A long, winding road to great depression
Bankruptcy sale: A woman walks past a store advertising a sale, on 'Black Friday' in Fairfax, Virginia on Friday. Shoppers turned up early for holiday sales at US stores on Friday, but the annual pilgrimage appeared thinner this year and many consumers vowed to keep spending down due to a shrinking economy.Picture: Reuters
J BRADFORD DELONG
BERKELEY
Sunday, November 30, 2008
FOR 15 months, the United States Federal Reserve, assisted by the financial regulators of the US Treasury, have been trying to make the macroeconomic consequences of the American mortgage-backed securities financial crisis as small as possible trying, above all, to avoid a deep depression.
They have also had three subsidiary objectives:
Keep as much economic activity as possible under private-sector control, in order to ensure that what is produced is what consumers really want.
Prevent the princes of Wall Street who led us into the crisis from profiting from the systemic risk that they created.
Ensure that homeowners and small investors do not absorb too much loss, for their only crime was to accept bad risks, which they would not have done in a world of properly diversified portfolios.
Now it is clear that the Fed and the Treasury have lost the game.
If a depression is to be avoided, it will have to be the work of other arms of the government, with other tools and powers.
The failure to contain the crisis will ultimately be traced, I think, to excessive concern with the first two subsidiary objectives: reining in Wall Street princes and keeping economic decision-making private.
Had the Fed and the Treasury given those two objectives their proper subsidiary weight, I suspect that we would not now be in this mess, and that the danger of a global depression would still be very far away. The desire to prevent the princes of Wall Street from profiting from the crisis was reflected in the Fed-Treasury decision to let Lehman Brothers collapse in an uncontrolled bankruptcy without oversight, supervision, or guarantees.
The logic behind that decision was that, previously in the crisis, equity shareholders had been severely punished when their firms were judged too big to fail.
The shareholders of Bear Stearns, AIG, Fannie Mae, and Freddie Mac essentially had ownership positions and all their wealth confiscated for pennies.
But this was not true of bondholders and counterparties, who were paid in full.
The Fed and Treasury feared that the lesson being taught in the last half of 2007 and the first half of 2008 was that the US government guaranteed all the debt and transactions of every bank and bank-like entity that was regarded as too big to fail.
That, the Fed and the Treasury believed, could not be healthy.
Lenders to very large overleveraged institutions had to have some incentive to calculate the risks.
But that required, at some point, allowing some bank to fail, and persuading some debt holders and counterparties that the government guarantee of support to institutions that were too big to fail was not certain.
In retrospect, this was a major mistake.
The extended web of finance as it existed in the summer of 2008 was the result of millions of calculations that the US government did, in fact, guarantee the unsecured debt of every very large bank and bank-like entity in America.
With that guarantee broken by Lehman Brothers collapse, every financial institution immediately sought to acquire a much greater capital cushion in order to avoid the need to draw on government support, but found it impossible to do so.
The Lehman Brothers bankruptcy created an extraordinary and immediate demand for additional bank capital, which the private sector could not supply.
It was at this point that the Treasury made the second mistake. Because it tried to keep the private sector private, it sought to avoid partial or full nationalisation of the components of the banking system deemed too big to fail.
In retrospect, the Treasury should have identified all such entities and started buying common stock in them whether they liked it or not until the crisis passed.
Yes, this is what might be called lemon socialism, creating grave dangers for corporate control, posing a threat of large-scale corruption, and establishing a precedent for intervention that could be very dangerous down the road.
But would that have been worse than what we face now?
The failure to sacrifice the subsidiary objective of keeping the private sector private meant that the Fed and the Treasury lost their opportunity to attain the principal objective of avoiding depression.
Of course, hindsight is always easy.
But if depression is to be avoided, it will be through old-fashioned Keynesian fiscal policy: the government must take a direct hand in boosting spending and deciding what goods and services will be in demand.
J Bradford DeLong is Professor of Economics at the University of California at Berkeley and a former Assistant US Treasury Secretary.
Project Syndicate
Sunday, November 30, 2008
Friday, November 28, 2008
China economic downturn deepens
China economic downturn deepens
For long life: A group of Chinese chefs show off the art of noodle making in Xian, northern China's Shaanxi province on Wednesday. The Chinese have been feasting on noodles for approximately 2,000 years, dating back to the Han dynasty (206 BC-220 AD). Picture: AFP
SINGAPORE
Friday, November 28, 2008
CHINA yesterday warned its economic downturn was deepening with the spread of the global financial crisis, while a senior European policymaker said woes could extend beyond 2009.
In India, emerging Asia's other economic titan, financial markets were closed after Islamist militants killed more than 100 people in the commercial capital Mumbai.
The violence in Mumbai and the political unrest in Thailand showed that political risk is an extra potential threat to emerging markets reeling from the global crisis.
"These awful events are reinforcing the nervousness about emerging markets, which have been weak any way for some time after the U.S. slowdown and the domino effect," said Justin Urquhart Stewart, investment director at Seven Investment Management in London.
The economic warnings from China's top planner came a day after its central bank cut interest rates by the biggest margin in 11 years in response to the worst global downturn in decades.
China's State Information Centre, a government think-tank, forecast annual growth would slow to eight per cent this quarter from nine per cent in the third quarter, a rapid cooling from double-digit rates recorded in the past five years.
"The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November," Zhang Ping, chairman of the National Development and Reform Commission, told a news conference.
With factories closing by the thousands, Chinese officials have grown increasingly concerned in recent weeks that slowing growth may threaten the stability that the ruling Communist party craves for its 1.3 billion people.
Slowing demand for Chinese exports in the West is curbing growth and there is no relief in sight.
The eurozone is likely to be in recession next year, European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said, reversing a forecast of slight growth made earlier this month.
Almunia would not give a specific forecast for 2009, but said next year may not mark the end of the eurozone's troubles. "The crisis may not end in 2009," he said.
Emphasising the bleak outlook, the eurozone's business climate indicator fell to its lowest in more than 15 years in November, European Commission data showed.
Reuters
For long life: A group of Chinese chefs show off the art of noodle making in Xian, northern China's Shaanxi province on Wednesday. The Chinese have been feasting on noodles for approximately 2,000 years, dating back to the Han dynasty (206 BC-220 AD). Picture: AFP
SINGAPORE
Friday, November 28, 2008
CHINA yesterday warned its economic downturn was deepening with the spread of the global financial crisis, while a senior European policymaker said woes could extend beyond 2009.
In India, emerging Asia's other economic titan, financial markets were closed after Islamist militants killed more than 100 people in the commercial capital Mumbai.
The violence in Mumbai and the political unrest in Thailand showed that political risk is an extra potential threat to emerging markets reeling from the global crisis.
"These awful events are reinforcing the nervousness about emerging markets, which have been weak any way for some time after the U.S. slowdown and the domino effect," said Justin Urquhart Stewart, investment director at Seven Investment Management in London.
The economic warnings from China's top planner came a day after its central bank cut interest rates by the biggest margin in 11 years in response to the worst global downturn in decades.
China's State Information Centre, a government think-tank, forecast annual growth would slow to eight per cent this quarter from nine per cent in the third quarter, a rapid cooling from double-digit rates recorded in the past five years.
"The global financial crisis has not bottomed out yet. The impact is spreading globally and deepening in China. Some domestic economic indicators point to an accelerated slowdown in November," Zhang Ping, chairman of the National Development and Reform Commission, told a news conference.
With factories closing by the thousands, Chinese officials have grown increasingly concerned in recent weeks that slowing growth may threaten the stability that the ruling Communist party craves for its 1.3 billion people.
Slowing demand for Chinese exports in the West is curbing growth and there is no relief in sight.
The eurozone is likely to be in recession next year, European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said, reversing a forecast of slight growth made earlier this month.
Almunia would not give a specific forecast for 2009, but said next year may not mark the end of the eurozone's troubles. "The crisis may not end in 2009," he said.
Emphasising the bleak outlook, the eurozone's business climate indicator fell to its lowest in more than 15 years in November, European Commission data showed.
Reuters
US$5 trillion lost in global financial crisis
US$5 trillion lost in global financial crisis
PARIS
Friday, November 28, 2008
A TOTAL of US$5 trillion has been lost in the global financial crisis, the head of the Davos economic forum said yesterday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be "Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: "As it stands now, about US$5 trillion has been lost in the financial crisis and now has to be reconstituted" by governments. The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
"I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment," Schwab said.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five-day forum.
Putin was the only world leader whose presence was confirmed, but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend. The full list will only be released in January.
The violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.
A crisis that began last year with the collapse of the US housing market has spread around the world, bringing several financial institutions to their knees and pushing the US, Japan and Europe into recession or to the brink of it.
Central banks around the globe have slashed interest rates to try to ease the flow of credit and restart stalled economies.
Economic sentiment in Europe's single currency zone slumped to 15-year lows in November and inflation expectations plunged, boosting the case for a big rate cut by the European Central Bank (ECB) next week.
"The eurozone is in a deep recession, upping the pressure on the ECB to cut interest rates further," said Christoph Weil, economist at Commerzbank. "We envisage a first move next week on a scale of 75 basis points to 2.5 per cent."
Benchmark rates stand at 3.25 per cent in the eurozone, compared with one per cent in the US.
Amid the crisis, job cuts are also increasing across the globe. Steelmaker ArcelorMittal said it would slash up to 9,000 positions. AFP, Reuters
PARIS
Friday, November 28, 2008
A TOTAL of US$5 trillion has been lost in the global financial crisis, the head of the Davos economic forum said yesterday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be "Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: "As it stands now, about US$5 trillion has been lost in the financial crisis and now has to be reconstituted" by governments. The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
"I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment," Schwab said.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five-day forum.
Putin was the only world leader whose presence was confirmed, but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend. The full list will only be released in January.
The violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.
A crisis that began last year with the collapse of the US housing market has spread around the world, bringing several financial institutions to their knees and pushing the US, Japan and Europe into recession or to the brink of it.
Central banks around the globe have slashed interest rates to try to ease the flow of credit and restart stalled economies.
Economic sentiment in Europe's single currency zone slumped to 15-year lows in November and inflation expectations plunged, boosting the case for a big rate cut by the European Central Bank (ECB) next week.
"The eurozone is in a deep recession, upping the pressure on the ECB to cut interest rates further," said Christoph Weil, economist at Commerzbank. "We envisage a first move next week on a scale of 75 basis points to 2.5 per cent."
Benchmark rates stand at 3.25 per cent in the eurozone, compared with one per cent in the US.
Amid the crisis, job cuts are also increasing across the globe. Steelmaker ArcelorMittal said it would slash up to 9,000 positions. AFP, Reuters
Banking Crises: Plus Ça Change
Banking Crises: Plus Ça Change …
By Steve Hanke
Banking crises are all too common. They are also costly. The potential cost of the most recent bail-out package in the United States is a staggering $2.25 trillion. That’s 16% of GDP. Compared to the actual bail-out costs following Indonesia’s banking crisis of 1997-98, for example, the US figure is small change. Indeed, Indonesia’s bail out costs amounted to 40% of GDP.
Today, facing the threat of a new banking crisis, many governments in this region have increased state guarantee on bank deposits (see table below) using taxpayers’ money. Malaysia too has guaranteed all ringgit and foreign currency deposits through the Malaysia Deposit Insurance Corporation (Perbadanan Insurans Deposit Malaysia).
New Zealand Guarantee retail deposits in New Zealand-registered banks, building societies, credit unions and deposit-taking finance companies (Oct 12)
Indonesia Raised bank deposit guarantees to 2 billion rupiah from 100 million rupiah per account (Oct 13)
Hong Kong Guaranteed all customer bank deposits until end of 2010 (Oct 14)
Malaysia Guaranteed all ringgit and foreign currency deposits with commercial, Islamic and investment banks, and deposit-taking development financial institutions regulated by the central bank until December, 2010 (Oct 16)
Singapore Guaranteed all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (Oct 16)
South Korea May expand deposit guarantee (Oct 17) Asia-Pacific governments most recent deposit guarantee policy changes
Australia Guarantee all deposits with financial institutions for the next three years (Oct 12)
Source: Bloomberg News
But the reality is, a potential crisis still lurks.
Is there a better way to organize banking, so that it would be safer, sounder and more stable? That is, so that it wouldn’t require backbreaking taxpayer bail outs?
Today, banks that accept deposits are not required to hold 100% liquid reserves against those deposits. Accordingly, banks operate under a fractional-reserve system that allows them to create liabilities: bank money.
To eliminate this element of discretion in the money circuit, fractional-reserve banking could be replaced by 100%-reserve banking. In short, banks would be required to cover all deposits they accept with 100% liquid reserves, which would restrict investments of depositors’ money into “safe” and liquid securities such as government bonds or bonds guaranteed by the government.
Under 100%-reserve banking, banks that accepted deposits would essentially be transformed into money-market mutual funds – “narrow banks” – which could not create credit.
Accordingly, depositors would no longer have to live in fear of being unable to withdraw their deposits because banks would have the liquid reserves to cover any withdrawals.
Banking panics, system-wide banking crises, and taxpayer bail outs would all be relegated to history.
Another important advantage of 100%-reserve banking is that banks would need very little equity capital to cover the small risks associated with the matching of their assets and deposit liabilities. This makes the 100%-reserve system particularly well-suited for emerging economies, where banks are usually notoriously undercapitalized.
How would credit be supplied in such a money and banking system? Merchant (or investment) banks that do not accept deposits would assume that function. They would intermediate savings and generate credit (not money) by issuing shares and subordinated debt instruments (unsecured bonds that have low-ranking claims on a company’s earnings and assets).
Safety, soundness, stability
This approach facilitates credit flows while separating money from credit. By doing so, it injects safety, soundness and stability into the credit circuit.
Indeed, shareholders would provide an important source of market discipline to the merchant banks because the banks’ owners would risk losing their investments in case of merchant bank failures.
The other element in the merchant banks’ capital structure would be provided by subordinated debt. This debt also provides an attractive source of market discipline because, as distinct from depositors, the holders of subordinated debt cannot withdraw their funds on demand when bad news surfaces.
The holders of subordinated debt would, therefore, have an incentive to monitor the merchant bankers carefully.
Would speculative entrepreneurial ventures never get loans because merchant banks would be too conservative? Not at all. Banks that specialized in riskier loans would simply issue subordinated debt at significantly higher interest rates. Investors would purchase these instruments, just as they purchase high yield junk bonds.
If banks that accept deposits were prohibited from creating bank money and were transformed into money-market mutual funds, bank runs would come to a halt. And more importantly, taxpayers would be off the hook, too.
----
Steve H. Hanke, contributing author to www.WauBebas.org, is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the CatoInstitute in Washington, D.C.
This article was published in Malaysiakini (28 Nov 08)
By Steve Hanke
Banking crises are all too common. They are also costly. The potential cost of the most recent bail-out package in the United States is a staggering $2.25 trillion. That’s 16% of GDP. Compared to the actual bail-out costs following Indonesia’s banking crisis of 1997-98, for example, the US figure is small change. Indeed, Indonesia’s bail out costs amounted to 40% of GDP.
Today, facing the threat of a new banking crisis, many governments in this region have increased state guarantee on bank deposits (see table below) using taxpayers’ money. Malaysia too has guaranteed all ringgit and foreign currency deposits through the Malaysia Deposit Insurance Corporation (Perbadanan Insurans Deposit Malaysia).
New Zealand Guarantee retail deposits in New Zealand-registered banks, building societies, credit unions and deposit-taking finance companies (Oct 12)
Indonesia Raised bank deposit guarantees to 2 billion rupiah from 100 million rupiah per account (Oct 13)
Hong Kong Guaranteed all customer bank deposits until end of 2010 (Oct 14)
Malaysia Guaranteed all ringgit and foreign currency deposits with commercial, Islamic and investment banks, and deposit-taking development financial institutions regulated by the central bank until December, 2010 (Oct 16)
Singapore Guaranteed all Singapore dollar and foreign currency deposits of individual and non-bank customers in banks, finance companies and merchant banks licensed by the Monetary Authority of Singapore (Oct 16)
South Korea May expand deposit guarantee (Oct 17) Asia-Pacific governments most recent deposit guarantee policy changes
Australia Guarantee all deposits with financial institutions for the next three years (Oct 12)
Source: Bloomberg News
But the reality is, a potential crisis still lurks.
Is there a better way to organize banking, so that it would be safer, sounder and more stable? That is, so that it wouldn’t require backbreaking taxpayer bail outs?
Today, banks that accept deposits are not required to hold 100% liquid reserves against those deposits. Accordingly, banks operate under a fractional-reserve system that allows them to create liabilities: bank money.
To eliminate this element of discretion in the money circuit, fractional-reserve banking could be replaced by 100%-reserve banking. In short, banks would be required to cover all deposits they accept with 100% liquid reserves, which would restrict investments of depositors’ money into “safe” and liquid securities such as government bonds or bonds guaranteed by the government.
Under 100%-reserve banking, banks that accepted deposits would essentially be transformed into money-market mutual funds – “narrow banks” – which could not create credit.
Accordingly, depositors would no longer have to live in fear of being unable to withdraw their deposits because banks would have the liquid reserves to cover any withdrawals.
Banking panics, system-wide banking crises, and taxpayer bail outs would all be relegated to history.
Another important advantage of 100%-reserve banking is that banks would need very little equity capital to cover the small risks associated with the matching of their assets and deposit liabilities. This makes the 100%-reserve system particularly well-suited for emerging economies, where banks are usually notoriously undercapitalized.
How would credit be supplied in such a money and banking system? Merchant (or investment) banks that do not accept deposits would assume that function. They would intermediate savings and generate credit (not money) by issuing shares and subordinated debt instruments (unsecured bonds that have low-ranking claims on a company’s earnings and assets).
Safety, soundness, stability
This approach facilitates credit flows while separating money from credit. By doing so, it injects safety, soundness and stability into the credit circuit.
Indeed, shareholders would provide an important source of market discipline to the merchant banks because the banks’ owners would risk losing their investments in case of merchant bank failures.
