Bhutan's Gross National Happiness & Money-Grubbing

♠ Posted by Emmanuel in , at 4/20/2014 12:06:00 AM
Everybody Wangchuck [L] Tonight and Meet the Jetsun [R].
Us Asians are routinely amused by Westerners buying our dear neighbor Bhutan's schtick hook, line and sinker. You see, Bhutan is famous the world over for measuring "gross national happiness" instead of the materialistic, output-oriented measures us unenlightened folks use like GDP and GNP. King Jigme Khesar Namgyel Wangchuck is certainly not averse to playing along. Especially among self-styled "progressives" this is taken as evidence for their enlightened stance in the place of mammon-worship common to the rest of us.

Take, for instance, this travelogue from Canada's Globe and Mail:
I was in the Kingdom of Bhutan, a small, mountainous country sandwiched between the giants of India and China. Protected all around by the snow-capped Himalayas, this is a place with its own distinct culture, ruled by a 34-year-old king who loves romantic comedies and Elvis, and guided by the principles of Gross National Happiness. While it may not be the easiest travel destination – Bhutan requires a prepaid daily minimum spend in order to secure a visa, and a trip from Canada will involve at least three separate flights – visiting this kingdom in the clouds can feel like a journey to another world, an almost-mystical destination that’s even more difficult to leave.
At this point I should also mention Jetsun Pema, formerly a student in London who now outdoes Kate Middleton by virtue of her exalted status as queen opposed to just a princess. Like Princess Catherine, she has become tabloid fodder. (Surely it helps draw the tourists?) I guess the glamor got to our Globe and Mail correspondent who goes about tossing lots of softballs Snowden 'n' Putin-style until he elaborates on this part:
The Bhutanese government requires visitors to spend a minimum of between $200 (U.S.) to $250 a day in order to issue a visa. The funds include basic hotel, guide and meals and must be prepaid to an approved tour operator. Visitors are also welcome to spend more, and have many opportunities to do so at one of the country’s luxury lodges. For more information, visit [...]
Wait, wait, wait: In the middle of all these paeans to the progressiveness of being more concerned with happiness than material possessions, we learn that Bhutan does not welcome travelers on a shoestring budget. Shouldn't Bhutan be "sharing" all this happiness with folks of lesser means? What's more, doesn't encouraging a minimum spend contradict the notion of being anti-materialistic? Bhutan's tourist information also points this out:
The minimum daily package for tourists travelling in a group of 3 persons or more is as follows: USD $200 per person per night for the months of January, February, June, July, August, and December. USD $250 per person per night for the months of March, April, May, September, October, and November
So much for Bhutan being the world's biggest hippie commune. To be fair, though, there are two lines of argument here:
  1. Bhutan is populated by money-grubbing hypocrites (see above); or
  2. The minimum spend provision has to deal with promoting sustainable tourism. Backpackers and the sort are not welcome since they go it alone and are more likely to be insensitive to polluting the environment, observing modest behavior, and generally acting ugly. By providing fewer guests with guides, this sort of inappropriate conduct is avoided for the benefit of all.
Bhutan obviously takes the second line:
The royal government has always been aware that an unrestricted flow of tourists can have negative impacts on Bhutan's pristine environment and its rich and unique culture. The government, therefore, adopted a policy of "high value-low volume" tourism, controlling the type and quantity of tourism right from the start.
All that's well and good, but isn't it all a tad elitist and materialistic?
So far, the government’s objective of maximizing foreign exchange earnings while minimizing the potentially adverse cultural and environmental impacts of tourism has paid off. The number of tourist arrivals has increased from just 287 in 1974 to close to 41,000 high-end tourists [my emphasis] in 2010. There was also a 56% increase on 2009 figures in high-end arrivals from neighbouring countries, especially India, highlighting the importance of the regional market.
Actually, Bhutan does not restrict tourist numbers, which would make sense ecologically speaking. So, combine a minimum daily spend with unlimited arrivals and it's hard not to question all these "green" and "post-materialist" marketing gimmicks that ever-so-gullible Westerners keep lapping up. Whatever your opinion of the matter, let's just say that economic considerations are not totally out of the picture. They're quite hard-nosed about all this travel business, actually. Plus, it makes me wonder why Bhutan is included in the Lonely Planet guide when the country is definitely not marketing itself to travelers on a shoestring budget.

TPP Hara-kiri: Will Japan Kill Off This Trade Pact?

