuals, corporations and the government. To be frank though, I don't think its nowhere alarming yet, but for some reason they're starting to freak out over it. Logically, for any export oriented country who wishes to turn its economy into more of a domestic consumption based structure, then obviously you'll need to debt to rise to generate retail sales. However, for some reason, I think Korea's rising debt is more related to its rising living expenses rather than a showcase of increase in domestic consumption. Now if that was the case, it could be something noteworthy.

The second article I read was actually a compilation of McKinsey; featuring a 6 articles each with its distinctive topic of focus. The first one elaborates on how South Korea spends more on Research & Development Per GDP compared to other advanced nations. The second article touches on Korea's resilient economy with the third talking about its national brand. The fifth details on how Korea should start shifting its economy to a service-based economy, and finally, a four step guide on how Korea can propser further in the future. Rather interesting, but I still think they still lack China's manpower, and Japan's technological superiority over them, not to mention how I think that the people in the region lack English proficiency; an essential component in becoming a globalized economy. But then again, English is without a doubt over-rated.

Annyeong!

Government's Efforts in Emerging Markets

Well if that's the case then I guess there's nothing wrong.

An article about how Kenya & Georgia's government in their efforts in becoming more transparent in fighting corruption, while at the same time encourage the participation of its citizens in data collection. I find this intriguing as the things that they are doing has yet to be done in oother more advanced countries.

But the bigger question would be its effectiveness; which needs to be tracked over time.

The Seperated States of America

Anyone up for putting on some duct tape?

So Obama’s new stimulus plan has been criticized. Big deal. He knew it was going to happen, Congress knew about it, even the people would’ve expected it. Based on the proposal in which he will table to Congress, the new stimulus package is meant to address the issue on high unemployment while increasing domestic consumption at the same time. So how will the USD$ 447 billion stimulus package be funded? Through one off cuts from the Healthcare programmes, as well as “limiting deductions for upper middle income earners”; in other words, taxing the rich.

The so called “Buffet Rule” (with reference to Warren Buffet), I don’t think this would much a very attractive package, particularly in the eye of politicians since apparently a significant number of the House of Representatives and The Senate are meant to be millionaires? But it seems like the Republicans are much more resistant towards the idea of reshuffling the budget to spend more rather than being taxed. There’s also the matter of the effectiveness of Obama’s plan; some find it to be “non-progressive” in nature since the stimulus package is funded through one-off cuts rather than a complete overhaul on the American fiscal structure. Frankly, I couldn’t agree more on this claim.

We all know that stimulus packages are a double-edged sword; it helped them pull through the 2008 without dragging the whole world with them (but no politician will get credited for actions he took which avoided catastrophes; people have a short memory) but we’ve also seen countries like Japan pull of a number of programmes which has done nothing to help to put their economy back on track (putting both their macro and microeconomic characteristics aside that is). From Obama’s point of view, pulling an austerity stunt would without a doubt drive the American economy straight off into the Recession river. So would this measure help save them?

As much as I hate to say this, I don’t know.

The Heat Of Financial Volatility

Very nice I like very much

Turns out the sneaky Chinese government finally came out of the closet by professing that in return for buying European bonds, the EU should reciprocate by granting them "market economy" status. Pretty smart eh? I've always known that the Chinese are a bunch of sneaky people. I've always had a sense of respect for them, until this Korean guy I met told me about his opinion on the country and its government. It all came much clearer when he reminded me of the country's kanji characters; "中国", where "中" means "centre / middle" and "国" refers to country. Get it? They see themselves as the centre of the world.

On another note in relation to the current Global Financial Meltdown; the one that has been hogging all of my blogspace of late to a point where I cant find any other shit to write about since its all over the news, Steve Forbes openly criticized Barrack Obama's stimulus package by quoting Japan's experience in dealing such matter; that they have had 15 stimulus packages in the last 20 years, and the outcome? Nothing. Frankly, I couldn't agree more on this but there are vast macro and microeconomic characteristics between United States and Japan (some discussed here), so a set of stimulus measures which doesn't work in Japan, might work in United States and vice versa.

The funny thing I find about this whole ordeal is how America keeps telling Europe to get their shit together but they can't even handle their own problems. This entire charade is too politically intertwined; stimulus package is tied to America's next General Election, Europeans can't think as a united entity and China is buying debts not for investment purposes, but for political gains. It's like the whole world is a fucking stageshow!

Think about the people you twats.

Where Are We Headed Part 2

But then the sun will go down again!