The other element in the merchant banks’ capital structure would be provided by subordinated debt. This debt also provides an attractive source of market discipline because, as distinct from depositors, the holders of subordinated debt cannot withdraw their funds on demand when bad news surfaces.
The holders of subordinated debt would, therefore, have an incentive to monitor the merchant bankers carefully.
Would speculative entrepreneurial ventures never get loans because merchant banks would be too conservative? Not at all. Banks that specialized in riskier loans would simply issue subordinated debt at significantly higher interest rates. Investors would purchase these instruments, just as they purchase high yield junk bonds.
If banks that accept deposits were prohibited from creating bank money and were transformed into money-market mutual funds, bank runs would come to a halt. And more importantly, taxpayers would be off the hook, too.
----
Steve H. Hanke, contributing author to www.WauBebas.org, is a Professor of Applied Economics at The Johns Hopkins University in Baltimore and a Senior Fellow at the CatoInstitute in Washington, D.C.
This article was published in Malaysiakini (28 Nov 08)
US$5 trillion lost in global financial crisis
US$5 trillion lost in global financial crisis
PARIS
Friday, November 28, 2008
A TOTAL of US$5 trillion has been lost in the global financial crisis, the head of the Davos economic forum said yesterday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be "Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: "As it stands now, about US$5 trillion has been lost in the financial crisis and now has to be reconstituted" by governments. The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
"I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment," Schwab said.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five-day forum.
Putin was the only world leader whose presence was confirmed, but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend. The full list will only be released in January.
The violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.
A crisis that began last year with the collapse of the US housing market has spread around the world, bringing several financial institutions to their knees and pushing the US, Japan and Europe into recession or to the brink of it.
Central banks around the globe have slashed interest rates to try to ease the flow of credit and restart stalled economies.
Economic sentiment in Europe's single currency zone slumped to 15-year lows in November and inflation expectations plunged, boosting the case for a big rate cut by the European Central Bank (ECB) next week.
"The eurozone is in a deep recession, upping the pressure on the ECB to cut interest rates further," said Christoph Weil, economist at Commerzbank. "We envisage a first move next week on a scale of 75 basis points to 2.5 per cent."
Benchmark rates stand at 3.25 per cent in the eurozone, compared with one per cent in the US.
Amid the crisis, job cuts are also increasing across the globe. Steelmaker ArcelorMittal said it would slash up to 9,000 positions. AFP, Reuters
PARIS
Friday, November 28, 2008
A TOTAL of US$5 trillion has been lost in the global financial crisis, the head of the Davos economic forum said yesterday as he announced a record presence of world leaders at the conference in January.
Russian Prime Minister Vladimir Putin will give the opening speech at the World Economic Forum in the Swiss resort on January 28 where the theme will be "Shaping The Post Crisis World", said its founder Klaus Schwab.
The Swiss economist, on a visit to Paris, said: "As it stands now, about US$5 trillion has been lost in the financial crisis and now has to be reconstituted" by governments. The forum had forecast the crisis in the financial system in its annual risk report at the start of the year.
"I am not dramatically pessimistic about the future, just realistically pessimistic and I think there are also enormous opportunities in terms of using technology and changing the environment," Schwab said.
He said the turmoil, the worst financial crisis since the Great Depression, meant that the 39th annual Davos meeting would be the most important ever and it will have the biggest participation.
Schwab said there would be more than 160 leaders of head of state or government or ministerial rank among the 1,200 business, social and trade union leaders at the five-day forum.
Putin was the only world leader whose presence was confirmed, but forum officials said many leaders from the Group of Eight industrial powers and emerging economic powers were expected to attend. The full list will only be released in January.
The violence in India and political unrest in Thailand highlighted political risk as an extra potential threat to emerging markets battered by the global crisis.
A crisis that began last year with the collapse of the US housing market has spread around the world, bringing several financial institutions to their knees and pushing the US, Japan and Europe into recession or to the brink of it.
Central banks around the globe have slashed interest rates to try to ease the flow of credit and restart stalled economies.
Economic sentiment in Europe's single currency zone slumped to 15-year lows in November and inflation expectations plunged, boosting the case for a big rate cut by the European Central Bank (ECB) next week.
"The eurozone is in a deep recession, upping the pressure on the ECB to cut interest rates further," said Christoph Weil, economist at Commerzbank. "We envisage a first move next week on a scale of 75 basis points to 2.5 per cent."
Benchmark rates stand at 3.25 per cent in the eurozone, compared with one per cent in the US.
Amid the crisis, job cuts are also increasing across the globe. Steelmaker ArcelorMittal said it would slash up to 9,000 positions. AFP, Reuters
Thursday, November 27, 2008
Crisis to take toll on pay: ILO
Crisis to take toll on pay: ILO
Stop the pain!: A worker, holds a cardboard of a screaming mouth, during the weekly demonstration over the global financial crisis in central Reykjavik on November 22. The ILO said the economic downturn will erode the wages of millions of workers. Picture: AFP
GENEVA
Thursday, November 27, 2008
ECONOMIC turmoil will erode the wages of millions of workers in 2009, fanning the flames of global recession, the International Labour Organisation (ILO) yesterday said.
Inflation-adjusted pay in rich nations will fall 0.5 per cent in the coming year the first wage decrease since before 2001 after having increased 0.8 per cent this year, according to new estimates from the United Nations agency.
Developing country wages should prove more resilient, led by continued gains in China and India, the ILO said.
On a global basis, it estimated real wages will rise 1.1 per cent in 2009, compared with 1.7 per cent in 2008.
"For the world's 1.5 billion wage earners, difficult times lie ahead," ILO Director-General Juan Somavia said in the Global Wage Report, whose comparable data only stretches back to 2001.
Somavia, a Chilean, called for strong collective bargaining to counter any decrease in wages linked to the world's financial and economic crises that the ILO has previously said will wipe out 20 million jobs by the end of 2009.
In previous periods of contraction, every one percentage point drop in gross domestic product (GDP) per capita brought about a 1.55 percentage point decline in average wages, making it even harder for people to spend and invest, according to ILO data.
"If this pattern were to be followed in the rapidly spreading global downturn, it would deepen the recession and delay the recovery," Somavia said.
But even when economic growth rates were buoyant, the ILO report said wages have failed to keep pace.
For each one percentage point of GDP growth from 1995 to 2007, average wages only increased 0.75 percentage points, with pay rates largely failing to increase in line with productivity growth levels, it found.
Inequalities between top and bottom wages have also risen, most notably in the US, Germany, Poland, Argentina, China and Thailand, the ILO said.
France, Spain, Brazil and Indonesia were found to have reduced those gaps somewhat in recent years.
Women's wages represent an average of 70 to 90 per cent of men's wages in most major economies, though some Asian nations have larger disparities, the report said.
People at the bottom of the wage ladder will be squeezed hardest by decreasing rates of pay in the coming period of economic contraction, according to ILO expert Manuela Tomei.
"If they fall too much, this will make the crisis even worse," she told a news briefing in Geneva.
Greater efforts to empower workers and enact minimum wage laws should help more people weather the coming storm, the ILO concluded.
"We think that it is important to encourage collective bargaining and social dialogue," Tomei said.
There have been a spate of job cuts from companies worldwide who have been hit hard by the financial turmoil.
International recruitment company Manpower had said employee numbers will be cut sharply in many Western nations as companies pare costs to survive the global financial crisis.
Reuters, AFP
Stop the pain!: A worker, holds a cardboard of a screaming mouth, during the weekly demonstration over the global financial crisis in central Reykjavik on November 22. The ILO said the economic downturn will erode the wages of millions of workers. Picture: AFP
GENEVA
Thursday, November 27, 2008
ECONOMIC turmoil will erode the wages of millions of workers in 2009, fanning the flames of global recession, the International Labour Organisation (ILO) yesterday said.
Inflation-adjusted pay in rich nations will fall 0.5 per cent in the coming year the first wage decrease since before 2001 after having increased 0.8 per cent this year, according to new estimates from the United Nations agency.
Developing country wages should prove more resilient, led by continued gains in China and India, the ILO said.
On a global basis, it estimated real wages will rise 1.1 per cent in 2009, compared with 1.7 per cent in 2008.
"For the world's 1.5 billion wage earners, difficult times lie ahead," ILO Director-General Juan Somavia said in the Global Wage Report, whose comparable data only stretches back to 2001.
Somavia, a Chilean, called for strong collective bargaining to counter any decrease in wages linked to the world's financial and economic crises that the ILO has previously said will wipe out 20 million jobs by the end of 2009.
In previous periods of contraction, every one percentage point drop in gross domestic product (GDP) per capita brought about a 1.55 percentage point decline in average wages, making it even harder for people to spend and invest, according to ILO data.
"If this pattern were to be followed in the rapidly spreading global downturn, it would deepen the recession and delay the recovery," Somavia said.
But even when economic growth rates were buoyant, the ILO report said wages have failed to keep pace.
For each one percentage point of GDP growth from 1995 to 2007, average wages only increased 0.75 percentage points, with pay rates largely failing to increase in line with productivity growth levels, it found.
Inequalities between top and bottom wages have also risen, most notably in the US, Germany, Poland, Argentina, China and Thailand, the ILO said.
France, Spain, Brazil and Indonesia were found to have reduced those gaps somewhat in recent years.
Women's wages represent an average of 70 to 90 per cent of men's wages in most major economies, though some Asian nations have larger disparities, the report said.
People at the bottom of the wage ladder will be squeezed hardest by decreasing rates of pay in the coming period of economic contraction, according to ILO expert Manuela Tomei.
"If they fall too much, this will make the crisis even worse," she told a news briefing in Geneva.
Greater efforts to empower workers and enact minimum wage laws should help more people weather the coming storm, the ILO concluded.
"We think that it is important to encourage collective bargaining and social dialogue," Tomei said.
There have been a spate of job cuts from companies worldwide who have been hit hard by the financial turmoil.
International recruitment company Manpower had said employee numbers will be cut sharply in many Western nations as companies pare costs to survive the global financial crisis.
Reuters, AFP
Job losses feared in Malaysia
Job losses feared in Malaysia
Gloomy forecast: Malaysian investor looks at the index board at a viewing gallery in Kuala Lumpur, Malaysia, last month. The recession in Malaysia next year is projected to be worse than the Asian crisis in 1997. It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers.Picture: EPA
ANIL NETTO
PENANG
Thursday, November 27, 2008
THE global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers. Although Malaysia's financial institutions and banks are in better shape than they were during the East Asian financial crisis in 1997, the economy is already feeling the effects of the recession in the West.
Economic growth for the country is projected at 3.5 per cent for next year but even that could be optimistic. Some analysts are not ruling out an economic contraction and there is growing concern that workers, both Malaysian and migrants, could be vulnerable.
"The recession here next year could be worse than the Asian crisis in 1997," warns economist Subramaniam Pillay, an associate professor in international finance at Nottingham University's campus in Malaysia. "It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers."
Now there are similar fears that as consumer demand in the West falters, exports here could slide and factories could once again shed workers before long.
With the experience of the recession of the mid to late 1980s in mind, activists have been calling for a comprehensive social security plan. Increasingly, calls are being heard for a national retrenchment fund to protect workers in anticipation of possible job losses.
The government has said it is considering this "but even if they start it off now, the fund won't be big enough to handle the recession next year," warns opposition parliamentarian Jeyakumar Devaraj.
The Malaysian Trades Union Congress has proposed that employers and employees should each contribute one ringgit per worker to the fund. With around five million salaried workers in the private sector, such a retrenchment fund could collect more than 100 million ringgit ($40 million) in a year.
"But there is no commitment from the government up to now," laments Devaraj. "Instead, we see them injecting 5 billion ringgit from the (state-managed) Employees Provident Fund (a retirement fund for workers) into the stock market."
Some have pointed out Malaysians will be cushioned from job losses by the presence of these migrant workers who could be the first to lose their jobs.
But that may give a false sense of security as thousands of Malaysians are also employed in free trade zones especially as operators in the electronics multinational corporations.
Subramaniam feels that the government should review its low-wage policy in attracting foreign investors. Local wages are suppressed by the presence of some three million low-wage migrant workers, about a third of them undocumented.
"What's the point of being among the world's top trading nations when your workers are being paid peanuts?" he asks.
Meanwhile, economic analysts have noted that a revised budget for next year is necessary as the present one tabled earlier this year was calculated based on an assumption of a global oil prices for next year of US$125 — whereas the price now has plummeted to around 50 dollars now.
About 40 per cent of the national budget is traditionally funded from petroleum revenue — Malaysia is a net exporter of oil — with the remainder coming from taxes, observes Subramaniam.
A sharp drop in the prices of oil and palm oil products will erode Malaysia's earnings and affect the budget - though the country has ample foreign exchange reserves.
Meanwhile, the government has announced a 5 million ringgit allocation to retrain retrenched workers. Human Resources Minister S Subramaniam said the government would top up 1 ringgit for every 1 ringgit spent by employers to retrain workers and upgrade their skills.
From November 1 this year, all skills upgrading retraining programmes would receive full financial aid.
In addition, the government has also announced a 7 billion ringgit economic stimulus package of pre-emptive pump priming.
Devaraj says instead of giving out large infrastructure contracts to private contractors who may hire low-wage foreign workers, the Public Works Department could hire temporary local workers directly as "work brigades", which he says would be a more effective way of creating a multiplier effect for the local economy.
Despite the fall in oil prices, many Malaysians are still finding it hard to cope with the cost of living especially higher food prices, which particularly squeezes the poor.
On November 17, the government slashed the pump price of petrol from 2.15 ringgit per litre to 2 ringgit — the fifth reduction in recent months as global prices sank to US$55 per barrel.
But many noticed that the local pump price is now still higher than it was on January 5 when petrol prices were then raised by 41 per cent to 2.70 ringgit at a time when the global oil price was around US$125.
The effect of the June 5 oil price hike is still being felt. Even as the pump prices locally were reduced, food prices — driven up by commodity speculators and local retailers — have not fallen correspondingly.
"It may be true that the price of oil has gone down but the prices of rice and other basic necessities are still sky high," complained one reader from Sabah in North Borneo of the popular Malaysia Today website. "I was in Kuching (in neighbouring Sarawak state) a month ago and I noted that the price of Beras Malaysia (local rice) was only 15 ringgit (4.1 dollars). Here in Kota Kinabalu (in Sabah) it is sold at 18 ringgit (4.9 dollars). Why is the difference so big?"
Even the poverty line has come under scrutiny. Though the official threshold for monthly household income was raised a couple of years ago from 588 to 691 ringgit, many analysts feel that that benchmark for measuring poverty is grossly understated.
A more realistic poverty line could be double that figure, putting many more Malaysians — up to 30 per cent in the industrialised state of Selangor — in the poverty bracket.
Concerned that workers rights could be affected as the economy slides, a coalition of civil society groups, the Oppressed People's Network (Jerit), is organising a nationwide bicycle campaign to highlight their concern about the more difficult conditions for workers. Scores of cyclists from three main locations in the north, south and east coast of the peninsula will be flagged off simultaneously on December 3 and they will pedal towards the Federal Parliament, converging there on December 18.
There they will be present a memorandum to Prime Minister Abdullah Badawi and opposition leader Anwar Ibrahim, highlighting their demands.
Their main demands include the introduction of a minimum wage, decent housing, price controls for essential goods and an end to the privatisation of essential services.
They are also linking this to broader civil and political rights including the restoration of local government election and the repeal of the draconian Internal Security Act, which allows indefinite detention without trial.
Along the way, they will also distribute leaflets to the public and present similar memorandums to the chief ministers of the various states.
Devaraj notes that recent global events have proven that the neo-liberal model — with its accompanying assumptions of deregulation and the unchecked pursuit of wealth — has had adverse results ranging from climate change to worsening food security to imbalances in the distribution of wealth between and within nations. "So we need to look at new and alternative paradigms of development," he says.
IPS
Gloomy forecast: Malaysian investor looks at the index board at a viewing gallery in Kuala Lumpur, Malaysia, last month. The recession in Malaysia next year is projected to be worse than the Asian crisis in 1997. It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers.Picture: EPA
ANIL NETTO
PENANG
Thursday, November 27, 2008
THE global economic slowdown is slowly creeping onto Malaysian shores leaving many worried about the impact it will have on workers. Although Malaysia's financial institutions and banks are in better shape than they were during the East Asian financial crisis in 1997, the economy is already feeling the effects of the recession in the West.
Economic growth for the country is projected at 3.5 per cent for next year but even that could be optimistic. Some analysts are not ruling out an economic contraction and there is growing concern that workers, both Malaysian and migrants, could be vulnerable.
"The recession here next year could be worse than the Asian crisis in 1997," warns economist Subramaniam Pillay, an associate professor in international finance at Nottingham University's campus in Malaysia. "It would be more like 1986, when commodity prices slumped and exports weakened, prompting factories to retrench workers."
Now there are similar fears that as consumer demand in the West falters, exports here could slide and factories could once again shed workers before long.
With the experience of the recession of the mid to late 1980s in mind, activists have been calling for a comprehensive social security plan. Increasingly, calls are being heard for a national retrenchment fund to protect workers in anticipation of possible job losses.
The government has said it is considering this "but even if they start it off now, the fund won't be big enough to handle the recession next year," warns opposition parliamentarian Jeyakumar Devaraj.
The Malaysian Trades Union Congress has proposed that employers and employees should each contribute one ringgit per worker to the fund. With around five million salaried workers in the private sector, such a retrenchment fund could collect more than 100 million ringgit ($40 million) in a year.
"But there is no commitment from the government up to now," laments Devaraj. "Instead, we see them injecting 5 billion ringgit from the (state-managed) Employees Provident Fund (a retirement fund for workers) into the stock market."
Some have pointed out Malaysians will be cushioned from job losses by the presence of these migrant workers who could be the first to lose their jobs.
But that may give a false sense of security as thousands of Malaysians are also employed in free trade zones especially as operators in the electronics multinational corporations.
Subramaniam feels that the government should review its low-wage policy in attracting foreign investors. Local wages are suppressed by the presence of some three million low-wage migrant workers, about a third of them undocumented.
