FACTORIES IN BANGLADESH

HELL FOR LEATHER: BANGLADESH’S TOXIC TANNERIES RAVAGE LIVES AND ENVIRONMENT

Jason Motlagh / Dhaka

Time, September 3, 2013

Inside the factory, shirtless workers stretch freshly dyed sheets of goat leather across industrial drying racks. Sleek and durable, the leather is in great demand at fashion houses from Italy to Hong Kong, feeding a global appetite for Bangladesh-made clothing that has boosted the country’s export earnings more than 20% in the past year. But outside, under the glaring sun, it’s clear who’s paying the price. Toxic runoff, the color of crude oil, is discharged into open gutters that course their way through jam-packed streets and makeshift housing, en route to city waterways. Seated by one of the gutters on his tea break is a gaunt Saddam Hossein — he is 23, but looking 10 years older and his hands are scarred from processing chemicals. “It’s hard labor,” he says. “But what else can I do?”

Bangladesh has become synonymous with cheap, ready-made garments and — in the wake of April’s Rana Plaza disaster — the appalling cost of fast fashion. Less notorious but no less grim is its booming leather industry, where workers and environment are degraded to sustain a billion-dollar business. Nearly all the country’s 206 tanneries are concentrated in one area — Hazaribagh, a cramped, filthy neighborhood in southwestern Dhaka, the sprawling capital.

(...) [article here]

THE INDIAN RUPEE DECLINE

RUPEE BREACHES 67: FOUR MYTHS ABOUT INDIA AND THE POLITICS OF PESSIMISM

Rajesh Pandathil

Firstpost, August 28, 2013

Why this panic about the rupee decline, asked Paul Krugman on 20 August, a day when the currency hit 64.13 forcing the RBI to intervene to pull it back to 63.25 levels at the close.

His contention was that a panic was unwarranted now as India's dollar denominated debt situation is not like the Asian crisis countries of 1997-1998 or Argentina in 2001 and the fall in the rupee was in line with the emerging market currencies.

“Now, the depreciation of the rupee will presumably lead to a spike in inflation - but it should be temporary. So at first examination this doesn't look like as big a deal as some headlines are suggesting. What am I missing?,” he said in his blog.

But then the rupee's record low was 64.13, a level which now looks like a strong one. The rupee has fallen 65 and 66 in a matter of 7-8 days and looks set to reach 70 faster than expected.

The Indian rupee breached the 67-mark in early trade Wednesday, hitting a record low of 67.98 against the dollar in a couple of minutes of trade.

(...) [article here]

CHINA’S SHADOW BANKING

CASH CRUNCH? CHINA'S TRUE CRUNCH TIME IS YET TO COME

China's 'shadow banking' sector could pose serious problems for the country in future

Linda Yueh

BBC News, June 24, 2013

How can a largely state-owned banking system experience a credit crunch? When the central bank decides to rein back credit.

The Chinese central bank has been reining back credit for some time now as it has sought to control housing prices. But, when the cheap money from the rest of the world began reversing (see my post on Great Reversal part II) due to the Fed signalling an end date for the era of cheap money, funds leaving emerging economies like China have made the situation more apparent.

Last week, the overnight lending rate between banks jumped to exceed 25% as banks became reluctant to lend to each other. But the lending rates fell again when the state-owned banks fell into line and resumed lending to each other.

Now, the Chinese central bank says that liquidity is "ample" and essentially indicated that it will not inject more cash, holding firm on the line of controlling credit growth in the economy.

As a result, the Chinese stock market fell into bear market territory led by the decline of banks. In other words, banks can't count on the central bank for cheap cash. In fact, the central bank wants to root out the poorly performing banks - especially those in the so-called shadow banking system.

(...) [article here]

JAPAN’S FISCAL STIMULUS

JAPAN TO CONSIDER FISCAL STEPS TO COUNTER HIT FROM TAX RISE

Mayumi Otsuma and Kyoko Shimodoi

Bloomberg, June 20, 2013

Japan’s government is ready to provide extra spending if a sales-tax increase next year damps economic growth, a senior finance ministry official said.

“We must take appropriate action to counter” any decline in economic growth after the tax increase planned for April, Yuzuru Takeuchi, 54, parliamentary secretary for finance and a lower house legislator, said in an interview today in Tokyo. The government will also create a panel to encourage companies to raise wages, he said.

Prime Minister Shinzo Abe is rolling out fiscal and monetary stimulus to help pull the economy out of a more than decade-long deflationary malaise. The government is grappling with supporting growth while trying to slow the increase in Japan’s debt burden, the developed world’s largest.

