|From: Sam Citron||6/15/2010 10:29:48 AM|
|The Rise of a Chinese Worker's Movement|
Spurred by the Foxconn suicides, and aided by an exploding Internet, China's labor ranks are organizing for higher wages and more rights
By Dexter Roberts
A nondescript Beijing suburb was recently the venue for an evening of radical politics. The New Labor Art Troupe, a performance group with a cast of laborers, ran a graphic photo of a Foxconn worker who had just killed himself. Poems were read commemorating the hard lives of migrant workers in electronics factories and on construction sites. A guitar and harmonica were hauled out and songs were sung with titles like Marginalized Life, Industrial Zone, Working Is Our Glory and Our Hell, Get Back Our Wages, and Fighting in Solidarity. Some of the hundred or so assembled migrant workers, many of them employed in small furniture factories around the capital, started crying. The evening ended with the crowd standing up for a Chinese rendition of the The Internationale, the old battle hymn of the worldwide socialist movement. "The atmosphere was militant, but there was no overt criticism of the government," says University of Hawaii political scientist Eric Harwit, who attended the two hour-plus evening performance on May 28. "They seemed really sincere that they were upset about migrant labor working conditions."
The recent Beijing performance is just one example of the rising labor activism now evident in China, activism that asserted itself in recent weeks at the factories of Foxconn and Honda Motor (HMC). It includes groups like New Labor, yet it also encompasses legal aid and other support networks at scores of universities, law firms focused on promoting worker rights, and countless migrant worker aid associations. "Civil society organizations are growing more powerful. They will push China to change," says Li Fan, director of the Beijing-based nongovernmental organization World & China Institute. Li has worked closely with labor groups as well as those pushing grassroots democracy.
The question is whether these groups can spawn a workers' movement that has the organization and mass to challenge factory owners across the country. Until a few years ago the Chinese authorities broke up sporadic workers' protests with relative ease: Local officials arrested a few ringleaders, then quickly offered concessions to the rest of the strikers to stop the unrest. Above all else, the Chinese security apparatus made sure that the leaders of labor protests in Shenzhen, Harbin, and elsewhere didn't connect with each other to form a national movement.
Today's young workers may be harder to corral. China now has 787 million mobile-phone users and 348 million Internet users—and migrant workers in their twenties are far more aware of world developments than their parents. The younger generation can follow labor actions as they unfold, whether in China's northeastern Rust Belt or southern Pearl River Delta. "They have access to information. They use their mobile phones for messaging, to send pictures and video, and to go online," says Chinese Academy of Social Sciences journalism professor Bu Wei, who is researching the use of media by migrant workers.
The more assertive workers have also benefited from a huge push by China's state-run media to popularize knowledge about the tough labor contract law promulgated in 2008. As a result, young workers know what's owed them, whether it be guarantees of double pay for overtime or safer working conditions. "Every worker is a labor lawyer by himself. They know their rights better than my HR officer," says Frank Jaeger, a German factory owner who produces cable connectors in Dongguan in Guangdong Province. Adds Harley Seyedin, president of the American Chamber of Commerce of South China: "There are Internet cafés everywhere, so the workers can get information. They are starting to ask for more. The days of cheap labor are gone."
The workers' ranks are now filled with self-starters like Xu Haitao. A 28-year-old technician in a small metal components factory in Shenzhen, Xu takes a class on labor law and worker rights every Sunday at a local migrant workers support center. "Of course, more and more workers understand their rights these days," says Xu, who surfs labor law sites regularly. "Last year I started using my own computer. Computers are not expensive anymore. I bought the pieces and constructed my own." Xu wants more workers to educate themselves. "Many capitalists and factory managers still abuse our rights," he says. "If all the workers knew the labor law—all 600 million of us—then many factory owners would go bankrupt."
These self-educated workers now have new allies in China's universities. A decade-long effort by Beijing to expand the number of students in China's universities has brought more and more of the rural population—and those with relatives and friends who still work in the factories—onto Chinese campuses. That has driven a wave of support at colleges for migrant workers, points out CASS professor Bu. Students studying law, political science, and social science are forming support groups and even provide legal aid for workers, to a degree not seen before. One of Bu's graduate students, for example, has a brother working for the Foxconn facility near Shanghai.