"What's the point of being among the world's top trading nations when your workers are being paid peanuts?" he asks.
Meanwhile, economic analysts have noted that a revised budget for next year is necessary as the present one tabled earlier this year was calculated based on an assumption of a global oil prices for next year of US$125 — whereas the price now has plummeted to around 50 dollars now.
About 40 per cent of the national budget is traditionally funded from petroleum revenue — Malaysia is a net exporter of oil — with the remainder coming from taxes, observes Subramaniam.
A sharp drop in the prices of oil and palm oil products will erode Malaysia's earnings and affect the budget - though the country has ample foreign exchange reserves.
Meanwhile, the government has announced a 5 million ringgit allocation to retrain retrenched workers. Human Resources Minister S Subramaniam said the government would top up 1 ringgit for every 1 ringgit spent by employers to retrain workers and upgrade their skills.
From November 1 this year, all skills upgrading retraining programmes would receive full financial aid.
In addition, the government has also announced a 7 billion ringgit economic stimulus package of pre-emptive pump priming.
Devaraj says instead of giving out large infrastructure contracts to private contractors who may hire low-wage foreign workers, the Public Works Department could hire temporary local workers directly as "work brigades", which he says would be a more effective way of creating a multiplier effect for the local economy.
Despite the fall in oil prices, many Malaysians are still finding it hard to cope with the cost of living especially higher food prices, which particularly squeezes the poor.
On November 17, the government slashed the pump price of petrol from 2.15 ringgit per litre to 2 ringgit — the fifth reduction in recent months as global prices sank to US$55 per barrel.
But many noticed that the local pump price is now still higher than it was on January 5 when petrol prices were then raised by 41 per cent to 2.70 ringgit at a time when the global oil price was around US$125.
The effect of the June 5 oil price hike is still being felt. Even as the pump prices locally were reduced, food prices — driven up by commodity speculators and local retailers — have not fallen correspondingly.
"It may be true that the price of oil has gone down but the prices of rice and other basic necessities are still sky high," complained one reader from Sabah in North Borneo of the popular Malaysia Today website. "I was in Kuching (in neighbouring Sarawak state) a month ago and I noted that the price of Beras Malaysia (local rice) was only 15 ringgit (4.1 dollars). Here in Kota Kinabalu (in Sabah) it is sold at 18 ringgit (4.9 dollars). Why is the difference so big?"
Even the poverty line has come under scrutiny. Though the official threshold for monthly household income was raised a couple of years ago from 588 to 691 ringgit, many analysts feel that that benchmark for measuring poverty is grossly understated.
A more realistic poverty line could be double that figure, putting many more Malaysians — up to 30 per cent in the industrialised state of Selangor — in the poverty bracket.
Concerned that workers rights could be affected as the economy slides, a coalition of civil society groups, the Oppressed People's Network (Jerit), is organising a nationwide bicycle campaign to highlight their concern about the more difficult conditions for workers. Scores of cyclists from three main locations in the north, south and east coast of the peninsula will be flagged off simultaneously on December 3 and they will pedal towards the Federal Parliament, converging there on December 18.
There they will be present a memorandum to Prime Minister Abdullah Badawi and opposition leader Anwar Ibrahim, highlighting their demands.
Their main demands include the introduction of a minimum wage, decent housing, price controls for essential goods and an end to the privatisation of essential services.
They are also linking this to broader civil and political rights including the restoration of local government election and the repeal of the draconian Internal Security Act, which allows indefinite detention without trial.
Along the way, they will also distribute leaflets to the public and present similar memorandums to the chief ministers of the various states.
Devaraj notes that recent global events have proven that the neo-liberal model — with its accompanying assumptions of deregulation and the unchecked pursuit of wealth — has had adverse results ranging from climate change to worsening food security to imbalances in the distribution of wealth between and within nations. "So we need to look at new and alternative paradigms of development," he says.
IPS
Wednesday, November 26, 2008
Test for SPN21 in its implementation
Test for SPN21 in its implementation
Wednesday, November 26, 2008
THE National Education System for the 21st Century or Sistem Pelajaran Negara 21 (SPN21) had mixed reviews from parents during a recent briefing by the Ministry of Education (MoE). While some parents and teachers embraced the system, many others came away disgruntled and still feeling in the dark: "Mixed reaction from parents to SPN21 briefing by Ministry (The Brunei Times, November 15, 2008).
One parent felt the the presentation was not transparent enough and that she could not get a clear picture what would happen come the time to implement it. "I felt that all the information was so incomplete. I have some idea of the new syllabus but the way it was presented, the whole idea was so obscure that I hope that is not the last time as I would like to know more about the system in more depth and detail," she said. A 26-year-old private sector employee, who wished to remain anonymous, said the briefing was so badly organised that he had yet to fully understand how the system operates. "It makes me wonder whether the teachers themselves are ready for this change or not. It is easy to be excited when you are up there, but when you are down here with the teachers and parents, we are the ones who are responsible for our children," he said.
If you visit the MoE portal on SPN21 the Curriculum and Assessment, the Offered Subjects, the Stages in School and the Students' Development are spelt out quite clearly. It spells out the Education System Structure, the Differences between the Current Education System and the SPN21 and Differences in the Schooling Duration under SPN21. It also spells out the Curriculum and Evaluation and Technical Education format.
The pre-school, primary school and the four or five year secondary format begins next year for Year 1 (Primary 1) Year 4 (Primary 4) and Year 7 (Form 1). Over Year 7 and Year 8 students will be subject to School-Based Assessment (SBA). At the end of Year 8, they will undergo the Student Progress Examination (SPE). Both the SBA and SPE will comprise the Student Progress Assessment (SPA) which will be used to channel students into either the General Education Programme (Four or five years) or the Applied Education Programme (five years ). The SPA will replace the current PMB examination which will come to an end after next year's Year 8 (Form 2) complete Year 9 (Form 3) in 2010. The Compulsory , Compulsory Complementary and Elective subjects are all spelt out for the various years.
Year 6 Primary pupils will still sit the assessment exam — PMR. Those who pass with 5As will enter the Science stream. Others who pass will enter the General Education (4- or 5-year-) or Applied Education (5-year-) programme. Those who fail can resit and, whether they pass or fail, will proceed to the Applied Education programme. Please visit the MoE portal for more details.
This is all well and good, now comes the hard part — implementing SPN21. Are the teachers ready for the full implementation of SPN21 beginning next year? As with parents many teachers were apprehensive about the impending implementation of SPN21: "Mixed reactions to full SPN21 implementation next year" (The Brunei Times, November 11, 2008). While some teachers were enthusiastic with the student-centred approach, others posed various problems involved including the large number pupils per classroom which made personal attention difficult. One teacher said that the MoE would be handing out the syllabus only in December and also said how there was still no transparency in the handling of the syllabus."We haven't seen the syllabus yet and the teachers are still not prepared. They don't even really know what they will be teaching," she said. Moreover student-centred learning will progress more smoothly if students in a classroom are more or less equally gifted, meaning streaming students for the various subjects. Perhaps within six months of its implementation, the first news of its strengths and weaknesses will be known and steps can begin to introduce the necessary tweaking to nudge it along the path to success.
Wednesday, November 26, 2008
THE National Education System for the 21st Century or Sistem Pelajaran Negara 21 (SPN21) had mixed reviews from parents during a recent briefing by the Ministry of Education (MoE). While some parents and teachers embraced the system, many others came away disgruntled and still feeling in the dark: "Mixed reaction from parents to SPN21 briefing by Ministry (The Brunei Times, November 15, 2008).
One parent felt the the presentation was not transparent enough and that she could not get a clear picture what would happen come the time to implement it. "I felt that all the information was so incomplete. I have some idea of the new syllabus but the way it was presented, the whole idea was so obscure that I hope that is not the last time as I would like to know more about the system in more depth and detail," she said. A 26-year-old private sector employee, who wished to remain anonymous, said the briefing was so badly organised that he had yet to fully understand how the system operates. "It makes me wonder whether the teachers themselves are ready for this change or not. It is easy to be excited when you are up there, but when you are down here with the teachers and parents, we are the ones who are responsible for our children," he said.
If you visit the MoE portal on SPN21 the Curriculum and Assessment, the Offered Subjects, the Stages in School and the Students' Development are spelt out quite clearly. It spells out the Education System Structure, the Differences between the Current Education System and the SPN21 and Differences in the Schooling Duration under SPN21. It also spells out the Curriculum and Evaluation and Technical Education format.
The pre-school, primary school and the four or five year secondary format begins next year for Year 1 (Primary 1) Year 4 (Primary 4) and Year 7 (Form 1). Over Year 7 and Year 8 students will be subject to School-Based Assessment (SBA). At the end of Year 8, they will undergo the Student Progress Examination (SPE). Both the SBA and SPE will comprise the Student Progress Assessment (SPA) which will be used to channel students into either the General Education Programme (Four or five years) or the Applied Education Programme (five years ). The SPA will replace the current PMB examination which will come to an end after next year's Year 8 (Form 2) complete Year 9 (Form 3) in 2010. The Compulsory , Compulsory Complementary and Elective subjects are all spelt out for the various years.
Year 6 Primary pupils will still sit the assessment exam — PMR. Those who pass with 5As will enter the Science stream. Others who pass will enter the General Education (4- or 5-year-) or Applied Education (5-year-) programme. Those who fail can resit and, whether they pass or fail, will proceed to the Applied Education programme. Please visit the MoE portal for more details.
This is all well and good, now comes the hard part — implementing SPN21. Are the teachers ready for the full implementation of SPN21 beginning next year? As with parents many teachers were apprehensive about the impending implementation of SPN21: "Mixed reactions to full SPN21 implementation next year" (The Brunei Times, November 11, 2008). While some teachers were enthusiastic with the student-centred approach, others posed various problems involved including the large number pupils per classroom which made personal attention difficult. One teacher said that the MoE would be handing out the syllabus only in December and also said how there was still no transparency in the handling of the syllabus."We haven't seen the syllabus yet and the teachers are still not prepared. They don't even really know what they will be teaching," she said. Moreover student-centred learning will progress more smoothly if students in a classroom are more or less equally gifted, meaning streaming students for the various subjects. Perhaps within six months of its implementation, the first news of its strengths and weaknesses will be known and steps can begin to introduce the necessary tweaking to nudge it along the path to success.
Tuesday, November 25, 2008
11/25/2008 2:54:04 AM -- Borneo Bulletin
The panacea of 'Intrapreneurship'
Borneo Bulletin via NewsEdge : ** NOTE: TRUNCATED STORY **
The letter written by Kay H entitled "Time for Brunei to think out of the box" (published in the Borneo Bulletin on Nov 8, 2008) highlighted a serious concern for our national socio-economic situation which in the long term may be too late to reverse when oil and gas have eventually depleted.
Even now the world economic and financial meltdown and its attendant global panic and frightening effect on the real economy has pulled down the price of oil from the high of US$147 per barrel in July 2008 to now hovering at US$70 per barrel. Consequently, this dramatic fall (and global economic recession) has made the oil- producing countries so jittery for obvious reasons.
To the point, to "think out of the box" is in fact the specific domain of risk-taking business shouldered by entrepreneurs - the risk takers. "Thinking out of the box" is all about how to be ever vigilant, and flexible and nimble in anticipating (not reacting, because you will be dead then!) and dealing quickly, in time for the inherent threats and risks in business: from gestation to its birth, growth and survivality. For example, the current impending demise of the three old giant US car companies - GM, Ford and Chrysler - if the US government has the nerve and stomach to refuse financial injections or other related support, is a live example of survivality.
(But then a story goes like this: During a high-powered Strategy Business Meeting of a giant dog food company, almost every member of the Board of Directors agrees that: the price of the product is competitive; the distribution system is efficient; the marketing is penetrating into wider areas; and, the packaging is very acceptable. But then with a palpable desperation the chairman is demanding to know why then its sales have been falling since last year! One assistant research officer coyly dared to stand up and trembling said: "Sir, the reality is those dogs just do not like the food!")
The market reality is: most Americans don't love GM, Ford, Chrysler cars. They prefer mostly those Japanese cars.
Thus, intelligence and skills are different from market reality.
Reality is experience - the greatest teacher through sweat, blood and tears. Just like those soldiers who have had experienced war. The bureaucrats do not face and feel these risks.
Having been genuinely spurred by the market reality, those Japanese competitors fully utilise their intelligence, skills and fear of failure by not only "thinking out of the box" but also by "acting out of the box", to confront reality. They are not arrogant. They welcome and seek market input.
Dell computer soared to the top of the PC industry in the 1980s and 1990s. Now Dell has discovered it is going in the wrong direction. The ailing PC maker has abandoned two of its core principles: exclusively online sales, and owning its own factories....(Newsweek Oct 20, 2008). Dell computer has decisively "thought and acted out of the box" quickly.
Confronting reality forces the entrepreneurs to think out of the box to survive. "Confronting Reality" is a book authored by Larry Bossidy and Ram Charan (2004), which meshes with the strategic action of "thinking out of the box" and "acting out of the box".
"Thinking" and "high sounding sloganeering" without "action" is just an illusion (a make-belief success). In risk taking business, this is a quick demise.
In the mercilessly competitive world of business, the essential confluence of basic traits and conditions such as intelligence, skills and creativity (innate or acquired) tempered with and galvanised by experience of threats and risks, profits and losses due to change is a constant phenomenon.
Flexibility and speed of decision and action, as well as the ever presence fear of failure, are all combined into a very powerful force that causes risk-taker-entrepreneurs to always be on 24/7 alert - anticipating, pre-empting and not reacting.
"Never think that fortune and misfortune are far from you forever" (Japanese proverb). Thus, flexibility and speed are essential. Being rigid or "boxed in" is suicidal. This powerful focused force constantly makes those entrepreneurs on the alert, because literally business is an ongoing battle. Defeat is not an option. They constantly peer far beyond their daily routine. A powerful 150-km range (with 360-degree vision) radar of anticipation is certainly far much better than one that can only detect over a distance of 50 kilometres (with 20-20 degree vision).
"One inch ahead is darkness" (Korean and Japanese proverb).
Thus, it is only too obvious that in a very competitive world of business you are not only habitually "thinking out of the box" but also simultaneously "acting out of the box". Again, not only out of the box, but a series of "boxes" of various sizes and shapes made of various types of materials!
Different degrees of seriousness, different complexities and intensities, different degrees of intractability. No uniformity, no linearity. You can see the first bounce, but the second bounce is unpredictable.
In business, once you get "boxed in", you will not only suffer visual and mental claustrophobia but eventually will suffocate. Thus, once you are "boxed in", you will be in the coffin.
According to John Hagel III in his book "Out Of The Box", one of the essential liberating factors for success is using, utilising the instantaneous and global power and convenience of the Internet or web services. This breaks beyond the borders, reaching wherever, whenever they are customers. The threats, risks and challenges are not only more intense but permanent.
On the other hand, John O Keeffe in his book, "Business Beyond The Box", asserts that in order to break far beyond "out of the box", your organisation must have the ability to innovate, rather than just be administrative; challenge the status quo, rather than accepting it; to look at what can be, rather than what is; and, to play with boundaries rather than just playing within the boundaries.
Kay H cited "China" as a good example of a nation and a race which has succeeded to "think and act out of the box". Their 5,000-year history is replete with all sorts of challenges and adversities. Thus, to them challenges always breed endless opportunities.
They constantly "act out of the box" far beyond their national boundaries. They are a modern super high-tech version of the legendary Admiral Zeng He, by making direct investments in many countries.
This "acting out of the box" has caught the attention of many such as: Ross Terrill who wrote a book entitled "The New Chinese Empire" (2003); Ted C Fishman who wrote a book entitled "China Inc - How The Rise Of The New Superpower Challenges America and The World" (2005); Oded Shenkar who wrote a book entitled "The Chinese Century"; and, Clyde Prestowitz who wrote a book about the collective rise of China and India in his book entitled, "Three Billion New Capitalists".
Even the UK magazine, "Economist", last year had featured China on its front cover under the headline "The Neocolonalist", referring to China's direct investments in Africa.
It is obvious that as a nation and a race, China economically and politically has succeeded tremendously not only to "think out of the box" but acted decisively to "act out of the box" by being a true capitalist openly in spite of being a communist-socialist country.
The Chinese bureaucrats themselves have this inborn nature of entrepreneurship. Thus, they fully understand and appreciate business. They appreciate, they have strong empathy with the pains and sufferings of their private sector, the innate dogged-driven risk-taking entrepreneurs, who created thousands of Chinese millionaires.
(Of course, there have been and are many negative aspects to China's rapid socio-economic transformation: corruption, fake goods, contaminated food and baby milk, as well as unsafe toys.)
It is obvious that their bureaucrats are like ducks in the water and fish in the river in their pro-supportiveness of businesses. To them, "no boxes" exist. To us, the entrepreneurs are the nemesis.
The question we must ask is why has Kay H taken the trouble to raise this intractable national issue in public (though it seems under a pseudonym)?
Could our anti-business bureaucrats radically change their mindset and be pro-business just like their Chinese counterparts?
Certainly our fixed salary anti-business bureaucrats do not have that feeling of fear of failure. And certainly they have not experienced nor will they ever be exposed to the reality of experiencing the sweat, blood and tears of keeping a business afloat in this turbulent world of business.
(Last week, there was a great shock: DBS had to start retrenching some of their senior officers. Not even an efficiently managed Singapore has been able to "escape" the global economic recession and financial turmoil.)
So how do we expect our bureaucrats to be automatically pro-business just like their stellar Chinese counterparts, let alone to emulate them?
Certainly over the years His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam has made several Titahs on the same issue. (One example is the Borneo Bulletin news item "Better deal for the people", which was published on Feb 23, 2007, where His Majesty's Titah focused on improving the Public Service and calling for private sector support.)
It appears that as a sequel to this Titah, the Management Service Department of the Prime Minister's Office then launched the "Program Mesra Pelanggan" on March 7, 2007. But then what has happened? Still in the 'box'?
Perhaps at this juncture, it is still relevant to refer to what we submitted to the Borneo Bulletin, which was published on March 24, 2007, under the headline "Of 'Little Napoleon' and galloping bankruptcies".