♠ Posted by Emmanuel in , at 4/18/2014 12:14:00 AM
Hara-kiri is defined as "ritual suicide by disembowelment." Two years ago, I described Japan joining negotiations to enlarge the existing TPP membership as a non-starter mainly because of Japan's  strong agricultural lobbies blocking off any sort of liberalization of sensitive crops--especially rice. There too remains the quite frankly idiotic complaint Americans have that the Japanese car market is "protected" since they have time and again failed to sell their oversized, gas-guzzling, left-hand drive cars that are unsuitable for sale in Japan. Yet, for obvious reasons, the US has been keen on Japan joining since it's the world's third largest economy and would in theory induce "bandwagoning" effects wherein others will feel they cannot be left behind and join as well.

As it is turning out so far, Japan has [surprise!] been the most intransigent of parties to TPP negotiations over agriculture. The US Trade Representative has already complained about their Japanese counterparts:
The US has accused Japan of blocking progress on a trade deal between 12 countries on the Pacific Rim by not allowing open access to its markets for agricultural products and motor vehicles. In his most critical comments yet on Japan, Michael Froman, the top US trade official, said: “We can’t have one country feeling entitled to take off the table and exclude vast areas of market access while the other countries are all putting on the table more ambitious offers...”

Japan wants to maintain – or phase out slowly – tariffs on five agricultural products including rice, beef, and pork that it has declared “sacred”. The two countries also disagree on what is needed for the three big US carmakers to compete on a level playing field with Toyota, Nissan and others. At a congressional hearing on Thursday, Mr Froman, the US trade representative, said he had told Japan that it was not living up to its commitment to help create a “high-standard, ambitious, comprehensive” agreement.
Harakiri here refers to political suicide by Japanese politicians. Removing protections on what they call "sacred" sectors (including beef, of course) would result in lost votes from rural interests who've traditionally supported the Liberal Democratic Party (LDP) and played a not-insignificant role in keeping it in power. So, apparently, the US is now backtracking. Call it a "low-standard, unambitious, shallow" agreement instead:
It remains highly uncertain to what extent the two countries can move closer on outstanding issues at a series of planned meetings between Akira Amari, minister in charge of TPP talks, and Michael Froman, U.S. trade representative, likely to last until Friday, as they remain far apart after their 18-hour talks held in Tokyo last week...
Washington, which had long called on Tokyo to stick to the basic TPP principle of abolishing all tariffs, gave up on doing so, and it is now asking Tokyo to lower its tariffs on beef — one of the main U.S. interests — to below 10 percent, according to negotiation sources [my emphasis].
So either no deal is done or a highly watered-down one is riddled with exemptions and opt-outs. As I said before, it would be low-standard/unambitious/shallow to the point that American lawmakers and their constituencies would become disinterested altogether
Japan’s position on agricultural products also has broader implications for concluding the TPP negotiations anytime soon. When one member doesn’t eliminate tariffs on a broad swath of products, others are compelled follow suit. Japan’s failure to eliminate tariffs on a large number of food and agricultural products would result in the withdrawal of concessions to Japan not just by the United States but by other TPP members. Some of those countries no doubt are looking for such an excuse to protect their own sensitive products.

The result would be a downward spiral of expectations for the TPP, with the deal moving from a comprehensive, first-class agreement to one that may have difficulty generating the level of interest and support needed here at home to gain congressional approval [my emphasis].
I remain rather pessimistic about TPP's prospects since Japan is far from the only country expressing reservations. If Japan doesn't kill it(self) off, there are others waiting in the wings to do so.

UPDATE: US-Japan bilateral talks have not yielded results, unfortunately for TPP's US boosters.

Cheers to Vlad Putin for Boosting My Euro Bonds

♠ Posted by Emmanuel in at 4/17/2014 12:34:00 AM
Ever heard of the term "financial martyrdom"? If you haven't, don't feel so bad since I just coined it at this very moment. In an earlier post, I talked about a Franklin Templeton bond fund I was offered that was full of Ukraine bonds. Let's just say I was sane enough to dodge that bullet. I have since invested my euro-denominated savings--I am not dumb enough to hold a boatload of dollars as I keep mentioning in this blog. What did I put them in? As a conservative investor, I put it into a bond fund of short duration, "just right" investments: not quite investment-grade but reasonably safe and higher yielding in comparison to German bunds and the like.

Anyway, I placed my funds at the end of last month. I was afraid that I had run out of juice since Eurozone yields were already at historic lows. Could they go even lower? Thankfully they can. What's more, I have Vlad Putin to thank. The geopolitical story goes like this: diversified investors want to keep a European presence, yet they are aware that bond prices don't have much higher to go. Even the brokest of the broke, the Greeks, can actually borrow again at sub-6% rates. It's a miracle if you ask me.

