Realising potential of local shrimp industry Shrimp farmers in Brunei currently facing uphill battle to survive
Fresh shrimps: Vendor at Gadong fish market showing his fresh prawns. Picture: The Brunei Times
IZAM SAID YA'AKUB
BANDAR SERI BEGAWAN
Saturday, November 8, 2008
DESPITE the efforts to bolster the aquaculture industry here in Brunei Darussalam, the local shrimp farming industry is having great difficulty in blossoming.
"It could be a matter of months, if not years, before some of our companies will fold," says Hj Nasrul Hakim, who helps operate a family business that has been farming shrimp for 13 years now.
The major difficulties encountered by the local shrimp farmers here is that since having been advised to culture a different species of shrimp, the previous species have come back to haunt the industry, which is thought to be less suitable locally and abroad for culturing and export.
Previously the local shrimp industry had moved from culturing Vanna Mei shrimp, which is easily found for sale in local markets here in Brunei because of its high yield from the harvests. According to local shrimp farmers here in Brunei, almost eight to 10 tonnes of Vanna Mei is imported here into Brunei every 10 days.
Shrimps, are susceptible to diseases, which either stunt the growth of the said shrimps or see them develop with deformities. As they are animals without sophisticated immune systems, diseases can spread through whole shrimp farms. However the most pressing aspect is that a shrimp infected by disease could be ingested by birds, which then spread the disease when travelling to other shrimp farms or feeding grounds, threatening the entire industry.
The move to Rostiris shrimp, was thought to be the way forward, a shrimp which is larger, less susceptible to disease and considered to be in greater demand among eateries and restaurants. However the costs involved meant that prices are higher.
At this point in time though the shrimp farmers, after having switched to the culturing of Rostiris, have discovered that yields are significantly less. "From 150,000 fries yields of up to two tonnes can be expected," said a local shrimp farmer who spoke on condition of anonymity. "With the previous shrimp (Vanna Mei) we could get up to four tonnes."
Judging by the complaints from shrimp farmers, attempts to cater for the export market have meant that competitiveness within the local market has come at a steep price.
During a quick trip to the Gadong wet markets The Brunei Times saw that prices for a kilo of imported Vanna Mei shrimp was $4, whereas the shrimp cultured locally in Brunei was priced at $10. "We are forced to lower our price and sell at a loss, because if we do not, the shrimp will go rotten," said the local shrimp farmer. Cutting their losses is only the tip of the iceberg, with many of the shrimp farmers finding it hard coming to grips with the extremely low price of imported shrimp.
"We know now that it is not illegal for them to import the shrimp, but asking us to culture a shrimp which is more expensive to our clients and difficult to sell could see the collapse of the whole industry," said Hj Nasrul Hakim.
Meanwhile the anticipated arrival of a Specific Pathogen Free (SPF) Black Tiger shrimp, which is also known as Penaeus Monodon, being bred in Brunei has been met with scepticism from the members of the shrimp farming community here in Brunei Darussalam.
During the 6th Aquaculture Seminar organised by the Fisheries Department in March 2008, the local shrimp industry was informed that the SPF process was nearly complete with genetically improved post-larvae available in the last quarter of 2008.
The three-year project which has seen the Department of Fisheries and Integrated Aquaculture International develop advanced aquaculture technology to produce large black tiger shrimp for export. These stocks of black tiger shrimp have been established and moved from primary quarantine to secondary quarantine toward potential SPF status. Once established, the breeding of SPF black tiger shrimp will be set to begin, marking a new chapter in the history of Brunei's fairly infant shrimp industry.
The approach is such that Brunei can carve a niche for itself in international high value seafood markets. The shrimps, which have been aimed at reaching 40gm per individual shrimp, will be aimed at exports but could easily satisfy the local market.
However one critical aspect which needs to be addressed is the fact that the production in Brunei Darussalam in itself is fragmented. To fulfil export demands, Brunei will need to find appropriate buyers that can be satisfied by the production from the Sultanate's infant shrimp industry. For the most part, the 13 shrimp farms will need to combine their production to achieve the numbers that are generally demanded by foreign markets.
Shrimp farmers face high costs for post-larvae, feed and labour, making it a challenge to compete on price with shrimps constantly being brought in to cater for Brunei's price sensitive consumption. Exports will therefore need to target a different market.
The Monodon could prove to be a winner, due to being a larger shrimp and even popular locally.
Yet in order to be successful in its endeavours abroad, the Brunei Monodon will need to be marketed appropriately, with HACCP and EU certifications in place.
While the race is on for Brunei's shrimp industry to find a way to become competitive against the imported Vanna Mei, the local industry itself needs to be convinced that the new Monodon shrimp is the right produce for their farms.
The Minister of Industry and Primary Resources in 2006 underscored the potential of Brunei's fisheries sector, which could achieve total receipts of $400 million in 2023.
From this forecast it has been widely projected that $200 million could come from aquaculture, with a further $113 million from prawn breeding. Last year the production achieved by Brunei's local shrimp industry surpassed 573 tonnes — 374.79 tonnes were shipped abroad in 2006.