And on the opposite side of this restraining, anti-business, lacking empathy bureaucrats is a heart-rending story about the vital importance of having a flourishing private sector, which is the creator of employment opportunities, the economic saviour. (Opinion letter entitled "How Listening to Radio Save My Life", which was published in the Borneo Bulletin on September 6, 2008)
The heart-rending story was about the existence of a successful company that had "saved" an unemployed man from being ruined by a deep despair and shame of being unemployed. (Borneo Bulletin news item "Liberating experience of 'happily employed man'", which was published on September 13, 2008)
This is a very fortuitous and very good example of how a company (private sector) "saved" a family. There may be hundreds of similar happy ending cases nationwide.
This is a very good example where those bureaucrats with strong national empathy should "walk the talk", get out from their "bureaucratic box" to get input - the "market" reality.
Recently, His Royal Highness the Crown Prince and Senior Minister at the Prime Minister's Office delivered a Sabda in which HRH said that the government would make it easy to do business. (Borneo Bulletin news item "Government to make it easy to do business in Brunei", which was published on Nov 12, 2008)
Perhaps we could surmise what Kay H had in mind through asking: Couldn't our bureaucrats be able (or don't they have the capacity) to "think out of the box" and "act out of the box"?
What has been puzzling the long-suffering private sector is: Why are our anti-business bureaucrats so "business-sadistic"?
It appears the answer to this grandeur hallucination of bureaucratic power of control is provided by Dr Noel Ticky of the University of Michigan Business School.
Dr Ticky made a strong remark about this bureaucratic anti-business affliction during a seminar on "Leadership" to mark the 20th Convocation of Universiti Brunei Darussalam October 20, 2008 at the Empire Hotel and Country Club. During his talk, he made this stunning remark - "Bureaucracy is a disease on human nature".
Our fear is: Would it be like the bird flu pandemic?
But then even though the bird flu pandemic had been said to have originated from China, the ever fascinating thing is that their bureaucrats are/were obviously free from this "disease on human nature".
One obvious socio-economic public policy management outcome from China's strong, deep pro-business "thinking" and "acting" outside the box has been that the Chinese bureaucrats are in fact proactive 'intrapreneurs' working hand-in-glove with their private sector risk-taking entrepreneurs.
Currently, Shanghai and Beijing are ranked 8th and 9th respectively in the 'World Best Cities To Do Business' list, according to the Nov-Dec 2008 issue of the bi-monthly journal, "Foreign Policy".
Before long, Shanghai and Beijing will overtake Hong Kong, once the English Language is widely used in China and the rule of law is properly respected.
Isn't this development a semblance of what we have been just keeping sloganeering all these years about our "PPP" (Public Private Partnership)? Perhaps it is apt here to adduce this statement made by Herb Rubensten and Tony Grundy in their book - "Breakthrough Inc - High growth strategies for entrepreneurial organisations" (1999) - in which they said:
"Business (regardless of their size), non-profit organisations/government (regardless of their mission or policy orientation) and educational institutions, including governments (regardless of their location or strengths), all must be run in accordance with the same basic, fundamental laws of commerce and use similar 'business' strategy tool.
"In fact, over the next ten years the distinction among for-profit, non-profit organisations and educational institutions (including governments ones) will be of little relevance to anyone but lawyers and tax agents..."
Now considering the current global panic and fears of widespread recession, this apparently prescient statement accurately reflects the panic and fear that have jolted Western leaders and their respective ministers.
** NOTE: This story has been truncated from its original size in order to facilitate transmission. If you need more information about this story, please contact NewsEdge at 1-973-422-0800 or support@acquiremedia.com. **
<>
The panacea of 'Intrapreneurship'
Borneo Bulletin via NewsEdge : ** NOTE: TRUNCATED STORY **
The letter written by Kay H entitled "Time for Brunei to think out of the box" (published in the Borneo Bulletin on Nov 8, 2008) highlighted a serious concern for our national socio-economic situation which in the long term may be too late to reverse when oil and gas have eventually depleted.
Even now the world economic and financial meltdown and its attendant global panic and frightening effect on the real economy has pulled down the price of oil from the high of US$147 per barrel in July 2008 to now hovering at US$70 per barrel. Consequently, this dramatic fall (and global economic recession) has made the oil- producing countries so jittery for obvious reasons.
To the point, to "think out of the box" is in fact the specific domain of risk-taking business shouldered by entrepreneurs - the risk takers. "Thinking out of the box" is all about how to be ever vigilant, and flexible and nimble in anticipating (not reacting, because you will be dead then!) and dealing quickly, in time for the inherent threats and risks in business: from gestation to its birth, growth and survivality. For example, the current impending demise of the three old giant US car companies - GM, Ford and Chrysler - if the US government has the nerve and stomach to refuse financial injections or other related support, is a live example of survivality.
(But then a story goes like this: During a high-powered Strategy Business Meeting of a giant dog food company, almost every member of the Board of Directors agrees that: the price of the product is competitive; the distribution system is efficient; the marketing is penetrating into wider areas; and, the packaging is very acceptable. But then with a palpable desperation the chairman is demanding to know why then its sales have been falling since last year! One assistant research officer coyly dared to stand up and trembling said: "Sir, the reality is those dogs just do not like the food!")
The market reality is: most Americans don't love GM, Ford, Chrysler cars. They prefer mostly those Japanese cars.
Thus, intelligence and skills are different from market reality.
Reality is experience - the greatest teacher through sweat, blood and tears. Just like those soldiers who have had experienced war. The bureaucrats do not face and feel these risks.
Having been genuinely spurred by the market reality, those Japanese competitors fully utilise their intelligence, skills and fear of failure by not only "thinking out of the box" but also by "acting out of the box", to confront reality. They are not arrogant. They welcome and seek market input.
Dell computer soared to the top of the PC industry in the 1980s and 1990s. Now Dell has discovered it is going in the wrong direction. The ailing PC maker has abandoned two of its core principles: exclusively online sales, and owning its own factories....(Newsweek Oct 20, 2008). Dell computer has decisively "thought and acted out of the box" quickly.
Confronting reality forces the entrepreneurs to think out of the box to survive. "Confronting Reality" is a book authored by Larry Bossidy and Ram Charan (2004), which meshes with the strategic action of "thinking out of the box" and "acting out of the box".
"Thinking" and "high sounding sloganeering" without "action" is just an illusion (a make-belief success). In risk taking business, this is a quick demise.
In the mercilessly competitive world of business, the essential confluence of basic traits and conditions such as intelligence, skills and creativity (innate or acquired) tempered with and galvanised by experience of threats and risks, profits and losses due to change is a constant phenomenon.
Flexibility and speed of decision and action, as well as the ever presence fear of failure, are all combined into a very powerful force that causes risk-taker-entrepreneurs to always be on 24/7 alert - anticipating, pre-empting and not reacting.
"Never think that fortune and misfortune are far from you forever" (Japanese proverb). Thus, flexibility and speed are essential. Being rigid or "boxed in" is suicidal. This powerful focused force constantly makes those entrepreneurs on the alert, because literally business is an ongoing battle. Defeat is not an option. They constantly peer far beyond their daily routine. A powerful 150-km range (with 360-degree vision) radar of anticipation is certainly far much better than one that can only detect over a distance of 50 kilometres (with 20-20 degree vision).
"One inch ahead is darkness" (Korean and Japanese proverb).
Thus, it is only too obvious that in a very competitive world of business you are not only habitually "thinking out of the box" but also simultaneously "acting out of the box". Again, not only out of the box, but a series of "boxes" of various sizes and shapes made of various types of materials!
Different degrees of seriousness, different complexities and intensities, different degrees of intractability. No uniformity, no linearity. You can see the first bounce, but the second bounce is unpredictable.
In business, once you get "boxed in", you will not only suffer visual and mental claustrophobia but eventually will suffocate. Thus, once you are "boxed in", you will be in the coffin.
According to John Hagel III in his book "Out Of The Box", one of the essential liberating factors for success is using, utilising the instantaneous and global power and convenience of the Internet or web services. This breaks beyond the borders, reaching wherever, whenever they are customers. The threats, risks and challenges are not only more intense but permanent.
On the other hand, John O Keeffe in his book, "Business Beyond The Box", asserts that in order to break far beyond "out of the box", your organisation must have the ability to innovate, rather than just be administrative; challenge the status quo, rather than accepting it; to look at what can be, rather than what is; and, to play with boundaries rather than just playing within the boundaries.
Kay H cited "China" as a good example of a nation and a race which has succeeded to "think and act out of the box". Their 5,000-year history is replete with all sorts of challenges and adversities. Thus, to them challenges always breed endless opportunities.
They constantly "act out of the box" far beyond their national boundaries. They are a modern super high-tech version of the legendary Admiral Zeng He, by making direct investments in many countries.
This "acting out of the box" has caught the attention of many such as: Ross Terrill who wrote a book entitled "The New Chinese Empire" (2003); Ted C Fishman who wrote a book entitled "China Inc - How The Rise Of The New Superpower Challenges America and The World" (2005); Oded Shenkar who wrote a book entitled "The Chinese Century"; and, Clyde Prestowitz who wrote a book about the collective rise of China and India in his book entitled, "Three Billion New Capitalists".
Even the UK magazine, "Economist", last year had featured China on its front cover under the headline "The Neocolonalist", referring to China's direct investments in Africa.
It is obvious that as a nation and a race, China economically and politically has succeeded tremendously not only to "think out of the box" but acted decisively to "act out of the box" by being a true capitalist openly in spite of being a communist-socialist country.
The Chinese bureaucrats themselves have this inborn nature of entrepreneurship. Thus, they fully understand and appreciate business. They appreciate, they have strong empathy with the pains and sufferings of their private sector, the innate dogged-driven risk-taking entrepreneurs, who created thousands of Chinese millionaires.
(Of course, there have been and are many negative aspects to China's rapid socio-economic transformation: corruption, fake goods, contaminated food and baby milk, as well as unsafe toys.)
It is obvious that their bureaucrats are like ducks in the water and fish in the river in their pro-supportiveness of businesses. To them, "no boxes" exist. To us, the entrepreneurs are the nemesis.
The question we must ask is why has Kay H taken the trouble to raise this intractable national issue in public (though it seems under a pseudonym)?
Could our anti-business bureaucrats radically change their mindset and be pro-business just like their Chinese counterparts?
Certainly our fixed salary anti-business bureaucrats do not have that feeling of fear of failure. And certainly they have not experienced nor will they ever be exposed to the reality of experiencing the sweat, blood and tears of keeping a business afloat in this turbulent world of business.
(Last week, there was a great shock: DBS had to start retrenching some of their senior officers. Not even an efficiently managed Singapore has been able to "escape" the global economic recession and financial turmoil.)
So how do we expect our bureaucrats to be automatically pro-business just like their stellar Chinese counterparts, let alone to emulate them?
Certainly over the years His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam has made several Titahs on the same issue. (One example is the Borneo Bulletin news item "Better deal for the people", which was published on Feb 23, 2007, where His Majesty's Titah focused on improving the Public Service and calling for private sector support.)
It appears that as a sequel to this Titah, the Management Service Department of the Prime Minister's Office then launched the "Program Mesra Pelanggan" on March 7, 2007. But then what has happened? Still in the 'box'?
Perhaps at this juncture, it is still relevant to refer to what we submitted to the Borneo Bulletin, which was published on March 24, 2007, under the headline "Of 'Little Napoleon' and galloping bankruptcies".
And on the opposite side of this restraining, anti-business, lacking empathy bureaucrats is a heart-rending story about the vital importance of having a flourishing private sector, which is the creator of employment opportunities, the economic saviour. (Opinion letter entitled "How Listening to Radio Save My Life", which was published in the Borneo Bulletin on September 6, 2008)
The heart-rending story was about the existence of a successful company that had "saved" an unemployed man from being ruined by a deep despair and shame of being unemployed. (Borneo Bulletin news item "Liberating experience of 'happily employed man'", which was published on September 13, 2008)
This is a very fortuitous and very good example of how a company (private sector) "saved" a family. There may be hundreds of similar happy ending cases nationwide.
This is a very good example where those bureaucrats with strong national empathy should "walk the talk", get out from their "bureaucratic box" to get input - the "market" reality.
Recently, His Royal Highness the Crown Prince and Senior Minister at the Prime Minister's Office delivered a Sabda in which HRH said that the government would make it easy to do business. (Borneo Bulletin news item "Government to make it easy to do business in Brunei", which was published on Nov 12, 2008)
Perhaps we could surmise what Kay H had in mind through asking: Couldn't our bureaucrats be able (or don't they have the capacity) to "think out of the box" and "act out of the box"?
What has been puzzling the long-suffering private sector is: Why are our anti-business bureaucrats so "business-sadistic"?
It appears the answer to this grandeur hallucination of bureaucratic power of control is provided by Dr Noel Ticky of the University of Michigan Business School.
Dr Ticky made a strong remark about this bureaucratic anti-business affliction during a seminar on "Leadership" to mark the 20th Convocation of Universiti Brunei Darussalam October 20, 2008 at the Empire Hotel and Country Club. During his talk, he made this stunning remark - "Bureaucracy is a disease on human nature".
Our fear is: Would it be like the bird flu pandemic?
But then even though the bird flu pandemic had been said to have originated from China, the ever fascinating thing is that their bureaucrats are/were obviously free from this "disease on human nature".
One obvious socio-economic public policy management outcome from China's strong, deep pro-business "thinking" and "acting" outside the box has been that the Chinese bureaucrats are in fact proactive 'intrapreneurs' working hand-in-glove with their private sector risk-taking entrepreneurs.
Currently, Shanghai and Beijing are ranked 8th and 9th respectively in the 'World Best Cities To Do Business' list, according to the Nov-Dec 2008 issue of the bi-monthly journal, "Foreign Policy".
Before long, Shanghai and Beijing will overtake Hong Kong, once the English Language is widely used in China and the rule of law is properly respected.
Isn't this development a semblance of what we have been just keeping sloganeering all these years about our "PPP" (Public Private Partnership)? Perhaps it is apt here to adduce this statement made by Herb Rubensten and Tony Grundy in their book - "Breakthrough Inc - High growth strategies for entrepreneurial organisations" (1999) - in which they said:
"Business (regardless of their size), non-profit organisations/government (regardless of their mission or policy orientation) and educational institutions, including governments (regardless of their location or strengths), all must be run in accordance with the same basic, fundamental laws of commerce and use similar 'business' strategy tool.
"In fact, over the next ten years the distinction among for-profit, non-profit organisations and educational institutions (including governments ones) will be of little relevance to anyone but lawyers and tax agents..."
Now considering the current global panic and fears of widespread recession, this apparently prescient statement accurately reflects the panic and fear that have jolted Western leaders and their respective ministers.
** NOTE: This story has been truncated from its original size in order to facilitate transmission. If you need more information about this story, please contact NewsEdge at 1-973-422-0800 or support@acquiremedia.com. **
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Experts say Asian markets to rebound in 2009
Experts say Asian markets to rebound in 2009
BANDAR SERI BEGAWAN
Tuesday, November 25, 2008
ASIAN markets are set to rebound during the second quarter next year, experts yesterday said during an investment forum here.
"The Asian markets will recover faster than the real economy although banks might take more time," said Sam Hanbury, managing director of Deutsche Asset Management (Asia) Limited, who was among the panelists during the Global Finance and Investments Roundtable.
Global markets have fallen over the past months as the financial crisis, which has its roots in the US, worsens.
Still, experts agreed Asian markets will recover next year, noting the region doesn't have problems with toxic debts like those facing developed countries as Asian banks have deleveraged following the Asian financial crisis of 1997.
Companies in Asia invested back in their shares, consolidated operations while government spending focused on infrastructure framework for better development which means that the balance sheets in Asia are on the positive side, the panelists said. No other part of the world can match the current balance sheets of Asian countries, they said.
Inflation is also no longer a problem due to subsidised commodities, the panelists said. Also, they pointed to the big savings of Asian households, which cushion financial systems.
The financial crisis started due to cheap credit, which led to the accumulation of huge debts.
Aberdeen Asset Management Asia's Peter Elston, who was present at the roundtable but not as a panelist, blamed credit default swaps complex financial instruments for the crisis.
Credit default swaps are used to hedge against the risk of borrowers defaulting on their debt, or to speculate on a company's credit quality. Lax regulation over their trading led to abuse.
"The current credit default swap is like buying insurance from the Titanic and issued by the people from the Titanic," he said, referring to the risky nature of trading these financial instruments.
In his company presentation, Ajmal Bhatty, chief executive of Takaful, Tokio Marine Middle East Ltd, said takaful, or Islamic insurance, is the new growth sector in Islamic finance. Takaful growth is seen at 15 to 25 per cent annually against a mere five per cent growth of conventional insurance, according to his presentation, which also noted takaful industry's "extraordinary level of activity since 2003.
In an interview, he said, one aspect of Islamic insurance that can be further explored is extending the range of savings plans and life insurance available in the market today. "Life insurance and savings plans have not developed so much as the conventional insurance side, which is focused on protection," he said.
Ian Baldwyn, general manager of DST International Pte Ltd, a financial solutions provider, said technology supporting the Islamic financial sector is lacking at present. "Historically, the technology is obviously built for the existing market convention in transacting." Junaidi Bahrum and Debbie Too
The Brunei Times
BANDAR SERI BEGAWAN
Tuesday, November 25, 2008
ASIAN markets are set to rebound during the second quarter next year, experts yesterday said during an investment forum here.
"The Asian markets will recover faster than the real economy although banks might take more time," said Sam Hanbury, managing director of Deutsche Asset Management (Asia) Limited, who was among the panelists during the Global Finance and Investments Roundtable.
Global markets have fallen over the past months as the financial crisis, which has its roots in the US, worsens.
Still, experts agreed Asian markets will recover next year, noting the region doesn't have problems with toxic debts like those facing developed countries as Asian banks have deleveraged following the Asian financial crisis of 1997.
