Why Markets Love Dictators

By Chan Akya, Asia Times

When a political party that has been in power for a long time suffers a sudden reverse in its fortunes, inevitably the financial media look to market reaction as a gauge of whether such moves are positive or negative. This of course goes with the longstanding principle of markets being a voting machine over the short term but eventually always being a weighing machine. In other words, fundamentals always triumph over near-term popularity questions. In Asia though, the political economy is more than a passing fad - indeed, in most countries it contributes to the bulk of fortunes enjoyed by businessmen. Thus it is that starting from the region's most developed economy, Japan, to its least developed countries like Pakistan, markets pay close attention to the composition of government, frequent statements, policy actions and the like. Going back to the first paragraph above, it becomes clear that the weighing machine and the voting machine become the same thing, in practice across Asia.

Click on the title to read the whole article.

What Matters With The Word ''Youn"?

There was a hot debat on Ki-Media regarding a recent Phnom Penh Post article accusing SRS a racist by using the word ''Youn''.

Personally or subjectively, I totally disagree with anyone who politicise or mischaracterise a word which is neutrally and commonly used. Whether the word has a racist origin or carries any negative connotation does not matter, as it is commonly used by all Cambodians without any prejudice. ''Youn'' just simply means Vietnamese. In another word, I could say Youn is informal and Vietnam (Vietnamese) is formal. There maybe some people who use it to express anger because of Vietnamese mistreatment and invasion on Cambodia for centuries, but the word itself is theoritically or practically neutral.

Don't Khmer know their own language? Should we be afraid just to use our own language? Should foreigners teach Khmer how to use Khmer?

Below are some of the most logical reasoning from Ki-Media regarding the word ''Youn'':

http://www.phnompenhpost.com/index.php/2010020831721/National-news/yuon-whats-in-a-xenonym.html

http://ki-media.blogspot.com/2010/02/protest-to-phnom-penh-post.html

http://ki-media.blogspot.com/2010/02/pejorative-terms-yuon-and-mien.html

Asia's Export Dependency Has To Change

The article gives insightful ideas for Cambodia's policy makers. I agree with both scholars, but more with Huang than Kruman. Which model is best for Cambodia, the Chninese or VN?

While westerners are busily building up their depleted savings, can export-dependent Asian economies adjust to a world in which the US consumer is no longer the buyer of last resort?

Economists are asking whether countries such as China will be able to reorient their economies so that domestic demand becomes the main driver of growth.

Why is Chinese household consumption so low and what can be done to fix it?

Mr Krugman pins much of the blame on a threadbare social safety net, which has shrunk even as China has grown richer. Most Chinese build up precautionary savings at the expense of consumption, he says.

Erecting a safety net, however, may have only a marginal effect on spending, says Mr Huang. He pins the blame not on high savings but rather on declining incomes, especially in rural areas where 700m people still live. He advocates a push to increase rural incomes by legalising micro-finance, abolishing the city registration system that prevents migrant workers from receiving social benefits, and accelerating land reform.

The global politics of swine flu

Adapted from Kaveh L Afrasiabi
Lesson: Crises could create opportunities, more crises, or both.
We may be at the incipient stage of swine flu's deadly spread across the globe, but already signs of new trans-Atlantic fissures over EU travel advisory to the United States and Mexico.
Swine flu is a contagious respiratory disease that usually affects pigs. "Hysterical", "unwarranted", "overreaction" and "ineffective", were the top choices of words used by US officials in reaction to the EU health officials' alarm bells, and the stern US responses to the Europeans' health disaster response reminds one of China's similar response when the US Center on Disease Control, put this statement on its website in response to the early reports of the SARS epidemic in Asia: "Don't go to mainland China, Hong Kong, Singapore and Hanoi unless you really have to.
Hundreds of US flights to and from Mexico have continued unabated since the swine flu outbreak, and there has not been any attempt by the US government to either close some borders with Mexico or even reduce the substantial human traffic crossing those borders, fearing the adverse economic impacts in today's climate of global economic recession. The trick is undoubtedly not to make policies based on worst-case scenarios, but then again there is also the grave risk of avoiding a painful "great reshuffling" of policies. "A severe pandemic might encourage us to rethink the deadly pace of globalization and biological trade in all living things," wrote Nikforuk. Clearly, Third World Mexico's lack of an integrated strategy to combat the infectious disease with adequate resources has a lot to do with the flu's high mortality rate compared to its impact in US and Canada. As usual, the North-South gaps reveal themselves with glaring and oppressive clarity in such outbreaks of public illness. At the same time, by posing the US as a "risk society", a whole new fertile field of discourse on America's (health) identity has been opened by the threat of swine flu. An imagined pandemic may sting the US nearly as much as a real pandemic and the sheer indeterminacy of the flu's potency and future growth simply adds to its dispensation of a new unhealthy image for the US. Swine flu points at the growing linkage between foreign policy and health policy, as well as the nexus between health and security. Should it turn out that we are merely witnessing its first phase of attack, which is pregnant with multiple subsequent waves causing greater and greater disruptions in world trade, transport and trans-border human movement, something impossible to pre-calculate at this stage, then a whole new logic of de-globalization may be inevitable. On the other hand, this flu has the potential to be labeled as a "metropolis disease" that does not contaminate much of the the Third World. On the whole, swine flu can take one of two directions, it can either act as a circuit-breaker for a renewed globalization in terms of collective response, or a potent source of "international solidarity" as envisioned by UN chief Ban. Or, finally, it may have the contradictory effect of pushing both chariots simultaneously, at least in the short run.

