Mfg Costs: Leave PRC for Cambodia, Laos & Myanmar

♠ Posted by Emmanuel in , at 5/25/2015 01:30:00 AM
Cheap, cheaper, cheapest: in search of low wages in Southeast Asia's CLMV.
The previous post on how China aspires to be Asia's Germany in producing high value-added manufactures jogged my memory about the this earlier article. Vietnam becoming the Republic of Samsung has already been discussed in an earlier post. However, there are also other low-cost destinations in Southeast Asia. Collectively, the latecomers to joining the Association of Southeast nations (ASEAN )are known as the CLMV countries with Cambodia joining in 1999, Laos and Myanmar in 1997, and Vietnam in 1995. Ever on the lookout for relatively skilled workers and dirt-cheap labor costs, CLMV are becoming attractive together with other Southeast Asian countries:
The cheap, young labor and strategic location of Myanmar, Cambodia and Laos are set to draw increasing numbers of manufacturers to Southeast Asia, which will eventually displace China for the title of "world's factory.'' The transformation will be part of the rise of the Association of Southeast Asian Nations to become the "third pillar'' of regional growth after China and India, ANZ Bank economists led by Glenn Maguire reckon. By 2030, more than half of 650 million people in Southeast Asia will be under the age of 30, part of an emerging middle class with high rates of consumption.
So ANZ actually believes that, collectively, Southeast Asia will surpass China as the "workshop to the world" given the advantages its various nations have aside from simply low cost:
"We also believe Southeast Asia will take up China’s mantle of the ‘world’s factory’ over the next 10-15 years as companies move to take advantage of cheap and abundant labor in areas such as the Mekong,'' ANZ said. What will likely assist this shift is the connection between low-cost labor in places like Myanmar, Cambodia and Laos, cost-effective manufacturers in Thailand, Vietnam, Indonesia and the Philippines, and sophisticated producers in Singapore and Malaysia.

Southeast Asian nations have resolved to establish the Asean Economic Community by the end of 2015 to enable the free movement of goods, services, capital and labor between the 10 member states. Together, the Southeast Asian nations could lift intra-regional trade to $1 trillion by 2025, ANZ estimates. Foreign direct investment into Asean from the major economies could climb to $106 billion in 2025, having already eclipsed investment into China for the first time in 2013.

"Most of Asean's member countries lie at the junction of the Pacific and Indian Oceans," ANZ noted. "The land-based members of Asean sit between the two most populous countries in the world – China and India. Access to these land and maritime routes allows Asean to participate in Asia’s expanding production network.''
Even for an ASEAN booster like yours truly, I think it's not going to be as easy as ANZ makes it sound. Still, the coming into effect of the ASEAN Economic Community at year-end 2015 is an awaited event that promises to bring Southeast Asia's advantages to wider global attention.

Is it no longer just a Vietnam story? We'll soon find out.

Adios Sweatshop: PRC's Mfg Plan to be Asia's Germany

♠ Posted by Emmanuel in , at 5/22/2015 10:44:00 AM
Is the sweatshopped China of today soon going to be its past?
A few days ago I featured a post on how low-cost manufacturing is migrating to even lower-cost locations than China such as Vietnam. So, even authoritarian China is not immune to upward pressures on wages as firms keen on the cheapest manufacturing possible head elsewhere. Now we receive news that even China is aware of these pressures and is adjusting accordingly. Instead of trying to remain the lowest-cost producer in perpetuity, which is impossible, it too is seeking value-added industries where productivity gains from capital and labor can help ensure that it remains the world's largest producer. From Caixin Online:
China’s State Council has unveiled a 10-year plan for upgrading the nation’s manufacturing capacity so it can catch up with production powerhouses like Germany and fend off competition from other developing countries. The Ministry of Industry and Telecommunication Technology (MIIT), which led the creation of the “Made in China 2025” plan, said the strategy is intended to give China an edge in innovation, green development and quality goods.

The MIIT put the focus on 10 sectors, including high-end computerized machinery and robotics, aerospace equipment, renewable-energy cars and biological medicine. Sha Nansheng, vice director of the MIIT’s Department of Science and Technology, said the country’s manufacturing industries are facing pressure on two fronts: competition from other developing countries where labor costs are lower, and a renewed push by developed nations of the West seeking an advantage in industrial manufacturing.