Many faculty members support their students' activism. "From the Foxconn tragedy, we hear screams coming from the lives of a new generation of migrant workers, warning the entire society to rethink this development model leveraged upon the sacrifice of people's basic dignity," warned an open letter dated May 19 and signed by nine sociologists from prominent schools, including Peking and Tsinghua Universities. "We call for national and local governments to implement practical measures that allow migrant workers to integrate and establish roots in the city...sharing the fruits of economic development they themselves created."
It may be a long summer for Chinese officials trying to contain this unrest. On June 3 more than 20 women workers were detained when police tried to shut down a two-week strike at a formerly state-owned cotton mill in Pingdingshan, Henan. Thousands of workers had stopped operating the looms to express their anger at their factory's privatization and to demand higher wages, reports the Hong Kong-based China Labour Bulletin. Although workers are back on the line at the Honda transmission plant that strikers had shut down, their language is anything but conciliatory. "We call all workers to maintain a high degree of unity and not to allow the capitalists to divide us," the Honda workers declared in a statement released on June 3. "We are not simply struggling for the rights of 1,800 workers, but for the rights of workers across the whole country." On June 7, another Honda plant in China went on strike.
The bottom line: A new, savvier, and more militant generation of workers may start to form a genuine labor movement in China.
Roberts is Bloomberg Businessweek's Asia News Editor and China bureau chief.
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|From: Sam Citron||6/16/2010 9:37:20 AM|
|France and Spain Proceed With Austerity Plans|
June 16, 2010, 6:29 am
The French government proposed a series of measures Wednesday to rein in the budget deficit, including raising the retirement age by two years and increasing income taxes on the rich, Matthew Saltmarsh reports in The New York Times.
Spain also was set to announce contentious plans to shake up its labor market Wednesday, as countries across the euro area respond to investor fears about public finances.
In France, the minimum age for retirement will be lifted gradually by 2018 to 62 from the current 60, the minister for labor, Eric Woerth, told reporters. The government had considered raising the age to 63.
“It looks like a major step forward,” said Jean-Michel Six, chief European economist at Standard & Poor’s. He said the announcement appeared to be a compromise between the demands of investors for deep budget cuts and the need to retain a sense of social equality.
France has been slower than other European countries like Spain, Portugal and Britain to announce fundamental budget changes, partly reflecting the fact that its budget deficit is lower, while investor demand has kept the interest rates that France pays on its debt low relative to most euro-zone countries.
“Working longer is inevitable,” Mr. Woerth said. “All our European partners have done this by working longer. We cannot avoid joining this movement.”
Increasing the minimum age of retirement “respects the fundamental principals of justice,” he said, “an effort must be made by all the French and not just one group.”
The long-awaited shakeup of the French pay-as-you-go pension system included extending the number of years of work required to qualify for a full pension to 41.5 years in 2020 from 41 years in 2012.
The age at which workers who have not made full contributions can receive a pension without penalties will rise gradually to 67 in 2023 from 65 in 2018. Civil servants, who now pay 7.85 percent of their salary in pension contributions, will see their deductions rise to the 10.55 percent paid by private sector employees by 2020.
The government is seeking to hold on to its top-notch credit rating by showing it is serious about reining in spending and borrowing.
The pension system alone is forecast to have a deficit of €32 billion, or $39 billion, this year. That figure would have surged without any changes.
The retirements proposals will save nearly €19 billion in 2018 and should bring the pension system back into credit that year, while the tax increases will bring in €3.7 billion next year, the government said.
President Nicolas Sarkozy, whose rating in opinion polls has been tumbling, “decided to take the cautious approach and spread the reforms over several years to make them less painful,” Mr Six said.
Mr. Sarkozy hopes the changes will demonstrate progress toward cutting the national debt — 78 percent of gross domestic product last year — and enable France to hold onto its AAA sovereign debt rating.
There was a muted reaction to the announcement in financial markets; the yield on the benchmark 10-year French government bond was unchanged around midday Wednesday, while the CAC-40 index in Paris was up 0.3 percent in line with other European markets.
The changes are likely to meet stiff resistance from public sector unions and political opponents of the center-right government.
Leaks of the government’s plans have already sparked angry reactions from the opposition Socialist party and labor unions, which demonstrated against the proposed measures before they were announced and confirmed this week a call for a day of demonstrations and strikes by private and public workers June 24.
Mr. Woerth said he remained “open to discussion” with unions and others affected.
The plan is expected to be debated by lawmakers in September.
In Spain, Prime Minister José Luis Rodríguez Zapatero is facing intense opposition to his economic program. He was to present a plan to improve the labor market Wednesday.