Link to Swine Flu: http://www.webmd.com/cold-and-flu/flu-guide/20061101/swine-flu-faq

The World's Most Competitive Countries

Half of the top 10 are European and the U.S. is still No. 1, but Asia's tigers are coming on strong.

Asian economies are overtaking the U.S. and Northern Europe to become the most competitive in the world.

Among the top 20 economies out of the 55 ranked, those in Asia-Pacific posted the greatest gains compared with last year.

IMD produced the rankings using 331 criteria ranging from gross domestic product growth and unemployment to the number of Internet users and the price of local cell-phone calls. Hard data from sources such as the World Bank and U.N. comprised two-thirds of the inputs; the rest came from nearly 4,000 survey responses from executives in each country regarding the availability of skilled employees, government regulation, the availability of venture capital, and other more qualitative issues.

See BW's slide show of the top dozen countries in this year's IMD competitiveness ranking.
Table: The World's Most Competitive Countries 2008

Hun Sen's Diplomatic Juggling Act

While the US interests for Cambodia come mainly from terrorism, China involvement is driven by economic interests.

More than any other Southeast Asian country, Cambodia finds itself caught in the middle of competing United States and Chinese diplomatic overtures. With Washington offering bilateral strategic initiatives and Beijing rich financial assistance, Prime Minister Hun Sen has deftly balanced the country's diplomacy between the two superpowers to his government's political advantage.

Cambodia's economy is expanding at double digit growth rates and China's economic interest in the country has intensified since 2005, when US oil company Chevron discovered what some have projected are large stores of oil and gas off the country's southern coast. Those growing commercial ties were witnessed in the establishment in February of a special economic zone at the coastal town of Sihanoukville, from which goods will be produced for export duty free to China.

While China's economic influence grows, that of the US is on the wane. In recent years the US has given around $150 million in annual economic aid, a small fraction of China's commercial patronage. At the same time US-Cambodian trade ties have fallen off, seen in the 30% year-on-year decline in garment exports to the US in 2007. The US has long been the primary importer of Cambodian textiles, which is still the country's largest export item.

By offering more aid through strategic initiatives, the US policy towards Cambodia has apparently shifted after emphasizing throughout the 1990s the promotion of democracy and the rule of law. That frequently put the two sides at diplomatic loggerheads, notably over an FBI investigation into a March 1997 bomb attack.

While the US tries to deflect China's commercial diplomacy, Beijing has simultaneously landed on ways to unite economically and culturally with Cambodia, including through outreach to politically influential ethnic-Chinese entrepreneurs. It's also apparent, some say, in the fading popularity of the English language over Mandarin Chinese, also known as Putonghua, in local schools. Cambodia is now home to the largest Chinese school in Southeast Asia, Duan Hua, which currently enrolls over 8,000 students. The most popular Chinese courses are specifically geared towards business, with students reasoning that English language capability may help to land jobs with international aid organizations, while Mandarin, which is taught across mainland China as the official language, will catapult them into more lucrative positions in business.

Inflation in emerging economies: An old enemy rears its head

Emerging economies risk repeating the same mistakes the developed world made in the inflationary 1970s

There are an alarming number of similarities between developing economies today and developed economies in the early 1970s.

Inflation in developing countries are in deed more serious, as official figures often understate their inflationary pressure. Widespread government subsidies and price controls are one reason, and price indices are often skewed by a lack of data or government cheating.

The recent jump has been caused mainly by surging oil and food prices and speculation.

Governments have responded with more price controls and export bans. In the short run such measures may help to cap inflation and avoid social unrest, but in the long run they do more harm than good.

Some central banks have nudged up interest rates this year, but they have not kept pace with inflation, so real rates have fallen and are now negative in most countries. Many policymakers in emerging economies argue that serious monetary tightening is not warranted: higher inflation is due solely to spikes in food and energy prices, caused by temporary supply shocks and speculation.

The synchronised jump in global food prices suggests there is more to the story than disruptions to supply. Prices are also rising partly because loose monetary conditions in emerging economies have boosted domestic demand.

Another reason why central banks cannot ignore agflation is that it can quickly spill over into other prices. Food accounts for 30-40% of the consumer-price index in most emerging economies, compared with only 15% in the G7 economies.

Philip Poole, also of HSBC, says that many emerging economies have run out of spare capacity because investment has not kept pace with economic growth. Hence firms are more likely to pass on cost increases.

In another echo, those central banks often face intense political pressure to hold rates low to boost growth and jobs. To many Western economists and policymakers the solution is simple: emerging economies should allow more flexibility in their exchange rates. This would permit them to raise interest rates, and a stronger currency would help to curb import prices. Another solution is to tighten fiscal policy to reduce excess demand.

China has helped to hold down inflation in developed economies because its goods are much cheaper, replacing more costly goods. Competition from China also forces local producers to cut their prices and it curbs wage demands in rich countries. As China moves up the value chain it will pull down the prices of a wider range of products. China will continue to help hold down global prices—although possibly by less than in the past.

Useful dos and don’ts for fast economic growth

Growth is not everything, but it is the foundation for everything. The poorer the country the more important growth becomes, partly because it is impossible to redistribute nothing and partly because higher incomes make a huge difference to the welfare of the poorest.