“If the government doesn’t announce a further fiscal package, we’re likely to see some payback” in growth from the boost in 2013 from government spending, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo.

The economy may shrink an annualized 3.9 percent in the second quarter of 2014 after the sales tax is raised to 8 percent from its current 5 percent, according to the median forecast of economists surveyed by Bloomberg News. The tax will be further increased to 10 percent in 2015.

(...) [article here]

CHINA’S PROPERTY PRICES

CHINA HOME-PRICE GAINS ADD TO DILEMMA ON CASH CRUNCH: ECONOMY

Bloomberg News

Bloomberg, June 18, 2013

Chinese property prices rose at the fastest pace in more than two years in major cities, defying tougher government curbs and constraining the ability of policy makers to ease credit in response to weakening economic growth.

New home prices in Beijing, Shanghai and Guangzhou posted the biggest gains in May since at least January 2011, and 69 of the 70 cities tracked by the government showed increases, the most since August 2011, National Bureau of Statistics data showed today in Beijing. Inbound non-financial investment rose 0.3 percent in May from a year earlier, the weakest in four months, according to the Ministry of Commerce.

The property gains limit the ability of Premier Li Keqiang to counter an economic slowdown that showed signs of deepening in May. The central bank today refrained from adding cash to the financial system and money-market rates reached the highest level in seven years this month, a liquidity squeeze that Fitch Ratings says may accelerate a banking crisis.

“The government is in a dilemma right now,” said Zhang Zhiwei, Hong Kong-based chief China economist at Nomura Holdings Inc., who previously worked at the International Monetary Fund.“It’s difficult for China to tighten the property market, while it also needs to bolster the economy, which has a strong reliance on property.”

(...) [article here]

CHINA AND THE SERVICE SECTOR

CHINA SETS FOCUS ON SERVICE INDUSTRIES

Bao Chang

The China Post, June 17, 2013

WU--I -- Now is the best time for China to develop its service trade, and the country can become one of the biggest outsourcing service providers in the world within the next few years, Wei Jianguo, former vice minister of commerce and secretary-general of China Center for International Economic Exchanges, said on Saturday.

At present, outsourcing service buyers in developed economies are moving their focus from investing in labor-intensive industries to the outsourcing service in high technology and research and development sectors.

“China should seize this unprecedented opportunity and get a foothold in the transaction of the world's service trade and gain an advantage compared with other emerging economies which are also seeking new opportunities in the outsourcing industry upgrading,” Wei said.

Wei was speaking at the Sixth Global Outsourcing Summit in Wuxi, in East China's Jiangsu province.

Jointly organized by the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, the Asia-Pacific CEO Association and the People's Government of Wuxi Municipality, the summit targets the promotion of multinational outsourcing and insourcing cooperation, and looks at the city's transformation amid economic globalization.

(...) [article here]

THE CHANGING ECOMOMIC DYNAMICS IN ASIA

WHAT ASIA'S NEW GROWTH TACK MEANS FOR INVESTORS

Asia has been a driving force behind global growth since the financial crisis. But the dynamics are changing as growth slows in China and Australia, and Japan pursues “hyperactive” monetary policy. In this issue of our Secular Outlook Series, portfolio managers Ramin Toloui, Tomoya Masanao and Robert Mead discuss how these developments are affecting the global outlook for the next three to five years and the implications for investors.

PIMCO

Business Spectator, June 13, 2013

Question: What is PIMCO’s secular outlook for Asia?

Ramin Toloui: Asia has been the critical driver of the global economy during the past five years, providing by far the largest contribution to global GDP growth of any region. China has been at the centre of Asia’s growth story, so the most important question for Asia’s secular outlook is: Can China maintain high rates of economic growth in the years ahead?

Our view is that Chinese GDP growth will downshift, averaging 6 per cent to 7.5 per cent annually for the next five years versus more than 9 per cent on average for the past five. The reason is that the previous engines of Chinese growth – net exports and investment – are reaching their limits. Prospects for export-led growth are inhibited by China’s large size in a global marketplace that remains deficient in aggregate demand due to high indebtedness in the developed world. Investment cannot play its previous role in driving growth because it has already risen to almost 50 per cent of GDP – up from 35 per cent in 2000 and from 42 per cent in 2007 before the global financial crisis – an extraordinary ratio by historical standards.