(With additional reporting by Ubaidillah Masli)
The Brunei Times
Saturday, November 8, 2008
Thursday, November 6, 2008
Govt guarantee on deposits cushions Brunei from crisis
Govt guarantee on deposits cushions Brunei from crisis
Pipeline: A worker is framed by water pipes at a construction site in Gadong. The crisis has been relatively painless for Brunei partly because of a government move to guarantee deposits. Picture: BT/Rudolf Portillo
DEBBIE TOO
BANDAR SERI BEGAWAN
Thursday, November 6, 2008
THE financial crisis may be hurting economies worldwide, but in the case of Brunei, "it has been relatively painless", thanks in part to the government's move last month to guarantee bank deposits. But the sultanate may not be as lucky if a global recession drags, Glen Rase, Citibank director and chairman of the Brunei Association of Banks, yesterday said.
The impact of the global financial crisis is relatively painless for Brunei due partly to the government guarantee on deposits, which had a very calming affect on the market, he said at the sidelines of a forum yesterday on the impact of the US subprime crisis and inflation on Asean economies.
"It has made it much easier as banks," he stressed.
"I think the region has very different kinds of impact. Brunei is a very liquid economy with a lot of savings here ... so the impacts here are different from some markets, which are heavily dependent on foreign direct investment or foreign financial commerce."
The government's move last month to guarantee deposits came in the heels of similar moves by other governments to safeguard their financial system amid a credit crunch which started in the US.
In the sultanate's case, the guarantee covers all Brunei dollar and foreign currency deposits of individual and non-bank customers in Islamic and conventional banks and finance companies, which are licensed and regulated by the Ministry of Finance. The guarantee will be valid until December 31, 2010.
Still, Rase cautioned that Brunei may feel the pinch if the global recession drags.
"If the recession is very long and the policy response doesn't survive the economy a couple years down the road when everything slows down, then you'll probably see the impact on Brunei, but I don't see any significant impacts now," he said.
Asked about when Brunei will feel the impact of the global financial crisis, Rase said, "Brunei is already feeling the effect of it. Oil prices are down by half and that is a direct response to the US slowdown and much in Europe, Japan and elsewhere. Oil revenues in Brunei are managed so that they don't flow in when prices go up and they don't necessarily collapse when prices come down, which is very well managed. So effectively, the average man on the street isn't going to see a lot of impact unless he or she is invested in other markets."
In case of inflation pressures, he said, "We've seen now that the commodity boom is pretty much over, so the prices of steel and one of the other things that go into building our economy is starting to come down and a lot of the inflationary pressure that is associated with that commodity boom has gone away."
For long-term investors, the crisis may be an opportune time to start buying property assets in London and Australia, where value has gone down, another participant said.
"If you are a long-term owner, this is the sale of the century. Some of the sovereign wealth funds dropped too early, but over the longer term it should be very positive," said Chan Kok Peng, executive director of research and chief economist of BNP Paribas Securities (Singapore).
He added that an equities rebound will not take five years. "Somehow second half of next year, you should see some rebound, but I'm not saying it will go back to the previous peak because of global deleveraging." The Brunei Times
Pipeline: A worker is framed by water pipes at a construction site in Gadong. The crisis has been relatively painless for Brunei partly because of a government move to guarantee deposits. Picture: BT/Rudolf Portillo
DEBBIE TOO
BANDAR SERI BEGAWAN
Thursday, November 6, 2008
THE financial crisis may be hurting economies worldwide, but in the case of Brunei, "it has been relatively painless", thanks in part to the government's move last month to guarantee bank deposits. But the sultanate may not be as lucky if a global recession drags, Glen Rase, Citibank director and chairman of the Brunei Association of Banks, yesterday said.
The impact of the global financial crisis is relatively painless for Brunei due partly to the government guarantee on deposits, which had a very calming affect on the market, he said at the sidelines of a forum yesterday on the impact of the US subprime crisis and inflation on Asean economies.
"It has made it much easier as banks," he stressed.
"I think the region has very different kinds of impact. Brunei is a very liquid economy with a lot of savings here ... so the impacts here are different from some markets, which are heavily dependent on foreign direct investment or foreign financial commerce."
The government's move last month to guarantee deposits came in the heels of similar moves by other governments to safeguard their financial system amid a credit crunch which started in the US.
In the sultanate's case, the guarantee covers all Brunei dollar and foreign currency deposits of individual and non-bank customers in Islamic and conventional banks and finance companies, which are licensed and regulated by the Ministry of Finance. The guarantee will be valid until December 31, 2010.
Still, Rase cautioned that Brunei may feel the pinch if the global recession drags.
"If the recession is very long and the policy response doesn't survive the economy a couple years down the road when everything slows down, then you'll probably see the impact on Brunei, but I don't see any significant impacts now," he said.
Asked about when Brunei will feel the impact of the global financial crisis, Rase said, "Brunei is already feeling the effect of it. Oil prices are down by half and that is a direct response to the US slowdown and much in Europe, Japan and elsewhere. Oil revenues in Brunei are managed so that they don't flow in when prices go up and they don't necessarily collapse when prices come down, which is very well managed. So effectively, the average man on the street isn't going to see a lot of impact unless he or she is invested in other markets."
In case of inflation pressures, he said, "We've seen now that the commodity boom is pretty much over, so the prices of steel and one of the other things that go into building our economy is starting to come down and a lot of the inflationary pressure that is associated with that commodity boom has gone away."
For long-term investors, the crisis may be an opportune time to start buying property assets in London and Australia, where value has gone down, another participant said.