Based on an analysis of 13 countries that have managed growth of 7 per cent a year over at least 25 years in the recently published Growth Report, countries enjoy high growth share five points of resemblance: they fully exploited the opportunities afforded by the world economy; they maintained macroeconomic stability; they sustained high rates of saving and investment; they let markets allocate resources; and they had committed, credible and capable governments.

These points are consistent with the so-called “Washington consensus” of the 1990s, which emphasised macroeconomic stability, trade and the market. Yet the report’s emphasis is different: it does not stress privatisation, free markets and free trade, while it does emphasise the role of the so-called “developmental state”.

The ingredients of fast growth include: investment of at least 25 per cent of gross domestic product, predominantly financed by domestic savings, including investment of some 5-7 per cent of GDP in infrastructure; and spending by private and public sectors of another 7-8 per cent of GDP on education, training and health. They also include: inward technology transfer, facilitated by exploitation of opportunities for trade and inward foreign direct investment; acceptance of competition, structural change and urbanisation; competitive labour markets, at least at the margin; the need to bring environmental protection into development from the beginning; and equality of opportunity, particularly for women.

Particularly welcome is the short list of policies to be avoided. Among them are: subsidising energy; using the civil service as employer of last resort; reducing fiscal deficits by cutting spending on infrastructure; providing open-ended protection to specific sectors; using price controls as a way to curb inflation; banning exports, to keep domestic prices low; underinvesting in urban infrastructure; underpaying public servants, such as teachers; and allowing the exchange rate to appreciate too far, too quickly.

Running through the report is belief in the role of an engaged government. This reflects the commission’s composition and intended audience. The obvious weakness is that it ignores how effective governments emerge. But the stress is correct: rapid development occurs in strong states, with effective governments, not in weak ones.

Cambodia's coming energy bonanza

If the United Nations, World Bank and Harvard University are to be believed, Cambodia is poised to become a major new global energy exporter, with a fossil-fuel windfall that promises to double the country's current GDP and potentially lift millions of Cambodians out of poverty.

The World Bank has said that Cambodia's total energy reserves may be as high as 2 billion barrels of oil and 10 trillion cubic feet of natural gas. Depending on future world prices, fuel exports could generate annual revenues upwards of US$2 billion, or several times the current combined amount that Cambodia generates in domestic revenues and receives in foreign aid. Meanwhile, Cambodian energy officials indicated this week that they hope to ramp up production as early as 2009, three to seven years earlier than the World Bank projected as feasible.

An energy-rich Cambodia would appreciably enhance the war-torn country's geostrategic significance, particularly as the United States and China aggressively joust for access to new fuel sources around the globe.

Yet there's also a potential Cold War twist to China's bid. Any future oil-and-gas-production agreements with the CPP-led government will likely need to pass through Sokimex, Cambodia's leading conglomerate, which through a joint venture with Tela Petroleum Group controls 80% of the country's domestic oil and gas distribution. Energy analysts note that Cambodia's newfound reserves coincide with the expectation that Vietnam's own diminishing fuel supplies will run out over the next decade. So far Hanoi has no plans on how it might fill this future energy gap.

What is more likely is that senior CPP officials have designs on building up Sokimex and perhaps also Tela Petroleum through lucrative state energy concessions, which, once converted into foreign-currency earnings, may be tapped to support its patronage-based political machine and further consolidate the party's dominance over Cambodian politics - akin to how Malaysia's ruling United Malays National Organization has relied on state oil giant Petronas for its own political purposes.

Western donors have already sounded warnings about the potential pitfalls of Cambodia's supposed newfound energy wealth. Hun Sen's government has come under intense donor pressure to tackle endemic corruption among his ranks.

Country for Sale

Almost half of Cambodia has been sold to foreign speculators in the past 18 months - and hundreds of thousands who fled the Khmer Rouge are homeless once more.

Cambodia is a nation that would drown if their boat tipped over; it is also a country whose citizens mostly do not belong to the places where they have ended up. The Khmer Rouge saw to that, eviscerating the kingdom after coming to power. Below are some highlights extracted from the long article:

• Forty-five per cent of the country's entire landmass has been sold off - from the land ringing Angkor Wat to the colonial buildings of Phnom Penh to the south-western islands. By 2006, the World Bank estimated that 40,000 had been made homeless in Phnom Penh alone.


• Rumours were buzzing around Sihanoukville's covered market that virtually every island in the region was up for sale. Over the following months, Koh Russei and Koh Ta Kiev, Koh Bong and Koh Ouen, Koh Preus, Koh Krabei and Koh Tres were all snapped up by foreigners, who then started negotiating for mainland sites, too, among them public beaches with names such as Serendipity, Occheuteal and Otres.


• The troubled kingdom of Cambodia had suddenly found itself a refuge for cash and speculators fleeing paralysed western financial markets.


• Foreign fund managers had started pitching up in Phnom Penh, alerted by the country's unexpected boom in tourism. Their interest was land speculation: buying up large sites in developing countries that they would then sit on in the hope that, with the influx of tourists, land values would soar.


• Hun Sen and his ruling CPP have, in effect, put the country up for sale. Crucially, they permit investors to form 100% foreign-owned companies in Cambodia that can buy land and real estate outright - or at least on 99-year plus 99-year leases. No other country in the world countenances such a deal. Even in Thailand and Vietnam, where similar land speculation and profiteering are under way, foreigners can be only minority shareholders.


