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Bloomberg News ANZ has received approval to sell its 9.6% stake in Vietnam’s Saigon Thuong Tin Commercial Joint Stock Bank, known as Sacombank, to Vietnam Export Import Commercial Joint Stock Bank, or Eximbank. ANZ established its relationship with Sacombank in 2005, but its self-branded business has grown significantly larger following local incorporation in 2008 and the purchase of the Royal Bank of Scotland’s institutional business in Vietnam in 2009. According to ANZ CEO Asia Pacific Europe and America Alex Thursby, ANZ has recently expanded its automated teller machine (ATM) network, launched internet banking for its Vietnamese customers and opened a 24/7 call center. It now has ten branches, allowing it to offer services covering personal banking, small-to-medium sized business as well as corporate and institutional banking in Vietnam. Deal Journal Australia has more.

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ANZ Agrees Sale Of 9.6% Stake In Vietnam’s Sacombank

China’s real estate scene is reminiscent of the 2007 US market: developers are slashing prices and infuriating owners who paid top yuan for properties. Problems in the real estate market are extending into steel, banking, mining and other sectors. Vacant developments are numerous because wealthy Chinese savers have few alternatives for investing growing wealth. “Beijing’s response to the global financial crisis added jet fuel to the fire,” writes Patrick Chovanec for Foreign Affairs, arguing that investors, not urban residents contributed to the bubble. “To maintain GDP growth of nearly ten percent during a massive downturn in global demand, China’s leaders engineered a lending boom that expanded the country’s money supply by roughly two-thirds.” Developers, after ignoring warnings to ease up on capacity, have urged the government to lift restrictions on owning multiple homes. By letting the bubble pop, the government could instantly create affordable housing for less affluent Chinese. – YaleGlobal Speculation, excess inventory, vacant developments, price reductions – a host of factors are set to undermine China’s real estate market and economic growth Patrick Chovanec Foreign Affairs, 26 December 2011 Rights:Copyright © 2002-2011 by the Council on Foreign Relations, Inc.

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China’s Real Estate Bubble May Have Just Popped

Author: Bradley O. Babson

At the moment of his accession to power, Kim Jong-il inherited the devastating impact of the collapse of the Soviet Union, the subsequent trade shock to North Korea’s economic output, the onset of the worst famine in modern history, and a humanitarian crisis that required a direct appeal to the outside world for help.

By the late 1990’s, he was forced to accept the realities of dependence on international aid, the rise of farmers markets as a grassroots response to the famine, and the introduction of capitalist notions such as ‘profits’ in the Constitution itself. Kim even briefly entertained the notion of establishing relationships with the International Monetary Fund, World Bank, and Asian Development Bank, attracted by the prospects for international finance, but balking at requirements for transparency, conditionality, and rules-based relations. Throughout his leadership tenure he only half-heartedly and grudgingly accepted the growing role for markets in the North’s economy and maintained a deep ambivalence to the prospect of economic empowerment of the North Korean people. His desire to maintain highly-centralised control over all aspects of North Korean society was sharply at odds with the decentralisation of information and decision-making needed for a market economy to replace a failed socialist economic management system. As a result, economic policy in the Kim Jong-il era was more shaped by events and forces for change than used as a tool to guide a managed process for national development.

Experiments in economic reforms were not accompanied by policies or the institution-building that would have been needed for recreating the economic success stories of China and Vietnam. Rather, the guiding light of economic policy for Kim Jong-il was mobilising resources for his purse from both domestic and foreign sources.  He was quite creative in devising ways to achieve this, such as demands for ‘loyalty’ payments, structuring of foreign exchange earning activities to send the cash to the top, negotiating with foreigners to get goodies for concessions, and pursuing illegal and internationally-sanctioned revenue-raising ventures.  At the end of the day, the North Korean economy under Kim Jong-il remains highly vulnerable to shortages of food, energy, and foreign exchange, with pressures for transformation of the economic system coming from both internal and external dynamics of change at work in North Korea.

Looking ahead, the key question is not whether there will be changes in economic policy but whether changes will be in the direction of building a market economy or governed by a new dynamic of competition for resources among contending parties for power.  The more the new regime leans towards the Worker’s Party, the more likely it will follow Chinese supported policies of developing a market economy under the guidance of the Party and gradually shift to funding defence needs from a centralised budget rather than the military having its own economic organs such as trading companies and banks that service them. The more the regime tilts towards the military, the more likely that competition for resources will trump incentives for pursuing systemic change.

