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From WSJ’s Davos blog:

Standard Chartered PLC remains bullish on the major Asian economies of India and China, encouraged by the policy outlook for the two countries this year, the bank’s Asia chief executive said.

The U.K.-based lender, which focuses almost exclusively on Asia and emerging economies, also sees European rivals retreating from those markets as they are beset with challenges at home, Standard Chartered Asia Chief Executive Jaspal Bindra said in an interview on the sidelines of the World Economic Forum.

In India last year, Standard Chartered confronted a range of challenges including slowing growth, rising interest rates and a depreciating rupee. Revenue from the bank’s India unit fell by 12% in the first half of 2011 and by the “mid-teens” in the third quarter, Group Finance Director Richard Meddings said earlier.

Mr. Bindra blamed higher interest rates. “Interest rates went up almost 400 basis points in a short period, and it is very difficult, if you do wholesale business with the best clients in the country, to pass on a 400 basis point increase at any one time.”

But the central bank’s surprise move to loosen monetary policy this week has sent a “clear signal” that there will be no further rate hikes and the government is shifting its focus to promoting growth, Mr. Bindra said.

The Reserve Bank of India Tuesday held its key lending rate steady for a second straight policy meeting but cut the minimum cash reserve requirement by 0.50 percentage point to ease liquidity.

“The government has for a long time shown a huge preference to manage inflation through monetary policy,” he said. But following the RBI cut, “I think we will see a more balanced approach.”

Mr. Bindra also said that the recent “normalization” of the rupee exchange rate — it is up 6% against the dollar so far this year after declining 15.1% in 2011 — will encourage renewed foreign investment.

In China, Mr. Bindra believes authorities will be successful in guiding the economy to a “soft landing” ahead of a leadership transition at the end of the year.

“The priority for all of 2012 and beyond is going to be ‘how do we keep things stable,’ as they have this transition of power at the top,” he said, adding that not just the top political leadership, but also the leaders of major financial institutions and regulators are all due to be reshuffled. “It is quite a massive-scale change of power.”

As European banks regroup and retreat from Asia, Standard Chartered sees an opening. The trend is especially pronounced in industries including shipping and commodities and in markets like Indonesia and India where dollar liquidity is scarce, he said.

“It gives us an opportunity to scale up market share, and second, it gives us a little bit of pricing advantage.”

– Aaron Back. Follow him on Twitter @AaronBack.

In recent years, China has re-invigorated its support for leading state-owned enterprises in sectors it considers important to “economic security,” explicitly looking to foster globally competitive national champions.

In 2009, China announced that by 2020 it would reduce carbon intensity 40% from 2005 levels.

The government has also focused on foreign trade as a major vehicle for economic growth.

The restructuring of the economy and resulting efficiency gains have contributed to a more than tenfold increase in GDP since 1978.

The disparities between the two sectors have combined to form an economic-cultural-social gap between the rural and urban areas, which is a major division in Chinese society.

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.

China’s increasing integration with the international economy and its growing efforts to use market forces to govern the domestic allocation of goods have exacerbated this problem.

The growth in both outbound investment from, and inbound investment to, China reflects the nation’s rising economic power and attractiveness as an investment destination.

” 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.

Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

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

Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum.

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

Major industrial products are textiles, chemicals, fertilizers, machinery (especially for agriculture), processed foods, iron and steel, building materials, plastics, toys, and electronics.

Brick, tile, cement, and food-processing plants are found in almost every province.

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Davos: StanChart Bullish on China, India

The prime minister is attending the World Economic Forum in Switzerland and meeting with leading business people to clarify Thailand’s flood recovery plan. Prime Minister Yingluck Shinawatra is in Davos, Switzerland today to take part in the 42nd World Economic Forum. She’s scheduled to take part in a round-table luncheon with leaders and leading business people to discuss sustainable economic growth.