Now, to the "financial martyrdom" part. Putin is sacrificing the well-being of the Russian economy to help small retail investors like yours truly with a few euros to place. Largely because of its leader's military adventurism, Russia has scrapped bond auction after bond auction in 2014:
Russia canceled its eighth bond sale this year as Finance Minister Anton Siluanov said the nation is facing the toughest conditions since 2008, when Lehman Brothers Holdings Inc.’s collapse sparked the financial crisis. Yields on local currency 10-year bonds jumped 76 basis points since Russia’s incursion into Ukraine’s Crimea region at the start of March. Rates on similar-maturity securities of Turkey, ranked one level below Russia at Fitch Ratings, fell 30 basis points in the period.

Russia is being frozen out of government bond markets after President Vladimir Putin’s annexation of Crimea drove relations with the U.S. and Europe to a Cold War low. The economy may not grow this year, with “considerable geopolitical risks” the main driver of Russian capital outflows, Siluanov said at a ministry meeting yesterday.
Yields on Russian debt are circling the stratospheric heights previously occupied by Greece and other European deadbeats:
The government won’t sell bonds when yields are too high, Siluanov said on April 1 after Russia announced a second-quarter borrowing plan of 150 billion rubles, 50 percent smaller than the same period last year.

The yield on Russia’s 10-year securities rose for a third day yesterday, adding seven basis points to 9.14 percent as of 6:27 p.m. in Moscow. The rate reached 9.79 percent on March 14, the highest since October 2009. “The current rates are still too expensive for them,” Yulia Safarbakova, an analyst at BCS Financial Group, said by e-mail yesterday. “That’s as long as the budget is in surplus” no other territories join Russia and the oil price stays high, she said.
Russia isn't exactly desperate to borrow at the moment since it has those $400 billion-something in foreign exchange reserves. That's even as its economy heads towards the zero growth mark due to all those Western sanctions and what else have you as money flees the country. This is where Putin's magnanimous nature comes in. Where else would the money fleeing Russia go but to nearby EU member countries? Investors are still looking for more yield than German bunds and other investment-grade stuff to place in. So, why not invest in places like Romania? As it so happens, this former Soviet-bloc country's borrowing costs are hitting all-time lows:
Romania raised 1.25 billion euros ($1.7 billion) in its second international bond sale this year, taking advantage of record-low borrowing costs to finance its budget deficit. The government sold 10-year bonds today at a yield of 200 basis points above mid-swaps, the equivalent of 3.7 percent, the lowest on record for the country, Budget Minister Liviu Voinea said in a phone interview. Citigroup Inc. (C), ING Groep NV, Societe Generale SA (GLE) and UniCredit SpA (UCG) managed the sale, Diana Popescu, deputy director at the Treasury, said by phone...

“We’ve completed our international funding needs for this year eight months ahead of schedule with today’s sale,” Voinea said. “This doesn’t mean that we won’t issue again if market opportunities allow, but it will be to pre-finance 2015.” 
As investors flee Russia, they are piling into the likes of Romania and other "just-right" investments:
Romania, the European Union’s fastest growing economy in the fourth quarter of 2013, is seeking to attract capital outflows from Ukraine. Investors are pulling money out of Romania’s northeastern neighbor as concern mounts that Russia will seize more of Ukraine after annexing Crimea in March. The yield on Romania’s eurobonds due in 2020 fell 2 basis points to 3.097 percent at 8:14 p.m. in Bucharest, a record low, according to data compiled by Bloomberg...
“The disputes between Russia and Ukraine remain important to watch, but I would say investors have now digested the fact that as long as negotiations continue in Ukraine the contagion impact on central Europe is minimal,” Raffaella Tenconi, a London-based economist at Bank of America Corp., said by e-mail. 
While Russia and Ukraine are locking horns, others stand to benefit as money piles in elsewhere. Thankfully, "elsewhere" happens to be in Europe just as investors seek the relative safety of bonds in parts of that continent where Putin isn't likely to send his guns, goons and gold. It seems Russian aggression is inversely related to bond yields of EU debt issuances.

As I said, what a thoughtful man this Vlad Putin. He's always helping out us small retail bond investors. Just when you thought euro-denominated bonds had run out of room to run, he engages in all these amusing forays into neighboring countries to not only entertain us with his exploits of shirtless machismo but to also improve the performance of our fixed-income investments. Paraphrasing George W. Bush who drew Putin's portrait above, I looked through his eyes and straight into his soul and saw a man who would capsize his country's economy just to help me eke out better returns on my humble euro investments.