While there may be an inclination to perpetuate the patronage practices of the elites by the Kim family, it is not likely that loyalties will transfer simply to the new leadership through such patronage alone. New incentives for supporting the regime will need to be pursued.  Key metrics of such changes will be in: 1) the ownership and transferability rights of assets; 2) the restructuring of the financial system including banking supervision, monetary-management policies, and development of the tax system and public expenditure policies to accommodate a market economy; 3) the support for decentralisation of economic decision-making and empowerment of traders and entrepreneurs; 4) the willingness to follow rules-based international practices in commerce and finance; and 5) the legal reforms to protect rights of parties in a market economy. This is a tall order, but one that might lead to a new dawn for North Korea.

Bradley O. Babson is a consultant on Asian affairs with a focus on Korea and Northeast Asia economic cooperation. He is retired from a career at the World Bank, with a concentration in East Asia. In the early 1990s he worked on the opening up of Vietnam and was the first World Bank Resident Representative in Hanoi.

1. Kim Jong Il’s death: continuity plus opportunity to engage
2. North Korea: new opportunities in a post-Kim Jong-il landscape
3. Kim Jong-il’s visit to China: What should we expect?

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After Kim Jong-il: will there be change or continuity in North Korean economic policy?

The statements made by the State Bank of Vietnam recently make people understand that while Vietnam is still busy “putting the banking system in order,” it would nearly say “no” to the establishment of any new
banks.

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SBV sets stricter rules on new bank establishment

Thailand Business News –

This year’s floods have had a vast impact on the property market, with sectors affected across the board. But the impact varies from sector to sector,from residential to industrial.

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Floods Won’t Affect Thai Property Market in the Long Term
Thailand’s property sector is showing signs of an early recovery, as selective investors return to purchasing real estate stocks and actual property.

Some of the credit goes to a one-year government stimulus package that reduces the Special Business Tax from 3.3% to 0.11%, extends the reduction on transfer taxes from 2% to 0.01% and mortgage registration fees and provides a tax deduction on mortgage principal and interest.
Thailand’s property indicators show:

1.The Stock Exchange of Thailand (SET) index began rebounding in April 2009, and property stocks – while the first to fall in H2/08 – were amongst the first to recover
2. The Bank of Thailand (BoT) has lowered its policy interest rate four times since December 2008, prompting banks to reduce the minimum lending rate (MLR) from 7.25% to 6.25%
3. A continued drop in sales of durable goods due to uncertainty surrounding the economy is highlighted consumer confidence index (CCI) to a historic low of 72.8 in Q1/09 and New housing registrations in Bangkok and surrounding areas fell 43.8% in Q1/09

Recognising that sales would slow, forward-thinking companies took the opportunity to focus on their fundamentals and improve their balance sheets. This was the strategy of Hubert Viriot, CEO of the luxury developer Raimon Land, who was appointed in the midst of the crisis.

Second, Thailand’s banking system is much healthier than its Western counterparts. There are no toxic assets on local banks’ balance sheets. This benefits both the supply and demand side.

But a stable political environment in Thailand would likely see interest rates rise by half a percentage point. And oil prices will float at about US$85 to $95 a barrel. Construction costs will rise when oil prices and interest rates are in an upward trend. Overall housing supply has dropped over the past two years with a decrease in the number of construction permits. Many small-sized developers went bust after failing to access loans from local financial institutions.

Author: Shinji Takagi, Osaka University

Financial integration can be defined in several ways. But the only relevant definition, in the context of ongoing policy debate in Asia, is in terms of bilateral financial links analogous to the way trade integration is typically defined.

No other definition would highlight the asymmetry between trade and finance in Asia. Indeed, some economies are very open financially, and interest rates and equity prices may be highly correlated across some national borders. Despite this, bilateral financial links in the region are much more limited than bilateral trade links.

In 2009, Asia’s intraregional trade amounted to more than 50 per cent of global trade, compared to less than 35 per cent for foreign direct investment (FDI) and around 6 per cent for portfolio investment. Asia’s so-called market-driven economic integration, therefore, yielded a lopsided outcome. In one sense, this outcome is not surprising. Finance is little affected by distance, whereas for trade distance matters critically. Money should flow to a financial centre that offers the smallest intermediation costs and to a country that offers the highest risk-adjusted returns, regardless of the location.

Even so, regional financial integration remains an important unfinished agenda for Asia. Despite there being no theoretical case for preferring regional to global financial integration, promoting regional financial transactions will have its benefits. As the region integrates in trade and production, information is created through face-to-face contacts and the specifics of economic activities. Given the nature of asymmetric information that characterises financial transactions, such local information is more conducive to making regional financing deals than global ones. If markets and institutions are sufficiently developed, then there should be some ‘home bias’ within Asia favouring regional financial transactions. This should be the case even in situations where global transactions offer absolute advantage. The clear lack of home bias in Asia suggests that there are imperfections to be addressed as well as unmet financing needs.

