THE PHILIPPINES, THAILAND AND THE US

OLD ALLIES, NEW DYNAMICS IN US PIVOT

Julius Cesar I Trajano

Asia Times, August 31, 2012

SINGAPORE - The US's "pivot" strategy towards the Asia-Pacific aims to reinvigorate security alliances with its established partners in the region. In Southeast Asia, the Philippines and Thailand have long been US treaty allies, affording them privileged access to US armaments and in the case of the Philippines a mutual defense guarantee if attacked by a third party.

The Philippines and Thailand, however, have had decidedly different responses to the US's renewed security engagement with the region. While Manila has warmly welcomed the US's military presence, Bangkok has adopted a hedging strategy to preserve its vibrant ties with China. Washington's ties with Bangkok and Manila are now influenced by two crucial factors: (1) the perception of an existential threat and (2) domestic political and economic interests.

A key strategic hub for American forces, the Philippines has offered the US greater access to its military facilities in exchange for assistance in the modernization of its military. The Philippine government announced on August 24 that it welcomed America's plan to deploy "X-band", a powerful new early warning radar, in Japan and the Philippines. The plan is seen by some as the centerpiece of the US's defense build-up in Asia to counter threats from nuclear North Korea and to contain China's rising military power.

(...) [artículo aquí]

INDIA AND THE RBI

DON'T BLAME SLOWDOWN OF INDIAN ECONOMY ON RBI

The Economic Times, August 30, 2012

The Indian economy has slowed down more sharply than anybody could have imagined a year ago. Official forecasts peg growth for the current year in the range of 6-6.7%. Many private forecasts are more pessimistic: they project growth of below 6%. How to raise the growth rate is the big challenge for the government. To do so, we need to get a handle on what has caused the slowdown in the first place. The RBI's latest annual report sheds useful light on the subject.

Everybody understands that a combination of domestic and global factors is responsible for the slowdown. The disagreement is about the relative importance of these. The RBI report attempts to quantify the impact of each of these. The RBI's internal research suggests that a 1% increase in the real weighted average lending rate (WALR) depresses industrial output by 0.6% over a one-year horizon.

Between 2010-11 and 2011-12, there was an increase in the real WALR by 2% (using the wholesale price index as the deflator). This would translate into a decline in industrial output of 1.2%. The decline in output, however, was much steeper, down 5.3%. Thus, the rise in interest rates does not explain the sheer magnitude of the slowdown.

The RBI also estimates that a 1% increase in global growth causes industrial output to increase by 0.7%. Global growth declined by 1.4 percentage points between calendar years 2010 and 2011. The impact of the decline in global growth on industrial output should have been 0.98%, or roughly 1%.

(...) [artículo aquí]

MUTED GROWTH IN INDIA

INDIA GDP FIGURES SET TO DEEPEN GLOOM

AFP

The Business Times, August 29, 2012

MUMBAI - India is set to announce dismal new economic growth figures on Friday, with expansion in the April-June quarter forecast at near nine-year-lows.

"The numbers will be bad," Siddhartha Sanyal, chief India economist with Barclays Capital told AFP ahead of the publication of the data, which is expected to deepen the gloom surrounding Asia's third-biggest economy.

"Industrial growth is likely to be flat, inflation is high and it is unclear what the government can do in the next three to six months," Sanyal said.

He forecasts India's gross domestic product (GDP) grew at the same rate as the previous quarter at 5.3 per cent, a high figure by the standards of developed countries but far below the near double-digit growth of much of the past decade.

Leif Eskesen, HSBC's chief India economist predicts the same, saying "growth will be muted due to global headwinds and the lack of structural reforms in India." India's once booming industrial sector is in crisis, with output contracting by a shock 1.8 per cent in June due to high borrowing costs, declining confidence and falling demand.

Overseas investor confidence in the Indian economy is also on the wane, as shown by figures for foreign direct investment (FDI) for the quarter to June which tumbled year-on-year by 67 per cent to $4.43 billion, Global rating agencies like Fitch and Standard and Poor's have lowered their outlook on India's investment-grade rating amid rising worries about the government's deteriorating finances and negative current account.

(...) [artículo aquí]

JAPAN’S SLOWDOWN

JAPAN CUTS ECONOMIC ASSESSMENT AS BNP SAYS CONTRACTION LOOMS

Andy Sharp and Keiko Ujikane

Bloomberg, August 28, 2012

Japan’s government downgraded its assessment of the world’s third-biggest economy for the first time in 10 months as some analysts forecast that gross domestic product will shrink this quarter.