Wary investors have sent Spanish borrowing costs up in recent days, after the Socialist-led government failed to win union backing for measures that it says are crucial for resurrecting the economy and allaying concerns about Spain’s public finances.
The Spanish prime minister is seeking to ease rules allowing lay-offs by employers in economic difficulty, while discouraging an over-reliance on temporary hiring to trim the 20 percent jobless rate, which is the highest in the euro zone.
Employers have said that the proposals do not go far enough, while unions have called for a general strike, although it might not occur until September.
The French government also announced a series of fiscal measures including an increase in income tax on high earners; the top rate would rise to 41 percent from 40 percent to be applied on earnings over €69,783.
In addition, companies would have to pay higher social charges to cover employees medical and unemployment coverage; some tax loopholes would be closed; a tax on home sales will edge up; higher taxes will be applied on stock options and dividends; and taxes on capital gains and investment income will rise slightly.
The shake-up is expected to be the last major legislative change of Mr. Sarkozy’s current five-year term, which expires in 2012.
“He’ll now focus on politics before the election,” Mr. Six of S&P said.
France has forecast a budget deficit of 8 percent of gross domestic product this year and has committed bring the deficit under 3 percent by 2013. Spain, which is in a worse situation, aims to cut its deficit to 9.3 percent of G.D.P. this year and 6 percent in 2011.
Other EU countries have responded to the problem of funding their aging populations already. Britain has announced plans to raise the retirement age to 68 from 65 starting 2044. Germany has agreed to increase the retirement age in steps to 67 from 65 by 2029.
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|From: Sam Citron||7/6/2010 6:05:13 PM|
|Turning East, Turkey Asserts Economic Power [NYT 7.5.10]|
By LANDON THOMAS Jr.
ISTANBUL — For decades, Turkey has been told it was not ready to join the European Union — that it was too backward economically to qualify for membership in the now 27-nation club.
That argument may no longer hold.
Today, Turkey is a fast-rising economic power, with a core of internationally competitive companies turning the youthful nation into an entrepreneurial hub, tapping cash-rich export markets in Russia and the Middle East while attracting billions of investment dollars in return.
For many in aging and debt-weary Europe, which will be lucky to eke out a little more than 1 percent growth this year, Turkey’s economic renaissance — last week it reported a stunning 11.4 percent expansion for the first quarter, second only to China — poses a completely new question: who needs the other one more — Europe or Turkey?
“The old powers are losing power, both economically and intellectually,” said Vural Ak, 42, the founder and chief executive of Intercity, the largest car leasing company in Turkey. “And Turkey is now strong enough to stand by itself.”
It is an astonishing transformation for an economy that just 10 years ago had a budget deficit of 16 percent of gross domestic product and inflation of 72 percent. It is one that lies at the root of the rise to power of Prime Minister Recep Tayyip Erdogan, who has combined social conservatism with fiscally cautious economic policies to make his Justice and Development Party, or A.K.P., the most dominant political movement in Turkey since the early days of the republic.
So complete has this evolution been that Turkey is now closer to fulfilling the criteria for adopting the euro — if it ever does get into the European Union — than most of the troubled economies already in the euro zone. It is well under the 60 percent ceiling on government debt (49 percent of G.D.P.) and could well get its annual budget deficit below the 3 percent benchmark next year. That leaves the reduction of inflation, now running at 8 percent, as the only remaining major policy goal.
“This is a dream world,” said Husnu M. Ozyegin, who became the richest man in Turkey when he sold his bank, Finansbank, to the National Bank of Greece in 2006. Sitting on the rooftop of his five-star Swiss Hotel, he was looking at his BlackBerry, scrolling down the most recent credit-default spreads for euro zone countries. He still could not quite believe what he was seeing.
“Greece, 980. Italy, 194 and here is Turkey at 192,” he said with a grunt of satisfaction. “If you had told me 10 years ago that Turkey’s financial risk would equal that of Italy I would have said you were crazy.”
Having sold at the top to Greece, Mr. Ozyegin is now putting his money to work in the east. His new bank, Eurocredit, gets 35 percent of its profit from its Russian operations.
Mr. Ozyegin represents the old guard of Turkey’s business elite that has embraced the Erdogan government for its economic successes. Less well known but just as important to Turkey’s future development has been the rapid rise of socially conservative business leaders who, under the A.K.P., have seen their businesses thrive by tapping Turkey’s flourishing consumer and export markets.