“If we cannot make products with good quality and brands, China cannot become a manufacturing powerhouse as we hope,” he said. “China might have also to cede its title as a large manufacturer due to competition from other (developing) countries.”
The model for this upgrading, as you may suspect, is Germany:
Germany has been pioneering smart manufacturing, which utilizes information technologies. This so-called fourth industrial revolution — after steam, electricity and information — connects machines to a network where production processes and speeds are automatically adjusted to minimize problems and costs.

Upgrading of manufacturing industries has become urgent in China, as its status as “the world’s factory” is undermined by developing countries, and it seeks a new engine of growth amid a slowing economy. The “Made in China 2025” plan will embrace the fourth industrial revolution concept — what some call Industry 4.0 — while opening itself to advanced ideas from countries such as the United States and Britain, the MIIT said.

Li Beiguang, vice director of the MIIT’s Department of Planning, recently told journalists that the government will lead the plan but leave implementation primarily to the market by protecting equal access and competition.
You wish China luck, but you do have to wonder if government fiat is the right way to encourage the sort of innovation necessary to bring China to the manufacturing frontier.

PRC Infrastructure Battle: Japan Pledges $100B for Asia

♠ Posted by Emmanuel in ,, at 5/21/2015 01:30:00 AM
Will the Japanese International Cooperation Agency of all institutions sink the ADB?
There is utterly fascinating news coming out of Tokyo that the Japanese are preparing to provide a hundred billion dollars in funding to Asian countries in need of infrastructure. Especially smarting from being overtaken as Asia's largest and the world's second-largest economy, Japan does not enjoy playing second fiddle to the Chinese (usurpers). I recently made a series of posts on the upcoming formation of the so-called Asian Infrastructure Investment Bank (AIIB)[1, 2, 3]. Notably, the US tried to persuade all and sundry of its allies not to join the AIIB. However, only Japan actually heeded the jealous Americans' call to stay out.

Now, however, we may have the latest round in Japan-China one-upmanship. For the AIIB, China is pledging a $50B initial contribution to be matched by the other members. Not to be outdone, the Japanese are saying they will pony up $100B for Asian countries to improve their infrastructure by themselves:
Japan will announce a $100 billion plan to invest in roads, bridges, railways and other building projects in Asia, a report said Tuesday, weeks after China outlined its vision for a new infrastructure development bank in the region. In the latest twist of a tussle for influence in the fast-growing region, Prime Minister Shinzo Abe is set to unveil the five-year public-private partnership this week, Jiji Press reported. The sum is in line with the expected $100 billion capital of the Asian Infrastructure Investment Bank (AIIB) that Beijing and more than 50 founding member states are establishing.

"The envisioned assistance is aimed at demonstrating Japan's stance to contribute to building up high-quality infrastructure in Asia through human resource development and technological transfers and showing the difference from the AIIB, so that Japan can keep a high profile in the region," Jiji said, without naming its sources.

The report comes after Japan's Finance Minister Taro Aso said earlier this month at an event hosted by the Asian Development Bank (ADB), a long-established body in which Tokyo plays a key role, that Japan was drafting a plan to boost investment in Asian infrastructure.
Aside from going one better than China all by itself, the Japanese may also want to show the rest of the world that its capabilities in building infrastructure exceed those of China. Which, of course, is entirely plausible. That said, Japan may also be following the lead of China in putting capacity for, well, infrastructure to good use outside of the home nation:
“The AIIB is motivated by multiple factors, one is geopolitical and one is purely economic Twitter , because once this bank exists, combined with the Silk Road Fund, it will begin to finance a lot of infrastructure, particularly railway infrastructure, in Central Asia, Western Asia and South Asia and even in the Middle East,” says Pieter P. Bottelier, a former senior World Bank official. “If that works, it will enable the Chinese to export excess capacity of large industry, such as the state-owned railway manufacturing industry.”
So Japan may have been reluctant to be second to anyone--especially to China--in addition to being more sensitive about US concerns. Still, I will be most interested in following if and how this $100B pot is disbursed. After all, the ADB is a multilateral institution, and the Japanese may choose to funnel money instead through its aid agencies:
The money reported Tuesday would come through government-affiliated bodies, such as the Japan International Cooperation Agency (JICA) and the Japan Bank for International Cooperation (JBIC), as well as the Asian Development Bank, Jiji said.
What happens to the ADB now if its largest shareholder undercuts it by funneling money bilaterally? Ironically, the AIIB may undermine the ADB not directly but by making Japan use it less in its goodwill efforts in Asia.