Philippine Tax Authority TKOs Manny Pacquiao

♠ Posted by Emmanuel in ,, at 4/16/2014 10:36:00 AM
Why are tax authorities always hate figures? The Good Book portrayed them as untouchables, and tax collectors have had something of an image problem since biblical times. While the entire Philippine nation was cheering Manny Pacquiao to victory over Timothy Bradley in last Sunday's title bout--which he won handily--someone was already seeing Philippine peso signs in her eyes. No, not Manny's manager but the country's tax collecting head honcho, Kim Henares of the Bureau on Internal Revenue (BIR). As the picture above implies, these two pugilists have had previous run-ins. Last year, the congressman accused her of "harassing" him over back taxes:
Pacquiao—who is also a congressman representing Sarangani province—has been slapped with a P2.2-billion bill by the BIR, which alleges that he failed to pay taxes for his income from boxing in recent years. For this, tax authorities have ordered local banks to freeze his accounts.
This prompted Pacquiao to call a press conference, saying that he was being harassed by local authorities for taxes that had supposedly been settled in the United States. [The US Internal Revenue Service itself has issued a levy on Pacquiao’s US bank accounts to recoup more than $18 million in alleged tax liabilities from 2006 to 2010.]
The "Taxman versus Pacman" trope meme has been circulating around the Philippine blogosphere. Kim Henares has become a celebrity herself over her tax crusading. As most development scholars know, collecting revenues is problematic in poor countries where limited institutional capabilities makes it easy for tax cheats to declare Mitt Romney-like incomes--or none at all. IFIs like the World Bank have been especially critical of the Philippines' inability to raise taxes collections as a percentage of GDP. For the past few years, it has not even crossed the relatively low 13% threshold. Quoth the World Bank on the Philippines:
Higher investments can be sustained by institutionalizing reforms in public finance. In this regard, a comprehensive program of tax policy and administrative measures should be pursued to raise tax revenues by up to 8 percent of GDP. The government’s medium-term target of an additional 3 percentage points of GDP by 2016 is on the right track. Higher revenues need not be equated with higher tax rates as tax administration can be improved substantially.
For instance, in the first quarter of 2013, the Bureau of Internal Revenue announced a campaign to boost tax collection from self-employed and professionals (SEPs) such as doctors, lawyers, and traders. The government estimates that only about 403,000 out of 1.8 million SEPs paid taxes and the average income declared by SEPs is not far from the income of a minimum wage worker [my italics]. Successful implementation of this campaign can generate up to 2 percent of GDP in tax revenues without raising tax rates.
Actually, there is a method to Henares' madness. She has taken to chasing the Philippines bling-bling crowd who take pride in ostentatious displays of wealth in a poor nation. Yes, professionals--doctors, lawyers and so on--tend to hide income from medical operations and billable hours. But, going after celebrities like Pacquiao has proven especially fruitful in gaining public attention with the message that no one is safe from the taxman. Ever seen the IRS head get featured in gossip columns? She does in the Philippines:
With her staff members diligently helping her, auditing books and sales reports, she knows exactly who, and how much or little, the rich and famous are paying and evading paying. Her first salvo was running after  reported tax evading celebrities as Judy Ann Santos, Regine Velasquez and Richard Gomez. When President Aquino told a meeting of the federation of Chinese businessmen that most of them were not paying the right taxes, he was using information provided by Henares.

Henares joined BIR in 2010. Statistics from her office showed that BIR collection for 2013 grew by 15 percent, exceeding the December 2013 target by 6.44 percent. For December 2013, collections from BIR operations amounted to P94.07 billion. Which is P8.25 billion or 9.1 percent more than collections made in December 2012.
You have to be tough to go after the Philippines' rich and famous like Manny. Fortunately, she appears up to the job. Her hobby is combat shooting (with a competition-spec .45 by the looks of it in the link). Speaking of whom, here's who you're up against, Manny: the submachine gun-toting BIR chief...
Tax honcho Kim Henares has got Manny Pacquiao in the crosshairs
Anyway, after Manny's cool $20 million in earnings from the Bradley fight, Attorney Henares has fired another warning shot already. The interesting IPE angle here is that Pacquiao can pay taxes from his matches in either the United States or the Philippines. What Henares is arguing is that he's better off paying them back home since (a) the tax rate there is lower and (b) a poorer country needs the money more as his tax bill climbs:
WBO Welterweight champion Manny Pacquiao now faces P2.56-billion in tax deficiencies after Sunday's match, Bureau of Internal Revenue (BIR) Commissioner Kim Henares said. In an interview over dzMM [radio] on Monday, Henares added up Pacquiao's guaranteed $20 million purse from his rematch with Timothy Bradley to his alleged back taxes of P1.1 billion from 2008 to 2009 and interests.
The People's Champion can settle the liabilities in the United States where his last fight was held and organized. Henares said, however, that the US Internal Revenue Service demands a 40 percent tax contribution from Pacquiao's earnings, while the BIR only asks for 32 percent.
Kim Henares gets two thumbs up from me--a true kickass woman if there ever was one. Yes, the Philippines certainly stands to benefit from improved revenue collection. Manny Pacquiao is a tax-dodging sissy next to her. Fair is fair so pay up, man! You learn early on who to pick fights with. My advice to Manny is to not @#$% around with Kimmy. I sure wouldn't.