Mr. Ak, the car leasing executive, exemplifies this new business elite of entrepreneurs. He drives a Ferrari to work, but he is also a practicing Muslim who does not drink and has no qualms in talking about his faith. He is not bound to the 20th-century secular consensus among the business, military and judicial elite that fought long and hard to keep Islam removed from public life.
On the wall behind his desk is a framed passage in Arabic from the Koran, and he recently financed an Islamic studies program just outside Washington at George Mason University in Fairfax, Va., where Mr. Erdogan recently spoke.
Whether he is embracing Islam as a set of principles to govern his life or Israeli irrigation technology for his sideline almond and walnut growing business, Mr. Ak represents the flexible dynamism — both social and economic — that has allowed Turkey to expand the commercial ties with Israel, Russia, Saudi Arabia, Iran and Syria that now underpin its ambition to become the dominant political actor in the region.
Other prominent members of this newer group of business executives are Mustafa Latif Topbas, the chairman and a founder of the discount-shopping chain BIM, the country’s fastest-growing retail chain, and Murat Ulker, who runs the chocolate and cookie manufacturer Yildiz Holding.
With around $11 billion in sales, Yildiz Holding supplies its branded food products not just to the Turkish market but to 110 markets globally. It has set up factories in Kazakhstan, Pakistan, Saudi Arabia and Ukraine and now owns the Godiva brand.
The two billionaires have deep ties to the prime minister — Mr. Erdogan once owned a company that distributed Ulker-branded products, and Mr. Topbas is a close adviser — but the trade opportunities in this part of the world are plentiful enough that a boost from the government is now no longer needed.
In June, Turkish exports grew by 13 percent compared with the previous year, with much of the demand coming from countries on Turkey’s border or close to it, like Iraq, Iran and Russia. With their immature manufacturing bases, they are eager buyers of Turkish cookies, automobiles and flat-screen televisions.
This year, for example, the country’s flagship carrier, Turkish Airlines, will fly to as many cities in Iraq (three) as it does to France. Some of its fastest growing routes are to Libya, Syria and Russia, Turkey’s largest trading partner, where it flies to seven cities. That is second only to Germany, which has a large population of immigrant Turks.
In Iran, Turkish companies are building fertilizer plants, making diapers and female sanitary products. In Iraq, the Acarsan Group, based in the southeastern town of Gaziantep, just won a bid to build five hospitals. And Turkish construction companies have a collective order book of over $30 billion, second only to China.
On the flip side, the Azerbaijani government owns Turkey’s major petrochemicals company and Saudi Arabia has been a big investor in the country’s growing Islamic finance sector.
No one here disputes that these trends give Mr. Erdogan the legitimacy — both at home and abroad — to lash out at Israel and to cut deals with Iran over its nuclear energy, moves that have strained ties with its chief ally and longtime supporter, the United States. (Turkey has exported $1.6 billion worth of goods to Iran and Syria this year, $200 million more than to the United States.)
But some worry that the muscle flexing may have gone too far — perhaps the result of tightening election polls at home — and that the aggressive tone with Israel may jeopardize the defining tenet of Turkey’s founder, Mustafa Kemal Ataturk: peace at home, peace in the world.
“The foreign policy of Turkey is good if it brings self-pride,” said Ferda Yildiz, the chairman of Basari Holding, a conglomerate that itself is in negotiations with the Syrian government to set up a factory in Syria that would make electricity meters.
Even so, he warns that it would be a mistake to become too caught up in an eastward expansion if it comes at the expense of the country’s longstanding inclination to look to the West for innovation and inspiration.
“It takes centuries to make relations and minutes to destroy them,” he said.
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|From: Julius Wong||8/2/2010 12:09:12 PM|
|New Silk Road by China Binds Asia to Latin America (Update1) |
By Simon Kennedy, Matthew Bristow and Shamim Adam
Aug. 2 (Bloomberg) -- The high-speed rail link China Railway Construction Corp. is building in Saudi Arabia doesn’t just connect the holy cities of Mecca and Medina. It shows how Asia, the Middle East, Africa and Latin America are holding the world economy together.
Ties between emerging markets form what economists at HSBC Holdings Plc and Royal Bank of Scotland Group Plc call the “new Silk Road” -- a $2.8-trillion version of the Asian-focused network of trade routes along which commerce prospered starting in about the second century.
Today’s world-spanning web is insulating markets such as China from the drag of weak recoveries in the advanced world and providing global growth with a new power source. Stephen King, HSBC’s chief economist, predicts the relationships will strengthen and lists them as a reason for his forecast that emerging markets will grow about three times faster than rich nations this year and next on average.