Companies in Asia invested back in their shares, consolidated operations while government spending focused on infrastructure framework for better development which means that the balance sheets in Asia are on the positive side, the panelists said. No other part of the world can match the current balance sheets of Asian countries, they said.
Inflation is also no longer a problem due to subsidised commodities, the panelists said. Also, they pointed to the big savings of Asian households, which cushion financial systems.
The financial crisis started due to cheap credit, which led to the accumulation of huge debts.
Aberdeen Asset Management Asia's Peter Elston, who was present at the roundtable but not as a panelist, blamed credit default swaps complex financial instruments for the crisis.
Credit default swaps are used to hedge against the risk of borrowers defaulting on their debt, or to speculate on a company's credit quality. Lax regulation over their trading led to abuse.
"The current credit default swap is like buying insurance from the Titanic and issued by the people from the Titanic," he said, referring to the risky nature of trading these financial instruments.
In his company presentation, Ajmal Bhatty, chief executive of Takaful, Tokio Marine Middle East Ltd, said takaful, or Islamic insurance, is the new growth sector in Islamic finance. Takaful growth is seen at 15 to 25 per cent annually against a mere five per cent growth of conventional insurance, according to his presentation, which also noted takaful industry's "extraordinary level of activity since 2003.
In an interview, he said, one aspect of Islamic insurance that can be further explored is extending the range of savings plans and life insurance available in the market today. "Life insurance and savings plans have not developed so much as the conventional insurance side, which is focused on protection," he said.
Ian Baldwyn, general manager of DST International Pte Ltd, a financial solutions provider, said technology supporting the Islamic financial sector is lacking at present. "Historically, the technology is obviously built for the existing market convention in transacting." Junaidi Bahrum and Debbie Too
The Brunei Times
Monday, November 24, 2008
Europe and global food crisis
Europe and global food crisis
MICHEL BARNIER
PARIS
Monday, November 24, 2008
BUT there is more to finding a solution than simply identifying those nations that are capable of feeding the rest of the world. It is increasingly urgent that every nation gain the means of feeding itself. This means that agriculture should become an international priority, with the poorest countries helped to safeguard the security and independence of their food supplies.
Countries and organisations are already mobilising. The United Nations Food and Agriculture Organisation argues that rising food prices could lead to increasing global conflicts. The Davos World Economic Forum ranks food insecurity as a major risk to humanity. The World Bank has forcefully emphasised the importance of agriculture to jump-starting economic expansion and breaking the cycle of poverty. UN Secretary Ban Ki-moon has created a working group to define a common plan of action, and Frances President Nicolas Sarkozy has proposed a global partnership for food.
Sarkozy's proposed partnership has three pillars. First, an international group should draft a worldwide strategy for food security. Second, an international scientific platform should be charged with evaluating the worlds agricultural situation, sending out warnings of upcoming crises, and possibly facilitating governments adoption of political and other strategic tools to deal with food crises.
Finally, the international finance community, despite its current problems, must be mobilised.
The reliability and size of the European Unions farm output means that it can and should play the role of regulator in global markets. If Europe cut back on its agricultural production, the increase in its own food imports would contribute significantly to a worldwide increase in food prices. This makes it imperative that EU food production levels be held steady for the sake of Europeans and of people in the worlds poorest countries.
But Europe cannot build up its own agriculture to the detriment of the less fortunate. So the EU must harmonise its policies with poorer countries. At present, export subsidies and support payments represent less than 1 per cent of the European agricultural budget, and the EU has undertaken to eliminate them once it receives reciprocal undertakings from major food-exporting countries. Since 2001, with the Everything but Arms initiative, all products from poor countries with the exception of weapons and munitions can enter the EU single market on a duty-free basis. This has led to the EU becoming the primary market for the poorest countries products.
The EU is also developing ways to respond to new global challenges through changes to its Common Agricultural Policy. This was reflected in the decision to suspend the set aside rule that requires a proportion of agricultural land to lie fallow. Now the EU is preparing to increase dairy quotas progressively, and evaluating the impact on world markets of its decisions regarding bio-fuels.
But Europes focus must be on encouraging the development of local agriculture. Doing so is the only way to achieve greater global food security and reduce poverty. It will also make it possible to ensure that today's high prices for agricultural products are transformed into opportunity for poor farmers. This is vital because, according to the World Bank, growth in farming eliminates poverty twice as much as growth in any other economic sector. Indeed, agriculture remains the primary productive sector in the worlds poorest countries, employing 65 per cent of the working population and, on average, contributing more than 25 per cent to GDP.
But over the past 20 years, support for agricultural development has been declining. Only 4 per cent of public development assistance is now earmarked for agriculture. The European Commission and EU member states are therefore planning to increase their assistance, both through the European Development Fund and by developing new sources of financial support.
Further liberalisation of farm trade will not ensure food security. Faced with the erratic nature of agricultural markets, regulation is needed to soften the impact on poorer countries of volatile food prices. This does not mean that protectionism is the way forward, only that taking account of specific issues that affect international farm trade weather, price volatility, or health risks may be necessary from time to time.
But, in a world where productivity differentials can be as great as one to 1,000, it would be unwise to rely on markets alone to enable the poorest countries to expand their economies.
Nor is it likely that much economic expansion will result from competition between multinational food distributors and producers in countries where famine still stalks the land.
Instead, bringing together outside expertise and local knowledge of the geography and environmental and economic constraints in order to spread risks and share the management of resources and projects is far more likely to help poor countries achieve food independence.
It was such an approach that, in less than 20 years, helped postwar Europe achieve food sovereignty. Countries that have protected their agricultural development from the threats posed by international markets such as India or Vietnam have achieved substantial reductions in agricultural poverty.
The time has also come to prioritise agriculture in order to ensure growth with a more human face. At the heart of the EU, France wants to play its part in a collective effort that is fast becoming a major issue for us all.
Michel Barnier is Frances Minister of Agriculture and Fisheries, and was formerly Frances Foreign Minister and EU Commissioner in charge of Regional Policy and the Reform of European Institutions.
Project Syndicate
MICHEL BARNIER
PARIS
Monday, November 24, 2008
BUT there is more to finding a solution than simply identifying those nations that are capable of feeding the rest of the world. It is increasingly urgent that every nation gain the means of feeding itself. This means that agriculture should become an international priority, with the poorest countries helped to safeguard the security and independence of their food supplies.
Countries and organisations are already mobilising. The United Nations Food and Agriculture Organisation argues that rising food prices could lead to increasing global conflicts. The Davos World Economic Forum ranks food insecurity as a major risk to humanity. The World Bank has forcefully emphasised the importance of agriculture to jump-starting economic expansion and breaking the cycle of poverty. UN Secretary Ban Ki-moon has created a working group to define a common plan of action, and Frances President Nicolas Sarkozy has proposed a global partnership for food.
Sarkozy's proposed partnership has three pillars. First, an international group should draft a worldwide strategy for food security. Second, an international scientific platform should be charged with evaluating the worlds agricultural situation, sending out warnings of upcoming crises, and possibly facilitating governments adoption of political and other strategic tools to deal with food crises.
Finally, the international finance community, despite its current problems, must be mobilised.
The reliability and size of the European Unions farm output means that it can and should play the role of regulator in global markets. If Europe cut back on its agricultural production, the increase in its own food imports would contribute significantly to a worldwide increase in food prices. This makes it imperative that EU food production levels be held steady for the sake of Europeans and of people in the worlds poorest countries.
But Europe cannot build up its own agriculture to the detriment of the less fortunate. So the EU must harmonise its policies with poorer countries. At present, export subsidies and support payments represent less than 1 per cent of the European agricultural budget, and the EU has undertaken to eliminate them once it receives reciprocal undertakings from major food-exporting countries. Since 2001, with the Everything but Arms initiative, all products from poor countries with the exception of weapons and munitions can enter the EU single market on a duty-free basis. This has led to the EU becoming the primary market for the poorest countries products.
The EU is also developing ways to respond to new global challenges through changes to its Common Agricultural Policy. This was reflected in the decision to suspend the set aside rule that requires a proportion of agricultural land to lie fallow. Now the EU is preparing to increase dairy quotas progressively, and evaluating the impact on world markets of its decisions regarding bio-fuels.
But Europes focus must be on encouraging the development of local agriculture. Doing so is the only way to achieve greater global food security and reduce poverty. It will also make it possible to ensure that today's high prices for agricultural products are transformed into opportunity for poor farmers. This is vital because, according to the World Bank, growth in farming eliminates poverty twice as much as growth in any other economic sector. Indeed, agriculture remains the primary productive sector in the worlds poorest countries, employing 65 per cent of the working population and, on average, contributing more than 25 per cent to GDP.
But over the past 20 years, support for agricultural development has been declining. Only 4 per cent of public development assistance is now earmarked for agriculture. The European Commission and EU member states are therefore planning to increase their assistance, both through the European Development Fund and by developing new sources of financial support.
Further liberalisation of farm trade will not ensure food security. Faced with the erratic nature of agricultural markets, regulation is needed to soften the impact on poorer countries of volatile food prices. This does not mean that protectionism is the way forward, only that taking account of specific issues that affect international farm trade weather, price volatility, or health risks may be necessary from time to time.
But, in a world where productivity differentials can be as great as one to 1,000, it would be unwise to rely on markets alone to enable the poorest countries to expand their economies.
Nor is it likely that much economic expansion will result from competition between multinational food distributors and producers in countries where famine still stalks the land.
Instead, bringing together outside expertise and local knowledge of the geography and environmental and economic constraints in order to spread risks and share the management of resources and projects is far more likely to help poor countries achieve food independence.
It was such an approach that, in less than 20 years, helped postwar Europe achieve food sovereignty. Countries that have protected their agricultural development from the threats posed by international markets such as India or Vietnam have achieved substantial reductions in agricultural poverty.
The time has also come to prioritise agriculture in order to ensure growth with a more human face. At the heart of the EU, France wants to play its part in a collective effort that is fast becoming a major issue for us all.
Michel Barnier is Frances Minister of Agriculture and Fisheries, and was formerly Frances Foreign Minister and EU Commissioner in charge of Regional Policy and the Reform of European Institutions.
Project Syndicate
Talking crisis in rising Asia
Talking crisis in rising Asia
DAVID BURTON
DHAKA
Monday, November 24, 2008
THE global financial turmoil has intensified in recent weeks, and the world economy is entering a deep and protracted slowdown. Despite bold actions in US and Europe to tackle the crisis, credit is likely to remain constrained for some time, as financial institutions continue to reduce leverage, while growth in industrial countries is expected to be negative next year. What does this mean for Asia? And what can be done to limit the impact on the region?
Despite emerging Asia's strong fundamentals — notably its substantial cushion in official reserves and robust corporate and banking sector balance sheets (and limited exposure to US sub-prime mortgages and structured credit products) — any hope that the region would escape the crisis largely unscathed has evaporated.
Weak global growth will depress demand for Asia's exports; indeed a significant export slowdown is already underway. And global financial turmoil is making itself felt strongly in the region, including through much tighter funding conditions, more volatile capital flows, sharply depressed equity prices, weakening currencies, and higher sovereign and bank spreads.
Looking ahead, slowing domestic economies (and in some cases, cooling housing markets) will likely raise pressures on corporates, contributing to a rise in bad loans and credit costs for banks, and risking an adverse cycle of a tightening of credit conditions and deteriorating economic growth.
The IMF's Asia and Pacific Regional Economic Outlook, forthcoming early next week projects a significant slowdown across the region, with growth falling well below trend in almost all countries. While emerging Asia is expected to escape the sort of full-fledged recession now expected for the US, EU, and Japan, risks — notably from the global environment are large and clearly to the downside.
Policymakers in the region have responded to the worsening economic environment with a range of measures. Several governments have broadened or increased guarantees on bank deposits or other liabilities, while central banks have taken steps to provide both domestic and foreign currency liquidity on an emergency basis. The focus of monetary policy in the region has been shifted decisively to supporting growth, and a number of fiscal stimulus packages have been adopted or announced.
These efforts should all help limit the damage to the region, but going forward, more will need to be done, at both the global and national levels. At last weekend's G-20 Summit in Washington, Asian countries played a key role — in line with their growing economic power — in developing an international roadmap for containing the current crisis and avoiding future ones. And national policies will play a critical role in protecting core financial institutions and softening the economic slowdown.
First, Asian policymakers need to continue to focus on ensuring financial stability and the functioning of credit markets. Despite the financial stresses, conventional bank lending in the region has held up reasonably well so far and policy-makers need to stand ready to minimise the tightening of overall credit conditions and its spillovers to the economy.
Monetary authorities will need to continue to supply their banking systems with adequate domestic and foreign exchange liquidity; develop contingency plans to extend guarantees and recapitalise banks, if necessary; and consider steps to support trade credit, should serious difficulties emerge. In all this, transparency and communication will be key, to allow both citizens and global investors to understand what is being done and why.
Second, monetary policy in almost all countries in the region should maintain an accommodative bias. With weakening domestic demand and lower commodities prices contributing to sharply reduced inflation risks, monetary policy should now be aimed squarely at supporting growth. However, with inflation rates still above target in some countries, communication by central banks regarding the economic outlook and the expected path of inflation will play a key role in anchoring expectations.
Third, fiscal policy can play a key role. Given the progress with fiscal consolidation in the region, most countries have room to use fiscal policy to support growth, albeit to varying degrees.
While the best approach will vary across countries, fiscal stimulus is most effective when it is timely, temporary, and targeted to purposes providing the biggest "bang for the buck". Infrastructure spending can be part of the mix, provided that projects are high quality and can begin to be implemented quickly.
Fourth, intervention in the foreign exchange markets should be limited. A number of regional currencies have weakened sharply since September. While some intervention may be warranted to smooth excess exchange rate volatility and to address possible overshooting, sustained one-sided intervention may backfire, resulting in larger and more disruptive adjustments later.
Moreover, given the potential need for further foreign exchange liquidity provision in some countries, international reserves should be marshalled for their most critical purposes.
Finally, despite Asia's generally strong fundamentals and appropriate policy response so far, it cannot be ruled out, especially if the global financial crisis intensifies, that some Asian economies could experience liquidity difficulties.
The international community needs to stand ready to provide large-scale and rapid financial assistance in those circumstances.
The IMF is ready to do just that, and has already moved quickly to help emerging market countries in other regions. Last month, the Fund introduced a new short-term liquidity facility for countries with sound policies but which are facing short-term balance of payments pressures, and is moving to increase the pool of resources available to it.
Moreover, substantial foreign exchange swaps are already available to Asean +3 countries under the Chiang Mai Initiative, and there have been discussions to increase these amounts and step up regional policy coordination more broadly.
So, while the period ahead will undoubtedly be a difficult one, Asia's strong fundamentals, coupled with a focused and pro-active policy stance should limit the damage. Given Asia's role in recent years as a global engine of growth — the region contributed more than half of global growth in recent years — an effective policy response will be critical both within the region and for the global economy.
David Burton is Director, Asia and Pacific Department, IMF.
The Daily Star/ANN
DAVID BURTON
DHAKA
Monday, November 24, 2008
THE global financial turmoil has intensified in recent weeks, and the world economy is entering a deep and protracted slowdown. Despite bold actions in US and Europe to tackle the crisis, credit is likely to remain constrained for some time, as financial institutions continue to reduce leverage, while growth in industrial countries is expected to be negative next year. What does this mean for Asia? And what can be done to limit the impact on the region?
Despite emerging Asia's strong fundamentals — notably its substantial cushion in official reserves and robust corporate and banking sector balance sheets (and limited exposure to US sub-prime mortgages and structured credit products) — any hope that the region would escape the crisis largely unscathed has evaporated.
Weak global growth will depress demand for Asia's exports; indeed a significant export slowdown is already underway. And global financial turmoil is making itself felt strongly in the region, including through much tighter funding conditions, more volatile capital flows, sharply depressed equity prices, weakening currencies, and higher sovereign and bank spreads.
Looking ahead, slowing domestic economies (and in some cases, cooling housing markets) will likely raise pressures on corporates, contributing to a rise in bad loans and credit costs for banks, and risking an adverse cycle of a tightening of credit conditions and deteriorating economic growth.
The IMF's Asia and Pacific Regional Economic Outlook, forthcoming early next week projects a significant slowdown across the region, with growth falling well below trend in almost all countries. While emerging Asia is expected to escape the sort of full-fledged recession now expected for the US, EU, and Japan, risks — notably from the global environment are large and clearly to the downside.
Policymakers in the region have responded to the worsening economic environment with a range of measures. Several governments have broadened or increased guarantees on bank deposits or other liabilities, while central banks have taken steps to provide both domestic and foreign currency liquidity on an emergency basis. The focus of monetary policy in the region has been shifted decisively to supporting growth, and a number of fiscal stimulus packages have been adopted or announced.
These efforts should all help limit the damage to the region, but going forward, more will need to be done, at both the global and national levels. At last weekend's G-20 Summit in Washington, Asian countries played a key role — in line with their growing economic power — in developing an international roadmap for containing the current crisis and avoiding future ones. And national policies will play a critical role in protecting core financial institutions and softening the economic slowdown.
First, Asian policymakers need to continue to focus on ensuring financial stability and the functioning of credit markets. Despite the financial stresses, conventional bank lending in the region has held up reasonably well so far and policy-makers need to stand ready to minimise the tightening of overall credit conditions and its spillovers to the economy.
Monetary authorities will need to continue to supply their banking systems with adequate domestic and foreign exchange liquidity; develop contingency plans to extend guarantees and recapitalise banks, if necessary; and consider steps to support trade credit, should serious difficulties emerge. In all this, transparency and communication will be key, to allow both citizens and global investors to understand what is being done and why.
Second, monetary policy in almost all countries in the region should maintain an accommodative bias. With weakening domestic demand and lower commodities prices contributing to sharply reduced inflation risks, monetary policy should now be aimed squarely at supporting growth. However, with inflation rates still above target in some countries, communication by central banks regarding the economic outlook and the expected path of inflation will play a key role in anchoring expectations.
Third, fiscal policy can play a key role. Given the progress with fiscal consolidation in the region, most countries have room to use fiscal policy to support growth, albeit to varying degrees.