UPDATE: Some lawmakers are apparently upset with Henares' brazen PR stunts designed to get Manny to pay. As I mention above, there are reasons why she must resort to publicity to get her objectives accomplished.

BRICs Guy on the EU's Road to Smurfdom

♠ Posted by Emmanuel in at 4/15/2014 01:40:00 AM
Jim O'Neill is known to most as the Goldman Sachs guy who termed the terms "BRICs" to represent the bloc of large developing countries Brazil, Russia, India, and China and to football fans as the would-be savior of Manchester United from the dastardly, debt-loving Glazer Ameriscum. (See anyone else buy a football team via LBO?) He also coined "MINTs" for Mexico, Indonesia, Nigeria and Turkey, albeit their subsequent performance is even spottier than the BRICs'.

Now, BeyondBRICs points us to a new report from him published by Bruegel that suggests the developed countries will lose a larger share of the world economy faster than he had thought. In other words, it's not just the BRICs but the entire developing country caboodle that's going to be growing especially in trade terms like gangbusters relative to their industrialized counterparts. Most vulnerable are the Europeans who are set for a kicking, especially after O'Neill and his bean counters totted up the figures post-European crisis:
We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation.
This figure shows precipitous declines in Europe's share of world trade in the next few years leading to 2020:

Individual EU nations are obviously not expected to fare well, with even Germany becoming less important:


Even as a proponent of developing countries, I think he's a tad optimistic and weighs post-European crisis data too much in extrapolating their future performance. We'll see. O'Neill also writes about things a lot of IPE commentators have commented on in that institutions of global economic governance do not fully reflect changes in the world's changing distribution of wealth. Remember, the US still selects the World Bank head, while the EU does the same for the IMF. The Eurocentric G-7 isn't exactly diverse and has become less so since they downsized from the G-8 after kicking out Russia. These ideas should not be new to IPE Zone readers, but it's good to hear an influential economist say the same things.

New Template is Now Fully Operational

♠ Posted by Emmanuel in at 4/15/2014 12:30:00 AM
Dear readers, in case you haven't noticed--in which case I suggest laser eye treatment, pronto--the blog's template has changed. Over the weekend I have been tinkering with a new template to give the blog a contemporary look and feel. Since messing around with blog templates got me into this line of "business" in the first place, I have a keen interest on presentation. Ever come across blogs that had pretty good content but you didn't visit that much since they looked, well, blah? To better serve my beloved readers, I have always striven to deliver the best in form and function.

I suppose I am not doing too shabbily in either department since the blog still ranks third among Google search results for the term "international political economy." First is the (Humpty Dumpty-esque) Wikipedia entry, second is the excellent description of IPE by Michael Veseth that even I use. Fourth is the Warwick University IPE site--as a graduate of arch-rival Birmingham University I am glad to put them behind (just kidding, Warwick friends)! Fifth is the Review of International Political Economy, a fine journal edited by Greg Chin who I met a while ago.