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PM to Meet Leading Businesspeople at World Econ Forum

A severe drought and a decline in rice prices in early 2010 do not bode well for agricultural production and consumption, although increased employment in manufacturing will partly offset the impact to agriculture.
All in all, a more favorable external environment should help boost real GDP growth to 6.2 percent in 2010. After this year, slower growth in developed countries, emerging capacity constraints as capacity idled during the crisis is quickly put to use, and the weight of the ongoing political turmoil on new investment, should likely keep growth below Thailand’s historical average of 5.1 percent. On the whole, Thailand’s fiscal and financial picture remains solid

The relative strength and power of sovereign wealth funds is massively increasing, and the money has to go somewhere.
But another factor is likely the presence of larger, institutional investors in large-cap stocks who are more concerned about long-term performance than short-term market movements.

In 1972 the Government took a further step in this direction by amending the “Announcement of the Executive Council No. 58 on the Control of Commercial Undertakings Affecting Public Safety and Welfare”. The changes extended Government control and regulation over the operations of finance and securities companies, which until then had operated fairly freely. Following these amendments, in May 1974, long-awaited legislation establishing “The Securities Exchange of Thailand” (SET) was enacted. This was followed by revisions to the Revenue Code at the end of the year, allowing the investment of savings in the capital market. By 1975 the basic legislative framework was in place and on April 30, 1975, “The Securities Exchange of Thailand” officially started trading. On January 1, 1991 its name was formally changed to “The Stock Exchange of Thailand” (SET).

Mumbai: Reserve Bank of India Deputy Governor KC Chakrabarty on Friday said efforts were being made to explore ways to pay for oil imported from Iran, which has been subjected to international sanctions. Chakrabarty termed the issue as one arising purely out of international sanctions on Iran and not a financial one. “We are finding, something is happening,” he said when asked about the way ahead to pay Iran for the crude which the country imports. When asked about the recent visit by an Indian team to the Gulf nation for settling the issue, he said, “They have to find a way out. “It is very difficult. It is international diplomacy. It has nothing to do with finance,” Chakrabarty said, speaking on the sidelines of an event here this evening. “The problem is we are not able to route the transactions through some banks because of international sanctions,” he added. Iran is the country’s second largest supplier of crude after Saudi Arabia. Earlier, payments for crude were made through multi-lateral settlement mechanisms which stopped about a year ago due to UN-imposed sanctions. Later, a novel way of payment was worked out wherein the Iranian Central Bank opened rupee accounts with Indian commercial banks, but that also is reportedly in trouble. US President Barack Obama on December 31 signed into law measures that deny access to the US financial system to any foreign bank that conducts business with the central bank of Iran. A report earlier this week said Iran was exploring the idea of increasing imports from India to compensate for its export of oil.

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India trying to find ways to pay for Iran oil: RBI

Author: John West, MrGlobalization

How does a Cold War organisation like the OECD respond to the end of the Cold War? Does it try to hang on to its former identity? Or does it embrace the new ‘age of globalisation’?

The end of the Cold War in 1989 represented a victory of values and ideology — the triumph of pluralistic democracy, respect for human rights and the market economy — for the OECD and its member countries. At the time, Asian economies were also emerging rapidly, based on a complex cocktail of export promotion, strong state intervention and non-democratic politics. Before the fall of the Berlin Wall, a number of these Asian economies were ‘economically qualified’ for OECD membership in terms of GDP per capita. But politically, there was never any suggestion that they might join.

Politics has always trumped economics at the OECD, even though economics is its core business. In the 1990s, for example, four central European countries were rushed in as members (following Mexico’s 1994 membership), while they were still fledgling market economies and democracies. They were the lost sheep of the North Atlantic community, having been occupied by the Soviets, and Western Europe and the US strongly supported their membership ambitions.

But Korea’s membership was very much a different case in point. It was economically better qualified, with a GDP per capita more than 60 per cent higher than the other five new members. It was perhaps even more qualified politically. Nevertheless, it is widely recognised that the OECD went soft on Mexico and the central European countries during the membership process, and went much tougher on Korea.

By 2007 when it came to inviting other countries to join the OECD, none of the most interesting possible members — Brazil, China, India, Indonesia and South Africa — had expressed interest in joining. They were offered and accepted a program of ‘Enhanced Engagement’, which was designed to prepare them for possible future membership.