“The potential for inter-emerging market trade is ginormous,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London, who coined the term BRIC in 2001 to describe the rising role of Brazil, Russia, India and China. “That makes it quite difficult to see how you get a sustained global recession because of what’s going on in the west.”
Share of Trade
The BRIC economies hold a 13 percent share of world trade and have been responsible for about half of global growth since the start of the financial crisis in 2007, according to O’Neill. He predicted the BRICs will grow about 9 percent this year and next compared with 2.6 percent in advanced nations.
Investors are tuning in. Research by Kieran Curtis, who helps oversee $2 billion at Aviva Investors in London, found growing trade between emerging markets helps explain why they now account for about 30 percent of global final consumption, about the same as the U.S. and up from 10 percent in 1990.
That should increase demand for the Chinese yuan if the government continues to loosen restrictions on settling trade transactions with its currency, he said.
“Go to a market in Nairobi and you’ll see Chinese goods on sale,” Curtis said. “If emerging market fundamentals continue to be superior, there is the potential for serious currency appreciation against old-guard currencies.”
China’s government signaled June 19 that it will allow a more flexible exchange rate. So far, it’s limited the yuan’s rise to less than 1 percent against the dollar after allowing a 21 percent appreciation in the three years to July 2008.
Jerome Booth, who helps oversee $33 billion of emerging- market assets as head of research at Ashmore Investment Management Ltd. in London, said emerging markets are increasingly starting to denominate trade contracts in currencies other than dollars as commerce between them rises.
Commodity prices that may have been dropped in the past when advanced nations grew less are now cushioned by trade between emerging markets, said Dariusz Sliwinski, head of emerging markets at Martin Currie Investment Management in Edinburgh.
“Commodity prices would have been much lower without the support, which is good for the likes of Russia and Brazil,” said Sliwinski, who helps manage about $15 billion.
Royal Bank of Scotland Chief China Economist Ben Simpfendorfer in Hong Kong says emerging Asian and Middle Eastern economies will account for 75 percent of every extra barrel of oil consumed or produced in the next decade, while copper should gain because it’s a key input in infrastructure and nickel may benefit because of its use in steel.
Impact on Commodities
The Standard & Poor’s GSCI Total Return Index, tracking the net amount investors received from 24 raw materials, climbed 13 percent last year. While the price of oil fell as low as $32.40 a barrel during the recession it has since rebounded, ending last week at $78.95 a barrel. The cost of nickel and copper more than doubled over the same period.
Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages $26 billion, says investors will increase their holdings of emerging-market equities.
“The populations in emerging markets, especially in Asia, are large,” he said. “They are getting more educated and income levels are rising, which make these countries very attractive for companies. China is a favorite for stock investors but we’re seeing more interest in Indian, Brazilian and Russian markets.”
Gains in Trade
The Geneva-based World Trade Organization estimates intra- emerging market trade rose on average by 18 percent per year from 2000 to 2008, faster than commerce between emerging and advanced nations. It totaled $2.8 trillion in 2008, about half of emerging-market trade with all nations.
That performance is especially welcome now given the sluggish recovery in the rich economies, said HSBC’s King, author of “Losing Control: The Emerging Threats to Western Prosperity” and a former U.K. Treasury official.
Chinese exports to the emerging world accounted for about 9.5 percent of gross domestic product in 2008, compared with 2 percent in 1985, he calculated. India’s jumped to 7.3 percent from 1.5 percent and Brazil’s almost doubled to 6.3 percent.
Emerging-market economies will grow 6.9 percent this year and 6.2 percent in 2011, King said, outpacing the 2.4 percent and 1.9 percent projected expansions of developed economies.
“There are now massive trade connections within the emerging markets and they’re becoming increasingly important,” said King in a telephone interview. “It means in one sense the emerging world is protected from the worst ravages of the developed world.”
Those ravages were born in the global recession of 2008-09 from which the advanced world is proving slow to recover, even after policy makers cut interest rates to record lows. That’s prompting businesses and investors to seek other sources of growth.
Of the foreign direct investment flowing into south, east and southeast Asia alone, China was a source of 13.3 percent in 2008, compared with the U.S.’s 7.9 percent and up from 0.4 percent in 1991, according to a report last month from the Geneva-based United Nations Conference on Trade and Development.