To sustain growth, China’s economy needs to shift to greater reliance on household demand. The good news is that the potential is extraordinary after more than a decade in which consumption has declined from 46 per cent to 35 per cent of GDP. Latent demand for not only consumer goods but also services such as health care is likely enormous. However, turning that potential into reality requires changes in economic policy that are wide-ranging and difficult, and also challenge vested interests among the political and industrial elite.

(...) [article here]

WEAKER DEMAND IN CHINA

CHINA LEADERS TESTED ON GROWTH RESOLVE AFTER SLOWDOWN: ECONOMY

Bloomberg News

Bloomberg, Jun 10, 2013

China’s new leaders face a test of their resolve to forgo short-term stimulus for slower, more-sustainable growth after May trade, inflation and lending data trailed estimates, signaling weaker global and domestic demand.

Industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed yesterday in Beijing. Export gains were at a 10-month low and imports dropped after a crackdown on fake trade invoices while fixed-asset investment growth moderated and new yuan loans declined.

The data add pressure on President Xi Jinping and Premier Li Keqiang to shore up growth less than three months into their tenure, after first-quarter expansion unexpectedly slowed. While the figures boost the case for easing monetary policy or approving more spending, the government’s room is limited by rising home prices, financial risks and overcapacity.

“The May data will force China’s leadership and the central bank to rethink growth and inflation -- it seems they were too optimistic about growth and too concerned about inflation,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “It’s a test for China’s leadership to see whether they are determined to reform.”

(...) [article here]

JAPAN’S “THREE-ARROW” POLICY

JAPAN’S SHINZO ABE UNDERWHELMING PACKAGE OF ECONOMIC REFORMS

Editorial Board

The Washington Post, June 7, 2013

JAPAN HAS been in a state of economic stagnation for much of the past two decades. The United States would benefit if this important ally could reverse that trend, aiding not only Japan’s own well-being and national security but also the balance of power in Northeast Asia.

The good news is that there is broad consensus about what ails Japan, and a new prime minister, Shinzo Abe, has come into office determined to act. Mr. Abe has fired the first two “arrows” in his “three-arrow” policy, aiming them at fiscal and monetary policy with the goal of ending Japan’s chronic deflation. His government is spending heavily on infrastructure, and the Bank of Japan has embarked on a massive asset-buying program.

Aggressive as these policies are, enacting them was relatively simple, politically, relative to tackling the third source of Japan’s woes: a vast web of regulations, subsidies and trade barriers whose net effect has been to support inefficient sectors, and the voters who live off them, at the expense of growth and innovation. Japanese productivity has remained essentially flat for the past two decades, a dangerous state of affairs in a country with a shrinking labor force and a growing dependent elderly population.

The politically powerful agriculture sector illustrates how self-defeating Japanese policy can be. Economists Takeo Hoshi, now at Stanford University, and Anil K. Kashyap of the University of Chicago have calculated that Japan’s farms got $53 billion in subsidies in 2010, an amount equal to the total value they added to the economy. In other words, farming made zero net contribution to Japan’s national income.

(...) [article here]

SLOW GROWTH IN CHINA

CHINA'S SLOW GROWTH CAN BE GOOD NEWS

Junheng Li

Forbes, June 6, 2013

Over the past 33 years, China thrived on a singular economic model: high-volume manufacturing of low-margin products for the rest of world. Today, that growth model has stalled – and not just for cyclical or near team temporary reasons, but because it has come to the end of the line. That is evidenced by the excess capacity that has built up in many sectors such as steel, cement, solar panels and construction materials, as well as the rising cost structure, declining global competitiveness and shrinking corporate profitability of many Chinese companies.

According to a study by brokerage CLSA on 428 publicly traded Chinese companies (excluding banks), corporate margins have declined from approximately 30% in 1997 (before the Asian Financial Crisis) to 10.5% currently. A lack of R&D and innovation has hindered Chinese companies from moving up the value chain, and China is falling behind in global competitiveness. Many state-owned enterprises (SOEs), including state-owned banks, are kept afloat by taking on increasingly more debt from banks or from each other. Excluding banks, Chinese companies’ return on equity has declined by approximately 35%, while corporate leverage has increased approximately 33% since 1997.

The picture is clear. Despite its unprecedented achievement of lifting 500 million people out of poverty in as little as thirty-three years, China’s economy has become a prisoner of its own success.

