Category Archives: Asia

Another billion poor people arrived on earth today.

PoorPeopleAccording to the Asian Development Bank, 1.5 billion people live below the poverty line, not the “official figure” of 0.5 billion., so the Asian poverty rate is 41.2% not 12.7%. The explanation is that the officially set poverty line of $1.25 a day is too low and by increasing it by 25 cents, to $1.50 (ooooh!), the poverty figures explode exponentially.

OK, so the headline is shocking, but so what?

Well, firstly these are BIG numbers.  Billions of people (like you and me) don’t have food and water, health and hygiene, jobs and leisure.  That’s morbid in a world of such affluence.

Which brings be to another point.  Massive wealth creation is only benefiting a few while everyone else works for their benefit.  And anyone with a modicum of ethics (you go to church, synagogue, temple, mosque, don’t you) or empathy (put yourself in their shoes) must feel this tragedy.

And whose fault is it?  Well certainly governments and multilateral agencies which can’t count or act efficiently, effectively, prudently.  But also mine and yours for buying too much cheap stuff made in Asia.

poor-peopleWell, it’s going to come back and bite us in the lifestyle as we start to lose our jobs and liberties because the global system is not working as it ought.

IMD: Asia’s poor increase by one-billion overnight

FT: Asians poorer than official data suggest, says ADB

 

Change in The East too.

Japan has voted for change.

After more than half a century of nearly unbroken rule the LDP was defeated in a landslide victory by the Democratic Party of Japan.

Of course, it is not easy to win an election in the face of an economic recession – people are naturally unhappy with the status quo. And, despite the majority, it is unlikely that there will be a radical change in Japanese politics because traditional manners and culture allow gradual change and the direction of change is uncertain.

But the result is a positive sign that people would like to change and move on.

BBC: Japan’s Hatoyama sweeps to power

BBC: Japan victor hails ‘revolution’

BBC: Hatoyama faces daunting economic task

BBC: Press upbeat on elections

One country – two systems, again?

It is encouraging to see the relationship between China and Taiwan improving.  Practical aspects like increased flights and trade will benefit both countries.  Maybe China is willing to engage because they envision another “one country – two systems” arrangement evolving which would allow both China and Taiwan to save face while continuing on their current paths.  Let’s hope so.

See BBC’s China and Taiwan in landmark deal

Is Thailand beginning to set a good example?

Thaksin Shinawatra is going on trial.  And it seems that judicial process might be getting institutional and popular backing.  That would be a very positive sign that Thailand is maturing into a sophisticated society and economy.

My experience with the judicial process a decade ago was not encouraging.  And I doubt we’ll see a conviction.  But the news that three of his lawyers were jailed last month by the Supreme Court for offering a cash bribe in a cake box is surprising.  Perhaps the Thai judiciary is becoming a counterweight to military, police and political corruption is encouraging.  Well done Thailand.  Other maturing nations, especially in Asia, should move in this direction.  Watch this space …

Is Japan joining the US as a global pariah?

Japan has started to fingerprint and photograph all foreigners when they arrive in the country, joining the United States in checking foreigners in this way. (Japan will require foreigners resident in Japan, as well as visitors, to be checked each time they enter.)

This kind of checking is a sad comment on the way humanity manages itself in an age of space travel, genetic engineering and nanotechnology. Integrity and mutual respect has been neglected. We have invested more in transport infrastructure than education. And now we are restricting movement when it should be freer. The crimes of a few are to be the cost of many. And justification for this kind of “security” measure is weak.

The Japanese government says it is an anti-terrorism measure but others say it is discrimination, saying it violates rights to privacy and could encourage xenophobia. It is ironic that there has been no terrorism in Japan committed by foreigners.

While Japan’s support of the US-led invasions of Afghanistan and Iraq have raised concerns that Japan could be a terror target, a more enlightened approach would be to behave better internationally: reducing military engagement (one would have thought that 2 atomic bombs would persuade people that war is wasteful and primitive) and stopping killing whales would be a good start.  Its a shame that Fukuda is not bolder and more forward thinking.

Oil, Asia, Asset Managers

McKinsey released this useful research on the world of money, pertinent to investors, asset managers and strategic planners.

The New Power Brokers: How Oil, Asia, Hedge Funds, and Private Equity Are Shaping Global Capital Markets McKinsey reviews petrodollar investors, Asian central banks, hedge funds, and private equity and their increasingly important role in world financial markets, offering new evidence on the size of these new power brokers, their impact, and their growth prospects. Read more Launch executive summary (PDF – 1.54 MB) Launch this report (PDF – 3.15 MB) Launch slideshow

Chapter summaries from McKinsey follow. (Free registration may be required.)