• Many foreign funds - hedge funds, property funds, private equity funds - operating on the outer margins of the financial world thrive on complexity, risk and maximising profit. In Phnom Penh, they found an ideal partner in the prime minister, who has created a unique business environment. Since the mid-90s, Hun Sen and the CPP have declined to enforce money-laundering legislation and have concerned themselves little with the probity of investors. Foreign businessmen were offered nine-year tax holidays, and were allowed to hold their cash in US dollars in banks outside the country.


• In July 2007, Hun Sen, gambling on his people's tenuous connection with the land, changed the designation of the southern islands so they could be sold. The forests, lakes, beaches and reefs - and the lives of the thousands of residents - were quietly transferred into the hands of private western developers.


• It was Hun Sen who, as early as 1989, realised the power of land. As he privatised the land, "he simultaneously cut off the rights of 360,000 exiled Cambodians, awarding prime slices to political allies and friends." Although he bathes his speeches in socialist values, even his closest aides told us that Hun Sen was more often than not a pragmatist.


• The investors could have sold up and come away rich. But this was development with a difference. They were speculating on the future value of the land, believing that by adding only modest infrastructure, perhaps attaching big-name hoteliers, they would reap vast profits in seven to 10 years.


• Since the land sell-offs, members of the government and its allies have been splashing huge sums around. A Korean developer told us that when he marketed Phnom Penh's first skyscraper, the 42-storey Gold Tower project in February, all two dozen £750,000 penthouse suites were bought within 24 hours by "an honour roll of the CPP and its friends in the military".


• Simon Taylor, the director of Global Witness, an international NGO that was forced to leave the country last year, having accused the CPP of running a logging racket, paints a depressing picture: "A shadow state has grown up, a government that misappropriates public assets, extorts from businesses and manages an extensive illicit economy.


• Has the legacy of the Khmer Rouge been purged? Naly Pilorge, director of Licadho, a local human rights NGO, thinks not: "Everyone claims Cambodia has come through the period of barbarism, but the sadism is still bubbling beneath the surface. Extreme violence, greed and disregard for the most basic human rights - of giving people a place to live - are still with us daily. The methods of the past are being used to dictate our future."

Asia Needs to Provide Global Leadership

Can Asians think?

The dean of Singapore's Lee Kuan Yew School of Public Policy says it's time to come to grips with the end of Western domination of global affairs. Below is his interview with BW:

You have boldly written about the hypocrisy of the West and its own inner conflicts that do not allow it to acknowledge that its time is up. What was the trigger that compelled you to express yourself thus?
I wrote because the Asian voice is never heard in the rest of the world. We are entering a completely new historical era, with new maps and new guidelines, [moving from] a monocultural world to a multicultural world. This new era is so different because it is the end of the era of Western domination of world history—though not the end of the West—and the beginning of a new era of a rising Asia. Because of Western dominance, the West has run the world for the past 200 years—in many ways benignly. It could do that when it felt confident and secure, when it felt the future belonged to it. But history teaches us that when these same powers become insecure, they become part of the problem, not part of the solution.
What are some of the consequences?
There is a global leadership vacuum at a time when you need new kinds of thinking. Asia needs to provide global leadership. But none of us seems to want to figure out what the consequences of the end of Western domination will be. It is painful for the West to give up power [and] it resists the transfer of power. It is anachronistic and absurd that the head of the IMF should still be a European and the head of the World Bank should still be American. The Doha round failed because the West has lost the confidence that it can push for trade talks and win.
And you think Asia would do better?
Asians could do as good a job in representing global interests. It is the responsibility of the rising powers to take this on, but there is a reluctance on the part of India and China to take this on too early.
But hasn't Asia been a big beneficiary of this Western dominance?
Yes. East Asia rose because [of] the rules-based order of the world, inherited from the West. America has done more for the rise of Asia than any other country. The yeast from which Asia rose came from Asian elites trained in the U.S. Larry Summers, then-president of Harvard University, said that in the industrial world, productivity improved by 50% in a single generation; in Asia, it has improved by 10,000%.
You give high praise to the Association of Southeast Asian Nations (Asean) over the EU. Why?
Asean is an economic mini-power worth under $1 trillion, but it is a diplomatic superpower. The EU is an economic superpower, but a diplomatic mini-power. After all these years, the EU still remains a Christian club. Look at Asean. It has all religions in it: Buddhism, Hinduism, Islam, Taoism, Confucianism, Communism, Christianity. Asean is the role model of the future, the EU is not.
What about the Middle East. Where does its rise fit in?
Its moment is nigh. The picture on the cover of my book is not Shanghai, but Dubai. Dubai wants to be Singapore. Dubai's success can pressurize and inspire Iran. The march to modernity in Asia began in Japan, then went to Southeast Asia, then China, then India—and from there it will go to Pakistan and the Middle East.
And China?
China is one of the most misunderstood countries in the world. Chinese society has changed 180 degrees in the last 30 years. Western universities are rushing to partner with Chinese universities. They have to join the line now. These are the universities of the future. China may have a closed political system, but it has open minds.
Finally, where do you see India in all this change?
India will have a critical role to play. With the rise of Asia, there will be a lot of angst in the West, especially if they lose to China, a Communist country, and fear the "yellow peril." India's rise in the West is seen as nonthreatening, because there are no traditional differences between India and the West.

Why are food prices rising?

Excerpts from various FT articles

Food prices have been rising steadily in the past few months and the effects are being felt globally. As agricultural commodities such as wheat and dairy trade at record highs, some governments, such as Russia, are implementing price controls on selected types of bread, cheese, milk, eggs and vegetable oil.