(...) [article here]

7% GROWTH IN CHINA

LI TELLS GERMANY CHINA TARGETS 7% GROWTH FOR DECADE: ECONOMY

Bloomberg News

Bloomberg, May 28, 2013

Chinese Premier Li Keqiang told German business leaders his country is confronted by “huge challenges” as it seeks 7 percent annual growth this decade, down from more than 10 percent in the previous 10 years.

China needs growth of about 7 percent to double per capita gross domestic product by 2020 from the level in 2010, Li said yesterday in Berlin after meeting with Chancellor Angela Merkel during his first trip abroad as premier. Expansion is cooling from the pace that propelled the nation to become the world’s second-biggest economy.

Li, who succeeded Wen Jiabao as premier in March, is signaling the limits of leaders’ tolerance for slower growth as Europe’s debt crisis curbs shipments abroad, manufacturing weakens and a government anti-extravagance campaign restrains restaurant and retail sales. The comments came days after President Xi Jinping said China won’t sacrifice the environment to ensure short-term expansion and policy makers outlined plans for a bigger role for the private sector.

“I don’t think it’s a change of policy stance, but I do feel that in the past several months we’ve started to hear more and more signals from the central government that they want to tolerate lower growth,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong.

Yesterday’s comments at a Germany-China business forum compare with Li’s remarks at a March 17 press conference that China must average 7.5 percent growth through 2020. State-media transcripts that day said Li gave a 7 percent figure.

(...) [article here]

THE DOWNTURN OF CHINA’S ECONOMY

CHINA'S ECONOMY FACES A ROUGH RIDE IN THE NEXT FEW YEARS

G. Bin Zhao says China's economy faces a rough ride in the next few years as the new leadership introduces major changes but the nation will emerge as a global powerhouse in two decades

G. Bin Zhao

South China Morning Post, 27 May, 2013

The world couldn't hide its disappointment when China's first-quarter GDP growth dropped to 7.7 per cent, slightly lower than market expectations. Unfortunately, this might just be the start; worse news could be just around the corner. Indeed, there are a number of reasons why the Chinese economy faces a downturn over the next few years. So, just how bad can it get?

First, the current leadership transition is an issue. It is clear the new Chinese leaders will introduce many changes, because they understand there is absolutely no alternative to secure China's long-term growth. Without major policy adjustments, any notion of turning the nation into a real superpower over the next few decades will just be an unrealistic dream. Certainly, the transition process will lead to social pain, particularly for the economy. In the meantime, the world needs to be aware of this so that another severe slide in China's gross domestic product will not come as a big blow to the global economy.

Second, economic growth is no longer the top priority on the Chinese agenda. Since the growth target is set at 7.5 per cent, the market should not expect any stimulus plan when it fluctuates to around seven per cent, or goes lower. As President Xi Jinping recently emphasised, the days of "ultra-high-speed" growth in China are over. Thus, policymakers will tolerate further economic decline.

(...) [article here]

HOT MONEY IN CHINA

THROWING COLD WATER ON HOT MONEY

Xin Zhiming

China Daily, May 25, 2013

The Chinese economy has become very attractive to speculative hot money. But by allowing the yuan to rise strongly, the authorities cause doubts whether the challenge is handled in a proper and coordinated manner.

Despite the slowing of its economy in the first quarter, foreign capital has been flowing into China to cash in on yuan appreciation and relatively high interest rates.

It is difficult to calculate the exact scale. However, some indicators, such as its foreign exchange purchases and value of exports, cast light on the abnormal influx of capital.

The country's new foreign exchange purchases an indicator for monitoring capital inflows amounted to 1.2 trillion yuan ($193.5 billion) in the first quarter, a huge increase on the 500 billion yuan for the whole of 2012.

According to the State Administration of Foreign Exchange, China had a surplus of more than $100 billion in its capital and financial accounts in the first quarter, compared with $20 billion for the fourth quarter of 2012.

Moreover, the jump in export growth in April, which was 14.7 percent year-on-year, is far higher than market expectations of about 10 percent, resulting in a 114.5-billion-yuan trade surplus. In March, China registered a trade deficit of 7.24 billion yuan.

These abnormal changes indicate an undefined amount of speculative money has been flowing into China.

(...) [article here]

CHINA AND INDIA AS SOURCES OF CAPITAL

CHINA, INDIA TO BE BIGGEST INVESTORS BY 2030: REPORT

Anna Yukhananov

Reuters, May 17, 2013

WASHINGTON (Reuters) - The percentage of global investment that goes to developing countries should triple in the next two decades as emerging economies catch up to richer nations and become more integrated into financial markets, the World Bank predicted in a report on Thursday.