While the best approach will vary across countries, fiscal stimulus is most effective when it is timely, temporary, and targeted to purposes providing the biggest "bang for the buck". Infrastructure spending can be part of the mix, provided that projects are high quality and can begin to be implemented quickly.
Fourth, intervention in the foreign exchange markets should be limited. A number of regional currencies have weakened sharply since September. While some intervention may be warranted to smooth excess exchange rate volatility and to address possible overshooting, sustained one-sided intervention may backfire, resulting in larger and more disruptive adjustments later.
Moreover, given the potential need for further foreign exchange liquidity provision in some countries, international reserves should be marshalled for their most critical purposes.
Finally, despite Asia's generally strong fundamentals and appropriate policy response so far, it cannot be ruled out, especially if the global financial crisis intensifies, that some Asian economies could experience liquidity difficulties.
The international community needs to stand ready to provide large-scale and rapid financial assistance in those circumstances.
The IMF is ready to do just that, and has already moved quickly to help emerging market countries in other regions. Last month, the Fund introduced a new short-term liquidity facility for countries with sound policies but which are facing short-term balance of payments pressures, and is moving to increase the pool of resources available to it.
Moreover, substantial foreign exchange swaps are already available to Asean +3 countries under the Chiang Mai Initiative, and there have been discussions to increase these amounts and step up regional policy coordination more broadly.
So, while the period ahead will undoubtedly be a difficult one, Asia's strong fundamentals, coupled with a focused and pro-active policy stance should limit the damage. Given Asia's role in recent years as a global engine of growth — the region contributed more than half of global growth in recent years — an effective policy response will be critical both within the region and for the global economy.
David Burton is Director, Asia and Pacific Department, IMF.
The Daily Star/ANN
Sunday, November 23, 2008
Brunei's second airport may be built in Belait
Brunei's second airport may be built in Belait
UBAIDILLAH MASLI
BANDAR SERI BEGAWAN
Sunday, November 23, 2008
BRUNEI may build its second international airport in the Belait district as part of the major revamp of development projects planned in the district under the National Land Use Master Plan 2006-2025 (NLUMP).
The feasibility of the second airport is currently being assessed by the Department of Civil Aviation, is currently looking into the existing Brunei International Airport and whether future international and regional air traffic will require either the expansion of the existing airport or the establishment of a new one.
This was said yesterday at a workshop on the preparation of the Belait District Development Plan 2006-2025 by a local engineering consultant, Vernon Yen, who further said that besides the airport assessment, there is possibility of introducing another highway within the interior of Belait in the next 20 years.
In his "Proposals and Strategies Report" presented during the workshop at the Work Skills Testing and Training Centre under the Ministry of Development, Yen said that the new highway would promote development in the interior of Belait, spreading the development away from the coastline where most of the district's existing development was focused.
The highway would form a section of the second national highway, which aims at enhancing the connectivity among the districts. Increasing the connectivity through the new national highway is hoped to improve the social interaction among the people of Brunei.
There was also a notion to connect the proposed highway to Miri at Marudi with the aim of attracting tourists visiting the nearby Gunung Mulu National Park in the sultanate.
In determining the NLUMP for the Belait district, four alternative spatial development strategies were considered, namely the coastal linear trend, urban consolidation, district centralisation and new national growth pole. From these four strategies, the best components of each were derived to produce the most feasible and preferred strategy for the Belait district.
The strategic growth centres option was proposed, where the strategy could strike a balance between coastal growth trends and the need for urban consolidation. It would also promote rural growth and opportunities in targeting investments and reversing the flow of rural-urban migration. One of the main aspects of the strategy was the potential of a future western growth pole with Kg Sungai Liang, proposed as another hub for urbanisation.
The strategy will also stimulate growth in the Labi Corridor, with Labi as a rural centre concentrating on agricultural productivity and food security. The development of the Labi Corridor would also improve connectivity and reduce isolation. Labi could also be developed into an eco-tourism hub due to its proximity to a number of forest reserves.
With Belait's population projected to reach 85,800 residents and nearly 16,000 housing units by the year 2025, Yen said that some of the major challenges of implementing the district plan included the adoption of relevant legislation and the coordination of all agencies involved.
The workshop, organised by the Department of Town and Country Planning (TCP) under the Ministry of Development, was attended by representatives from more than 40 relevant government departments and private agencies.
The main objective of the workshop was to receive feedback from the parties involved in the strategies and issues of land use as well as the development of Belait district.
After the presentation, the participants were split up into discussion groups where they highlighted their concerns on the district plan.
It was hoped that the workshop will foster closer cooperation among all the parties involved in the development of the Belait district.
The Brunei Times
UBAIDILLAH MASLI
BANDAR SERI BEGAWAN
Sunday, November 23, 2008
BRUNEI may build its second international airport in the Belait district as part of the major revamp of development projects planned in the district under the National Land Use Master Plan 2006-2025 (NLUMP).
The feasibility of the second airport is currently being assessed by the Department of Civil Aviation, is currently looking into the existing Brunei International Airport and whether future international and regional air traffic will require either the expansion of the existing airport or the establishment of a new one.
This was said yesterday at a workshop on the preparation of the Belait District Development Plan 2006-2025 by a local engineering consultant, Vernon Yen, who further said that besides the airport assessment, there is possibility of introducing another highway within the interior of Belait in the next 20 years.
In his "Proposals and Strategies Report" presented during the workshop at the Work Skills Testing and Training Centre under the Ministry of Development, Yen said that the new highway would promote development in the interior of Belait, spreading the development away from the coastline where most of the district's existing development was focused.
The highway would form a section of the second national highway, which aims at enhancing the connectivity among the districts. Increasing the connectivity through the new national highway is hoped to improve the social interaction among the people of Brunei.
There was also a notion to connect the proposed highway to Miri at Marudi with the aim of attracting tourists visiting the nearby Gunung Mulu National Park in the sultanate.
In determining the NLUMP for the Belait district, four alternative spatial development strategies were considered, namely the coastal linear trend, urban consolidation, district centralisation and new national growth pole. From these four strategies, the best components of each were derived to produce the most feasible and preferred strategy for the Belait district.
The strategic growth centres option was proposed, where the strategy could strike a balance between coastal growth trends and the need for urban consolidation. It would also promote rural growth and opportunities in targeting investments and reversing the flow of rural-urban migration. One of the main aspects of the strategy was the potential of a future western growth pole with Kg Sungai Liang, proposed as another hub for urbanisation.
The strategy will also stimulate growth in the Labi Corridor, with Labi as a rural centre concentrating on agricultural productivity and food security. The development of the Labi Corridor would also improve connectivity and reduce isolation. Labi could also be developed into an eco-tourism hub due to its proximity to a number of forest reserves.
With Belait's population projected to reach 85,800 residents and nearly 16,000 housing units by the year 2025, Yen said that some of the major challenges of implementing the district plan included the adoption of relevant legislation and the coordination of all agencies involved.
The workshop, organised by the Department of Town and Country Planning (TCP) under the Ministry of Development, was attended by representatives from more than 40 relevant government departments and private agencies.
The main objective of the workshop was to receive feedback from the parties involved in the strategies and issues of land use as well as the development of Belait district.
After the presentation, the participants were split up into discussion groups where they highlighted their concerns on the district plan.
It was hoped that the workshop will foster closer cooperation among all the parties involved in the development of the Belait district.
The Brunei Times
Friday, November 21, 2008
BSB As 21st Century Capital City
BSB As 21st Century Capital City
By Azlan Othman
Bandar Seri Begawan - Brunei Darussalam is mulling the possibility for the capital city, Bandar Seri Begawan, to have a world-class facility with university campus, first-class condominium and business facilities especially in the field of Islamic finance. It is also hoped that BSB would become a sustainable city for people with an eco-friendly concept.
Permanent Secretary at the Ministry of Home Affairs Dato Paduka Awang Serbini Hj Ali highlighted this to a group of foreign diplomats in the country in a briefing on consultancy services for the preparation of BSB Development Master Plan, yesterday.
BSB has recently expanded its municipal boundary 10 times to cover an area of 100.36 sq km.
The BSB Municipal Department intends to prepare a Bandar Seri Begawan Development Master Plan, which shall be based on its vision and strategic objectives to guide the future development of the capital city.
The government envisions to bring BSB city on par with other world cities and finds the need for a master plan to prepare BSB as a 21st Century capital city to integrate existing new growth centers, rationalize emerging pattern of developments by government and private
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sectors, as well as to ensure that development is carried out in a progressive and sustainable way.
The BSB Development Master plan shall be a comprehensive one providing solid and clear development strategies that will serve as a guidance or reference for the city's future development.
Meanwhile, suitably qualified consultancy firms are being invited to submit their Expression of Interests (EOI) which shall describe in detail the type of relevant skills, experience, levels of expertise or any other capabilities they have to meet the project requirements.
The EOI should also provide information on the firm's experience and track record on similar projects, qualifications and experience of key personnel, including CVs, photographs and reports of sample work.
Expression of Interests together with relevant documents must be submitted not later than December 27, 2008 to the Secretariat, Committee to Appoint Consultants for the Ministry of Home Affairs, 5th floor at JIn James Pearce.
During the briefing, the foreign diplomats asked about the last master plan, which was made in 1997.
It was also revealed that works on the BSB waterfront is now being carried out in stages where parking spaces will be phased-out and the public can utilize the Yayasan and multi storey car park.
Incentives offered by the municipal authorities to foreign consultancy firms like logistics, office, transportation and other assistances were also highlighted.
The proposal for the capital boundary and main zones of the Municipal Department were also highlighted, as well as four plans around the capital namely Kg Ayer improvement plan, Kg Ayer hill park plan, BSB central and Gadong improvement plan area and Subok. -- Courtesy of Borneo Bulletin
By Azlan Othman
Bandar Seri Begawan - Brunei Darussalam is mulling the possibility for the capital city, Bandar Seri Begawan, to have a world-class facility with university campus, first-class condominium and business facilities especially in the field of Islamic finance. It is also hoped that BSB would become a sustainable city for people with an eco-friendly concept.
Permanent Secretary at the Ministry of Home Affairs Dato Paduka Awang Serbini Hj Ali highlighted this to a group of foreign diplomats in the country in a briefing on consultancy services for the preparation of BSB Development Master Plan, yesterday.
BSB has recently expanded its municipal boundary 10 times to cover an area of 100.36 sq km.
The BSB Municipal Department intends to prepare a Bandar Seri Begawan Development Master Plan, which shall be based on its vision and strategic objectives to guide the future development of the capital city.
The government envisions to bring BSB city on par with other world cities and finds the need for a master plan to prepare BSB as a 21st Century capital city to integrate existing new growth centers, rationalize emerging pattern of developments by government and private
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sectors, as well as to ensure that development is carried out in a progressive and sustainable way.
The BSB Development Master plan shall be a comprehensive one providing solid and clear development strategies that will serve as a guidance or reference for the city's future development.
Meanwhile, suitably qualified consultancy firms are being invited to submit their Expression of Interests (EOI) which shall describe in detail the type of relevant skills, experience, levels of expertise or any other capabilities they have to meet the project requirements.
The EOI should also provide information on the firm's experience and track record on similar projects, qualifications and experience of key personnel, including CVs, photographs and reports of sample work.
Expression of Interests together with relevant documents must be submitted not later than December 27, 2008 to the Secretariat, Committee to Appoint Consultants for the Ministry of Home Affairs, 5th floor at JIn James Pearce.
During the briefing, the foreign diplomats asked about the last master plan, which was made in 1997.
It was also revealed that works on the BSB waterfront is now being carried out in stages where parking spaces will be phased-out and the public can utilize the Yayasan and multi storey car park.
Incentives offered by the municipal authorities to foreign consultancy firms like logistics, office, transportation and other assistances were also highlighted.
The proposal for the capital boundary and main zones of the Municipal Department were also highlighted, as well as four plans around the capital namely Kg Ayer improvement plan, Kg Ayer hill park plan, BSB central and Gadong improvement plan area and Subok. -- Courtesy of Borneo Bulletin
6,000 vacancies of various posts in civil service
6,000 vacancies of various posts in civil service
Switch roles: Sa Bali Abas, the PSD Director General delivering his speech yesterday.Picture: BT/Jefrisalas
BANDAR SERI BEGAWAN
Friday, November 21, 2008
Civil servants must be able to assume tasks of absent staff or unfilled positions
THERE were hushed whispers when Director General of the Public Service Department, Sa Ali Abas, indicated in his opening speech yesterday that there were currently 6,000 vacancies in the various government sectors. Although the director general did not qualify his statement, he clearly indicated the number of posts lying vacant.
The speech was given yesterday in a briefing on the memo issued by the Prime Minister's Office on proper procedures and guidelines on appointment of temporary officers to fill the duties of absent colleagues or vacant positions at the Bertabur Hall of the Ministry of Development.
Speaking on the memo, the director general said that the switching of roles and taking on of tasks left by an absent employee or a unfilled position should be used to the fullest extent by civil servants to gain more experience and a steady hand in their work which will enhance and develop their career.
"The need to continuously develop is essential for an individual so as to keep up with the challenges brought about by globalisation," he said.
He pointed out that, with the current financial turmoil, the world was faced with a greater challenge to overcome constraints. "The need to constantly equip yourself with new skills is crucial to buffer against any economic volatility that may occur," he said.
"This is certain to generate economic benefits as the public sector enhances its operations the efficiency spin-offs can be achieved in the real economy. As Brunei aims to diversify its economic base, the importance of the public sector is indeed crucial as it would be able to facilitate the sustainable growth of the nation."
He added that there were several weaknesses which needed to be ironed out in the current administration including the condition that replacement staff are not allowed to give directives during the absence of an officer. This and several other aspects will be worked on, said Sa Bali Abas.
The responsibility for appointment of replacements lie in the hands of heads or supervisors of each and every department who has to ensure that the appointed officers are capable to take over the tasks to prevent any complaints or misunderstandings.
The director general stressed that the memo should be filled in compliance with the guidelines and added: "The last thing that anyone wants to hear is replacement officers' payment is retracted due to the memo not complying with the standards."
The Brunei Times
Switch roles: Sa Bali Abas, the PSD Director General delivering his speech yesterday.Picture: BT/Jefrisalas
BANDAR SERI BEGAWAN
Friday, November 21, 2008
Civil servants must be able to assume tasks of absent staff or unfilled positions
THERE were hushed whispers when Director General of the Public Service Department, Sa Ali Abas, indicated in his opening speech yesterday that there were currently 6,000 vacancies in the various government sectors. Although the director general did not qualify his statement, he clearly indicated the number of posts lying vacant.
The speech was given yesterday in a briefing on the memo issued by the Prime Minister's Office on proper procedures and guidelines on appointment of temporary officers to fill the duties of absent colleagues or vacant positions at the Bertabur Hall of the Ministry of Development.
Speaking on the memo, the director general said that the switching of roles and taking on of tasks left by an absent employee or a unfilled position should be used to the fullest extent by civil servants to gain more experience and a steady hand in their work which will enhance and develop their career.
"The need to continuously develop is essential for an individual so as to keep up with the challenges brought about by globalisation," he said.
He pointed out that, with the current financial turmoil, the world was faced with a greater challenge to overcome constraints. "The need to constantly equip yourself with new skills is crucial to buffer against any economic volatility that may occur," he said.
"This is certain to generate economic benefits as the public sector enhances its operations the efficiency spin-offs can be achieved in the real economy. As Brunei aims to diversify its economic base, the importance of the public sector is indeed crucial as it would be able to facilitate the sustainable growth of the nation."
He added that there were several weaknesses which needed to be ironed out in the current administration including the condition that replacement staff are not allowed to give directives during the absence of an officer. This and several other aspects will be worked on, said Sa Bali Abas.
The responsibility for appointment of replacements lie in the hands of heads or supervisors of each and every department who has to ensure that the appointed officers are capable to take over the tasks to prevent any complaints or misunderstandings.
The director general stressed that the memo should be filled in compliance with the guidelines and added: "The last thing that anyone wants to hear is replacement officers' payment is retracted due to the memo not complying with the standards."
The Brunei Times
Thursday, November 20, 2008
Global liquidity crisis over: Nomura chief
Global liquidity crisis over: Nomura chief
Not so blue: A man stands in front of glass windows overlooking the Hong Kong harbour yesterday. Picture: AFP
TOKYO
Thursday, November 20, 2008
THE global liquidity crisis appears to be over but much work remains to be done to rebuild the economic damage wrought by months of financial turmoil, the head of Japan's top broker said yesterday.
"The liquidity crisis in the financial world is over. The next step is how to rebuild the real economy," Kenichi Watanabe, chief executive of Nomura Holdings, said.
"This of course involves each country's fiscal spending," he said.
"People are paying attention to how respective governments gun their engines," he said in reference to world leaders pledging at the recent G20 summit to galvanise economic growth.
Global banks and financial markets have been hammered by the credit crunch that began with a wave of defaults on US mortgages.
Watanabe said China would be vital in an Asian economic recovery. "When considering the Asian region as a whole, people's interest lies in how China ignites its engine," he said.
Nomura Holdings, which moved quickly to buy the Asian and European operations of failed Wall Street bank Lehman Brothers, lost about US$1.5 billion in the first half of this financial year because of turmoil in world markets. He said Nomura aims to return to profit "as soon as possible", helped by the acquisition of Lehman's customer base and expertise in financial products.
AFP
Not so blue: A man stands in front of glass windows overlooking the Hong Kong harbour yesterday. Picture: AFP
TOKYO
Thursday, November 20, 2008
THE global liquidity crisis appears to be over but much work remains to be done to rebuild the economic damage wrought by months of financial turmoil, the head of Japan's top broker said yesterday.
"The liquidity crisis in the financial world is over. The next step is how to rebuild the real economy," Kenichi Watanabe, chief executive of Nomura Holdings, said.
"This of course involves each country's fiscal spending," he said.
"People are paying attention to how respective governments gun their engines," he said in reference to world leaders pledging at the recent G20 summit to galvanise economic growth.