UPDATE 1: Japan Times notes that a majority of JICA's annual budget is already for infrastructure. Watch out ADB?
In the initiative, the government will extend yen loans to Asian countries through the Japan International Cooperation Agency and lend through the government-affiliated Japan Bank for International Cooperation. The government is also mulling greater financial assistance by the Asian Development Bank, to which it is the largest contributor.

The government hopes to encourage private-sector investments in Asia by reducing risks with the use of public funds. At present, Asia-bound yen loans through JICA total some ¥600 billion a year, of which 60 to 70 percent is related to infrastructure.
UPDATE 2 [5/22]: Somewhat anticlimactically, Japanese PM Shinzo Abe made the announcement public today, filling in a few more details and upping the stakes to $110 billion. Take that, China:
Japan unveiled a plan on Thursday to provide $110 billion in aid for Asian infrastructure projects, as China prepares to launch a new institutional lender that is seen as encroaching on the regional financial clout of Tokyo and its ally Washington. The amount of Japanese funds, to be invested over 5 years, tops the expected $100 billion capitalisation of the Asian Infrastructure Investment Bank (AIIB), the Beijing-sponsored lender scheduled to begin operations next year.

Japanese officials said the plan, announced by Prime Minister Shinzo Abe at a symposium of Asian officials and experts, represents a 30 percent increase over Tokyo's past infrastructure funding. Japan said it wants to focus on "high quality" aid, for example, by helping recipients tap its expertise in reducing pollution while building roads and railways. That's an implicit contrast with the AIIB, whose projects Washington has said may not adequately safeguard the environment. 

"We intend to actively make use of such funds in order to spread high-quality and innovative infrastructure throughout Asia, taking a long-term view," Abe said in a speech announcing the plan. About half the funds will be extended by state affiliated agencies in charge of aid and loans and the rest in collaboration with the Asian Development Bank (ADB).

Eurovision, Migration, Romanian Kids & Workaway Parents

♠ Posted by Emmanuel in ,, at 5/20/2015 01:30:00 AM
Cherishing those rare time mum is home in Romania.
It's that time of the year again when that quintessential display of European unity (really) and sheer weirdness comes around. Yes, it is time for Eurovision 2015.  In recent years, winners have included Finnish Klingons in Lordi and a bearded Austrian transgender, er, performer in Conchita Wurst. Like most entertainment, it is larger than life and over the top--but not always. This year, we have performers tackling the rather more serious but quite common issue of transnational families within the European Union separated by economic migration.

Given that the Romanian economy has never really taken off in quite the same way as, say, Poland, outmigration continues apace. Hence, the phenomenon of transnational families where the parent(s) work abroad and the children stay at home has become a prevalent social issue. As it so happens, Romania's entry tackles just this issue since there are some 3 million Romanians working elsewhere out of  a population of 20 million. That's a lot of economic migrants:
With just days to go before they perform at the Eurovision song contest, the Romanian pop-rock group Voltaj are rehearsing their hearts out. For them, the competition is not just about representing their country but also about giving voice to thousands of children who grow up alone in Romania, with parents forced to go West to find work. The five-member band is well established in the ex-communist state, now the European Union's second-poorest after Bulgaria, and home to some 20 million people.
They are hoping their performance will touch viewers elsewhere in Europe--including countries of destination:
Their ballad "All Over Again" draws attention to an oft-ignored flipside of European migration -- the youngsters left behind. The problem affects "whole generations of children" who face "severe, long-term trauma" because they are forced to make it through their formative years without parents' support, Voltaj singer Calin Goia told AFP. "I've been asked whether I think the subject matter will interest a foreign audience. And I think it will, because the topic of child-parent relationships is universal," he said.
Transnational families are actually a fairly widespread phenomenon in new EU member states like Romania and Bulgaria:
Some 350,000 Romanian children -- almost 10 percent of the country's total child population -- have at least one parent living abroad, according to Save the Children and Alternative Sociale, another NGO. The government puts the figure much lower at 82,339. In neighbouring Bulgaria, 267,000 children share their lot, according to a recent study by the Partners Bulgaria foundation. The children are cared for by grandparents or aunts and uncles, though some live in state-run households as they wait for their parents to return.
The performance by Voltaj is quite good, actually, but you have to wonder if a rather less flamboyant, smaller-gestured song can win at a competition where the incredibly oddball have higher visibility. Maybe if they performed the song as cross-gendered, bearded Klingon women they'd have a better chance if winning? At any rate, I wish Voltaj the best in bringing to light social issues faced in the former Eastern Europe partly resulting from regional integration.