These nations and their comparatively younger and bigger populations are also set to become the largest sources of capital, with China and India turning into the world's two biggest investors by 2030, the global development lender said.

The shifting landscape of saving and investment has profound implications for everything from which currencies will dominate global markets to the rise of new financial centers, patterns of capital flows and investment priorities.

But policymakers are still woefully unprepared for the changes, fixating instead on what will happen in the next three to six months, Kaushik Basu, the World Bank's chief economist, said.

"The big question that should concern us all is what will happen to the major drivers of growth and development: namely savings and investment," Basu told reporters ahead of the report's release.

(...) [article here]

MA GUANGYUAN AND CHINA’S ECONOMY

'CHINA'S ECONOMY SERIOUSLY UNBALANCED'

Li Yu and Peng Chao

China Daily, May 14, 2013

China's economy is suffering from serious imbalances, financial commentator Ma Guangyuan said at the business school of Sichuan University on May 9.

"China's economy relies too much on investment and export," he said.

China's investment accounts for more than 45 percent of its GDP in recent years, almost twice the world's average. In 2010, the share climbed to 69.3 percent, according to Ma.

The high investment hasn't led to high return, however. China's investment has increased 25 percent annually in the past five years, but GDP has only increased by about 10 percent.

Low consumption is also a big problem. The share of consumption as a part of China's GDP has been falling sharply in recent years, according to materials Ma provided.

Consumption made up over 50 percent of China's GDP in the 1980s and 46 percent in the 1990s. The share fell to 33.8 percent in 2010, much lower than the world's average (61 percent).

"A nation is irresponsible to the world's economy if it doesn't consume," Ma quoted American experts.

(...) [article here]

CURRENCY WARS AND THE YEN

AS YEN HITS 100 TO US$, GET READY FOR MORE CURRENCY WARS

Vivek Kaul

Firstpost, May 11, 2013

Ushinawareta Nijūnen, or the period of two lost decades for Japan (from 1990 to 2010), might finally be coming to an end. Or so it seems.

And Japan has to thank Abenomics unleashed by its current Prime Minister Shinzo Abe for it. Abe has more or less bullied the Bank of Japan, the Japanese central bank, to go on an unlimited money printing spree, until it manages to create an inflation of 2 percent.

Japanese money supply is set to double over a two-year period. And all this 'new' money that is being pumped into the financial system will chase an almost similar number of goods and services, and thus drive up their prices. Or so the hope is. The target is to create an inflation of 2 percent and get people spending money again. When prices are rising or are expected to rise, people tend to buy stuff, because they don't want to pay a higher price later (This, of course, is true to a certain level of inflation and doesn't hold in the Indian case where retail inflation is greater than 10 percent). As people go out and shop, it helps businesses and in turn the overall economy.

In an environment where prices are stagnant or falling, as has been the case with Japan for a while now, people tend to postpone purchases in the hope of getting a better deal. The situation where prices are falling is referred to as deflation.

In 2012, the average inflation in Japan was zero percent, which meant that prices neither rose nor fell. In fact, in each of the three years for the period between 2009 and 2011, prices fell on the whole. This has led people to postpone their consumption and hence had a severe impact on Japanese economic growth. To break this "deflationary trap", Shinzo Abe and the Bank of Japan have decided to go on an almost unlimited money printing spree.

(...) [article here]

¿THATCHERISM… IN CHINA?

THATCHERISM WITH CHINESE CHARACTERISTICS

Conditions in China are similar to what Britain faced during Thatcher's reign, something the new leadership should note

Deng Tishun

Caixin, May 10, 2013

As the world mourned the passing of former British prime minister Margaret Thatcher, and remembered her belief in small government, free enterprise and monetarism, we should look at what today's China can learn from her legacy.

At almost exactly the same time Thatcher was leading Britain out of an economic slump, China under Deng Xiaoping embarked on its own social and economic reform, which had tenets similar to what was later known as Thatcherism.

Deng understood how the free market functioned, giving people more power over their lives by granting private property ownership, motivating the formation of private enterprises and rolling back omnipresent government controls. China has since enjoyed dramatic ascendance.

Despite its eye-catching growth, China remains a developing country with per capita GDP well below the global average. Its growth momentum has slowed noticeably over the past few years, partly due to a lack of reform breakthroughs. Many economic challenges faced by Thatcher in the 1970s pose the same threats to today's China. These include:

Big government. China's fiscal revenue as a percentage of GDP increased to 23 percent at the end of 2012 from 12.9 percent in 1992. Its fiscal expenditure as a percentage of GDP increased to 24 percent from 13.9 percent over the same period. These figures are now back to the levels they were at in 1981 when China embarked on economic reform programs.