Rice prices have surged to a 20-year high in the latest sign of global food inflation, creating policy headaches in Asia, where more than 2.5bn people depend on cheap and abundant supplies of the grain. Asia has not known famines since the 1970s, and recent price rises for rice and other basic foodstuffs have sparked unrest.

Indeed, there is already ample evidence that political tensions are building: the World Food Programme, for example, now thinks a third of the world’s population lives in countries with food price controls or export bans.

There are now widespread predictions that there could be further price increases soon, because of growing demand for key resources. Scarcity of water and arable land means that the boom in food prices could last longer than most expect, a new study has warned. But why is food getting more expensive?

Here are the main factors I summarise from various articles: tight supplies and rising demand in emerging markets, urbanisation, changing diets in emerging market, subsidies and market distortion, the impact of climate change, rising input price, capital and resource misallocation. Click on the title link for interactive multimedia.

More related topics: http://www.ft.com/foodprices

Twenty-year high in rice prices sparks fears:

http://www.ft.com/cms/s/0/f40ad5ca-e975-11dc-8365-0000779fd2ac,dwp_uuid=a955630e-3603-11dc-ad42-0000779fd2ac.html

The next crisis will be over food: http://www.ft.com/cms/s/5a9b3c72-db2e-11dc-9fdd-0000779fd2ac,dwp_uuid=a955630e-3603-11dc-ad42-0000779fd2ac.html

U.S. Is Top Source of Money Sent Home by Migrants

India gets more money sent back from migrants than any country in the world, according to a new World Bank report that also showed the U.S. was the top source of remittance.
Migrants sent $27 billion to India in 2007. China came in second, receiving $25.7 billion and Mexico was a close third with $25 billion.
In many developing countries, remittances provide a life line for the poor. They are often an essential source of foreign exchange and a stabilizing force for the economy in turbulent times.
The U.S., which was the top immigration country in 2005 with 38.4 million immigrants, is by far the largest source of outflows, with $42 billion in recorded outward flows in 2006. Saudi Arabia ranks as the second largest, followed by Switzerland and Germany. The Mexico-U.S. corridor is the largest migration corridor in the world, the Worlds Bank said, accounting for 10.4 million migrants by 2005.
For 2007, recorded remittances flows world-wide are estimated at $318 billion, of which $240 billion went to developing countries. However, the World Bank notes, “These flows don’t include informal channels, which would significantly enlarge the volume of remittances if they were recorded.” –Phil Izzo

Trackback URL: http://blogs.wsj.com/economics/2008/03/19/us-is-top-source-of-money-sent-home-by-migrants/?mod=WSJBlog/trackback/

Links to the original article and more information about immigration and remittance: http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21692926~pagePK:34370~piPK:34424~theSitePK:4607,00.html

Asia faces 'unique and complex' terror threat

Business Times, 22 Feb 2008

THE terrorist threat facing businesses operating in South-east Asia is 'unique, complex and specific to the region', according to Lloyd's, the world's leading specialist insurance market, which also provides insurance cover against terrorism.

A new report from Lloyd's and the London-based International Institute for Strategic Studies (IISS), released yesterday in Singapore, warns that traditional forms of terrorism in Asia are being superseded by area-specific threats, such as criminal gangs with political agendas.

The report, entitled 'Terrorism in Asia: What does it mean for business?', outlines five practical steps businesses can take to minimise the threat from a terrorist attack:

1. gather high-quality information from the right sources - both government and academic

2. guide strategy and operations;
3. choose locations wisely
4. adopt security as business facilitator, not a burden;
5. protect supply chains; and
6. engage with local communities and understand local customs and traditions.

The report found that the main threat to businesses operating in South-east Asia are proximity to Western targets, such as embassies and hotels; kidnapping of employees; and threats to transport routes and supply chains.

Speaking at the launch of the report, Lloyd's chief executive officer Richard Ward said:

'There is no such thing as a uniform global threat, and in South-east Asia, businesses face some complex and specific regional issues. While there are fewer occurrences of Islamist terrorism in the area, criminal gangs with agendas are on the rise, with kidnappings and other forms of violent crime increasingly prevalent in some parts of the region.'

'Businesses need to be better at information gathering from the right source in order to focus on what they are actually threatened with, not reading the media headlines that usually focus on radicalism, and making decisions based on that,' he said.

Strategic Trade Routes: Seeking new ways to deliver the goods

One of the best places to appreciate the development of trade between Asia and Europe is aboard a ship in the Gulf of Suez. (Click here to look at possible routes for transporting cargo in Asia and Europe.)

According to figures from Global Insight, an economics and trade forecaster, container shipping volumes between Asia and Europe are likely to grow 17.2 per cent this year alone. Traffic this year will approach double its 2003 level – part of the reason why ships deployed on the route now are two-and-a-half times the size of the largest a decade ago.

With demand in North America slowing this year, Asia-Europe trades could soon overtake trans-Pacific trades as the world’s main long-haul container trade route. The surge has led to questions all along the route of this remarkable flow of goods about how best to capitalise on the trade and how to cope with it. Operators’ strategies are constantly changing as they seek ever-cheaper, faster, more reliable means of moving their goods.

One of the most important trends at work is obvious along China’s River Yangtze, which links much of inland China to the sea at Shanghai.