Global banks and financial markets have been hammered by the credit crunch that began with a wave of defaults on US mortgages.
Watanabe said China would be vital in an Asian economic recovery. "When considering the Asian region as a whole, people's interest lies in how China ignites its engine," he said.
Nomura Holdings, which moved quickly to buy the Asian and European operations of failed Wall Street bank Lehman Brothers, lost about US$1.5 billion in the first half of this financial year because of turmoil in world markets. He said Nomura aims to return to profit "as soon as possible", helped by the acquisition of Lehman's customer base and expertise in financial products.
AFP
Key to achieving economies of scale to reduce costs, compete globally
Cooperate, advice to shrimp farmers
UBAIDILLAH MASLI
BANDAR SERI BEGAWAN
Thursday, November 20, 2008
Key to achieving economies of scale to reduce costs, compete globally
SHRIMP farmers must cooperate to reduce fragmentation and improve the efficiency of the industry in order to expand and reach economies of scale, said the director of the Fisheries Department.
Hjh Hasnah Ibrahim made the call to local shrimp culture operators yesterday in response to the article, "Realising potential of local shrimp industry," published by The Brunei Times on November 8, 2008.
For local farmers to compete in the global shrimp farming sector, it is necessary for farmers to implement a profitable production model based on a niche product that commands premium prices, the director said in a letter to The Brunei Times.
"They must also implement more efficient production technologies that reduce costs and leverage (on) the strengths of Brunei: a well educated and bilingual workforce, excellent infrastructure and low energy costs," she added.
The Fisheries Department acknowledged the causes of the competitive disadvantages faced by the country's shrimp farmers was the switch in production of Rostris (Litopenaeus stylirostris) from a similar shrimp, Litopenaeus vannamei, but said that there were other factors involved which needed to be considered.
With most of the world shrimp farmers opting for the vannamei, this particular shrimp has become a low-price commodity as result of oversupply and disproportionate drop in price for the small-sized shrimp. Therefore, only low-cost producers were willing to produce large volumes, while experiencing thin profit margins so that they were able to compete in the market via the vannamei.
"This is not a good fit for Brunei," Hjh Hasnah said.
According to the department, Brunei produced less than 1,000 tonnes of shrimp annually, equivalent to less than one per cent of shrimp production of many competing countries. The director said that the lack of economies of scale in the local industry resulted in higher costs of feed and post-larvae.
She went on to say that although Brunei enjoyed lower energy costs than most competing countries, this only made up a small component of the overall operating costs.
Due to underlying factors such as high labour costs, the key issue still remained: "Brunei has higher costs of production than other shrimp farming countries in the region".
As these difficulties have grown, Brunei shrimp farmers have "retreated" from the highly competitive export markets and focused more on the local markets, which have also succumbed to the threat of vannamei, as more of this cheaper variety of shrimp are being imported into Brunei.
The department felt that the answer to the problem was not competing "head-on" with the low-priced commodity but, rather, to restructure the farming sector to reduce costs and generate high-value products.
In this effort, the Fisheries Department in a three-year agreement with US company, Integrated Aquaculture International (IAI), implemented plans to introduce the black tiger shrimp over the past two years. The shrimp, which is also known as the Penaeus monodon, could grow to a much larger size than the other two types of shrimp and could command higher prices in international markets.
However, the monodon had to be selectively bred over several shrimp generations to combat their susceptibility to disease and thus, generating a specific pathogen free (SPF) stock.
The director said that the programme was well under way and the F2 generation of SPF monodon has already been developed.
With the plans to build the Telisai Phase II farm expansion, Brunei's shrimp production could see an increase to 2,000 metric tonnes per year.
This target productivity could achieve the required economies of scale in feed, post-larvae, processing and marketing, the director said.
Apart from their cooperation in developing SPF shrimp, IAI also worked with the department in genetically-improved post-larvae, high-performing feeds, and sustainable farming systems and techniques aimed to produce quality shrimp for premium markets.
"We are hopeful that the new business model will grow, prosper and lead to other high-value spin-offs that will benefit Brunei for years to come," said Hjh Hasnah.
In an interview with a local shrimp farmer, Hj Nasrul Hakim Hj Othman of S Kota Sdn Bhd told The Brunei Times that at present, there was no particular organisation which unites the 13 local shrimp culturers.
However, he said that, under their own initiative, the farmers did meet and work together to collect data and discuss issues faced by the farmers to present to the Fisheries Department.
Hj Nasrul Hakim welcomed the formation of such an organisation but wished the department would emphasise the idea to all the farmers directly on the significance of this cooperation.
The Brunei Times
UBAIDILLAH MASLI
BANDAR SERI BEGAWAN
Thursday, November 20, 2008
Key to achieving economies of scale to reduce costs, compete globally
SHRIMP farmers must cooperate to reduce fragmentation and improve the efficiency of the industry in order to expand and reach economies of scale, said the director of the Fisheries Department.
Hjh Hasnah Ibrahim made the call to local shrimp culture operators yesterday in response to the article, "Realising potential of local shrimp industry," published by The Brunei Times on November 8, 2008.
For local farmers to compete in the global shrimp farming sector, it is necessary for farmers to implement a profitable production model based on a niche product that commands premium prices, the director said in a letter to The Brunei Times.
"They must also implement more efficient production technologies that reduce costs and leverage (on) the strengths of Brunei: a well educated and bilingual workforce, excellent infrastructure and low energy costs," she added.
The Fisheries Department acknowledged the causes of the competitive disadvantages faced by the country's shrimp farmers was the switch in production of Rostris (Litopenaeus stylirostris) from a similar shrimp, Litopenaeus vannamei, but said that there were other factors involved which needed to be considered.
With most of the world shrimp farmers opting for the vannamei, this particular shrimp has become a low-price commodity as result of oversupply and disproportionate drop in price for the small-sized shrimp. Therefore, only low-cost producers were willing to produce large volumes, while experiencing thin profit margins so that they were able to compete in the market via the vannamei.
"This is not a good fit for Brunei," Hjh Hasnah said.
According to the department, Brunei produced less than 1,000 tonnes of shrimp annually, equivalent to less than one per cent of shrimp production of many competing countries. The director said that the lack of economies of scale in the local industry resulted in higher costs of feed and post-larvae.
She went on to say that although Brunei enjoyed lower energy costs than most competing countries, this only made up a small component of the overall operating costs.
Due to underlying factors such as high labour costs, the key issue still remained: "Brunei has higher costs of production than other shrimp farming countries in the region".
As these difficulties have grown, Brunei shrimp farmers have "retreated" from the highly competitive export markets and focused more on the local markets, which have also succumbed to the threat of vannamei, as more of this cheaper variety of shrimp are being imported into Brunei.
The department felt that the answer to the problem was not competing "head-on" with the low-priced commodity but, rather, to restructure the farming sector to reduce costs and generate high-value products.
In this effort, the Fisheries Department in a three-year agreement with US company, Integrated Aquaculture International (IAI), implemented plans to introduce the black tiger shrimp over the past two years. The shrimp, which is also known as the Penaeus monodon, could grow to a much larger size than the other two types of shrimp and could command higher prices in international markets.
However, the monodon had to be selectively bred over several shrimp generations to combat their susceptibility to disease and thus, generating a specific pathogen free (SPF) stock.
The director said that the programme was well under way and the F2 generation of SPF monodon has already been developed.
With the plans to build the Telisai Phase II farm expansion, Brunei's shrimp production could see an increase to 2,000 metric tonnes per year.
This target productivity could achieve the required economies of scale in feed, post-larvae, processing and marketing, the director said.
Apart from their cooperation in developing SPF shrimp, IAI also worked with the department in genetically-improved post-larvae, high-performing feeds, and sustainable farming systems and techniques aimed to produce quality shrimp for premium markets.
"We are hopeful that the new business model will grow, prosper and lead to other high-value spin-offs that will benefit Brunei for years to come," said Hjh Hasnah.
In an interview with a local shrimp farmer, Hj Nasrul Hakim Hj Othman of S Kota Sdn Bhd told The Brunei Times that at present, there was no particular organisation which unites the 13 local shrimp culturers.
However, he said that, under their own initiative, the farmers did meet and work together to collect data and discuss issues faced by the farmers to present to the Fisheries Department.
Hj Nasrul Hakim welcomed the formation of such an organisation but wished the department would emphasise the idea to all the farmers directly on the significance of this cooperation.
The Brunei Times
Brunei Sept inflation tame versus Asean peers
Brunei Sept inflation tame versus Asean peers
DEBBIE TOO
BANDAR SERI BEGAWAN
Thursday, November 20, 2008
INFLATION eased a minuscule 0.3 per cent in September from August, but jumped a hefty 3.1 per cent from the same period last year.
The Department of Economic Planning and Development said one of the main reasons for Brunei's significantly low inflation rate compared with other Asean countries is the government's subsidy on rice and sugar, petrol and diesel, and liquefied petroleum gas.
The state subsidy moderated the consumer price index for the indices for food and non-alcoholic beverages, transport, housing, water and electricity and maintenance.
The department cited Brunei's low electricity and water tariff, the minimal medical consultation fee of $1 and regulated prices of new motor vehicles and infant powdered milk for contributing to the low inflation.
While most of the prices of the major groups remained unchanged, one notable drop in price was seen in clothing and footwear, which dropped by five per cent from the previous month.
According to the report from the department, cheaper prices of ready-made clothing, material for both men and women, including footwear, during the Brunei Grand Sales led to the decline.
An economist who wished to remain anonymous said that this would normally happen after major sales.
"People would buy less and so you see shops lowering the cost of their clothing to maintain their business."
Small prawn, cucumber and ikan puteh prices posted significant price increases, which contributed to the food and non-alcoholic beverages group's increase of 0.7 per cent.
Prices of small prawns rose 20.9 per cent, cucumber prices by 13.7 per cent and ikan puteh by 12.6 per cent.
The local economist said this was mainly due to a large number of businesses and households who were making prawn purchases to prepare for the Hari Raya festivities.
"When a large group of businesses or individuals start buying up prawns, the market will have a lower supply and when there is a low supply of something but the demand is high, the price increases," the economist said.
Notable decreases in the same category of goods include cauliflower by 11.7 per cent and wheat flour by 8.9 per cent.
In other groups, the cost of household goods, services and operation fell by 0.9 per cent as a result of cheaper prices of furniture, floor covering, household furnishings, among others.
The Brunei Times
DEBBIE TOO
BANDAR SERI BEGAWAN
Thursday, November 20, 2008
INFLATION eased a minuscule 0.3 per cent in September from August, but jumped a hefty 3.1 per cent from the same period last year.
The Department of Economic Planning and Development said one of the main reasons for Brunei's significantly low inflation rate compared with other Asean countries is the government's subsidy on rice and sugar, petrol and diesel, and liquefied petroleum gas.
The state subsidy moderated the consumer price index for the indices for food and non-alcoholic beverages, transport, housing, water and electricity and maintenance.
The department cited Brunei's low electricity and water tariff, the minimal medical consultation fee of $1 and regulated prices of new motor vehicles and infant powdered milk for contributing to the low inflation.
While most of the prices of the major groups remained unchanged, one notable drop in price was seen in clothing and footwear, which dropped by five per cent from the previous month.
According to the report from the department, cheaper prices of ready-made clothing, material for both men and women, including footwear, during the Brunei Grand Sales led to the decline.
An economist who wished to remain anonymous said that this would normally happen after major sales.
"People would buy less and so you see shops lowering the cost of their clothing to maintain their business."
Small prawn, cucumber and ikan puteh prices posted significant price increases, which contributed to the food and non-alcoholic beverages group's increase of 0.7 per cent.
Prices of small prawns rose 20.9 per cent, cucumber prices by 13.7 per cent and ikan puteh by 12.6 per cent.
The local economist said this was mainly due to a large number of businesses and households who were making prawn purchases to prepare for the Hari Raya festivities.
"When a large group of businesses or individuals start buying up prawns, the market will have a lower supply and when there is a low supply of something but the demand is high, the price increases," the economist said.
Notable decreases in the same category of goods include cauliflower by 11.7 per cent and wheat flour by 8.9 per cent.
In other groups, the cost of household goods, services and operation fell by 0.9 per cent as a result of cheaper prices of furniture, floor covering, household furnishings, among others.
The Brunei Times
Tuesday, November 18, 2008
Finance summit ends up with mild action
Finance summit ends up with mild action
MARTIN KHOR
KUALA LUMPUR
Tuesday, November 18, 2008
LEADERS of 20 countries met at the Finance Summit in Washington last Friday and Saturday and agreed to take a wide range of actions to counter the world economic recession and prevent future financial crisis like the one that almost engulfed the developed countries financial system.
It was quite striking how some of the actions proposed especially about the need to regulate financial speculation and cross-border capital flows are similar to the proposals that Malaysia had made ten years ago in the midst of the Asian financial crisis.
At that time, Malaysian leaders were heavily criticised for the then unorthodox policies such as lowering interest rates, boosting government spending, fixing the exchange rate and imposing controls over the outflow of portfolio capital.
Malaysian officials also advocated international financial reform, especially control over currency speculation, regulating the activities of hedge funds and credit agencies, and reducing the leverage that banks give in loans to speculators. These proposals were made at the meetings of the International Monetary Fund and at the United Nation's financing-for-development summit process. But the proposals were rejected outright.
For the next decade, the activities of the hedge funds multiplied, further deregulation took place and more and new financial instruments and products were introduced, such as the mortgage-backed securities that turned sour and sparked the problems that snowballed into the greatest financial crisis in 60 years.
Now that the crisis has taken place in the very heart of the financial system the United States and Europe the Western political leaders are at last paying close attention to its causes and to the solutions.
Egged on by France, the United States President George W. Bush hosted the Group of 20 to the two-day summit to discuss the crisis.
The group comprises the major Western countries, Japan, and several developing countries including China, India, Brazil, Indonesia, South Korea and South Africa.
Many developing countries are unhappy that an exclusive and unelected small group of countries have been invited to make global financial policy. They have advocated that the reform discussion be held within the United Nations instead.
But the US and Europe have so far rejected this role for the UN, despite its holding an international financing-for-development conference at the end of this month. And so it was the G20 which were convened for last weeks summit.
The Summit Declaration identified the root cause of the crisis as the market players seeking higher yield without appreciating the risks nor due diligence.
Other causes were weak underwriting standards, unsound risk management practices, complex and opaque financial products and excessive leverage.
Policy makers, regulators and supervisors in some advanced countries did not appreciate and address the risks building up in financial markets, keep pace with financial innovation or take into account the systemic ramifications of regulatory actions, said the declaration.
It then listed a set of principles to guide future policies. These included strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation and reforming international financial institutions.
The leaders also pledged their commitment to an open global economy, to reject trade protectionism and to try again to make progress in the WTOs Doha negotiations.
The declaration came with an action plan for reform. Its proposals included revamping accountancy standards, a review of present national regulations in banking, securities and insurance and proposals to improve them.
It added that credit agencies must abide by high standards and avoid conflict of interest. Banks must have adequate capital while new standards for capital requirements for their structured credit and securitisation activities.
Under international cooperation, the declaration also asked supervisors to set up supervisory colleges for all major cross-border financial institutions, and to strengthen cross-border crisis management arrangements.
On reforming international financial institutions, the declaration said the IMF should take the leading role in drawing lessons from the crisis and must review its lending instruments. Developing countries get a mention here. The leaders said they would explore ways to restore access to credit and resume capital flows for emerging and developing countries, which in turn should have greater voice and representation.
The advisory role of the IMF is also to be strengthened.
The Summits missing leader was Barrack Obama, who cleverly stayed away as after all this was Bush's show.
Thus, the summit and its declaration had the feel of being tentative, as it will have to wait for Obama to take actions for the US. Thus this was only an initial Summit.
Some actions agreed on are scheduled to complete by March 31 while other actions have only been proposed but when they are to be implemented is not stated.
There is thus to be a follow-up summit a more important one around April. By then it will be clear how much deeper in recession the world will be in.
The actions listed in the Declaration are mild for example, measures to regulate hedge funds and to stabilise exchange rates of different countries are missing and will likely prove inadequate for dealing with the crisis.
The Star/ANN
MARTIN KHOR
KUALA LUMPUR
Tuesday, November 18, 2008
LEADERS of 20 countries met at the Finance Summit in Washington last Friday and Saturday and agreed to take a wide range of actions to counter the world economic recession and prevent future financial crisis like the one that almost engulfed the developed countries financial system.
It was quite striking how some of the actions proposed especially about the need to regulate financial speculation and cross-border capital flows are similar to the proposals that Malaysia had made ten years ago in the midst of the Asian financial crisis.
At that time, Malaysian leaders were heavily criticised for the then unorthodox policies such as lowering interest rates, boosting government spending, fixing the exchange rate and imposing controls over the outflow of portfolio capital.
Malaysian officials also advocated international financial reform, especially control over currency speculation, regulating the activities of hedge funds and credit agencies, and reducing the leverage that banks give in loans to speculators. These proposals were made at the meetings of the International Monetary Fund and at the United Nation's financing-for-development summit process. But the proposals were rejected outright.
For the next decade, the activities of the hedge funds multiplied, further deregulation took place and more and new financial instruments and products were introduced, such as the mortgage-backed securities that turned sour and sparked the problems that snowballed into the greatest financial crisis in 60 years.
Now that the crisis has taken place in the very heart of the financial system the United States and Europe the Western political leaders are at last paying close attention to its causes and to the solutions.
Egged on by France, the United States President George W. Bush hosted the Group of 20 to the two-day summit to discuss the crisis.
The group comprises the major Western countries, Japan, and several developing countries including China, India, Brazil, Indonesia, South Korea and South Africa.
Many developing countries are unhappy that an exclusive and unelected small group of countries have been invited to make global financial policy. They have advocated that the reform discussion be held within the United Nations instead.
But the US and Europe have so far rejected this role for the UN, despite its holding an international financing-for-development conference at the end of this month. And so it was the G20 which were convened for last weeks summit.
The Summit Declaration identified the root cause of the crisis as the market players seeking higher yield without appreciating the risks nor due diligence.