"If you are a long-term owner, this is the sale of the century. Some of the sovereign wealth funds dropped too early, but over the longer term it should be very positive," said Chan Kok Peng, executive director of research and chief economist of BNP Paribas Securities (Singapore).
He added that an equities rebound will not take five years. "Somehow second half of next year, you should see some rebound, but I'm not saying it will go back to the previous peak because of global deleveraging." The Brunei Times
Wednesday, November 5, 2008
SPARK avenue for economic diversification
SPARK avenue for economic diversification
New opportunities: Pg Kerma Raja Pg Hj Kamarulzaman (R), chairman of the Sg Liang authority, accompanied by the Chairman of the 34th AJBM Shazali Dato Hj Sulaiman (L) during their visit to Sg Liang Industrial Park.Picture: BT/Jefrisalas
BELAIT
Wednesday, November 5, 2008
SOME 50 of the 34th Asean-Japan Business Meeting (AJBM) delegates had the opportunity to a firsthand view of Sungai Liang Industrial Park (SPARK), that was designated to become a world class petrochemical hub during a visit to the project site yesterday.
Organised by Brunei Economic Development Board (BEDB) the visit provided an avenue to enlighten delegates on business opportunities that are currently present in Brunei Darussalam, particularly at SPARK.
Prior to the visit, the delegates were briefed on "New Business Opportunities in Brunei Darussalam" by BEDB Chief Executive Officer Vincent Cheong at the MMC Centre in Sungai Liang.
The CEO briefed the delegates on Brunei's economic background, especially the low inflation rate of 1.5 per cent. This is comparably low compared to other Asean countries.
The low and attractive corporate income tax incurred by businesses were explained to the delegates as one of the most attractive feature in conducting business.
He took this opportunity to further explain Brunei's attentiveness in conserving its flora and fauna in the Heart of Borneo Project.
His presentation covered other aspects such as the current economic challenges experienced by the country where he revealed that with a GDP of 2.1 per cent to support the population growth of 2.7 per cent it actually erodes away per capita income.
Vincent explained to the delegates on the nation dependency on oil and gas industry, as 96 per cent of its export coming from this sector.
Later during his briefing the CEO informed the delegates with attractive potential industry to be invested in the nation that includes not only extending the oil and gas value chain but also by leveraging on Islamic brand.
"Brunei's strategy includes looking at the halal pharmaceutical and cosmetics industry, in which BEDB are currently in the process of coming up with its guidelines," said Vincent.
Those present were also briefed on a number of BEDB initiative namely SPARK, Pulau Muara Besar and the Anggerek Desa Technology Park
Present yesterday in the briefing were the chairman of Sungai Liang Authority Pg Kerma Raja Pg Hj Kamarulzaman PPSDB Pg Hj Ali, the head of delegation Tosghitaka Hagiwaran senior advisor for Komatsu Corporation, Senior Officials from BEDB.
The visit was among the highlights for 34th AJBM, a joint effort between Keizai Doyukai and Asia Inc Forum before the delegates' departure yesterday evening. (DKR1)
The Brunei Times
New opportunities: Pg Kerma Raja Pg Hj Kamarulzaman (R), chairman of the Sg Liang authority, accompanied by the Chairman of the 34th AJBM Shazali Dato Hj Sulaiman (L) during their visit to Sg Liang Industrial Park.Picture: BT/Jefrisalas
BELAIT
Wednesday, November 5, 2008
SOME 50 of the 34th Asean-Japan Business Meeting (AJBM) delegates had the opportunity to a firsthand view of Sungai Liang Industrial Park (SPARK), that was designated to become a world class petrochemical hub during a visit to the project site yesterday.
Organised by Brunei Economic Development Board (BEDB) the visit provided an avenue to enlighten delegates on business opportunities that are currently present in Brunei Darussalam, particularly at SPARK.
Prior to the visit, the delegates were briefed on "New Business Opportunities in Brunei Darussalam" by BEDB Chief Executive Officer Vincent Cheong at the MMC Centre in Sungai Liang.
The CEO briefed the delegates on Brunei's economic background, especially the low inflation rate of 1.5 per cent. This is comparably low compared to other Asean countries.
The low and attractive corporate income tax incurred by businesses were explained to the delegates as one of the most attractive feature in conducting business.
He took this opportunity to further explain Brunei's attentiveness in conserving its flora and fauna in the Heart of Borneo Project.
His presentation covered other aspects such as the current economic challenges experienced by the country where he revealed that with a GDP of 2.1 per cent to support the population growth of 2.7 per cent it actually erodes away per capita income.
Vincent explained to the delegates on the nation dependency on oil and gas industry, as 96 per cent of its export coming from this sector.
Later during his briefing the CEO informed the delegates with attractive potential industry to be invested in the nation that includes not only extending the oil and gas value chain but also by leveraging on Islamic brand.
"Brunei's strategy includes looking at the halal pharmaceutical and cosmetics industry, in which BEDB are currently in the process of coming up with its guidelines," said Vincent.
Those present were also briefed on a number of BEDB initiative namely SPARK, Pulau Muara Besar and the Anggerek Desa Technology Park
Present yesterday in the briefing were the chairman of Sungai Liang Authority Pg Kerma Raja Pg Hj Kamarulzaman PPSDB Pg Hj Ali, the head of delegation Tosghitaka Hagiwaran senior advisor for Komatsu Corporation, Senior Officials from BEDB.