The move inland has inspired hope that the rail route from Asia to Europe, via the trans-Mongolian or trans-Manchurian railways on to Russia’s famous trans-Siberian route, might be able to capture a portion of the traffic. Russian and Chinese railway officials argued at an event this year in Brussels that the faster journey time on the route compared with sea transport gave it a significant competitive advantage. In June, European Rail Shuttle, part of Denmark’s AP Møller-Maersk, operated what it said was the first train carrying imports to Europe all the way from China.

Many parts of Asia are also focusing on developing the cargo capabilities of their airports, in the hope of acting either as hubs or gateways to and from areas producing high-value electronics or other valuable goods that are expensive enough to justify the higher costs involved in air transport.

Lines can also use different strategies to improve their reliability, using small feeder vessels to call at congested ports such as India’s Jawaharlal Nehru Port then picking up the goods from a transshipment hub such as Colombo in Sri Lanka or Salalah in Oman. At the European end, lines are particularly concerned with how to cope with soaring traffic levels at relatively undeveloped ports in the Black and Baltic Seas.

Trade wars can lead to shooting wars

This is a very long article, which requires a strong general knowledge of various fields to comprehend. It is one of the most interesting, sophisticated, informative, balanced, and complete articles I ever read. The commentary is really worth reading. The below summary is just some notable excerpts from the original article ( with some edition). Click on the link title for a complete version.

Excerpts from Asia Times by Henry C K Liu

Within US policy circles, the rapid rise of China as a major force in the global economy is provoking a reconsideration of whether free trade is still in the US national interest.

The prospect that China can be a major economic power is feeding widespread paranoia in the United States. The fear is that developing nations, led by China and India, may out-compete the advanced nations for high-tech jobs while keeping the low-skill, labor-intensive manufacturing jobs they already own. China already is the world's biggest producer and exporter of consumer electronics and it is a matter of time before it becomes a major player in auto exports. Shipbuilding is now dominated by China and aircraft manufacturing will follow.

The fear of China by Western World dates back to almost two centuries of racial prejudice, ever since Western imperialism invaded Asia beginning in the early 19th century, and it has been accelerating with these facts: It is the country with the world's largest population, an ancient culture and long history would again be a big player in the world economy as it modernizes, the fear that China might soon gain advantages of labor, capital and even technology. Chinese culture commands close affinity with the peoples of Asia, the main concentration of the world's population and a revived focal point of global geopolitics.

The US is waking up from its self-delusion to the reality that free trade never leads to balanced trade. Free trade always works against the weaker trading partner, even with the principle of comparative advantage. The US was happy to promote free trade when unbalanced trade was in favor of the stronger US economy. Balanced trade between unequal partners requires managed trade at the expense of the stronger partner, which is achieved by the weaker economy resorting to government interference for more favorable terms of trade.

While the narrowing of the wage disparity will slow the job drain to China, the resultant rise in Chinese aggregate national wealth will threaten US economic dominance in the world. In a neo-liberal free-trade regime, the US has a choice of losing jobs or losing economic dominance and geopolitical power to China. That is the key dilemma in US economic policy toward China.

A market economy is a feeble weakling compared with a wartime command economy. That a war in Asia would relocate manufacturing jobs back to the United States in large scale to get the US economy moving again must have occurred to the neo-con warriors who have been controlling US policy since 2000. The hawks in this group are betting that China's nuclear deterrence against attacks from the US can be neutralized by the US strategic defense initiative (SDI), and that the US mainland will again be safe from attack.

Henry Kissinger, arguably the greatest living master of geo-realpolitik, wrote on June 13 in the Washington Post: "Military imperialism is not the Chinese style. [Karl von] Clausewitz, the leading Western strategic theoretician, addresses the preparation and conduct of a central battle. Sun Tzu, his Chinese counterpart, focuses on the psychological weakening of the adversary. China seeks its objectives by careful study, patience and the accumulation of nuances - only rarely does China risk a winner-take-all showdown."

US fear of China is a reaction to the destabilizing effect on existing, established geo-economics from the natural rise in economic power of a modernizing nation with a large population. It was this natural advantage of a large population that permitted the US and the USSR to exploit geopolitical opportunities to catapult themselves into superpower status after World War II.

China, similarly to the US experience, will go through several series of historic policy debates over the choice between isolationism and international engagement as its economy develops. Developing countries should not misconstrue isolationism as an effective strategy of anti-imperialism. Quarantine is a strategy that deprives the subject of any chance of developing effective immunity against invading viruses that eventually exposes it to more serious vulnerability. Hostility breeds counter-hostility, and protectionism breeds counter-protectionism. Isolation between hostile nations leads inevitably to war.

The decline of China that began in early 19th century was traceable in part to Chinese self-imposed isolationism, in contrast to Japan's forced opening to the then more technologically advanced West that led to the Meiji Reformation. Immigration is the fountainhead of economic development and sustained prosperity. The developmental history of the US is one of immigration. Germany benefited greatly from the immigration of Jews and lost much from Nazi prosecution of its Jewish citizens.

An internationally engaged China will be a positive force for world peace and prosperity. US hostility and preemptive strategy toward a peacefully rising China may be forced to fall back on ineffective US unilateralism, devoid of willing partners even from among its residual Cold War allies. Everywhere else in the world, from Asia to Latin America, from the Middle East to Africa, sympathy for China's effort to regain its natural prominence in the world and positive response to its effective development strategy are mounting while appreciation for unilateral US security and economic policies is falling.

Neo-communism in China is largely a strategic response to and the resultant consequence of expanding global neo-liberalism. If neo-liberalism should fail and the global trading system freeze, the future of Chinese neo-communism will also be put in jeopardy. Thus US isolationism is the unwitting ally of Chinese orthodox communism.