Other causes were weak underwriting standards, unsound risk management practices, complex and opaque financial products and excessive leverage.
Policy makers, regulators and supervisors in some advanced countries did not appreciate and address the risks building up in financial markets, keep pace with financial innovation or take into account the systemic ramifications of regulatory actions, said the declaration.
It then listed a set of principles to guide future policies. These included strengthening transparency and accountability, enhancing sound regulation, promoting integrity in financial markets, reinforcing international cooperation and reforming international financial institutions.
The leaders also pledged their commitment to an open global economy, to reject trade protectionism and to try again to make progress in the WTOs Doha negotiations.
The declaration came with an action plan for reform. Its proposals included revamping accountancy standards, a review of present national regulations in banking, securities and insurance and proposals to improve them.
It added that credit agencies must abide by high standards and avoid conflict of interest. Banks must have adequate capital while new standards for capital requirements for their structured credit and securitisation activities.
Under international cooperation, the declaration also asked supervisors to set up supervisory colleges for all major cross-border financial institutions, and to strengthen cross-border crisis management arrangements.
On reforming international financial institutions, the declaration said the IMF should take the leading role in drawing lessons from the crisis and must review its lending instruments. Developing countries get a mention here. The leaders said they would explore ways to restore access to credit and resume capital flows for emerging and developing countries, which in turn should have greater voice and representation.
The advisory role of the IMF is also to be strengthened.
The Summits missing leader was Barrack Obama, who cleverly stayed away as after all this was Bush's show.
Thus, the summit and its declaration had the feel of being tentative, as it will have to wait for Obama to take actions for the US. Thus this was only an initial Summit.
Some actions agreed on are scheduled to complete by March 31 while other actions have only been proposed but when they are to be implemented is not stated.
There is thus to be a follow-up summit a more important one around April. By then it will be clear how much deeper in recession the world will be in.
The actions listed in the Declaration are mild for example, measures to regulate hedge funds and to stabilise exchange rates of different countries are missing and will likely prove inadequate for dealing with the crisis.
The Star/ANN
Indonesia's reasons to smile
Indonesia's reasons to smile
DR TERRY LACEY
JAKARTA
Tuesday, November 18, 2008
MUSTIKA Ratu, the leading Indonesian cosmetics company, is smiling because as consumers fall away from expensive brands like L'Oreal they head down-market, as reported recently in The Jakarta Post (11/13/08). So in the first nine months of 2008 Mustika generated US$19.43 million ($29 million) of revenue, up 23 per cent on 2007.
This middle and down market cosmetics company expects to hit 20 per cent of its revenue on exports this year, to hold its Western markets despite recession because budget conscious consumers will stay with them and to build new export markets in the next few years in Asia, Europe (probably in Eastern Europe) and in the Middle East.
From the latest seminar in Jakarta on "Investment Prospects in the Upcoming Election Year" run by the Bisnis Indonesia newspaper group in Jakarta on November 13 the economic prospects for Indonesia for 2009 look mixed, but by no means all negative.
Economic growth can still reach 5 or 6 per cent in 2009 and the country may not need to use the World Bank standby loan of US$2 billion, triggered if growth falls below 5.8 per cent.
The latest economic projections from the UK Economic Intelligence Unit (EIU) arguing a growth rate for Indonesia of only 3.7 per cent are much lower than those of local economists.
The projection seems to underestimate local strengths and perhaps reflects a mechanistic Eurocentric model. The EIU projects global recession (based on global growth but under 2.5 per cent) whereas local economists say Southern countries face a downturn induced by a Western recession, not a global recession.
There is no agreed definition of a global recession. It is not based on the agreed definition for a national recession, which is two consecutive quarters with negative growth.
The definition of global recession now put forward by the EIU (below 2.5 per cent growth) and the IMF (below 3 per cent) seems to be a way of taking the continuing relative success of Southern economies to facilitate a contradictory twin track argument. You are in the same position as us so give the liquidity you have and we don't. We may all be in the same boat but we are not in the same position. Those demanding access to Southern liquidity now were the ones who maintained a near political monopoly over the Bretton Woods system.
Some economists from G7 countries, faced with the end of its role as an exclusive global economic in-group seems to be attempting to globalise the concept of recession for their own political advantage rather than taking a more positive approach to mobilise the G20 to help get the world economy going again, as UK Prime Minister Gordon Brown has suggested.
They seem determined to have one more try to subordinate the southern economies to the failed formulas of the old system. Southern political and economic leaders are deeply suspicious of the financial logic now being pursed by the IMF and fear it represents the replication of the mistakes it made during the 1998 Asian crash.
Southern countries, economists and politicians are increasingly fed up with mechanistic Eurocentric economic modelling that's seems designed to drag Southern economies down the same hole into which those of the West have already fallen.
And local stockbrokers trying to talk down confidence in the Indonesian banks with panic SMS messages in order to make money are likely to get themselves arrested (one was two days ago), while crooked bankers in Indonesia are also ending up in jail.
Indonesia got the IMF treatment once (in 1998) and if it needs a loan this time to finance economic counter-measures against the downturn then it will take a standby loan from the World Bank and on different terms from those of the IMF. God help Iceland, Hungary and Pakistan if the IMF does to them what it did to Indonesia last time.
Indonesia is now among the top 20 economies in the world (and on the UN Security Council) and its position within the G20 is assured by continuing growth rates. It is overtaking Belgium and Sweden and will overtake Turkey to become the largest Muslim-led economy in the world.
It is likely to keep growing and then join the top ten economies in the world sometime between 2020 and 2025. Indonesia is on the move, despite still having too much poverty and under-development. As long as it stays stable, with a strong democracy and gradually improving economic and financial management, then it will stay on track.
Indonesia still lacks confidence and has not fully recovered from the 1998 banking crash, when it took a greater hit because the IMF medicine initially made the illness worse.
However its economic results now speak for themselves and the country has much improved economic and financial leadership under the Government of President Susilo Bambang Yudhoyono and its formidable Minister of Finance and Acting Coordinating Minister for Economic Affairs, Sri Mulyani Indrawati.
If Western leaders could see local Indonesian data on banks and business applied to their own countries, with 2008 growth at 6.3 per cent, low non performing loans in the banking system (around 3 per cent ), US$50 billions cash of foreign reserves, US$10 billion invested abroad and US$60 billions of inward investment, then they would be over the moon.
Current newspaper headlines in Indonesia point to plenty of good news in this giant archipelagic country, five hours across on a jumbo jet.
Seen from Jakarta, Indonesia, the ups and downs of Wall Street and Main Street in the United States are a long way away and London, Paris and Berlin are not much nearer. But the cold winds of the Western recession are affecting Indonesian export markets and having some negative impacts on the financial system and the real economy. However there is absolutely no chance of a national recession here. Although many Southern countries will suffer a downturn most are unlikely to go into national recession, if the economic news in Indonesia is anything to go by. Local news headlines are about declining growth in some sectors and additional risks to be managed. But some companies are doing better because of the worldwide downturn and there is an opportunity to focus on strengthening the economic grass roots here while the West takes two years to recover. Paradoxically the more integrated, globalised and Westernised an economy is, the more likely it will be to join the Western countries in a full recession, so Singapore may have a recession while Indonesia will not.
Bank of Indonesia Deputy Governor Muliaman D Hadad warns that the rate of non performing loans could go up, because of fluctuations in commodity prices, especially oil palm. Also that the growth in bank lending may decline from 33 per cent in 2008 to 22 per cent in 2009, but that the latter target is perfectly realistic.
Meanwhile Ramzi A Zuhdi, Bank Indonesia director of shariah banking, points out that the shariah banking sector is expected to grow by 20 per cent in terms of assets and 30 per cent in terms of loans in 2009. Indonesian shariah banking will have grown in this current year by 35 per cent in terms of deposits and 26 per cent in terms of assets and lending. In Indonesia shariah banking is under-developed and has a long way to go, but its expansion appears to be almost 100 per cent insulated from the Western recession.
Local front page financial news has been dominated by the stock market crash in the first week of August and the ensuing saga, like a trip-roaring novel on high finance and intrigue, of the renowned Indonesian conglomerate, the Bakrie Group. But Bakrieland is not Indonesia. It's just a part of the picture but not central to the new fundamentals. Indonesia has a self-generating economy sustained 65 per cent by consumption, and a huge and growing number of SMEs, backed by a large +US$100 billion state budget, and a strengthening tax base.
The stock market crash of the Bakrie Group and its Herculean efforts to sell off a 35 per cent stake of the shares in the Bumi Resources coal company, said to be worth US$1.3 billion, but subject to plummeting share prices in the last month, attracted rival offers from Northstar Equity Partners, a US buyer lined up with local Indonesian State Owned Enterprises, versus an offer from San Miguel Corp, the largest food and beverage conglomerate in the Philippines, which also has heavy clout in Asean and global reach.
This story tended to dominate the Indonesian headlines and the trades on the Stock Exchange. But this will not determine the future of the Indonesian economy.
What it tells us about fundamentals is of more importance. Indonesia has substantial resources including huge coal reserves. It has an under-developed energy sector requiring an additional 40,000 Mwe of power by 2025, with large potential for hydro power, geothermal and renewable energy and biofuels. Indonesia needs US$100 billion of private investment over ten years, half of it for energy.
If Indonesia is to continue to grow at between 5 and 6 per cent, or to push the growth rate up to 7 per cent after 2010, then what is needed is less focus on the adventures of a few politically connected oligarchic families who previously dominated the economy, along with the State Owned Enterprises, and more focus on strengthening SMEs in the decentralised provinces, right down to community level, to mobilise the coalition that can put Indonesia into the top ten economies in the world.
Many Southern countries are now sympathetic to what UK Prime Minister, Gordon Brown, says is needed. To invest and finance our way out of trouble, and to mobilise the wealth and liquidity of Brazil, Russia, India, China, (the BRICs) and of Asia, the Middle East and the G20 to get the world moving again. Working together on this basis to save the world economy and help each other is a great idea and Southern public opinion will support this, but subject to one political condition.
This means the restructuring of the world's financial architecture and economic management, taking account of the new global balance of power. That's the deal.
The Brunei Times
DR TERRY LACEY
JAKARTA
Tuesday, November 18, 2008
MUSTIKA Ratu, the leading Indonesian cosmetics company, is smiling because as consumers fall away from expensive brands like L'Oreal they head down-market, as reported recently in The Jakarta Post (11/13/08). So in the first nine months of 2008 Mustika generated US$19.43 million ($29 million) of revenue, up 23 per cent on 2007.
This middle and down market cosmetics company expects to hit 20 per cent of its revenue on exports this year, to hold its Western markets despite recession because budget conscious consumers will stay with them and to build new export markets in the next few years in Asia, Europe (probably in Eastern Europe) and in the Middle East.
From the latest seminar in Jakarta on "Investment Prospects in the Upcoming Election Year" run by the Bisnis Indonesia newspaper group in Jakarta on November 13 the economic prospects for Indonesia for 2009 look mixed, but by no means all negative.
Economic growth can still reach 5 or 6 per cent in 2009 and the country may not need to use the World Bank standby loan of US$2 billion, triggered if growth falls below 5.8 per cent.
The latest economic projections from the UK Economic Intelligence Unit (EIU) arguing a growth rate for Indonesia of only 3.7 per cent are much lower than those of local economists.
The projection seems to underestimate local strengths and perhaps reflects a mechanistic Eurocentric model. The EIU projects global recession (based on global growth but under 2.5 per cent) whereas local economists say Southern countries face a downturn induced by a Western recession, not a global recession.
There is no agreed definition of a global recession. It is not based on the agreed definition for a national recession, which is two consecutive quarters with negative growth.
The definition of global recession now put forward by the EIU (below 2.5 per cent growth) and the IMF (below 3 per cent) seems to be a way of taking the continuing relative success of Southern economies to facilitate a contradictory twin track argument. You are in the same position as us so give the liquidity you have and we don't. We may all be in the same boat but we are not in the same position. Those demanding access to Southern liquidity now were the ones who maintained a near political monopoly over the Bretton Woods system.
Some economists from G7 countries, faced with the end of its role as an exclusive global economic in-group seems to be attempting to globalise the concept of recession for their own political advantage rather than taking a more positive approach to mobilise the G20 to help get the world economy going again, as UK Prime Minister Gordon Brown has suggested.
They seem determined to have one more try to subordinate the southern economies to the failed formulas of the old system. Southern political and economic leaders are deeply suspicious of the financial logic now being pursed by the IMF and fear it represents the replication of the mistakes it made during the 1998 Asian crash.
Southern countries, economists and politicians are increasingly fed up with mechanistic Eurocentric economic modelling that's seems designed to drag Southern economies down the same hole into which those of the West have already fallen.
And local stockbrokers trying to talk down confidence in the Indonesian banks with panic SMS messages in order to make money are likely to get themselves arrested (one was two days ago), while crooked bankers in Indonesia are also ending up in jail.
Indonesia got the IMF treatment once (in 1998) and if it needs a loan this time to finance economic counter-measures against the downturn then it will take a standby loan from the World Bank and on different terms from those of the IMF. God help Iceland, Hungary and Pakistan if the IMF does to them what it did to Indonesia last time.
Indonesia is now among the top 20 economies in the world (and on the UN Security Council) and its position within the G20 is assured by continuing growth rates. It is overtaking Belgium and Sweden and will overtake Turkey to become the largest Muslim-led economy in the world.
It is likely to keep growing and then join the top ten economies in the world sometime between 2020 and 2025. Indonesia is on the move, despite still having too much poverty and under-development. As long as it stays stable, with a strong democracy and gradually improving economic and financial management, then it will stay on track.
Indonesia still lacks confidence and has not fully recovered from the 1998 banking crash, when it took a greater hit because the IMF medicine initially made the illness worse.
However its economic results now speak for themselves and the country has much improved economic and financial leadership under the Government of President Susilo Bambang Yudhoyono and its formidable Minister of Finance and Acting Coordinating Minister for Economic Affairs, Sri Mulyani Indrawati.
If Western leaders could see local Indonesian data on banks and business applied to their own countries, with 2008 growth at 6.3 per cent, low non performing loans in the banking system (around 3 per cent ), US$50 billions cash of foreign reserves, US$10 billion invested abroad and US$60 billions of inward investment, then they would be over the moon.
Current newspaper headlines in Indonesia point to plenty of good news in this giant archipelagic country, five hours across on a jumbo jet.
Seen from Jakarta, Indonesia, the ups and downs of Wall Street and Main Street in the United States are a long way away and London, Paris and Berlin are not much nearer. But the cold winds of the Western recession are affecting Indonesian export markets and having some negative impacts on the financial system and the real economy. However there is absolutely no chance of a national recession here. Although many Southern countries will suffer a downturn most are unlikely to go into national recession, if the economic news in Indonesia is anything to go by. Local news headlines are about declining growth in some sectors and additional risks to be managed. But some companies are doing better because of the worldwide downturn and there is an opportunity to focus on strengthening the economic grass roots here while the West takes two years to recover. Paradoxically the more integrated, globalised and Westernised an economy is, the more likely it will be to join the Western countries in a full recession, so Singapore may have a recession while Indonesia will not.
Bank of Indonesia Deputy Governor Muliaman D Hadad warns that the rate of non performing loans could go up, because of fluctuations in commodity prices, especially oil palm. Also that the growth in bank lending may decline from 33 per cent in 2008 to 22 per cent in 2009, but that the latter target is perfectly realistic.
Meanwhile Ramzi A Zuhdi, Bank Indonesia director of shariah banking, points out that the shariah banking sector is expected to grow by 20 per cent in terms of assets and 30 per cent in terms of loans in 2009. Indonesian shariah banking will have grown in this current year by 35 per cent in terms of deposits and 26 per cent in terms of assets and lending. In Indonesia shariah banking is under-developed and has a long way to go, but its expansion appears to be almost 100 per cent insulated from the Western recession.
Local front page financial news has been dominated by the stock market crash in the first week of August and the ensuing saga, like a trip-roaring novel on high finance and intrigue, of the renowned Indonesian conglomerate, the Bakrie Group. But Bakrieland is not Indonesia. It's just a part of the picture but not central to the new fundamentals. Indonesia has a self-generating economy sustained 65 per cent by consumption, and a huge and growing number of SMEs, backed by a large +US$100 billion state budget, and a strengthening tax base.
The stock market crash of the Bakrie Group and its Herculean efforts to sell off a 35 per cent stake of the shares in the Bumi Resources coal company, said to be worth US$1.3 billion, but subject to plummeting share prices in the last month, attracted rival offers from Northstar Equity Partners, a US buyer lined up with local Indonesian State Owned Enterprises, versus an offer from San Miguel Corp, the largest food and beverage conglomerate in the Philippines, which also has heavy clout in Asean and global reach.
This story tended to dominate the Indonesian headlines and the trades on the Stock Exchange. But this will not determine the future of the Indonesian economy.
What it tells us about fundamentals is of more importance. Indonesia has substantial resources including huge coal reserves. It has an under-developed energy sector requiring an additional 40,000 Mwe of power by 2025, with large potential for hydro power, geothermal and renewable energy and biofuels. Indonesia needs US$100 billion of private investment over ten years, half of it for energy.
If Indonesia is to continue to grow at between 5 and 6 per cent, or to push the growth rate up to 7 per cent after 2010, then what is needed is less focus on the adventures of a few politically connected oligarchic families who previously dominated the economy, along with the State Owned Enterprises, and more focus on strengthening SMEs in the decentralised provinces, right down to community level, to mobilise the coalition that can put Indonesia into the top ten economies in the world.
Many Southern countries are now sympathetic to what UK Prime Minister, Gordon Brown, says is needed. To invest and finance our way out of trouble, and to mobilise the wealth and liquidity of Brazil, Russia, India, China, (the BRICs) and of Asia, the Middle East and the G20 to get the world moving again. Working together on this basis to save the world economy and help each other is a great idea and Southern public opinion will support this, but subject to one political condition.
This means the restructuring of the world's financial architecture and economic management, taking account of the new global balance of power. That's the deal.
The Brunei Times
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