Some notes in case you are interested:
  1. The blogroll has been moved to the footer area. One of the major innovations in web design has been moving a lot of content to this area, so I'm just keeping up. (From three columns we now move back to two columns, too.) Again, I do not necessarily agree with these blogs and sites, but I think they provides a fair representation of interesting material for the wide-ranging discipline that is IPE. Inactive links have been removed.
  2. All Foreign Policy blogs have been removed. What sort of jerks put blogs behind a paywall? It's totally against blogging ethos--even the Financial Times and Wall Street Journal which are the finest subscription-based sites do nothing of that sort of shameless money-grubbing. FP hucksters are thus banished. I will not register, let alone pay, for readily available content. A sucker is born every minute, but I hope you are not one of them.
  3. The blog title and description are now hard-coded into the header.
  4. The Archives and Tags sections have been combined in this neat template I found. For continuity's sake, familiar elements such as the textured background, the LibraryThing widget and the followers list carry over unchanged.
  5. The column width is now 1250 pixels. Most visitors to the blog have widths of 1280 or more, so it makes sense to make this move to maximize screen real estate. Ever visit sites that use only half the screen and have teeny-weeny text when viewed at 1920x1080 or higher? I certainly have, and they waste today's higher resolution screens. Previous templates dating from 2007 and 2008 were optimized for 1024x768 and 1280x800 screens that I was operating then, but time moves on. 
  6. All blog posts now have folds after a couple of lines on the main screen. For my next blog template, I will probably move to a title + picture template especially if readership keeps moving to mobile devices.
  7. There are still some things I am tinkering with such as the drop-down menus. I am also trying to shave off bits of HTML code here and there to speed up page loading by a few milliseconds. Pingdom suggests it loads reasonably fast already...
Otherwise, you are now witness to the firepower of this fully (re)armed and operational battle station. I target all forms of globaloney and hypocrisy. As it has for seven years now, the IPE Zone maintains its integrity by taking no prisoners. You may certainly not favor ideas and opinions expressed here, but rest assured they are mine alone. I do not entertain ads, paid placements, paywalls or other forms of commercial debasement. If you want people trying to sucker you into buying doodads at every turn, head elsewhere.

There will never be enough fish to fry even if I had all the time in the world.

PS: The new "Z" favicon is made to match the new color scheme. I am still deciding which of of the two above I should use.

Poland's Rise and the "Catholic Work Ethic"

♠ Posted by Emmanuel in ,, at 4/13/2014 07:22:00 PM
Makeup your mind on the reasons for Poland's export success.
Given the woes of Ukraine, many folks there are wondering, "Why are we not like Poland?" And for good reason: Poland's economic resurgence is remarkable set against the backdrop of a stagnant EU. Already, it is aiming to translate its economic clout into political clout. The contrast between Ukraine and Poland cannot be starker. What did the latter do to set the stage for today's success?
There are various reasons Poland, a country of 38.5 million with more than 200 years of tragic history, suddenly finds itself in a position of envy. It has a large internal economy, a business-friendly political class, and the hypercharged potential of a developing country catching up with its western peers. It is playing an increasingly influential role in EU negotiations, often providing a voice of restraint during discussions on how to rebalance an off-kilter euro zone...

Since the fall of the Iron Curtain, Poland has refashioned itself as a model of free-market economics. From 1989 to 2007 its economy grew 177 percent, outpacing its Central and Eastern European neighbors as it nearly tripled in size—the result of a series of aggressive measures taken by the government after the collapse of communism. Price controls were lifted, government wages were capped, trade was liberalized, and the Polish currency, the zloty, was made convertible. The policies left millions out of work but freed Poland to begin to recover from decades of mismanagement. The economy got a further boost with the country’s entry into the EU in 2004.
This, of course, is in stark contrast to Ukraine's staunch anti-reformist post-Soviet history. Now, one of the largest export phenomena to emerge out of Poland is Inglot Cosmetics (male readers should ask the ladies about this brand). In contrast to most male bloggers who consider the subject matter "girly" and avoid them altogether, I keep close tabs on fashion and luxury industries since they are often at the forefront of globalization in terms of leading-edge marketing and distribution. Having to appeal to the most cosmopolitan of consumers means riding trends as soon as they emerge anywhere in the world, and those who claim to write about globalization without covering these industries are quite risible.

Inglot has caught the eye of no less than the Financial Times for its astute business practices. As Inglot branches multiply across the globe, it eventually reached Manila. Coming from the Philippines, I have always been fascinated with hardworking Poles who are now leading the way in the EU. Similar to the Philippines, Poland remains devoutly Catholic. Yet, like Poland, the Philippines is progressing relatively quickly nowadays and is among those leading Asia in growth.