The visit was among the highlights for 34th AJBM, a joint effort between Keizai Doyukai and Asia Inc Forum before the delegates' departure yesterday evening. (DKR1)
The Brunei Times
No direct effect of global crisis on Brunei, says Baiduri Bank GM
No direct effect of global crisis on Brunei, says Baiduri Bank GM
Less exposure: Pierre Imhof, the general manager of Baiduri Bank says Brunei is relatively safe. Picture: BT file photo
DEBBIE TOO
BANDAR SERI BEGAWAN
Wednesday, November 5, 2008
THE present global financial crisis may not directly affect Brunei but its indirect impact can be felt on the economy.
Pierre Imhof, the general manager of Baiduri Bank, said: "The automobile and construction industries in Brunei can be affected indirectly. Since most of the cars are imported from Japan and South Korea, the local automobile industry can feel the effect, depending on the volatility of the currencies. However, it's too early to say whether the (Japanese) Yen will increase significantly against the Brunei dollar to see the difference," he added.
Imhof said that the construction industry could see an indirect positive impact. If there is a recession in the rest of the world, the raw material costs may see a decline. Thus reducing import costs for countries.
The Baiduri Bank general manager said that the magnitude of the present global financial crisis can be compared with the one that happened in 1929.
"It lasted many years and in certain countries the effects could be felt till the World War II," he said.
Asked about locals who have invested in foreign currencies, Imhof said that if the investments are long term, then the value of these investments, in the form of assets, real estate, equities or bonds, may pick up again after the crisis.
"The effect would be felt if it was more on the level of the portfolio or the accumulated assets than that of the level of day-to-day life," he said.
Imhof said that Brunei has always been relatively safe in an environment of crisis due to the fact that it is dependent on oil and gas production.
"The production has been relatively stable for many years and therefore the income of the country is mainly derived from oil and gas. There is very limited exposure of the country or direct exposure to the rest of the world. My view is that if oil and gas prices are going down, the income generated by this activity will be lower," he said.
"We must also observe that the prices of oil went up to US$150 (per barrel) a few months ago, which was totally unexpected and it dropped back to US$60 which is much lower than the peak; but it is still higher than what it was three years ago, so I believe that it is still at a level at which traditional oil producers, like Brunei, are generating a significant income," he added.
Imhof said that Brunei was still mainly domestic economy.
"As long as it generates income from oil and gas, and there is a strong incentive given by the government and the authorities to promote projects and spending, then I think Brunei will be relatively safe," he said.
The Brunei Times
Less exposure: Pierre Imhof, the general manager of Baiduri Bank says Brunei is relatively safe. Picture: BT file photo
DEBBIE TOO
BANDAR SERI BEGAWAN
Wednesday, November 5, 2008
THE present global financial crisis may not directly affect Brunei but its indirect impact can be felt on the economy.
Pierre Imhof, the general manager of Baiduri Bank, said: "The automobile and construction industries in Brunei can be affected indirectly. Since most of the cars are imported from Japan and South Korea, the local automobile industry can feel the effect, depending on the volatility of the currencies. However, it's too early to say whether the (Japanese) Yen will increase significantly against the Brunei dollar to see the difference," he added.
Imhof said that the construction industry could see an indirect positive impact. If there is a recession in the rest of the world, the raw material costs may see a decline. Thus reducing import costs for countries.
The Baiduri Bank general manager said that the magnitude of the present global financial crisis can be compared with the one that happened in 1929.
"It lasted many years and in certain countries the effects could be felt till the World War II," he said.
Asked about locals who have invested in foreign currencies, Imhof said that if the investments are long term, then the value of these investments, in the form of assets, real estate, equities or bonds, may pick up again after the crisis.
"The effect would be felt if it was more on the level of the portfolio or the accumulated assets than that of the level of day-to-day life," he said.
Imhof said that Brunei has always been relatively safe in an environment of crisis due to the fact that it is dependent on oil and gas production.
"The production has been relatively stable for many years and therefore the income of the country is mainly derived from oil and gas. There is very limited exposure of the country or direct exposure to the rest of the world. My view is that if oil and gas prices are going down, the income generated by this activity will be lower," he said.
"We must also observe that the prices of oil went up to US$150 (per barrel) a few months ago, which was totally unexpected and it dropped back to US$60 which is much lower than the peak; but it is still higher than what it was three years ago, so I believe that it is still at a level at which traditional oil producers, like Brunei, are generating a significant income," he added.
Imhof said that Brunei was still mainly domestic economy.
"As long as it generates income from oil and gas, and there is a strong incentive given by the government and the authorities to promote projects and spending, then I think Brunei will be relatively safe," he said.
The Brunei Times
Tuesday, November 4, 2008
Countries hit by falling commodity prices
Countries hit by falling commodity prices
MARTIN KHOR
KUALA LUMPUR
Tuesday, November 4, 2008
COMMODITY prices have begun to decline sharply in the past few months, at a time when the turmoil in global financial markets intensified, and as recessionary conditions took hold in many developed countries.
Malaysia is one of the countries affected. As a net oil exporter, it has been hit by the dramatic fall in the oil price from a peak of US$140 ($210) a barrel just a few months ago to the current price of just above US$60.