China, the world’s fastest-growing major economy, dominates the push into fellow emerging markets, passing the U.S. as the biggest exporter to the Middle East in 2008.
Huawei in India
Shenzen-based Huawei Technologies Co., its biggest maker of phone equipment, had orders of $1.7 billion from India in 2008 and said in January that it will invest $500 million in its research center in Bangalore.
China Mobile Ltd. of Hong Kong, the world’s biggest phone carrier, is “interested in doing business in Africa,” where it can boost services in rural areas, Chairman Wang Jianzhou said in a June 26 interview.
Elsewhere in Asia, a group led by Korea Electric Power Corp., South Korea’s largest utility, beat off competition from General Electric Co. and France’s Areva SA to win a $20 billion UAE nuclear contract. The Saudi Railways Organization last month awarded a contract to China South Locomotive and Rolling Stock Corp. to supply 10 cargo locomotives. The Mecca-Medina rail contract went to Beijing-based China Railway as part of a Saudi- Chinese consortium.
Brazil in Africa
In Latin America, Brazil’s Vale SA has been on an international spending spree, helped by booming commodities demand from China and a currency that has doubled against the dollar since 2003. The company estimates that its $1.3-billion coal mine in Mozambique will have a capacity of 11 million tons per year three to four years after it enters production in the first half of 2011.
Vale in 2009 acquired stakes in three copper projects, in Zambia, Africa’s largest producer of the metal, and the Democratic Republic of Congo. In April this year, the company agreed to pay $2.5 billion for iron ore deposits in Guinea, including assets the country confiscated from the Rio Tinto Group.
“We saw the same phenomenon with American and European companies 50 to 100 years ago as they went global,” said Shane Oliver, head of investment strategy at AMP Capital Investors, which manages about $95 billion in Sydney. “Emerging-market companies are now big enough and they have the choice of going to developed countries where they may be more constrained or to the emerging world where the growth potential is.”
They are also jostling with each other. Brazil’s Empresa Brasileira de Aeronautica SA, or Embraer, is braced for increased competition from new Chinese and Russian rivals.
In December 2009, 32 percent of the backlog of orders for Embraer’s medium-range E-Jet airliners was from emerging markets, up from 1 percent in 2005. Over the same period the company’s backlog of orders from North America and Europe fell to 53 percent of the total, down from 91 percent.
“We are selling less, on a proportional basis, to the U.S. and Western Europe, and we have a growth in sales in Latin America, Asia and Asia-Pacific,” said Paulo Cesar, Embraer’s executive vice president-airline market, in a telephone interview.
Embraer is braced for new competition from Russia’s Sukhoi Co. and the Commercial Aircraft Corporation of China, or Comac, particularly in their home markets, Cesar said. Both companies are developing civilian airliners.
Middle East Link
Royal Bank of Scotland’s Simpfendorfer, whose book “The New Silk Road: How a Rising Arab World is Turning Away from The West and Rediscovering China” was published last year, says the trade ties between China and the Middle East alone make for a modern Silk Road.
The original was more than 4,000 miles (10,200 kilometers) of trade routes crossing Asia and into southern Europe and north Africa. Based around China’s silk industry and once traveled by Marco Polo, the commerce it enabled also helped power the growth of civilizations from Egypt to Rome.
Governments are seeking to take advantage of the modern version. India said in May that it will open an economic division at its embassy in China’s capital as the two countries seek to increase bilateral trade to $60 billion this year from $43 billion last year. Since taking office in 2003, Brazilian President Luiz Inacio Lula da Silva has visited about 68 developing nations, more than any of his predecessors.
With trade nevertheless comes tension. Developing economies in Asia and the Middle East accounted for about 45 percent of new anti-dumping investigations reported to the WTO in 2009, up from 22 percent in 1998.
China said in May that India shouldn’t discriminate against Chinese telecommunication products, a month after people with knowledge of the matter said contracts for products from Huawei Technologies and ZTE Corp. were vetoed by India’s government on national security grounds.
MTN Group Ltd., Africa’s largest mobile-phone company, in June halted talks to purchase $10 billion of assets from Orascom Telecom Holding SAE after Algeria’s government blocked a sale of the company’s local unit, the most profitable in the portfolio. Orascom, the biggest mobile-phone company by subscribers in the Middle East, also operates in Bangladesh, Pakistan and Egypt.
There is still scope for ties to strengthen. In a study released last week, the Washington-based Inter-American Development Bank concluded “massive bilateral trade” could develop between Latin America and India if tariffs are cut.