Is Asian 'Currency Manipulation' Behind US Jokeonomy?

♠ Posted by Emmanuel in at 5/19/2015 08:41:00 AM

Much ridicule has been heaped upon the American economy for its moribund nature as of late. Bill Gross, formerly of PIMCO, famously coined the term the "new normal" to denote US and more broadly developed world growth rates that were subpar; generally in the 0-to-low-2-point-something range. Not to be outdone, the IMF has called it the "new mediocre" because (a) that's what it is based on historical trends and (b) all sorts of [market liberalizing] reforms can be undertaken to encourage more impressive growth. Me? Being no slouch in front of the computer keyboard--or at least I'd like to think so as a blogger--I call it the "American Jokeonomy." Its hilarity stems from the US telling the world that its brand of capitalism is the way to economic salvation. However, when the rest of the world looks at it, all we see are stagnation, inequality, and yes, mediocrity.

So all sorts of explanations and remedies have been offered for this phenomenon. The IMF thinks it's a lack of openness:
Countries can realize significant payoffs with product market reforms. If Italy were to reduce its services sector regulations to bring them in line with those of the Netherlands, for example, the average total factor productivity growth gain across all industries could amount to about 0.1 percentage point a year, and about 0.4 percentage point in the services sector.
On the other hand, there are also the dyed-in-wool protectionist/isolationists. Of the stark raving mad variety, my favorite is Peter Morici, who favors the US hitting all and sundry trade partners--especially those of the dastardly Asian variety--with all sorts of sanctions over currency manipulation. What's somewhat new in Morici's harangue is that he relates a lack of resolve in confronting currency manipulators with confronting security challenges:
Other Asian nations, including U.S. free trade partner South Korea, have mimicked China’s currency policy and in the bargain, the U.S. international competitiveness and growth appear permanently crippled. Since 2000, the U.S. economy has grown a scant 1.8 percent a year, and one of the biggest challenges facing the next president will be finding the money to maintain an adequate Navy to secure the Pacific while maintaining an essential presence in the Mediterranean and Persian Gulf.

What is remarkable, though, is how fatalistically Obama has doubled down on the failed Clinton and younger-Bush policies. Prominent economists on the left, right and in between have suggested policies to get the dollar fairly valued against the yuan and other Asia currencies but the president steadfastly rejects even considering those.
Call it the "economic appeasement" theory of American stagnation. Actually, I'd rather like to see what happens if dyed-in-wool protectionists like Morici had a chance. Did it ever occur to Morici that these same "currency manipulators" do so by helping fund the US government by buying its debt? Like most of the fantasists, he clings to this idea that devaluing the dollar is all that it takes to set things right. I, on the other hand, believe it's due to a whole host of factors that a country in decline cannot really arrest.

One of these days, I suspect we'll get to actually test the Morici theory. 

Xiaomi's Lei Jun & Overrating English Language Skills

♠ Posted by Emmanuel in ,, at 5/18/2015 01:30:00 AM
Xiaomi's Lei Jun: Zen and the art of smart phone launches in overseas markets.
One of the greatest conceits English-speaking Western nations have is that comprehension of the language is "developmental." In other words, if you can speak English, your chances of successfully integrating into global markets are increased since it is the language of business. Despite being a native English speaker--the Philippines has two official languages, English and Filipino--I have always doubted this idea. If English speaking gave countries such a leg up, why is it that the Chinese, Japanese, Koreans who have been the most successful in the region instead of, say, the Filipinos or the Indians? Fluency in English  may play a part in the development story, but it is neither a necessary or sufficient condition for development, obviously.