In a continuation of my previous post, where I somehow feel that the world is heading into a period of stagflation, let me justify that this was made based on three critical assumptions, where the fulfilment of all three (not either one) would definitely plunge the global economy into a period of stagflation;

Assumption 1 ;

If America fails to reduce and control its fiscal deficits; the downgrading of the American bond is not as much of a threat when compared to its inability to control its own budget. What happened subsequent to the downgrade was the lost in investor's confidence (from individuals to small companies) since, if the market really thought that America couldn't pay its debt, China would already be on a fire sale since they are America's biggest lender.

Assumption 2 ;

That unless Europe either kick the shit out of Greece out of Europe (for failing to meet their fiscal target), increase European Financial Stability Fund's funding capacity, or actually act as a fucking United Europe instead of whining like a bitch about how they have to pay for the other countries' fuckups, the region's continued instability posses a massive risk to the global economy. To put it simply; they need to stop being politically divided and stand united.

Assumption 3 ;

Unless China controls its rate of inflation, the global inflation rate would continue to rise. This is simply driven by the fact that the Chinese just manufacture too much shit; everything for $1 dollar. If the domestic prices continue to increase, then this would gradually lead in an increase of prices for their exports. Then, we can start getting ourselves busy by digging our own graves.

Luckily, it seems that China's inflation rate seems to be cooling off of late, and by the looks of it the government plans on putting their consistent interest rate hikes to a halt to accomodate growth. But the prospects for America still looking uncertain as they plan for another massive job growth package, while at the same time, urging European countries to bail out their debt-riddled neighbors under the pretext that "stronger members should absorb the costs; else, the regional effects would cost much greater". As Assumption No. 3 slowly cools off, we still have the first two to worry about; would we still be headed towards a global stagflation?

By the looks of it, the indicators are too strong to suggest otherwise.

Why Stupid People Get Richer

Is a very interesting book title

Here we have the deputy chairman of The Star giving a speech to UTAR graduates on how to be more creative and take (calculated) risks. An interesting and thoughtful speech.

Would've been better if I was there to hear it myself.

Where Are We Headed Part 1

Coming soon to a store near you.

In the west, we have America's debt ceiling crisis (which remains partially unresolved), with Europe on the verge of kicking Greece out of the eurozone for failing to meet their fiscal targets; being one of the conditions they accepted when receiving the bailout fund from the European Financial Stability Fund / European Central Bank. I knew that this whole debt-crisis bullshit would somehow spread to the east, but I didn't expect it to have such an impact to a point where Fitch Ratings changed their outlook to China to negative, with a high probability of downgrading their bond ratings as well; including Japan.

Although numerous organizations are confident that chances for a double-dip recession or a meltdown similiar to 2008 are low, the outlook is still bleak, worse, we might even be heading towards a total global stagflation. Personally I believe this is the only direction in which the global economy is heading, and the signs are evident. High inflation, with moderated or low economic growth leaves legislators and central bankers with a massive headache. The South Korean government is one of the many countries currently experiencing this issue.

Despite all this, OECD has called for central banks to maintain their interest rates, wheras the IMF has urged countries to opt for stimulus packages or introduce some measures to develop growth (provided that they develop a credible mid-term debt control strategy) instead of focusing on short term austerity measures. These options however, are extremely tight and limited; not many countries (especially ones which are currently debt riddled) have the luxury executing anything else except an expenditure cut. So where does all this leaves us? In a shithole without a doubt.

Maybe Paul Krugman can come up with a Plan C this time?

World's Solar Panel Industry

We needz moar energi!

I have always been under the impression that America is the world's leader in terms of innovation, technological development and advancement in sciences. But with the closure of some of the Solar Manufacturing Companies; some backed by Barrack Obama himself, citing stiff competition from their Chinese counterpart, is this a tipping point where soon we will see China lead the way for solar panel developments?  It seems that solar panel manufacturers in South Korea are also suffering due to the loss of their American competitors and Chinese competition. Surely this is a sign predicting a shift in the World's Economic Centre of Gravity?

Cliche, but only time will tell.

Shared Growth; Feasibile? or Detrimental?

Small Businessman with Small Software and a small .... ?

It seem's that Lee Myung Bak is either a people's man or is just desperately trying to gain public support as he came under fire for another one of his antics on shared growth. A feasibility study was conducted by Korea Economic Research Institute (KERI) which claims that the "profit sharing" proposal he came up with does not carry positive impacts on the economy. But despite the report published by KERI, Lee's administration continued to search of areas in which they can help SME's grow, by developing a "Chaebol Shield"; which technically bars certain companies from participating in certain "SME Designated" industries. This however is still criticized by certain parties as the regulation set is non-conforming (not legally binding / entirely up to corporation's discretion). This however did not stop the Korean government from expanding the chaebol shield to include certain products such as tofu, and industries such as expendable office supplies and IT contents with further designation SME-protected industries to be developed in the future. Although many disagree on this policy, there are others who are completely behind it citing that Chaebol's ability to dominate the market through their suppliers and ability to receive cheap financing as factors that should change the non-conforming ordinance into a legally binding one. Not to mention that since most of the Chaebol's are family owned, wealth distribution is narrowed and limited to certain few - something which the Koreans call "top 1%".