Gene Grossman, who succeeded Federal Reserve Chairman Ben S. Bernanke as head of Princeton University’s economics department, sees a repeating pattern of what he called the “home market effect,” in which countries at similar income levels increasingly trade because their consumers have similar tastes and spending power.
India’s Tata Group was the second-largest investor in sub- Saharan Africa in the six years through 2009, according to the Organization for Economic Cooperation and Development.
“Once an Indian firm enters and develops expertise based on its sales to its local market it now sees profit opportunities in serving markets elsewhere,” said Grossman.
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|From: Julius Wong||10/13/2010 7:38:43 AM|
|RPT-SPECIAL REPORT-Mongolia's fabled mine stirs Asian frontier|
Wed Oct 13, 2010 2:52am GMT
The new gold rush to develop Mongolia's resources could make it the world's fastest-growing economy over the next five years, according to Renaissance Capital, which projected GDP will almost quadruple to $23 billion by 2013 from $6 billion today. To profit from its untapped iron ore, coal, copper, uranium, silver, and gold deposits, the government needs to build a vast network of roads and railways to ship the inerals out of the country's vast interior. More than 10 "strategically important" deposits are in development including the Dornod uranium deposits, the Asgat silver deposit, and the massive Tavan Tolgoi coal site.
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|From: Julius Wong||11/11/2010 7:20:19 AM|
|Singapore Passing Malaysia 45 Years After Lee’s Tears (Update1) |
By Shamim Adam
Nov. 11 (Bloomberg) -- Forty-five years after Singapore’s expulsion from a union with Malaysia left Lee Kuan Yew in tears on national television, the economy of the city-state he led to independence is poised to overtake its neighbor.
Singapore’s gross domestic product will cap its fastest annual growth this year since independence, rising as much as 15 percent to about $210 billion, while the economy of Malaysia, a country 478 times its size, will expand 7 percent to $205 billion, government forecasts show. The nations are scheduled to release their 2010 data by February.
The island that former economic adviser Albert Winsemius once said was considered a “poor little market in a dark corner of Asia” is now ranked by the World Bank as the easiest place to do business, has the world’s second-busiest container port, and boasts the highest proportion of millionaire households, according to the Boston Consulting Group.
“Singapore kept on moving to the next level as the world economy evolved and adjusted to market demands and investors’ interests,” said Lee Hock Guan, senior fellow at the Singapore- based Institute of Southeast Asian Studies. “Malaysia was struck by the curse of resource-rich countries: It didn’t optimize its human capital.”
From a low-cost manufacturing center for companies such as Texas Instruments Inc. in the 1960s, Singapore has become the world’s fourth-largest foreign-exchange center with a S$1.2 trillion ($932 billion) asset-management industry.
Smaller than New York City and the only Southeast Asian nation without natural resources, Singapore has grown 189-fold since independence in 1965, helping boost GDP per capita to $36,537 last year from $512. Malaysia’s economy expanded at one- third the pace during the same period and had a GDP per capita of $6,975 in 2009, up from $335 in 1965.
Malaysia’s growth fell to an average 4.7 percent a year in the past decade, from 7.2 percent in the 1990s, when former prime minister Mahathir Mohamad wooed overseas manufacturers, built highways and erected the world’s tallest twin towers.
“Development is like a marathon and all policies geared toward it must be sustainable and continuous,” said Thomas Lam, chief economist at OSK-DMG, a venture between Malaysian securities firm OSK Holdings Bhd. and Deutsche Bank AG. “Malaysia runs the marathon like a 100 meter event, so you see the initial spurt but not continuous progress in the race.”
Lam, 35, is one of 386,000 Malaysians who have become permanent residents or citizens of Singapore, a list that includes Health Minister Khaw Boon Wan and Oversea-Chinese Banking Corp. Chairman Cheong Choong Kong.
“Singapore seems to offer greater career opportunity and mobility in my field,” said Lam, the second-most-accurate U.S. economic forecaster for 2008 to 2009 in Bloomberg surveys.
After more than 140 years under British rule, Singapore joined the Federation of Malaysia in September 1963 as Lee and his colleagues sought a bigger common market to cut unemployment and curb communism. The merger survived less than two years amid ideological differences and worsening relations between the United Malays National Organisation, which dominated the ruling Barisan Nasional coalition, and Lee’s People’s Action Party.