This idea was brought to mind by Xiaomi founder Lei Jun recently unveiling his company's new smart phone range in India--an obviously large market which considerable potential. This necessitated speaking in English, and to put it mildly, let's say his language skills were not quite as sharp as they could have been. Jokes were made on the Internet at his expense as he kept repeating "Are you OK?" when he meant "Are we doing alright?":
When the charismatic CEO of Chinese smartphone maker Xiaomi took the stage in New Delhi to launch its first product for the international market, he stumbled over his few set lines in English. “Hello, how are you?” Lei Jun asked the Indian audience last Thursday, his first time using English in a product launch. “India Mi fans, I’m very happy to be in China,” he said, then corrected himself: “to be in India.”

The crowd of Indian Xiaomi fans laughed, but ultimately roared its welcome. Next, Mr. Lei announced a free Xiaomi smart wristband for each audience member. He sought to gauge the enthusiasm by shouting, with escalating volume, “Are you OK? Are you OK?” That “Are you OK?” has turned into an overnight meme on Chinese social media. It’s also set off a discussion in China about the hurdles Chinese executives face in the English-speaking global marketplace.
While some grammar snobs may have cringed, to me it seems utterly immaterial that the head of a Chinese firm trying to sell me cell phones has trouble expressing himself in English. Publicly speaking before a foreign audience is hard enough, but doing so in a language you don't use everyday is more so. Really, who cares if Lei Jun is not a master thespian in his English delivery? He seems enthusiastic enough, and the Indian crowd seemed to appreciate the effort he made in communicating with them. Most importantly in this case, the foreign language skills of Lei Jun have no bearing whatsoever on the functionality of Xiaomi phones. And, ultimately, I believe that's what consumers in India and elsewhere will have foremost in mind while evaluating smart phone purchases.

Following this line of reasoning, I would not even be in the least concerned if the company's head spoke no English whatsoever. Just as Apple's millions of Chinese customers don't know or care if Tim Cook speaks conversational Mandarin, I do not see why Xiaomi's overseas customers would care if Lei Jun speaks conversational English. There is a certain cultural expectation that makes the latter seem more "important" or "natural" when in fact Mandarin, not English, is the world's most widely-spoken language.

Xiaomi phones run mostly on Google Android, so there are no "localization" issues for models targeted at English-speaking markets. There are more important things to consider. Indeed, one could argue that a reason why many developing countries which have many English speakers have not done as well as they could is because they bought all this guff about English  comprehension being "developmental." As with Lei Jun, perhaps the reality is different: non-native English speakers succeed because they try harder to make up for a perceived lack of English language skills.

To me, though, speaking "straight" English ranks rather low on developmental priorities. Again, see the pecking order here in Asia. 

Coming Soon? US Navy vs PRC Landgrabbers

♠ Posted by Emmanuel in ,, at 5/14/2015 01:30:00 AM
Wassup, Chinese landgrabbers? Guess who looks like visiting you soon..
When even the hyper-tabloidal UK Daily Mail features aerial photographs of China's efforts to create artificial islands in the South China Sea--the Philippines now calls it the West Philippine Sea--you know an international relations issue has made it to the prime time. The grievances of China's neighbors--especially the Philippines and Vietnam--are well-known: the PRC is busy constructing these artificial islands to dubiously claim that they generate a 200 nautical mile EEZ around them that is, well, Chinese territory as per maritime law. Since the start of the year, these efforts have gone into overdrive, allegedly condemning even pristine coral reefs to environmental destruction as the Chinese dump tons of sand on ecologically sensitive sites. But hey, whoever said Chinese officialdom ever gave a fig about the environment in pursuit of its interests?

It seems like the day of reckoning in the South China Sea may be getting closer as a result. With US regional allies clamoring for support, the time nears when US Navy warships may be paying China's reclamation efforts a visit, raising the likelihood of armed clashes:
After repeated and unheeded warnings to China to halt its massive reclamation works in the South China Sea, the U.S. is contemplating an option fraught with danger: limited, but direct, military action.

