Tuesday, 18 August 2009

ASEAN Deals Bringing Asia Closer Together

August 18th, 2009
by 2point6billion.com

Aug. 18 - The recently announced deals between China and India concerning ASEAN trade are expected to add a welcome boost to trade figures within the region, and to stimulate recovery following the global downturn. Accordingly it seems an appropriate time to revisit the prefaces to the China Briefing book “China’s Neighbors” as it provides a good overview of the region and which countries and organizations are players within it. The book’s complete contents and purchase details can be viewed here.

World Bank report on ease of Asian business
The ease of doing business across Asia varies significantly. According to the “Doing Business Report 2009″ prepared jointly by the International Finance Corporation and the World Bank, Singapore retains its number one position on the overall regulatory ease of doing business for a third consecutive year. While due to poignant regulatory reforms China’s rank improved from 83 from 90, out of 181 countries. India, however, slipped two notches to rank at 122nd, below its neighbors Nepal, Bangladesh and Pakistan which have been placed 121, 110 and 77 respectively in the overall ranking.

Among Asia-Pacific countries, the Philippines, ranked 140th, lags behind most of Asia for ease of doing business behind even Cambodia at 135 and only ahead of Laos at 165 and East Timor at 170. The average ranking for East Asia is 8. Consequently, Bangladesh is ranked 110 and has reduced the time needed to register property from 425 to 245 days. Bhutan is ranked 124th.

Eastern Europe, Central Asia and the Caucasus, led by Azerbaijan, made more changes than any other region to make doing business easier over the past year, according to the report. Azerbaijan improved its ranking by 64 places and is this year’s top reformer. Large economies that fell in the rankings include Germany, which dropped to 25 from 20, Mexico, to 56 from 42, and Russia, to 120 from 112.

The report ranks economies based on 10 indicators of business regulation that record the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business.

The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates, said the report.

Asia’s regional economies: The cost of bowl of rice a day
In a region comprising the giant populations of China (1.3 billion), India (1.25 billion) and the emerging nations of Southeast Asia (collectively, about 880 million), much of the economic data on China trends misses two points; the massive impact on China that emerging Asia has; and the financial impact of the poverty level rising by just one more affordable bowl of rice a day, per person.

In the scramble to unravel China’s economics, and the questions inflation and a slowing GDP ask, much has been made of a potential recession in the U.S. markets and the competitive impact of a resurgent India. While the recession has made an impact, the rise in wealth of China’s neighboring countries also has had a major impact on the region, and on China. India’s population is set to shortly (if it hasn’t already) overtake China’s ageing one, while the combined populations of Indonesia, Pakistan, Bangladesh, the Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia and Laos are collectively close to three quarters of both China and India individually.

In the rush to understand China economics, the populations of smaller countries, such as Vietnam (85 million) have been forgotten. Yet collectively, the third part of the Asian triangle is nearly as large as the other two.

Such oversights are misleading. Emerging Asia has a huge impact on what goes on in China and how it affects prices. While growth regionally in countries such as Cambodia and Laos — relative minnows with populations of 14 and 7 million each — would not seem to have any clout or impact on the China price, when included with the other regional markets — all growing from between 7-10 percent annually — the implications seem to become more serious. Just raising the level of wealth in these countries enough to allow each person an additional bowl of rice a day is having a profound impact.

While rice consumption in China has fallen by 860,000 tons annually over the past three years (the only Asian nation in which this has occurred), it has been far outstripped by an increase in consumption in India of 6,522,000 tons. Consumption in the additional emerging Asian economies we mention above collectively rose by a further 6,419,000 tons, almost equivalent to that of India’s rise. That’s an increase of over 12 million tons since 2005. Considering that in terms of global productivity for rice per acre, that means a rough estimate of an extra 8 million acres has had to be set aside during that same period just to meet that demand — and from a region whose arable land mass is far from efficient.

The cost impact has been huge, and is also difficult to track down. With such a stress on domestic suppliers, governments have been subsidizing the true cost of production by giving farmers handouts, and by literally digging into reserves. Cyclones earlier this year in Southeast India destroyed crops, forcing the government to step in to write off debt and keep families alive. Rice reserves held in stock are dropping, and much has been found to have been poorly warehoused. Meanwhile, prices in Pakistan have increased by US$200 per ton or about 30 percent in the past 28 months and prices have risen by similar amounts in Thailand and Vietnam.

China and emerging Asia’s continued growth and development is raising several questions: who has really factored in the micro-elements impacting the economies; what is truly the impact of an additional bowl of rice, per day, per head of regional population; and what are the costs and impacts upon the regional economies, including that of China, to deliver just such a basic staple.

Emerging Asia may be booming, but much of the commodity price impact, as the region places more demands on resources will surely affect China’s own provision of its basic resources as well as the China costs in doing so.

The Shanghai Cooperation Organization gathers regional strength
With the rise of Asia and the emergence of Central Asia in global economics and politics the role of the Shanghai Cooperation Organization is growing in importance. Founded in 2001 in Shanghai by the leaders of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, the SCO was originally formed due to growing security concerns in the region. Its role has been extended to encompass economic benefits to member countries as well. India, Iran, Mongolia and Pakistan remain observers to the SCO.

SCO countries (full members and observers) comprise a hefty 25 percent of Earth’s land area. Although the declaration on the establishment of the Shanghai Cooperation Organization contained a statement that it “is not an alliance directed against other states and regions and it adheres to the principle of openness”, many observers believe that one of the original purposes of the SCO was to serve as a counterbalance to NATO and the United States and in particular to avoid conflicts that would allow the United States to intervene in areas near both Russia and China.

On the economic front, SCO members have agreed to improve the flow of goods in the region while prioritizing joint energy projects in the oil and gas sector the exploration of new hydrocarbon reserves, and joint use of water resources.

In order to bolster security among member nations, the SCO focuses on eradicating the threats faced from terrorism, separatism, extremism and drug trafficking. As a result, joint military exercises between the member countries play an important part in securing the region.

Cultural cooperation also occurs in the SCO framework, with member countries holding art festivals and cultural exhibitions in each other’s countries.


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