Out of curiousity, I did a mini-search on the number of South Korean corporations listed in Forbes 2000, the number of employees in which they employ, and compared the number of employment to the country's population. For benchmarking purposes, I chose Taiwan and Turkey since they have roughly the same GDP Per Capita as South Korea;

	Taiwan	S. Korea	Turkey
Population (Million)	23	49	73
Employees (Per 100 Thousand)	0.8	0.4	0.2
Ratio Population : Employment	3.48%	0.82%	0.27%
Forbes 2000 Listed Companies	42	52	11

The results are quite interesting. We can see clearly from the table that although South Korea have corporations which are more globally recognizable compared to Taiwan (at least from my view), it seems that Taiwan is winning in terms of developing a more distributed form of competition, and that the corporations they develop employ more people according based on the Ratio Population.

So the question now is, would the "Shared Growth", "Profit-Sharing" and "Chaebol Shield" system proposed and implemented by the government would lead to a better wealth distribution system? My personal view would be Yes (with the exception of the Profit-Sharing policy), however, it would take time, and changing such a concept will not be easy. It all depends on what the people want, whether corporations are willing to oblige, and whether South Koreans themselves are willing to shift away from having a "Chaebol-oriented" mentality to a one focusing more on a "United Growth".

But at the end of the day, I guess its just all about greed.

Socialism vs. Capitalism

Picture not associated with post ... at least not directly.

I think it should be more like Article(s). JoongAng Daily daily reported huge tensions between the business community as well as the lawmakers of the country, to the extent that a politician dubbed a chairman of a  shipping company a 'murderer', some even calling 'stupid'. It seems that a similiar situation is also growing in Germany where industry players claim that the government led under Chancellor Merkel have stopped listening and taking feedback from coporate leaders.

On another note, we have North Koreans travelling to Canada to do their Masters in Business Administration. Seems that they are trying to pickup a thing or two from the free-market system which could be taken back home.

Thing's are moving and changing a bit too fast don't you think?

Production vs. Consumption Economy?

O noy weech shud I chooz??

I got bored of reading this 160 paged report on my organization's Strategic Plan so I wandered off on the net and found this really interesting argument on Production-based Economy and Consumption-based Economy. So it started getting my brain running; which is better? Production-based, Consumption-based, (what about Export-based?) or a mixed form of both?

The way I see it, each of the two articles had their own valid points; when it comes to production based economy, you produce goods - which either directly or inadvertently generates jobs and economic activity. The Pro-Production-based cited that the economic slowdown is due to the fact that Americans have developed a sense of debt-funded consumer spending, and have been gearing towards too much spending while moving their productions overseas; resulting in a slowdown of economic activity. So the issue here to him is; they need to increase investments (in production of goods) and get back producing goods rather than outsourcing everything and not encourage consumer spending as that alone is insufficient in getting back an economy on track.

For the consumption based argument the author disagrees by stating that the whole point of moving your manufacturing overseas is so that goods can be manufactured at a cheaper rate - saving consumers money to spend on something else. As manufacturing jobs involve low-skilled workers, this would allow companies in America to focus more on high-skilled jobs and innovation; a much more value producing activity. To put it simply, outsourcing manufacturing jobs overseas actually benefits the economy, and the whole point of economic activity is so that consumers can consume.

Now, I don't really know much about economics but I must say I do enjoy reading about it. These two authors do have their own valid points but the fact right now is simple; America is much more of a Consumption or Domestic based economy rather than a producer - with certain exceptions such as Defense Equipment & Machines, Aerospace Machineries etc. Apart from this, I don't think its such a good thing (intuitively) if a country were to run a straight trade deficit for 40 years. Its a good thing if you move low-skilled workers overseas in order to focus on high-value jobs locally, but that means there won't be any jobs for low-skilled workers (more could be argued on the importance of low skilled workers from countries like Japan where it is heavily automated and Singapore). Although the production aspect of the economic activity is moved overseas, the financial benefits is retained domestically through increased profits; to which could be spent on more investment in other high-value or innovation-based areas.

So it's a bit of a trade-off, I think the best mix is, to mix it. Production driven may result in over-production, which may lead to an export based economy which has its own drawback. Consumption driven squeezes the lower end of the social hiearchy due to lack of jobs, and primarily focuses on benefiting the higher echelons of society. A mixture of both would be perfect however, in a globalized world, specialization is the key to a country's success.

So which would we better?