By sending U.S. warplanes over artificial islands that China is building, and sailing naval vessels close by—an option now under consideration, according to U.S. officials in Washington—America could end up being sucked more deeply into an increasingly heated territorial dispute between China and its neighbors, say regional security experts.

If such action fails to deter China, America will face a hard choice: back down and damage its credibility with friends and allies in the region, or escalate with the risk of being drawn into open conflict with China.
PRC officialdom is not fond of the idea, naturally:
China immediately suggested that America would be crossing a line if it goes ahead with the plan. “Do you think we would support that move?” asked Foreign Ministry spokeswoman Hua Chunying. “Freedom of navigation definitely does not mean the military vessel or aircraft of a foreign country can willfully enter the territorial waters or airspace of another country.”

Her comments reinforced a view that America and China may be on a collision course. There’s very little prospect that China will stop ballooning the specks of territory it controls in the Spratly Islands. Much of the work has already been completed, but there is still more to do.
If I were a Marxist, I'd say it's a contest playing out in Southeast Asia among rival imperialists--the United States and China. When dealing with them, I'd say Southeast Asians cannot possibly have friends among these two, only interests. And, the problem for so very long is that Southeast Asian nations have differing interests with regard to both, allowing China especially to capitalize on the regional discord.

Sending American warships to China's assorted landgrabs should be informative at the very least. The PRC's subsequent actions will be "revealed preferences" in the tradeoff between economy and security. While US naval might is still supreme, a show of force may be just the ticket.

UPDATE: US Foreign Secretary visiting Chinese President Xi Jinping in Beijing did not do much to reduce tensions over this matter. It remains entirely possible that the United States' Seventh Fleet will be paying China's land-grabbing activities a visit real soon.

Fast-Track Authority Fails: Is TPP a Goner?

♠ Posted by Emmanuel in , at 5/13/2015 01:30:00 AM
Mission accomplished for trade-bashers; will Obama's congressional foes successfully derail TPP again?
While trade has been a moribund topic Stateside for quite a long time, the US Congress voting on whether to grant President Obama fast-track authority--or that which enables him to secure trade deals like the Trans-Pacific Partnership currently being negotiated and have them voted on a yea/nay basis instead of being amended or filibustered--was bound to generate some interest. Unfortunately for Obama, he has just failed to secure the 60 votes needed in the Senate. With fast-track authority stalled, is the TPP too? (The House votes on fast-track authority soon as well.)
Senate Democrats on Tuesday blocked a bill that would give President Barack Obama fast-track authority to expedite trade agreements through Congress, a major defeat for the president and his allies who say the measure is necessary to complete a 12-nation Pacific trade deal that is a centerpiece of the administration’s economic agenda.The vote was 52-45, with supporters short of the 60 votes necessary to clear a procedural hurdle to advance the bill.

The Senate action almost certainly won’t be the last word on the issue. Most observers believe a majority of senators support the fast-track measure as well as the Trans-Pacific Partnership, the big trade deal whose path would be smoothed by fast-track. But the procedural setback means Senate Majority Leader Mitch McConnell (R., Ky.) must regroup in an effort to assemble the support necessary to advance the measure past the chamber’s 60-vote threshold.
Who voted against fast-track authority? Mostly Democrats--for the most part anti-trade--and more so nowadays after years and years of moribund incomes in the US which they usually blame on trade liberalization. Senate Democrats asked fast-track authority to be bundled with all sorts of other things like retraining for those who lose their jobs due to trade liberalization and the ever-popular currency manipulation chestnut. In the absence of most of these, well, they just turned their own president down:
“This issue’s not over,” Mr. McConnell told reporters shortly before the vote, which he expected to lose. “I’m hopeful we’ll put this in the win column for the country sometime soon.”

Tuesday’s vote reflected a number of objections, on substance, politics and Senate procedure. The bulk of the no votes came from Democrats, led by Senate Minority Leader Harry Reid, of Nevada, who demanded that the fast-track measure be packaged with three other measures: one providing assistance to workers hurt by trade; a customs bill that includes worker protections and language to push the administration to do more to combat currency manipulation; and one extending an expiring program that provides trade preferences to sub-Saharan African countries.