Today the OECD finds itself with 34 members, with some 24 from Europe and only two from Asia. In contrast, the WTO’s list of the world’s 34 leading exporters includes 10 Asian economies. Many of these Asian countries are also internationally significant in areas such as investment, finance and carbon emissions — and school students from Shanghai now outperform all OECD countries in the organisation’s Programme for International Student Assessment, which measures literacy, numeracy and scientific ability. But while the Enhanced Engagement countries participate in a wide array of OECD activities, none of them are interested in membership. A very senior OECD official once described this program as a ‘one-way love affair’.

So the OECD, which has sometimes called itself a ‘hub of globalisation’, seems destined to have a membership which accounts for an ever-declining share of the world economy. It stands at a crossroads, bypassed by Asian-led globalisation at a time when the G20 has more member countries from Asia than Europe.

What are the main problems and solutions?

Even though it is essentially an economic organisation, the OECD has retained a strong North Atlantic political identity. This is partly because it is governed by foreign ministries and also because of the US’ dominant role. And as the recent UN vote on Libya showed, there are still vast political gulfs between the Enhanced Engagement and OECD countries.

New members are also forced to accept and align their policies with a now vast array of instruments and conditions they had no role in creating. From an OECD point of view, this means becoming a ‘responsible stakeholder’. From an emerging country point of view, it means being a ‘rule-taker’, that is, swallowing an OECD agenda now increasingly questioned in light of recent financial crises.  The OECD also has too many European members.  Something must be done about this ‘eurocentricity’, such as establishing constituencies, to improve the organisation’s effectiveness.

Overall, the OECD must adapt much more radically to the changed world and offer a more flexible and pragmatic approach to the application of its values and instruments through its membership. It must then launch a major campaign to recruit the Enhanced Engagement countries as members. The OECD Secretariat and its membership have not yet managed to convince emerging Asian economies of the organisation’s manifest benefits. But the OECD is still in many ways the best idea in town, with its excellent analysis and opportunities for policy dialogue. And emerging Asia has much to learn from the OECD experience in many areas, like developing social safety nets, economic upgrading, dealing with ageing populations, and public-sector reform.

As well as revitalising the OECD, this strategy could contribute to improving relations between the two major blocs which divide the world today — the OECD countries and the Enhanced Engagement countries.

John West is Editor-in-Chief at MrGlobalization.  This article is based on his paper ‘The OECD and Asia: Worlds Apart in Today’s Globalization’, published in Revista de Economia Mundial No. 28 (2011), 67–92.

1. OECD policy brief on emerging economic giants
2. Engaging Central Asia: the EU-Shanghai Cooperation Organisation (SCO) axis
3. The South Asia Cold War ‘quadrilateral’ redux?

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The OECD and Asia: a Cold War organisation in the age of globalisation

Associated Press Indonesian activists gather sandals at the office of Indonesian Commission for Child Protection in Jakarta to protest the prosecution of a 15-year-old boy for stealing an old pair of sandals from a police officer. More In Indonesia Amobee Focuses on the Rest of Asia Indonesians Praise Ghost-Buster Guard Indonesian Police Shave Punks’ Heads Provocative Ad Links Women’s Success to the Bedroom BlackBerry Maker Faces Questions on Stampede Flinging footwear at people in power is so last decade; the new trend in Indonesia is to donate it. Indonesians have dropped thousands of old flip-flops and other footwear at police stations and a child protection group to protest the heavy-handed treatment of a 15-year-old boy accused of stealing a policeman’s sandals in the northern state of Central Sulawesi. After allegedly stealing the $3 slippers in 2010, the boy was beaten by three police officers and now faces up to five years in prison.

The policemen were punished for their brutality after the boy filed a complaint—which may be why the police decided to force the case to court, according to local reports .

The trial of the boy, referred to by only his initials, AAL, in local media, has been going on since last month and continues Wednesday.  It has sparked the anger of Indonesians frustrated with a justice system that sometimes seems too tough on citizens even as government officials accused of extorting millions escape heavy sentences.

The National Commission for Child Protection announced last week that it would take donations to buy the police officer new sandals, but people started showing up with used footwear instead .