It's quite a turnaround, and this phenomenon has led me to carefully read a wonderful journal article by Martyna Sliwa on how a "Catholic Work Ethic" has emerged to counter the established notion of a "Protestant Work Ethic" whose main idea is that Protestants are less fatalistic than Catholics and thus work harder since their fates are not predetermined:
This article engages the question of whether contemporary Poland is a country in which Catholic Work Values prevail. First, it discusses the meaning of work in Catholic Social Teachings. Then, it provides an overview of the historical experience of Poland and the Polish nation's trajectory of forming its relationship with the Catholic Church. Furthermore, based on a number of empirical studies, it explores the current role of the Catholic religion in the lives of the Poles, with an emphasis on the principles and virtues related to work. It argues that as a consequence of a long period under the occupation of foreign powers between 1795 and 1918, of involvement in the two world wars, and of the post-WWII era of the Communist regime from 1945 to 1989, the model of Catholicism which has developed in Poland is characterised by a strong identification of a large proportion of the society with the Church, but, at the same time, by signs of selectivity towards religion, which transpire also in the way in which the Poles feel about and approach work-related matters.
Critics will of course complain that Italy, Portugal and Spain are prime examples of Catholic failures in Europe, but consider that they are increasingly becoming like the French who are only nominally Catholic as out-of-wedlock births rise and church attendance falls in those countries. The Sliwa article points out that the path taken by Poland in relation to religion and its current rise is idiosyncratic. However, there are certainly points of reference to draw upon for other predominantly Catholic countries. Indeed, if Weber were still around today, he may have to reconceptualize his ideas given the geographically dispersed emergence of fast-growing Catholic economies including Poland (Eastern Europe), the Philippines (Southeast Asia) and Mexico (North America). At the very least, Catholicism may no longer be a brake on growth but even a modest accelerant when combined with certain pro-growth policies.

From marketing their own software to their own makeup, the Poles simply "get" the global marketplace in a way others really haven't by building their own export brands--go ask the Chinese, for instance. Let the "Catholic Work Ethic" show us the way.

(Labor) Terminator: (Coming) Rise of Drone Ships

♠ Posted by Emmanuel in , at 4/13/2014 10:14:00 AM
Where's the 'bridge'? Getouttahere!
The shipping industry's importance to global trade cannot be overstated. Depending on your source, 80-90% of all traded goods are exchanged via shipborne transportation. Hence the only slightly inaccurate title of Rose George's recent book on shipping being an "invisible industry," Ninety Percent of Everything. (Obviously, not all goods are traded.) In the quest to bring us ever lower-priced goods, shipping lines have done a lot to circumvent developed world regulations. The advent of flags of convenience or registering vessels not in the countries of the ships' ownership is a case in point. Flying a Panamanian or Liberian flag skirts all sorts of developed world regulations concerning environmental and labor standards. To illustrate the latter, somewhere between a quarter to a third of all seafarers come from the Philippines. They earn rather less than their Greek or Cypriot counterparts.

That said, labor still constitutes the largest expense for shipping firms. I suppose, then, that it would only be a matter of time before drone cargo ships enter service. Heck, if murderous Yanquis rain death from the skies the world over without any regret, what's the particular difficulty in manning ships remotely? Rolls-Royce--the engine maker, not the car brand which has been sold to BMW--has the latest in this line of innovation:
Rolls-Royce’s Blue Ocean development team has set up a virtual-reality prototype at its office in Alesund, Norway, that simulates 360-degree views from a vessel’s bridge. Eventually, the London-based manufacturer of engines and turbines says, captains on dry land will use similar control centers to command hundreds of crewless ships. Drone ships would be safer, cheaper and less polluting for the $375 billion shipping industry that carries 90 percent of world trade, Rolls-Royce says.

They might be deployed in regions such as the Baltic Sea within a decade, while regulatory hurdles and industry and union skepticism about cost and safety will slow global adoption, said Oskar Levander, the company’s vice president of innovation in marine engineering and technology. “Now the technology is at the level where we can make this happen, and society is moving in this direction,” Levander said by phone last month. “If we want marine to do this, now is the time to move.” 
Big money is behind this project as cost considerations come into play:
The European Union is funding a 3.5 million-euro ($4.8 million) study called the Maritime Unmanned Navigation through Intelligence in Networks project. The researchers are preparing the prototype for simulated sea trials to assess the costs and benefits, which will finish next year, said Hans-Christoph Burmeister at the Fraunhofer Center for Maritime Logistics and Services CML in Hamburg... 

Crew costs of $3,299 a day account for about 44 percent of total operating expenses for a large container ship, according to Moore Stephens LLP, an industry accountant and consultant. 
The article goes on to discuss the safety concerns--hacking, terrorism and so on--but I do not believe them to be insurmountable. In time, our grandchildren will probably not be pondering about what to do with drunken sailors in song but rather hacked drone cargo ships!

US Bastardizes APEC, PRC Bastardizes Boao Forum

♠ Posted by Emmanuel in , at 4/11/2014 02:56:00 PM
There's interesting commentary over at The Diplomat concerning the ongoing Boao Forum, formerly China's World Economic Forum wannabe/knock-off featuring the movers and shakers in politics and business in Asia. Supposedly a non-government organization to discuss economic issues in Asia, its role is evolving to become a mouthpiece for its largest backers. Namely, the Communist Party.