“For me, it is a moment of anguish,” Lee said on Aug. 9, 1965, the day Singapore became a sovereign state. “My whole adult life, I believed in Malaysian merger and unity of the two territories.” Lee, 87, was Singapore’s prime minister from 1959 to 1990.
‘Loss of Time’
Winsemius, the country’s economic adviser from 1961 to 1984, said he thought the merger was a “loss of time.” Credited with helping formulate Singapore’s industrial strategy, Winsemius, who died in 1996, said the general opinion of Singapore in the early 1960s was a country “going down the drain.”
The government acted by investing in export-based industries. It built new container terminals for Singapore’s port, the genesis of the country’s development; reclaimed land offshore to attract companies such as Exxon Mobil Corp. and Royal Dutch/Shell Group for a S$30 billion oil refining complex; and moved into high-tech industries like electronics and drugs.
“Economic development does not occur naturally,” said Ravi Menon, a senior official at Singapore’s Ministry of Trade and Industry. “This is where free marketers are disenchanted with Singapore. The government has never hesitated from guiding the development process or intervening in markets where it believes such intervention will lead to superior outcomes.”
The government invested about S$500 million in its Biopolis biomedical research hub after attracting drugmakers including Pfizer Inc. and Novartis AG. It cut corporate tax rates by nine percentage points since 2000 to 17 percent, compared with 25 percent in Malaysia.
BNP Paribas has a “buy” recommendation on Keppel Corp. and SembCorp Marine Ltd., the world’s biggest builders of oil rigs and two of the companies the government backed to propagate its industrial policy. Singapore Technologies Engineering Ltd., Asia’s biggest aircraft-maintenance company, was rated a “buy” by Deutsche Bank AG.
Singapore was kicked out of the union partly because Lee opposed Malaysia’s affirmative-action policy, which provides special rights to the ethnic Malay majority. While Malaysian Prime Minister Najib Razak has pledged to roll back key policies of ethnic favoritism, he told UMNO’s 61st General Assembly last month that the “social contract” that gives benefits to the Malays cannot be repealed.
“Singapore will overtake Malaysia because its focus is just on economic growth,” Mahathir, Malaysia’s prime minister from 1981 to 2003, said in an e-mailed response to questions. “There is no social restructuring goal such as fair distribution of wealth between races as we have in Malaysia.”
Najib is trying to return the Malaysian economy to the levels of growth that boosted stock prices almost fivefold in the decade through 1996. He set a goal of tripling gross national income to 1.7 trillion ringgit ($550 billion) in 2020, from 600 billion ringgit in 2009 and creating 3.3 million jobs.
His government unveiled an economic transformation program in September aimed at attracting investment, including $444 billion of programs this decade ranging from mass rail to nuclear power, led by private and government-linked companies.
“Malaysia has to ask itself why its investment rates are so low,” said Vikram Nehru, World Bank regional chief economist for East Asia and the Pacific. “There are questions about availability of labor, entry and exit barriers, and underlying concerns about policy executions.”
Najib is also taking steps to bolster the talent base, including plans for a teaching hospital with courses by Baltimore-based Johns Hopkins University and a new corporation tasked with luring back skilled Malaysians from overseas.
About 350,000 to 400,000 Malaysian citizens work in Singapore, including 150,000 who commute daily via buses and motorcycles to jobs in the city-state’s factories, kitchens and offices.
“Singapore followed the export-led industrialization model to become a base for foreign manufacturers,” said Lee of the Institute of Southeast Asian Studies. “The main model for Malaysia for a number of years was import-substitution where it protected certain industries. That created inertia.”
Lee, a 52-year-old Malaysian who studied and lived overseas for more than 30 years, said he plans to return to live in Malaysia only when he retires.
Singapore beat 182 economies to take first place in the World Bank’s annual ranking of business conditions, which looks at property rights, taxes, access to credit, labor laws and regulations on customs and licenses. Malaysia climbed two steps to 21st, according to the Nov. 4 report.
Mercer Consulting ranked Singapore as Asia’s most livable city in May, even as it lags behind Hong Kong on measurements of personal freedom and media censorship. The government says restrictions on public assembly and speeches are necessary to maintain social and religious harmony among its 5 million people. The city was wracked by violence between ethnic Malays and Chinese in the 1960s.
The country must keep innovating to stay ahead, said Tomo Kinoshita, deputy head of Asia economics research at Nomura Holdings Inc. in Hong Kong.
“Singapore must keep searching for new markets,” Kinoshita said. “Less developed Asian countries are all growing quickly and trying to catch up.”
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