The government-financed child protection organization, which is urging the boy’s timely acquittal , now plans to collect and deliver thousands of pairs of shoes to the officer. “The flip-flop collection is a spontaneous movement, which has sprung up since the news broke last week. It shows how people are concerned about injustice in the system,” said Sofyan Farid Lembah, the Central Sulawesi-based commissioner of the Commission for Child Protection, which has so far collected 3,000 pairs of sandals across the country. “How can an underage child be facing a five-year sentence for a petty crime?” This isn’t the first high-profile case of what seems like police harassment for small crimes. Last year two men were caught in a police sting operation for trying to sell their iPads online without local-language user manuals.

They were acquitted in October but prosecutors plan to appeal. Also last year, pop star Nazril “Ariel” Irham was sentenced to 3 1/2 years in jail for making two blurry, homemade sex videos that leaked on the Internet.

The court rejected Mr. Irham’s argument that the videos had been stolen and released without his permission, saying he hadn’t done enough to stop their distribution. Meanwhile just last month, police in the conservative state of Aceh raided a punk rock concert and detained more than 50 fans, shaving mohawks , removing piercings and forcing detainees into a 10-day rehabilitation program. –With contributions from Yayu Yuniar

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Indonesians Protest With Flip-Flops

In a significant move, Network 18 and TV 18 announced an expansion into regional news and entertainment on television through a Rs 2,100-crore acquisition of ETV channels. Both the companies also announced rights issues for themselves, each amounting to Rs 2,700 crore. The proceeds will be used to make both the companies debt-free, finance the ETV acquisition, and fund working capital requirements.

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Network18 to acquire ETV, become debt-free

Overall inflation may recede to 6 per cent and the Reserve Bank of India (RBI) may start cutting key rates by March next year, Finance Minister Pranab Mukherjee has said.

The government data released on Thursday revealed that prices of primary food articles, which accounts for 14 per cent of the wholesale price index, jumped merely 0.42 per cent over the week to December 17 from the year-ago period.

Speaking to reporters, Mr. Mukherjee said, “If this trend continues then you will have (fiscal) year-end (headline) inflation around six per cent.”

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The Finance Ministry is preparing to modify related laws in order to force private banks to pay 15 billion baht to the Deposit Protection Agency, which will be part of 30 billion baht used to pay off interests incurred by the Financial Institutions Development Fund. Finance Minister Thirachai Phuvanatnaranubala has announced that officials have agreed on how the 45 billion baht in interests incurred by the Financial Institutions Development Fund would be paid off.

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Ministry to Push for More Banks’ Contribution to Deposit Protection

Real GDP fell 6.3 percent between the third quarter of 2008 and the first quarter of 2009, as global demand slumped, before rebounding 6.9 percent through the end of 2009. The rebound was due to a recovery in global demand, an end to inventory liquidation and a pickup in private consumption as confidence returned.
The continuation of certain government policies, especially the pension to the elderly and free education should also support higher consumption levels for the poor. The longer-term goal of reducing reliance on external demand will take time, especially given political uncertainties that hinder the government’s ability to implement not only its investment program but also needed structural reforms.

In Vietnam, households use to held their savings in cash or real estate. With the opening of the stock market, you have seen a tremendous shift of funds into the capital market.
‘‘Institutional investors want to have the ability to get in or out of a stock without significantly influencing the share price.

The modern Thai capital market can essentially be divided into two phases, beginning with “The Bangkok Stock Exchange” which was privately owned, followed by the establishment of “The Securities Exchange of Thailand”.

The inception of the Thai stock market began as far back as July 1962, when a private group established an organized stock exchange as a limited partnership. The group later became a limited company and changed its name to the “Bangkok Stock Exchange Co., Ltd.” (BSE) in 1963.
Despite its well-intended foundation the BSE was rather inactive. Annual turnover value consisted of only 160 million baht in 1968, and 114 million baht in 1969. Trading volumes continued to fall sharply thereafter to 46 million baht in 1970, and then 28 million baht in 1971. The turnover in debentures reached 87 million baht in 1972, but stocks continued to perform poorly, with turnover hitting an all time low of only 26 million baht. The BSE finally ceased operations in the early 1970s.

It is generally accepted that the BSE failed to succeed because of a lack of official government support and a limited investor understanding of the equity market.