Even more significant has been the alarming and quick decline in the price of palm oil. Crude palm oil futures in Malaysia tumbled from a record high of RM4,500 ($1,870) a tonne in early March to about RM1,500 at the end of last week.
This 66 per cent drop is causing incomes to fall correspondingly among the smallholders in Malaysia and Indonesia. According to a Financial Times report, millions of small producers in Indonesia are now struggling to survive.
The price of rubber is also coming under pressure. Last week, officials of Malaysia, Thailand and Indonesia met in Bangkok and agreed to cut rubber output by 215,000 tonnes in 2009 to boost prices, which according to Thai official had fallen from US$2 a kg a year ago to US$1.72.
The output cuts in the three countries will be through the felling of plantations, reduction of tapping and delay in starting the tapping of new trees by a year, according to a Thai official after the meeting.
The fall in commodity prices is not all bad news. Consumers benefit from lower prices, and manufacturers have lower costs. Importing countries also get reduced import bills.
But for developing countries like Malaysia which are commodity exporters, the losses far outweigh the benefits, as export earnings fall and millions of producers suffer reduced incomes.
For the past few years there has been a boom in prices of most commodities. Some analysts even predicted that there had been a structural shift in commodity trends and the boom would last many years, instead of being part of the usual boom-and-bust cycle.
Other analysts saw the super-boom as partly driven by real demand increase (especially in China) but also significantly driven by speculators. This is now proving correct.
There is a slowdown in demand, but more importantly a flight from commodity markets by speculators, due to the global financial crisis and the deepening recession.
Data from the UN Food and Agriculture Organisation show that for many food commodities, export prices peaked around June and have been declining since, with the price falls intensifying in the past two months. However, prices of most food commodities are still higher than a year ago, with some exceptions.
Meanwhile, the prices of many minerals and metals have also fallen significantly in recent weeks.
The commodity boom seems to be over and is being replaced by a new general commodity price slump.
The FAO Food Price Index (FFPI) dropped a further 6 per cent in September, falling to a nine-month low of 188 points. The sharp decline in the index reflected the rapid decrease in international prices of all major food and feed commodities.
The fall in food prices overall was reflected in the decline in indices for cereals, oils and fats, meat and sugar.
After reaching a high of 278 points in June 2008, the FAO Cereal Price Index fell to 228 points in September. The FAO Oils/Fats Price Index fell to 209 points in September, or 28 per cent below the June record.
The FAO Meat Price Index fell to 140 points in September, 4 per cent below its peak in August. And the Dairy Price Index fell to 218 points in September, down almost 12 per cent from August.
According to the FAO report, the fall in prices of most cereals continued in September and into the first week of October.
This was largely in response to favourable prospects for 2008 harvests, the influence of falling crude oil prices and financial turmoil in world economies.
The report gave a detailed account of the price situation in three major cereals wheat, maize and rice.
On rice, the FAO said that expectations of record 2008 padi crops in the northern hemisphere were keeping downward pressure on export prices. The price of Thai white rice 100 per cent B averaged US$764 per tonne in September, about 3 per cent down from August, and fell to US$734 in the first week of October.
The drop in Thai prices over the past few months would likely have been more pronounced had it not been for the country's official procurement programme launched in June.
Indeed, in other export markets the slide has been deeper, with price quotations over the same period down 35 per cent in Vietnam and Pakistan and 16 per cent in the US. However, prices are still well above their values of September 2007 (by 130 per cent in Thailand, 92 per cent in the United States, 74 per cent in Vietnam and 53 per cent in Pakistan).
On wheat, international prices continued to decline sharply. The US wheat price averaged US$308 a tonne in September, and fell to US$264 in the first week of October, about 45 per cent below its peak in March, and 25 per cent down from October 2007.
Maize prices fell further towards the end of September and in early October. The US maize price averaged US$229 per tonne in September, and fell to US$184 in the first week of October, 35 per cent below the peak in June, but still 13 per cent above October last year.
According to the FAO, 36 countries are in need of external assistance as a result of crop failures, conflict or insecurity, natural disasters, and high domestic food prices.
The Star/ANN
MARTIN KHOR
KUALA LUMPUR
Tuesday, November 4, 2008
COMMODITY prices have begun to decline sharply in the past few months, at a time when the turmoil in global financial markets intensified, and as recessionary conditions took hold in many developed countries.
Malaysia is one of the countries affected. As a net oil exporter, it has been hit by the dramatic fall in the oil price from a peak of US$140 ($210) a barrel just a few months ago to the current price of just above US$60.
Even more significant has been the alarming and quick decline in the price of palm oil. Crude palm oil futures in Malaysia tumbled from a record high of RM4,500 ($1,870) a tonne in early March to about RM1,500 at the end of last week.
This 66 per cent drop is causing incomes to fall correspondingly among the smallholders in Malaysia and Indonesia. According to a Financial Times report, millions of small producers in Indonesia are now struggling to survive.
The price of rubber is also coming under pressure. Last week, officials of Malaysia, Thailand and Indonesia met in Bangkok and agreed to cut rubber output by 215,000 tonnes in 2009 to boost prices, which according to Thai official had fallen from US$2 a kg a year ago to US$1.72.