Chapter 1: The New Power Brokers MGI details how the rising influence of the four players is jointly shaping global financial markets. Their combined assets grew from just $3.2 trillion in 2000 to an estimated $8.7 trillion–$9.1 trillion in 2006. The factors fueling their growth will persist for at least another five years and, even under conservative assumptions, all four power brokers will grow in size and influence in the years ahead. Launch this chapter (PDF – 1.68 MB)

Chapter 2: Petrodollars: Fueling Global Capital Markets Petrodollars are the largest of the four power brokers with between $3.4 trillion and $3.8 trillion in foreign financial assets at end-2006. Assuming oil at $50 per barrel, their assets would grow to $5.9 trillion by 2012. Launch this chapter (PDF – 1.75 MB)

Chapter 3: Asian Central Banks: The Cautious Giants Asian central banks had $3.1 trillion in foreign-reserve assets at the end of 2006 from just $1 trillion in 2000. Assuming flat or declining current-account surpluses in Japan and China, Asian reserve assets will grow to $5.1 trillion by 2012, with average annual investments of $321 billion per year in global capital markets. Launch this chapter (PDF – 1.80 MB)

Chapter 4: Hedge Funds: From Mavericks to Mainstream Hedge fund assets under management have tripled since 2000, reaching an estimated $1.7 trillion by mid-2007 on the back of record inflows and high returns. Including leverage used to boost returns, the industry’s assets rise to as much as $6 trillion—which would make hedge funds the biggest of the four new power brokers. In MGI’s base case, hedge fund assets could reach $3.5 trillion by 2012—and between $9 trillion and $12 trillion including leverage. Launch this chapter (PDF – 1.76 MB)

Chapter 5: Private Equity: Eclipsing Public Capital Markets? Despite the intense public focus it attracts, private equity is the smallest of the four new power brokers, with $710 billion in investors’ capital at the end of 2006. Even with growth rates slower than in the past few years, MGI projects that global private-equity assets under management could reach as much as $1.4 trillion by 2012. Launch this chapter (PDF – 1.75 MB)

As the US slows, will Asia and the world follow?

While I expect China and India to weather the slow down in US consumption reasonably well, perhaps even benefiting from a relief of inflationary pressure, others are more sanguine about the central role the US economy still plays in the global economy. This linked article, A Subprime Outlook for the Global Economy, by Stephen Roach is worth consideration, not least because of his excellent and long track record as Chief Economist for Morgan Stanley and now its Asia Chairman. In it he outlines his expectation of the impact of the US sub-prime meltdown on Asian economies (China, Taiwan, Japan …) and recommends a more considered approach by policy makers to management of asset markets.

The theme of increasingly interconnected economies upon which he touches also suggests that this is where solutions might arise. This coupled with a more thoughtful approach by policy makers might encourage decision makers to look beyond standard measures of performance.  I remain open to the idea that Africa will replace Asia as Asia rises and that non-financial measures will become more important to people and governments as issues such as climate change, health, education and lifestyle are taken more seriously.

Japanese leadership crisis – new PM

September has not been a good month for politics in Japan.

At the beginning of September, Agriculture Minister Takehiko Endo resigned only a week after being appointed. He admitted that a private farm group he heads was involved in illegal dealings – it had been paid 1.15m Yen ($9,900) by the state after overstating crop damage in 1999. Endo’s predecessor, Norihiko Akagi, also resigned in August over an accounting row in his office. And the previous incumbent, Toshikatsu Matsuoka, committed suicide in May over claims he had links to a political funding scandal. Agriculture is dirty business! He was replaced by Masatoshi Wakabayashi, Japan’s fourth agriculture minister in four months.

Then despite Shinzo Abe’s cabinet reshuffle in an attempt to regain credibility after the LDP’s utter defeat in July’s upper house polls, it all became to much for him and he resigned as Prime Minister owing to exhaustion. His support waned as he faced a row over pensions, scandals (as above) and pushed for more military engagement in a pacifist country.

Today, Yasuo Fukuda became Prime Minister, having won leadership of the LDP last Sunday by defeating hawkish former Foreign Minister Taro Aso. Fukuda’s support may have been come from a desire to return to a more traditional profile. Fukuda is a member of the political elite. He is the son of a prime minister from the 1970s and was former chief cabinet secretary under Mr Abe’s predecessor, Junichiro Koizumi. Fukuda is also not young at 71 – Abe was Japan’s youngest Prime Minister and Koizumi was also relatively young. Fukuda has said that he will seek stronger ties to Asian neighbours, including China.

Certainly Japan needs a steady hand. It also needs to expunge cronyism. This will allow people to focus on economics and society instead of the messy business of politics.