"The general dogma that anything that expands globalization is good for everyone isn't right," Samuelson said. And as all political scientists know, when the majority loses, the politics turns ugly in a democracy.

China is significant not only because it is the most populous nation with the fastest-growing economy, but also because it is one of the poorest and thus has much prospect and room for basic growth. The whole world now wants to trade and interact with the Chinese economy because under the current trade regime, trade with China benefits the foreign trading partners more than its does China itself. Federal Reserve chairman Alan Greenspan warned senators in public testimony not to let their misguided frustrations with China's economic policies breed reactions that would do the US economy more harm than good.

The danger of trade wars

US geopolitical hostility toward China will manifest itself first in trade friction, which will lead to a mutually recriminatory trade war between the two major economies that will attract opportunistic trade realignments among the traditional allies of the United States. US multinational corporations, unable to steer US domestic politics, will increasingly trade with China through their foreign subsidiaries, leaving the US economy with even fewer jobs, and a condition that will further exacerbate anti-China popular sentiments that translate into more anti-free-trade policies generally and anti-China policies specifically.

A war between the US and China can have no winners, particularly on the political front. Even if the US were to prevail militarily through its technological superiority, the political cost of military victory would be so severe that the US as it currently exists would not be recognizable after the conflict and the original geopolitical aim behind the conflict would remain elusive, as the Vietnam War and the Iraq war have demonstrated.

US policymakers have an option to make China a friend and partner in a peaceful world for the benefit of all nations. To do so, they must first recognize that the world can operate on the principle of platitude and that prosperity is not something to be fought over by killing consumers in a world plagued with overcapacity.

Russia and China’s challenge for the west

By Gideon Rachman
October 23 2007

Dmitry Peskov, official spokesman for the Russian president, likes a joke. Visitors to his Kremlin office last week noticed that the screensaver on his computer is a series of revolving quotes from George Orwell’s Nineteen Eighty-Four: “Big Brother is watching you”, “war is peace”, “freedom is slavery”, “ignorance is strength”.

Mr Peskov speaks with the relaxed good humour of an American spin-doctor. But listening to some of what he had to say, I experienced a strong sense of déjà vu – and it was not the US that was brought to mind. It was China.

During the cold war, it was natural to lump Russia and China together. Now the two countries are once again occupying similar ideological terrain. They no longer espouse communism. But both Russia and China have nonetheless separately arrived at very similar political doctrines. At home, the formula is authoritarianism, combined with rapid economic growth and nationalism. Internationally, both see their rising economic power as the basis for righting past humiliations. They preach a doctrine of absolute respect for national sovereignty.

Russian and Chinese nationalism – backed by economic strength – poses obvious foreign policy dilemmas for the west. The issues involved are both practical and philosophical. Was it wrong to suppose that globalisation and economic growth would eventually mean that Russia and China would become liberal democracies? If that was too glib, are the new China and Russia threatening to western interests?

It is too soon to answer these questions definitively. China and Russia once again pose an ideological challenge to the west. But authoritarian nationalism, backed by massive foreign reserves, may turn out to be simply a phase on the long march to liberal democracy. Or it may turn out to be something more durable – and Orwellian.

Asia’s Dangerous Divide

Beijing and Washington are building new alliances throughout the continent. Is it a good or bad news for Cambodia?

Later this month, the navies of the United States, India, Japan, Australia and Singapore will get together in the Bay of Bengal for one of the largest peacetime joint military exercises ever. Dubbed Malabar 07, the exercise stems in part from Japanese Prime Minister Shinzo Abe's recent push to strengthen ties with India and other Asian democracies.

His motivation for the move isn't hard to understand. Around the same time Abe was in India, 6,500 troops from Russia, China and four Central Asian countries converged on the Siberian city of Chelyabinsk to show off their own armed prowess. The "Peace Mission 07" exercise was held under the auspices of the Shanghai Cooperation Organization (SCO).

Yet the underlying message was clear enough. Taken together, the Malabar and Peace Mission exercises point to a potentially dangerous reality taking shape: the emergence of two competing security camps in Asia. On the one hand stands the United States, still the area's dominant military power; traditional allies such as Japan and Australia; and a few new friends, such as Mongolia and, potentially, India. On the other stands China, which is using its rapid economic growth and accelerating defense spending, as well as close ties to Russia, Pakistan, the Central Asian states, Burma, and Cambodia, to raise its own profile and to develop a sphere of influence. As the competition accelerates, more and more states are finding themselves forced to choose sides.

This is unlikely to result in a stark new cold war; for economic reasons, especially, countries in both spheres should remain more integrated than the Soviet and U.S. blocs were during the second half of the 20th century. And a number of states—including South Korea, Indonesia, Thailand, Malaysia, and Vietnam—seem determined to sit on the fence. Still, the security situation is growing increasingly tense as the sides jockey for influence. Apart from anti-Western ire, another powerful glue binding the Chinese camp is energy security. Both the U.S. and China are driven increasingly by a fight for energy supplies (vital ports and strategic routes).

Despite the many warning signs, however, some scholars advise against gloomy predictions. They argue that the SCO, for example, shouldn't be taken seriously, since its members, while sharing some interests, are divided by others. Economic interconnections also greatly complicate the picture. China is integrated into the West and the global economy in ways that the Soviet Union never was. India is also very eager to do business with China, and signed an economic-cooperation and border agreement with its giant neighbor in 2005. Economic factors also help explain why a number of states have refused to align with either security camp. South Korea, once a stalwart U.S. ally, has lately seemed to be tilting toward China, which—here again—recently became Seoul's pre-eminent business partner.