The output cuts in the three countries will be through the felling of plantations, reduction of tapping and delay in starting the tapping of new trees by a year, according to a Thai official after the meeting.
The fall in commodity prices is not all bad news. Consumers benefit from lower prices, and manufacturers have lower costs. Importing countries also get reduced import bills.
But for developing countries like Malaysia which are commodity exporters, the losses far outweigh the benefits, as export earnings fall and millions of producers suffer reduced incomes.
For the past few years there has been a boom in prices of most commodities. Some analysts even predicted that there had been a structural shift in commodity trends and the boom would last many years, instead of being part of the usual boom-and-bust cycle.
Other analysts saw the super-boom as partly driven by real demand increase (especially in China) but also significantly driven by speculators. This is now proving correct.
There is a slowdown in demand, but more importantly a flight from commodity markets by speculators, due to the global financial crisis and the deepening recession.
Data from the UN Food and Agriculture Organisation show that for many food commodities, export prices peaked around June and have been declining since, with the price falls intensifying in the past two months. However, prices of most food commodities are still higher than a year ago, with some exceptions.
Meanwhile, the prices of many minerals and metals have also fallen significantly in recent weeks.
The commodity boom seems to be over and is being replaced by a new general commodity price slump.
The FAO Food Price Index (FFPI) dropped a further 6 per cent in September, falling to a nine-month low of 188 points. The sharp decline in the index reflected the rapid decrease in international prices of all major food and feed commodities.
The fall in food prices overall was reflected in the decline in indices for cereals, oils and fats, meat and sugar.
After reaching a high of 278 points in June 2008, the FAO Cereal Price Index fell to 228 points in September. The FAO Oils/Fats Price Index fell to 209 points in September, or 28 per cent below the June record.
The FAO Meat Price Index fell to 140 points in September, 4 per cent below its peak in August. And the Dairy Price Index fell to 218 points in September, down almost 12 per cent from August.
According to the FAO report, the fall in prices of most cereals continued in September and into the first week of October.
This was largely in response to favourable prospects for 2008 harvests, the influence of falling crude oil prices and financial turmoil in world economies.
The report gave a detailed account of the price situation in three major cereals wheat, maize and rice.
On rice, the FAO said that expectations of record 2008 padi crops in the northern hemisphere were keeping downward pressure on export prices. The price of Thai white rice 100 per cent B averaged US$764 per tonne in September, about 3 per cent down from August, and fell to US$734 in the first week of October.
The drop in Thai prices over the past few months would likely have been more pronounced had it not been for the country's official procurement programme launched in June.
Indeed, in other export markets the slide has been deeper, with price quotations over the same period down 35 per cent in Vietnam and Pakistan and 16 per cent in the US. However, prices are still well above their values of September 2007 (by 130 per cent in Thailand, 92 per cent in the United States, 74 per cent in Vietnam and 53 per cent in Pakistan).
On wheat, international prices continued to decline sharply. The US wheat price averaged US$308 a tonne in September, and fell to US$264 in the first week of October, about 45 per cent below its peak in March, and 25 per cent down from October 2007.
Maize prices fell further towards the end of September and in early October. The US maize price averaged US$229 per tonne in September, and fell to US$184 in the first week of October, 35 per cent below the peak in June, but still 13 per cent above October last year.
According to the FAO, 36 countries are in need of external assistance as a result of crop failures, conflict or insecurity, natural disasters, and high domestic food prices.
The Star/ANN
Rise and fall of Great Powers
Rise and fall of Great Powers
CHING CHEONG
SINGAPORE
Tuesday, November 4, 2008
THE current financial meltdown may well signify the beginning of the end of US global leadership which began during World War II.
Historian Paul Kennedy examined what caused great powers to rise or fall in his 1987 book, The Rise And Fall Of The Great Powers: Economic Change And Military Conflict From 1500 To 2000.
His conclusion was simple: "The decline of great powers is caused by simple economic over-extension."
That seems to hold true, regardless of the power's political and economic system. Both the 1991 collapse of the Soviet Union, a totalitarian regime, and the likely decline of the United States, a free- wheeling capitalist regime, testify to the correctness of Professor Kennedy's hypothesis.
Many analysts of the current financial crisis have put the blame squarely on economic over-extension. "The word that could define the financial times Americans are now living through — and the economic pain that has begun — is leverage," noted Time magazine.
"Leveraging" allows the consumer, the corporation and the country to spend beyond their means by borrowing.
Many have concluded that the American way of life is unsustainable and cannot be a model for other nations for the simple reason that no country can forever borrow its way to prosperity. Economist Michael Hodges has calculated that the total debt chalked up by the American government, corporations and consumers was a staggering US$53 trillion ($80 trillion) as of January 1, 2008. The per capita debt worked out to US$175,154.
America's foreign debt is just as high.
Hodges calculated that its total external debt as of January 1, 2008 was US$12.5 trillion. Both domestic and foreign debts grew by leaps and bounds only after 1990.
Official figures show that between 1957 and the 1980s, the growth rates of US debt and national income were about the same.
From the 1990s, debt grew twice as fast as national income, with financial sector debt growing four times as fast. As for America's external debt, it soared from US$6.4 trillion in 2003 to US$12.5 trillion within four years. That's a 100 per cent jump!