There's a lot of interesting stuff in the article, but I am particularly struck by it dropping its veneer of being a pan-Asian initiative and nakedly pursuing topics and discussion points favored by the PRC leadership:
One of the perks of being the forum’s perpetual host is setting the agenda: on the docket for discussion were several hot topics of great interest to Beijing, including sessions on “Reviving the Silk Road” and “Urbanization of People.”
However, recently the Boao Forum has been moving beyond purely economic topics to discuss other regional issues. Given China’s leading role in the Boao Forum, the expansion of the forum’s agenda reflects China’s regional leadership ambitions. In 2013, the forum introduced non-economic topics to its agenda for the first time, including food safety and America-Asia relations (not coincidentally, those two topics are of major interest to Beijing). This year, the forum has expanded its scope yet again, with plans to include discussions on potential cooperation in South China Sea, a code of conduct for cyberspace [re: NSA spying], and China-U.S. relations in the Asia-Pacific region.
So yes, China is using the Boao Forum to fry its favorite fishes. Then again, the same has been going on in the Asia-Pacific Economic Cooperation (APEC)--the United States' favored venue for (mis?)characterizing itself as an "Asia-Pacific" economy and politicizing an "economic" gathering:
Chinese officials have raised similar complaints about the U.S. reshaping APEC to take on regional security issues rather than remaining a purely economic forum. Apparently, China has decided that “if you can’t beat ‘em, join ‘em” — and Beijing is now slowly turning the China-led economic forum into a platform for discussion on major regional issues. The U.S. has had success framing conversations on sensitive issues like conduct in cyber-space and how to handle the South China Sea disputes. By raising these same issues in its own forum, Beijing can set the agenda for a change.
I guess sometimes it's not the economy (stupid).

UPDATE: ECNS has a summary of the talks given at the event. 

Up Next: Mass Delisting of Russian Stocks From US Bourses

♠ Posted by Emmanuel in at 4/11/2014 09:23:00 AM
I've got the Norilsk Blooze...

State of Palestine deniers the United States looking for ways to "punish" Russia over taking back territory it gifted to Ukraine leads us to all sorts of interesting places. The lack of trade ties between the US and Russia makes it difficult to apply sanctions, but that isn't to say Americans haven't tried using the WTO to get back at Russia.

Now we're coming to another way the Yanquis are trying to bash Russia. Instead of trade, how about the investment front? As it turns out, there are quite a few publicly-listed Russian companies being traded via American depositary receipts or ADRs. Being mostly state-affiliated enterprises, these would certainly do as bait for publicity-seeking US politicians by using their American presence as a backdoor for imposing sanctions.

And, by halting trading on Russian stocks in the possession of American nationals, massive downward pressure can be placed on these stocks:
When Russia’s first deputy prime minister urged companies to delist from overseas stock markets two days ago, he made a reference to concerns about the country’s “economic security.” While Igor Shuvalov didn’t specify what the security issues are, there may be reasons for the Kremlin to be concerned about stock trading as the U.S. and Europe threaten to step up sanctions against Russia, according to Gibson, Dunn & Crutcher LLP. The New York-listed equities of any company that the Treasury Department adds to the sanctions list would become off limits to U.S. investors, said Judith A. Lee, a sanctions lawyer at Gibson Dunn in Washington.

“If a company is designated, then any shares of that company in the control or possession of a U.S. person are blocked,” Lee said by e-mail on April 8. “Those shares could not be sold. That would really put downward pressure on the stock price.” The Bloomberg index of the biggest Russian companies traded in New York rose 0.2 percent yesterday, capping a decline of 19 percent this year. The measure has plunged almost twice as much as the benchmark Micex gauge of Moscow-traded equities, which has fallen 10 percent. 
Political risk analysts see Russia's move as an attempt to cut off vulnerabilities as the US seeks to expand sanctions past government officials to state-affilicated enterprises:
Chris Hamilton, a spokesman for the U.K. Financial Conduct Authority declined to comment on how deeper sanctions against Russia could affect holders of Russian stocks listed in London. Hagar Chemali, a Treasury spokeswoman, also declined to comment.

“So far sanctions have been imposed on individuals and their assets,” Charles Hecker, the global research director at Control Risks Group in London, said by phone yesterday. “What we could move to next are companies and those companies’ assets.” State-owned Russian companies or “Russian companies that have a great deal of political exposure” could be on a new sanctions list, Hecker said.
Nuff said. Let's party like its 1949.