In this respect there are insights to be gained from taking a close look at the cross-border financial links of Japan, the region’s largest creditor country. In 2009 Japan’s intraregional trade with Asia was more than 40 per cent of its total global trade. In contrast, Asia’s share in Japan’s financial transactions was only 24 per cent for FDI assets, and was even smaller, at less than 9 per cent, for FDI liabilities. The importance of Asia was almost negligible for portfolio investments: 8 per cent for equity assets, 1 per cent for debt assets and l.7 per cent for equity liabilities. The exception is Japan’s debt liabilities, where Asia accounted for 18 per cent at the end of 2009. This indicates that Asian investors are active participants in Japan’s large bond market. In terms of cross-border banking flows, Asia’s share was only 7 per cent, broadly similar to the share in total global cross-border bank claims. This suggests that Japanese banks differ little from other international banks in their lending behaviour towards Asia. In short, Japan’s financial links with Asia are much weaker than the links with North America and Europe, though Asia is by far the most important trading partner.

The pattern of investment activity points to a few possible factors to explain Asia’s lopsidedly small share in Japan’s financial transactions, and hence the lack of regional financial integration within Asia. First are the underdeveloped and small domestic capital markets. Second are the capital account restrictions that limit the scope for two-way capital flows. Third are the licensing and other regulatory practices that discriminate ex post against the cross-border activity of Asia-based banks.

Accordingly, in order to promote regional financial integration, the authorities of many of the region’s economies must develop their domestic capital markets further, and make them deep, liquid and efficient. They should also ease or remove controls on the ability of residents to invest abroad. And finally, they should relax the regulatory barriers on the entry of foreign banks, especially those from within the region. Because Asian financial systems remain largely bank-based, promoting this cross-border activity would be especially important.

Undoubtedly part of the limited financial integration we now observe in Asia is related to the stages of development of many of the economies. Regional financial integration is bound to deepen to a level more commensurate with trade integration as Asian economies grow, per capita incomes rise, and financial wealth is accumulated.

Even so, some of the identified gaps require remedial action by governments. This is likely to be a long process because it involves institution and capacity building. Regional cooperative efforts may be needed to safeguard the process of capital account liberalisation and to relax the licensing standards for Asia-based foreign banks. Similarly, regional cooperation may be useful in setting common standards for domestic capital markets and cross-border issues of financial products. In the long run, a region-wide consolidation of domestic capital markets may help create a market with the size, depth and liquidity that is sufficiently attractive to large international and regional investors.

Shinji Takagi is Professor of Economics at the Graduate School of Economics, Osaka University, Japan.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s global impact‘.

1. North-East Asian economic integration: APEC or FTA games?
2. Asian economic integration and cooperation- Challenges and way forward
3. Will Euro problems hurt Asian monetary integration?

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Asian financial integration: an unfinished agenda

The first step to fixing a problem is admitting one exists. But in the face of growing public concern over a recent stretch of air pollution in the Chinese capital, local officials this week did little to ease the outcry.

In the midst of an especially smoggy stretch of days this past week, local officials and state-run media did little to suggest Beijing was prepared to tackle its air pollution levels, among the worst of the world’s major cities. The state-run Global Times newspaper early this week reported a dense “fog” had descended over the capital. The local government was reporting “slight” pollution levels even as readings by the U.S. Embassy described pollution as “hazardous.”

And in an interview published Friday in the Beijing Times newspaper, Du Shaozhong, a spokesman for the municipal environmental bureau, questioned the embassy’s independent readings, which have long been a point of contention between Beijing and Washington. “I’m not clear about their monitoring tools and methods, and how they ensure accuracy” Mr. Du said.

The interview appeared to be a response to a wave of criticism he and the city’s environmental bureau have come under in recent days, particularly on Sina Weibo, the popular microblogging site owned by Sina Corp. Mr. Du has 79,000 followers on the site, and hundreds of them were demanding more information from the city on current air pollution levels.

In particular, many wanted to know when the city would begin releasing measurements of PM2.5 pollution particles – that is, those particles 2.5 micrometers or smaller in diameter. The city currently releases measurements only for coarser PM10 particles. Experts say fine PM2.5 particles are especially dangerous and can easily penetrate a person’s lungs and bloodstream.