What prompted this post-Cold War borrowing spree? It had to do largely with the perception that American capitalism was invincible, especially after the Soviet Union collapsed in 1991. This perceived invincibility affected American behaviour in a number of ways. Firstly, the US government began to act more unilaterally.
While the US conducted its foreign policy during the Cold War period within a multilateral framework, President George W Bush disregarded consensus-building. There was little that other nations could do to change the mind of the world's sole superpower when it decided to invade Iraq. According to Nobel economics laureate Joseph Stiglitz, the war in Iraq has so far cost America US$3.3 trillion.
The Bush administration's own estimate is US$500 billion, far in excess of its initial estimate of US$60 billion.
Professor Stiglitz believes that the Iraq war contributed to the sub-prime mortgage crisis, because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit. Also, the collapse of Soviet-style economic planning led to the rise of market determinism.
As political philosopher John Gray wrote in The Observer newspaper recently: "The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology...A type of market fundamentalism became the guiding philosophy."
Regulatory supervision and monitoring by the authorities were eased in favour of a free-wheeling market. With cheap money readily available, consumers and corporations over-borrowed and overstretched themselves, thus precipitating the current crisis.
Appearing before a congressional committee two weeks ago, former Federal Reserve chairman Alan Greenspan admitted that he had discovered a flaw in the "critical functioning structure that defines how the world works". He said: "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."
Asked by committee chairman Henry Waxman if he was saying his world view was "not working", Greenspan replied: "Absolutely, precisely."
Two hundred years ago, America's founding fathers had warned of the dangers of piling up debt. "No generation has a right to contract debts greater than can be paid off during the course of its own existence," George Washington wrote in 1789. And Thomas Jefferson said: "I place economy among the first and most important virtues, and debt as the greatest of dangers to be feared."
Alas, these words of wisdom are long forgotten in America.
The Straits Times/ANN
CHING CHEONG
SINGAPORE
Tuesday, November 4, 2008
THE current financial meltdown may well signify the beginning of the end of US global leadership which began during World War II.
Historian Paul Kennedy examined what caused great powers to rise or fall in his 1987 book, The Rise And Fall Of The Great Powers: Economic Change And Military Conflict From 1500 To 2000.
His conclusion was simple: "The decline of great powers is caused by simple economic over-extension."
That seems to hold true, regardless of the power's political and economic system. Both the 1991 collapse of the Soviet Union, a totalitarian regime, and the likely decline of the United States, a free- wheeling capitalist regime, testify to the correctness of Professor Kennedy's hypothesis.
Many analysts of the current financial crisis have put the blame squarely on economic over-extension. "The word that could define the financial times Americans are now living through — and the economic pain that has begun — is leverage," noted Time magazine.
"Leveraging" allows the consumer, the corporation and the country to spend beyond their means by borrowing.
Many have concluded that the American way of life is unsustainable and cannot be a model for other nations for the simple reason that no country can forever borrow its way to prosperity. Economist Michael Hodges has calculated that the total debt chalked up by the American government, corporations and consumers was a staggering US$53 trillion ($80 trillion) as of January 1, 2008. The per capita debt worked out to US$175,154.
America's foreign debt is just as high.
Hodges calculated that its total external debt as of January 1, 2008 was US$12.5 trillion. Both domestic and foreign debts grew by leaps and bounds only after 1990.
Official figures show that between 1957 and the 1980s, the growth rates of US debt and national income were about the same.
From the 1990s, debt grew twice as fast as national income, with financial sector debt growing four times as fast. As for America's external debt, it soared from US$6.4 trillion in 2003 to US$12.5 trillion within four years. That's a 100 per cent jump!
What prompted this post-Cold War borrowing spree? It had to do largely with the perception that American capitalism was invincible, especially after the Soviet Union collapsed in 1991. This perceived invincibility affected American behaviour in a number of ways. Firstly, the US government began to act more unilaterally.
While the US conducted its foreign policy during the Cold War period within a multilateral framework, President George W Bush disregarded consensus-building. There was little that other nations could do to change the mind of the world's sole superpower when it decided to invade Iraq. According to Nobel economics laureate Joseph Stiglitz, the war in Iraq has so far cost America US$3.3 trillion.
The Bush administration's own estimate is US$500 billion, far in excess of its initial estimate of US$60 billion.
Professor Stiglitz believes that the Iraq war contributed to the sub-prime mortgage crisis, because the US central bank responded to the massive financial drain of the war by flooding the American economy with cheap credit. Also, the collapse of Soviet-style economic planning led to the rise of market determinism.
As political philosopher John Gray wrote in The Observer newspaper recently: "The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology...A type of market fundamentalism became the guiding philosophy."
Regulatory supervision and monitoring by the authorities were eased in favour of a free-wheeling market. With cheap money readily available, consumers and corporations over-borrowed and overstretched themselves, thus precipitating the current crisis.
Appearing before a congressional committee two weeks ago, former Federal Reserve chairman Alan Greenspan admitted that he had discovered a flaw in the "critical functioning structure that defines how the world works". He said: "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."
Asked by committee chairman Henry Waxman if he was saying his world view was "not working", Greenspan replied: "Absolutely, precisely."
Two hundred years ago, America's founding fathers had warned of the dangers of piling up debt. "No generation has a right to contract debts greater than can be paid off during the course of its own existence," George Washington wrote in 1789. And Thomas Jefferson said: "I place economy among the first and most important virtues, and debt as the greatest of dangers to be feared."