"Everybody has concerns about China, but the closer you are to China the less you're able to articulate them out loud," says the CSIS's Glosserman. "I think everyone is hedging in every direction." And it will probably be some time before China and its new friends pose a serious military threat to the United States and its camp. But they're trying—and if trends continue in the current direction, they may well someday succeed.

Armies of the Enlightened

Throughout Asia, Buddhism is growing fast, playing an increasingly political—and, in some spots, militant—role.

In recent years, massive groups of fervent believers have taken to the streets of Asia with angry political demands. They've railed against government corruption, condemned the onslaught of Western values and decried the erosion of traditional morals. Having built an extensive network of grass-roots aid groups, their numbers are exploding. Some have even picked up arms to defend their beliefs. Sound familiar? It should—only the faithful in question aren't Islamic fundamentalists or conservative Christians. They're Buddhists: members of what used to be Asia's quietest religion, one usually associated with pacifism and contemplation.

Some buddhist organizations are now wading straight into the rough-and-tumble of everyday politics, suggesting last year's monk-led protests in Burma weren't an anomaly. In Thailand, an ultraconservative Buddhist faction helped topple Prime Minister Thaksin Shinawatra in 2006. In India, the populist leader of a rapidly expanding Buddhist-supported party is now being touted as a future prime minister. And in the most dramatic cases, some Buddhists have even begun advocating violence—such as Sri Lanka's fiercely nationalist Jathika Hela Urumaya party—or have started picking up guns themselves, as in southern Thailand.

Buddhists are adopting a tough-minded new profile, which can be explained in part by their numbers. The religion is growing fast. Though it's hard to nail down exact figures, scholars say there are now some 100 million Buddhists in China alone. In India, the birthplace of Buddha, there were only 8 million in 2001, but experts now set the total at 35 million. And in Taiwan, the number of Buddhists grew from 5.5 million in 2001 to 8 million in 2006.

The boom reflects several factors. In China and Taiwan, the growth of the faithful reflects the loosening of political control. In recent years, Beijing has significantly eased restrictions on all the country's faiths, not least because religious values (once attacked during the Cultural Revolution) are now viewed as a vital bulwark of the "harmonious society" touted by the government. Meanwhile, as Asian societies grow richer, Buddhism's powerful critique of materialism is resonating among the new middle classes. Akash Suri, for instance, is a 25-year-old banker in New Delhi who once lived a lavish lifestyle, splurging on clothes, restaurants and expensive holidays. But a couple of years ago he began thinking "that all this fancy lifestyle was not making me happy. Instead there was anxiety and stress." Buddhism and meditation calmed him.

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The tigers that lost their roar

Other emerging economies are producing world-class companies by the dozen. Why aren't the countries of South-East Asia?

It is easy to forget, now that China and India are all the rage, that until ten years ago South-East Asia was the world's fastest-developing region.

The region has 570m people and had a head start in economic development over much of the rest of Asia. So why does it still have no global consumer brands of the stature of South Korea's Samsung and LG? Where are its equivalents of India's world-conquering Tata Steel, Ranbaxy and Wipro? Or China's market-devouring Huawei and Lenovo? Ask an investor in London or New York to name globally respected South-East Asian firms and the answer is unlikely to consist of much more than Singapore Airlines.

In a recent book, “Asian Godfathers”, Joe Studwell examines this failure in stark terms. The region's business scene remains dominated by old-fashioned, mediocre, sprawling conglomerates, run at the whims of ageing patriarchal owners. These firms' core competence, such as it is, is exploiting their cosy connections with governing elites. Their profits come from rent-seeking: being handed generous state contracts and concessions, or using their sway with officialdom to keep potential competitors out. If they need technology, they buy it from abroad. As a result the region has “no indigenous, large-scale companies producing world-class products and services.”

Corruption is another great burden on business. That is true elsewhere in Asia too, but several South-East Asian countries—notably Indonesia—are afflicted by corrupt and unreliable judicial systems, making it difficult to enforce contracts.

Although it is hard to generalise across Asia, another obstacle to developing world-class businesses is that the five main South-East Asian economies do worse than might be expected—that is, relative to their national incomes—in promoting technology and higher education. Both the lack of fair competition between businesses and the failure to widen access to education may have a common underlying cause: that South-East Asian countries remain in the grip of narrow elites.

The rise of China and India, with their huge home markets, may mean that it is too late for South-East Asia to become big in manufacturing. But it does still have the prospect of producing world-leading firms in other areas where it has an edge. Tourism and hospitality are obvious examples, especially as the region's neighbours become richer. South-East Asia could become both “the Mediterranean and the Caribbean of Asia”, enthuses YTL's Mr Yeoh.

Natural resources are another promising source of future world-beaters. Following Brazil and, closer to home, Australia, South-East Asia is beginning to build global businesses by making the most of what nature has provided. The region already dominates some types of agricultural produce.

The reasons why South-East Asia has been slower than other regions to produce world-class businesses are complex and open to debate. But they do seem to be linked to the perseverance of narrow elites and to the countries' sluggishness in overcoming old rivalries and building an integrated regional market. As a handful of promising companies are showing, not all is lost. Even in today's fierce jungle, South-East Asia can still breed tigers.