Risks include a “further slowing down of overseas economies and sharp fluctuations in the financial and capital markets,” the Cabinet Office said in a monthly report released in Tokyo today. It cut an evaluation of the global economy.

The government lowered its view on personal consumption, home-building, exports, imports and industrial output, while raising its assessment of the labor market. The Bank of Japan next meets on Sept. 18 and 19 to review monetary policy, while global investors are awaiting an Aug. 31 speech by Federal Reserve Chairman Ben S. Bernanke to gauge the outlook for stimulus in the world’s biggest economy.

“Europe’s debt crisis is having the effect of a body blow to Japan’s economy,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Concerns over Japan’s economic outlook will probably build pressure on the BOJ to apply more monetary stimulus,” said Maruyama, who says the central bank could move in October.

(...) [artículo aquí]

“MIDDLE INDIA”

INVISIBLE, VOLATILE 'MIDDLE INDIA' NEEDS ATTENTION AND POLICY SUPPORT

Rama Bijapurkar

The Economic Times, August 27, 2012

In the decade after liberalisation, 'invisible India' referred to the poor, barely earning, mostly rural India, which many said had got lost as policymakers' attention was focused on the so-called middle class, whose steeply-increasing consumption was very important for GDP growth. Also, it was this consumption juggernaut that would attract FDI and vibrant domestic investment, and cause trickle-down of aspiration and incomes, and create jobs down the income ladder.

After that, when it was accepted that the trickle-down didn't trickle all the way down, the spotlight shifted to the plight of the poor and 'inclusive growth' became the new mantra. The hitherto-invisible India became the target for a slew of welfare programmes, most prominent being the MGNREGA. Financial inclusion, being pushed hard by the banking regulator for a while now, is also aimed at this segment, and more such programmes are on the anvil.

(...) [artículo aquí]

WEN JIABAO AND EXPORTS

WEN URGES STABILIZING EXPORT GROWTH

Xinhua

China Daily, August 26, 2012

GUANGZHOU - Premier Wen Jiabao said China should carry out targeted efforts to steady export growth so the country can hopefully meet this year's economic and social development goals.

During an inspection tour on Friday and Saturday to the southern province of Guangdong, the country's major exporter of goods, Wen said China should place high attention to the difficulties and uncertainties facing exports, which had taken a hit from the global economic headwinds.

"The third quarter of the year is a critical period for China to realize the year's export growth target and we should take targeted steps to stabilize growth," Wen said.

China aims to expand its foreign trade by 10 percent this year.

Wen's latest remarks came as export growth slowed sharply in July to a six-month low following dwindling demand from Europe and Japan.

Exports rose a mere 1 percent year-on-year to 176.9 billion U.S. dollars in July, plummeting from the 11.3-percent growth seen in June, official data showed.

During the trip, Wen visited several companies in cities of Guangzhou, Foshan and Dongguan, where he asked them to push forward structural adjustments, increase input in fostering innovation and make diversified strategies to adapt to the export markets.

Wen said that judging from the new export indexes, China's export outlook will continue to be clouded by difficulties and uncertainties.

(...) [artículo aquí]

THE DIAOYUS

THE DIAOYUS: TAIWAN'S, CHINA'S, OR JAPAN'S?

Nobody wants to ask an international court to find out

Cyril Pereira

Asia Sentinel, August 25, 2012

Considerable heat has been generated on the streets of Chinese cities recently with enraged mobs burning Japanese cars while a fishing boat load of purported heroes from Hong Kong planted China and Taiwan flags on the disputed Diaoyu islands in the East China Sea.

Apart from plentiful bluster and jingoism there is neither clarity nor consensus over the legal merits of the claims by Taiwan and China. Japan controls the island cluster which they refer to as the Senkakus.
Chinese Imperial maritime logbooks going back to the 1400s refer to the Diaoyu Islands as navigational landmarks. Imperial Japan formally incorporated the Senkaku Islands as national territory on 14 January 1895, converting their prior terra nullius (no man’s land) status.

After Japan’s WWII surrender to America, the Senkakus were administered as part of the Okinawa Prefecture under the United States Civil Administration of the Ryuku Islands from 1945 to 1972 when they reverted to Japan under the Okinawa Reversion Treaty ratified by the US Congress in 1971.

The UN Economic Commission for Asia and the Far East (ECAFE) report of 1969 raised the potential of large oil reserves around the Senkaku/Daioyu archipelago. That energized the territorial claims between Taiwan, China and Japan, which continues unresolved.
Since 1972 the civic administration of the Senkaku Islands was placed under the mayor of Ishigaki but he is not permitted to develop them or initiate commercial activity without clearance from the central government.

(...) [artículo aquí]