(...) [article here]

CURRENCY WARS IN ASIA

ABENOMICS AND CURRENCY WARS.WHAT ARE WE TO DO

Tan Sri Lin See-yan

The Star, May 4, 2013

ABENOMICS, the aggressive management blend of monetary and fiscal stimuli to reflate Japan's stagnant economy, according to Prime Minister Shinzo Abe. Consequently, yen weakened considerably notching 23 weeks of back-to-back falls against the US dollar, completing the longest losing streak in 24 years. The sell-off brought it within striking distance of 100 yen to US$1, a level not seen since 2009.

US dollar has since climbed 25%, and the pound 9%-10% against the yen since mid-April. Worries are that yen can move to within 110. This has led to a growing chorus of emerging nations (including China, Russia, Colombia and Thailand) expressing alarm over the prospect of “currency wars.” Indeed, many nations around the world are vying to keep their currencies “weak” as well, through “macro-prudential” means, including limited interventions. So much so the Moscow G-20 meeting in February had to re-affirm that economic stimulus policies should be aimed at lifting domestic growth and not target exchange rate.

The Asian Shadow Financial Regulatory Committee (of which I am a member) recommended at its April 18 meeting at Shanghai's Fudan University that (i) Asian economies particularly those in North-East Asia, should refrain from competitive devaluation and protectionist policies, which would have a negative impact on world trade flows; (ii) the Bank of Japan should be considerate, cautious and transparent in undertaking further quantitative easing, by not targeting a weak yen and taking into account the concern of others; and (iii) IMF and, in particular ADB need to closely monitor international financial flows and strengthen its surveillance framework for macroeconomic policies of nations so that it will be more effective in promoting global monetary stability.

(...) [article here]

INDIA’S ECONOMY: ROBUST AND RESILIENT

INDIA GROWTH STORY INTACT, WILL CONTINUE TO GROW FASTER ON DOMESTIC DEMAND: ADB PRESIDENT

The Economic Times, May 3, 2011

NEW DELHI: Growth in emerging Asian economies, including India and China, is likely to remain robust and resilient even after the global crisis due to strong domestic demand, Asian Development Bank's new president Takehiko Nakao said.

Speaking on Thursday, ahead of the ADB's annual meeting, Nakao conceded that the current account surpluses in emerging economies had depleted to 2% from 10% because of the economic crisis.

However, he said, "India, China and other emerging economies would continue to grow faster than other developed economies because of strong domestic demand and strong production capacity in the region." The way forward for these economies is to continue attracting investments, especially in infrastructure development, Nakao said, adding that this can be done by good taxation and mobilising domestic savings.

Admitting that private sector has been a key contributor to Asia's economic boom and a powerful tool in the fight against poverty, he said there still remains considerable untapped potential for drawing on the entrepreneurship, talent and productivity in our region. "India needs to upgrade its services sector to absorb millions of workforce that gets generated each year. Besides, government needs to enhance private sector participation by creating conducive business environment to expand the sources and volume of available infrastructure financing," he said.

(...) [article here]

ECONOMIC RISKS IN ASIA

IMF FLAGS RISKS OF ASSET BUBBLES, MIDDLE INCOME TRAP IN ASIA

Kevin Lim

Reuters, April 29, 2013

SINGAPORE (Reuters) - Asia needs to guard against asset bubbles and its emerging economies must improve government institutions and liberalise rigid labour and product markets if they wish to reach the level of developed countries, the International Monetary Fund said on Monday.

"Emerging Asia is potentially susceptible to the 'middle-income trap,' a phenomenon whereby economies risk stagnation at middle-income levels and fail to graduate into the ranks of advanced economies," the IMF said in its latest Regional Economic Outlook for Asia and the Pacific.

"MIEs (middle-income economies) in Asia are less exposed to the risk of a sustained growth slowdown than MIEs in other regions. However, their relative performance is weaker on institutions," the international funding agency said.

IMF's warning about the emerging risks faced by Asian countries come at time when the region looks set to lead a global economic recovery as risks from a meltdown in Europe recede.

"While the external risk of severe economic fallout from an acute euro area crisis has diminished, regional risks are coming into clearer focus. These include some ongoing buildup of financial imbalances and rising asset prices," the IMF said

(...) [article here]