Earlier in the day, Mr. McConnell had agreed to combine the bill with the workers’ aid measure, known as Trade Adjustment Assistance. That program would provide $450 million a year through 2021 for job training for workers displaced by trade deals. Some Republicans argue including that provision could further complicate the trade measure’s chances for approval by the Senate, but it was seen as helpful to winning the support of some Democrats who felt strongly about the effect of trade on workers.

The other two measures were left out, including the customs bill, which angered Democrats who wanted its provisions aimed at ensuring greater enforcement of the terms of trade deals. They were concerned that if enforcement measures were voted on separately, they would be left behind as the basic fast-track package moves ahead through Congress. The customs bill also included measures to combat currency manipulation, which they see as an unfair trading practice.
So Obama and the Republicans--well, those who are not knee-jerk anti-Obama sorts--will try to regroup and gain the necessary 60 votes for a filibuster-proof majority. Based on the Senate vote, the House vote may not be so promising, either. This story is not over yet since they will try again. You get the feeling though that a "clean" fast-track authority is not possible and that granting this authority will only happen if all sorts of doodads are added on to it to make Democrats happy. In the meantime, the other TPP participants are probably quite displeased. After all, why negotiate a trade deal that won't even pass muster in its main proponent's legislature? Time is obviously running out for Obama since he has but one year left in office.

Also see the FT's backgrounder on fast-track authority if you want more specifics on its nuances.

Building Roads: PRC Plot to Buy Off Pakistan?

♠ Posted by Emmanuel in ,, at 5/12/2015 01:30:00 AM
Follow the money trail on the mooted China-Pakistan superhighway.
The Chinese way to winning friends by buying off nations is formulaic by now: The first pillar of this diplomatic outreach effort involves unconditional lending of vast sums of money. To this end, the Chinese like to contrast their "mutual benefit" and "mutual respect" against the laundry list of conditionalities imposed by the likes of the World Bank, IMF or regional development banks. The second pillar consists of infrastructure: If the Chinese have gained experience in any particular area over the past few decades, it's in building structures. You name it--airports, power stations, roads, railways, seaports, even football stadiums--and the Chinese have accumulated vast experience constructing it. In particular, connecting to other countries enables either the smoother process of extracting raw materials necessary for China's massive manufacturing machine and the export of finished goods in the opposite direction.

Governance? Human rights? Quite frankly, China doesn't give a &*^% about any of those things. Hence the Chinese reading of the principle of "non-interference" in others' affairs.

In terms of being chronically hard-up, few countries in the Asia-Pacific come close to Pakistan. This repeat borrower from the IMF certainly chafes at the conditionalities imposed upon it time and again. And for what? The monies provided are not especially large. Into this picture comes China attempting to win friends and buy off nations. You don't need a PhD in economics or political science to figure out how to win the hearts of the Pakistanis after years of having to deal with the loathsome, self-important Yanquis and their assorted minions: shovel wads of cash with few to no strings attached. Build infrastructure while you're at it, too.

To no one's surprise, China is using both pillars in attempting to win over its neighbor:
The focus of spending is on building a China-Pakistan Economic Corridor (CPEC) - a network of roads, railway and pipelines between the long-time allies. They will run some 3,000km (1,800 miles) from Gwadar in Pakistan to China's western Xinjiang region. The projects will give China direct access to the Indian Ocean and beyond. This marks a major advance in China's plans to boost its influence in Central and South Asia, correspondents say, and far exceeds US spending in Pakistan.
Once more, Big Things are planned for Pakistani development:
Is Pakistan on the verge of becoming the Asian Tiger Prime Minister Nawaz Sharif said it would become when he was last in power in 1997? China plans to inject some $46bn - almost three times the entire foreign direct investment Pakistan has received since 2008. Many say Mr Sharif's penchant for "thinking big" and China's increasing need to control maritime trade routes may well combine to pull off an economic miracle in Pakistan.