The U.S. Embassy in Beijing publishes independent hourly PM2.5 readings as well as an air-quality index on an official embassy Twitter feed, much to Beijing’s chagrin. Leaked WikiLeaks cables this summer revealed a tense meeting between U.S. and Chinese officials in 2009 over the independent U.S. readings, which Beijing argued might confuse the Chinese public because the U.S. data conflicted with official Chinese data.  The U.S. index regularly surpasses a level of 300, which the U.S. government classifies as hazardous pollution. On more than one occasion this year, the index has topped its ceiling of 500.

Adding insult to insult to injury, the Hong Kong-based South China Morning Post, citing an air-purification equipment firm, reported Friday that top Communist Party officials had amassed fleet of air purifiers for buildings inside Zhongnanhai, the leadership’s heavily guarded residential compound. The SCMP said Broad Group, a Hunan-based air conditioner maker, had touted the Zhongnanhai air purifiers on its website.

“They are everywhere in Zhongnanhai, from living rooms and meeting rooms to swimming pools and gyms,” the SCMP quoted Broad Group’s website as saying. “It is a blessing for the people that our purifiers have created a healthy and clean environment for state leaders.” The company’s claims couldn’t be independently confirmed.

The state-run Global Times newspaper weighed in Wednesday with an editorial on the pollution. The gist: Be patient, people.

“The public sees world standards, and they expect China to adopt the most advanced ones,” the editorial read. “But we must accept that the national can’t reach these standards quickly.”

On Friday afternoon in Beijing, the U.S. Embassy’s air-quality index hovered around 170, or a mere “unhealthy” rating. That’s several steps below the “hazardous” levels of earlier this week. It’s a relative breath of fresh air for smog-weary Beijingers.

–Brian Spegele. Follow him on Twitter @bspegele.

Reforms started in the late 1970s with the phasing out of collectivized agriculture, and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment.

The Chinese government seeks to add energy production capacity from sources other than coal and oil, and is focusing on nuclear and other alternative energy development.

China is also the second largest trading nation in the world and the largest exporter and second largest importer of goods.
The PRC government’s decision to permit China to be used by multinational corporations as an export platform has made the country a major competitor to other Asian export-led economies, such as South Korea, Singapore, and Malaysia.

Nevertheless, key bottlenecks continue to constrain growth.

The two sectors have differed in many respects.

The technological level and quality standards of its industry as a whole are still fairly low, notwithstanding a marked change since 2000, spurred in part by foreign investment.

The market-oriented reforms China has implemented over the past two decades have unleashed individual initiative and entrepreneurship, whilst retaining state domination of the economy.

China now ranks as the fifth largest global investor in outbound direct investment (ODI) with a total volume of $56.5 billion, compared to a ranking of 12th in 2008, the Ministry of Commerce said on Sunday.

” Although the figure is already “quite amazing,” the volume is “not large enough” considering China’s economic growth and local companies’ expanding demand for international opportunities, Shen said.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

Although China is still a developing country with a relatively low per capita income, it has experienced tremendous economic growth since the late 1970s.

Agriculture is by far the leading occupation, involving over 50% of the population, although extensive rough, high terrain and large arid areas – especially in the west and north – limit cultivation to only about 10% of the land surface.

Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east.

China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork).

Oil fields discovered in the 1960s and after made China a net exporter, and by the early 1990s, China was the world’s fifth-ranked oil producer.

China’s leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt.

Coal is the single most important energy source in China; coal-fired thermal electric generators provide over 70% of the country’s electric power.

There are railroads to North Korea, Russia, Mongolia, and Vietnam, and road connections to Pakistan, India, Nepal, and Myanmar.

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Smog, Bureaucratic Waffling Add to Beijing’s Murk

Thailand Business News – Thailand Business News

New launches for Q3 2011 were dramatically down compared with the previous quarter by around 74%. Approximately 3,000 units were launched in Q3 compared to around 11,600 in Q2 2011 and was the lowest number recorded in the past three years. Share this Article

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Short term uncertainties cause 74% drop in condominium launches

Prinsiri took a similar approach.

Second, Thailand’s banking system is much healthier than its Western counterparts. There are no toxic assets on local banks’ balance sheets. This benefits both the supply and demand side.

The mid to high-end segment boomed this year in Thailand as demand was wide and remained strong. The high-end will recover in the third or fourth quarter. But supply in this segment is very limited due to scarcity of land for new developments. Around 80% of the new launch in this segment was taken up. New supply in the high-end segment, now quoted at 150,000 to 200,000 baht a square metre, will be provided by developers with a strong financial status, experienced teams and products that match demand.
Currently, the MahaNakhon project is the only new high-end project in the pipeline. The Sukhothai Residence project on Sathorn Road, which is 70% sold, has frozen sales until demand can sustain the desired prices.