Alas, these words of wisdom are long forgotten in America.
The Straits Times/ANN
Asean urged to speed up integration amid turmoil
Asean urged to speed up integration amid turmoil
DEBBIE TOO
BANDAR SERI BEGAWAN
Tuesday, November 4, 2008
ASEAN members should spur efforts to integrate their economies and wean the region's dependence on the US as a trade partner as the region grapples with the financial crisis.
"Basically for the past 30 years, the world economy has been relying on the American consumers to drive global growth and it was only recently, emerging markets started to do it," said Cesar Purisima, chairman of the executive committee of Philippine-based process integration consulting firm Prople BPO/Prople KPO Inc.
"In 2007, it was the first time China conquered more of the global growth in actual terms than the US. Then the crisis happens. Now the question is who will help drive us from this present situation?" said Purisima, who was one of the panelists at yesterday's Asean-Japan Business Meeting held here.
He said Asean and Japan, with the rest of Asia should try to accelerate the integration of the region and create an alternative consumer market.
"Through the purchasing power of the consumers, we will therefore create a bigger domestic market," he said.
The former Philippine finance secretary said integration has to be done with Asean as a whole because individually, it will not succeed. "Whether it is Asean countries or Asean+Japan or Japan+3, we should put together funds to accelerate this integration that will focus on narrowing infrastructure gap to focus on putting together the various supply chains and various Asean companies so that they could operate as one," he said.
"For example, a Philippine food company could be put together with a Thai food company, or a Philippine insurance agency could merge with a Singapore insurance company so that they could operate as one so integration is not only done at the government level, but also at the corporate level," he said.
He said that 60 per cent of exports from Asia went outside Asia. This figure has to be reduced, he said, saying more of Asia's exports should be shipped within the region.
Also, he said, "The exports have to be final consumer goods and not the intermediate goods."
Purisima said the process of improving purchasing power would have to start with improving workers' productivity and improving infrastructure.
"Once you gain momentum, you will realise the power of numbers and when you have 575 million people improving their per capita income by $1,000 each, that's $575 billion in additional economic equity that will go a long way in moving economies not only for the region but for the world," said Purisima.
If Asean economies do not integrate, Purisima presented a grim scenario.
"If the reaction of the countries was to be more protectionist, then that will make the crisis even worse. What would happen is that cost of goods in each other's markets will increase and the disposable income will continue to decrease and economical liquidity in general will slow down.
"When you are trying to protect your market by closing the door, you actually get the opposite effect, which is, harming your economy more," he said.
"The fact is that we've globalised and it's hard to reverse," he said.
The Asean-Japan Business Meeting was held at The Empire Hotel and Country Club. It ends today.The Brunei Times
DEBBIE TOO
BANDAR SERI BEGAWAN
Tuesday, November 4, 2008
ASEAN members should spur efforts to integrate their economies and wean the region's dependence on the US as a trade partner as the region grapples with the financial crisis.
"Basically for the past 30 years, the world economy has been relying on the American consumers to drive global growth and it was only recently, emerging markets started to do it," said Cesar Purisima, chairman of the executive committee of Philippine-based process integration consulting firm Prople BPO/Prople KPO Inc.
"In 2007, it was the first time China conquered more of the global growth in actual terms than the US. Then the crisis happens. Now the question is who will help drive us from this present situation?" said Purisima, who was one of the panelists at yesterday's Asean-Japan Business Meeting held here.
He said Asean and Japan, with the rest of Asia should try to accelerate the integration of the region and create an alternative consumer market.
"Through the purchasing power of the consumers, we will therefore create a bigger domestic market," he said.
The former Philippine finance secretary said integration has to be done with Asean as a whole because individually, it will not succeed. "Whether it is Asean countries or Asean+Japan or Japan+3, we should put together funds to accelerate this integration that will focus on narrowing infrastructure gap to focus on putting together the various supply chains and various Asean companies so that they could operate as one," he said.
"For example, a Philippine food company could be put together with a Thai food company, or a Philippine insurance agency could merge with a Singapore insurance company so that they could operate as one so integration is not only done at the government level, but also at the corporate level," he said.
He said that 60 per cent of exports from Asia went outside Asia. This figure has to be reduced, he said, saying more of Asia's exports should be shipped within the region.
Also, he said, "The exports have to be final consumer goods and not the intermediate goods."
Purisima said the process of improving purchasing power would have to start with improving workers' productivity and improving infrastructure.
"Once you gain momentum, you will realise the power of numbers and when you have 575 million people improving their per capita income by $1,000 each, that's $575 billion in additional economic equity that will go a long way in moving economies not only for the region but for the world," said Purisima.
If Asean economies do not integrate, Purisima presented a grim scenario.
"If the reaction of the countries was to be more protectionist, then that will make the crisis even worse. What would happen is that cost of goods in each other's markets will increase and the disposable income will continue to decrease and economical liquidity in general will slow down.
"When you are trying to protect your market by closing the door, you actually get the opposite effect, which is, harming your economy more," he said.
"The fact is that we've globalised and it's hard to reverse," he said.
The Asean-Japan Business Meeting was held at The Empire Hotel and Country Club. It ends today.The Brunei Times
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