But there are questions over Pakistan's ability to absorb this investment given its chronic problems with militancy, separatism, political volatility and official corruption. China is worried about violence from ethnic Uighurs in its mostly Muslim north-western Xinjiang region and fears hard-line separatists could team up with Uighur militants fighting alongside members of Pakistan's Taliban.
$46 billion! Even $4.6 billion a year would have been mighty impressive in light of the funds provided by the World Bank and other institutions of American hegemony. You have to wonder though if strife-torn Pakistan has the absorptive capacity to productively use so much capital being injected in so little time.

Given Pakistan's history of uncontrolled corruption and insurgency, it may ironically be this country that makes China more aware of the needs for good governance if it turns out that it is throwing away good money after bad on a country that's proven to be a bottomless money pit since its independence. In that case, it would begin to act like any other international lender.

Meet Europe's Hardest Workers: The, er, Greeks

♠ Posted by Emmanuel in , at 5/11/2015 01:30:00 AM
If Greeks work such long hours, then why are they so broke?
One of the more astounding facts I routinely come across about Europe is that the Greeks work the most number of hours going by OECD data.This finding, of course, flies in the face of common assumptions nowadays that the Greeks are lazy people whose lack of effort has precipitated the economic crisis it's been facing for years and years. Perhaps the Greeks are the European equivalents of James Brown, the hardest working man in show business?

But I digress. The sheer number of hours worked gives very little indication of worker productivity. First, they may be working a lot of hours doing grunt work that does not yield much in terms of economic output. That is, many Greeks may be stuck doing barely sophisticated manual labor. Second, when labor is not matched with adequate capital, then total factor productivity may suffer. Sure they work a lot, but again, they do not produce much without the aid of sophisticated machinery or computers.

This finding has prompted much griping in the Greek press that stereotypes about them are unjustified. Meanwhile, the Germans and Dutch allegedly do not deserve their reputation for being hard working people going by the numbers presented above:
Greeks are the hardest working people in Europe, since they work 2,037 hours per year, a[n] OECD study shows. The Organisation for Economic Co-operation and Development conducted a study to determine in which of the 38 OECD member-countries people work the most. Greece ranked third in the world, after Korea and Mexico, and first among European countries.

In Europe, the Dutch work the least hours per year (1380), followed closely by the Germans who work 1388 hours. Norway comes third with its people working 1408 hours every year, followed by the Danish who work 1411. Greeks are the hardest working Europeans (2,037 hours) followed by the Polish (1918 hours), the Hungarians (1883 hours) and the Estonians (1868).
The BBC has an earlier article explaining how these numbers are "artifactual" at best:
The average Greek is working a full 40% longer than the average German. But there is more to these figures than meets the eye. There are two big reasons why these two countries have such different annual working hour totals.

Pascal Marianna, who is a labour markets statistician at the OECD says: "The Greek labour market is composed of a large number of people who are self-employed, meaning farmers and - on the other hand - shop-keepers who are working long hours." Self-employed workers tend to work more than those who have specified hours in an employment contract.

The second reason Mr Marianna points to is the different number of part-time workers in each country. "In Germany, the share of employees working part-time is quite high. This represents something like one in four," he says. As these annual hours figures are for all workers, the large proportion who work part-time in Germany is bringing down the overall average. In Greece, far fewer people work part-time.
We should again return to the matter of productivity:
Why is it then that it's Greece that needs to be bailed out, and not Germany? That's a complicated question. But you get part way to answering it by doing another simple sum. Take gross domestic product (GDP) - that's the country's entire production - and divide it by the number of workers.

On this basis, the average German worker is more productive than the average Greek. Germany ranks as the eighth most productive country by worker out of the OECD countries - or the seventh out of the European countries - while Greece comes in at 24th. Mr Marianna says this is mainly because Germany has a very efficient manufacturing sector. And while a smaller proportion of Germans work in agriculture, here too they are more efficient - partly because "technology is more widespread", he says.
As with South Korea--another country even more famous for its long work hours (and low productivity)--you have to consider what people actually do on the job more than how many hours they claim to be on the job. As if we needed more proof that it's better to work "smart" than work "hard." Pencil-pushing and sticking around the office just for the sake of doing so may impress others, but productivity statistics eventually show up such needless demonstrations of earnestness.