BMW Builds Its First Theme Park - In Korea [?!]

♠ Posted by Emmanuel in Cars,South Korea,Travel at 6/30/2014 01:30:00 AM

Where Gangnam stylers will be hanging out real soon.

Having seen Ferrari World in Abu Dhabi, let's just say I am not entirely convinced about the authenticity of automotive theme parks. If I wanted to buy ludicrously overpriced Ferrari paraphernalia (or that of any other make for that matter), I could easily do that online. Worse, there wasn't really an opportunity to do real driving, whether deliberately crashing into other drivers Schumacher-style or unfortunately slamming into the barriers because I am no racing car driver. It's a real shame because the adjoining Yas Marina Circuit is among the best in Formula One Fortunately, however, not all car theme parks are like that.

Enter BMW. Just like Ferrari, the Bavarian automaker has decided to open its theme park not in its homeland but in a promising export market. What's notable though is that the Korean car market has long been one of the most closed in the world to promote the development of homegrown brands such as Hyundai, Kia, SsangYong and Daewoo. From a 2007 article in the WSJ:

South Korea has one of the most closed markets of any auto-producing nation, with an 8% tariff and a long list of other barriers that make foreign cars more expensive than domestic ones. Only 3.5% of vehicles sold in South Korea last year were made outside the country, below the 5% import level of Japan and 37% of the U.S.

It is only relatively recently that Korea has begun opening up its car market. Consistent with the "infant industry" argument, that Hyundai and sister brand Kia have achieved no small amount of success in foreign markets makes Korean officials believe that they can now duke it out with other brands at home. Nor is coincidental that Korea has begun inking FTA after FTA even with countries that are major exporters of automobiles...such as Germany via the EU. European manufacturers even view Korean ones as an existential threats.

If you can't beat 'em at home, why not challenge them where they live? At least that's BMW's ploy. Better yet, unlike the rather lame Ferrari World, this automobile theme park will actually allow you to drive performance cars. What a radical concept; Koreans even welcome the competition since the theme park is being constructed by a subsidiary of--wait for it--Hyundai:

For many Koreans, having fun in the car is limited to getting out of congested traffic downtown and managing to open the throttle for a few moments on a highway. Starting in July, BMW Group Korea is going to change that by opening its first BMW Group Driving Center in Asia. About an hour’s drive from downtown Seoul, the BMW Group Driving Center will be on Yeongjong Island near Incheon International Airport.

The 236,176 square-meter site, equivalent to 33 football fields, can be easily spotted when people drive to the airport as it’s right next to the Incheon International Airport Expressway. The construction of the center, which is being carried out by Hyundai Development Company, is about 60 percent completed.

Again, driving is a central part of the experience. Worth remembering is that even BMW is a Johnny-Come-Lately, having established in-country operationsin 1995:

There will be six courses in the center, each providing different thrills. The six courses are Acceleration and Braking, Circular, Multiple, Handling, Dynamic and xDrive. As an example, the xDrive course, which tests BMW’s four-wheel drive system through eight types of road conditions, takes 30 minutes driving time and can be used by six different drivers at the same time...

“It makes me emotional when visiting this place, because it kind of reflects 1995, when BMW first landed in Korea to develop the market,” BMW Group Korea President and CEO Kim Hyo-joon said at a press conference yesterday. Last year, BMW Group Korea sold 39,397 units (including BMW Motorrad motorcycles), a 15.5 percent increase from 2012. Korea is now its ninth-biggest market, surpassing Canada. 

Commercial motives are driving BMW's effort:

BMW is trying to capture the South Korean luxury car market. Some 150,000 imported cars were registered in South Korea last year. That is only half as many as Japan, but the market has potential for growth. BMW last year sold 1,920 7 Series luxury sedans in South Korea, roughly five times the number in Japan. Branding is not the only reason European cars are popular in South Korea. A free trade agreement between South Korea and the European Union came into effect in 2011, pushing down import duties. Furthermore, the won became stronger, making imported cars cheaper for South Korean consumers.

IMHO it's an outcome showing the best possible outcomes of trade: BMW gets to cultivate a new foreign market, while even Hyundai benefits by building the theme parrk. What's curious to me is how BMW has taken the fight right to the heart of another automaker's home country instead of, say, China or India.

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Dirigisme Rules: Etihad Buys 49% of Alitalia

♠ Posted by Emmanuel in Europe,Middle East,Travel at 6/29/2014 01:30:00 AM

Emirates pitchmen Pele and Cristiano Ronaldo celebrate it buying Alitalia.

 You may wonder if I am suffering from schizophrenia after penning the post below on why "dirigisme sucks" using the example of French involvement in the sale of Alstom to General Electric. How can I now be contradicting myself by stating that "dirigisme rules"? To quote Walt Whitman, I am large; I contain multitudes. Poetics aside, the simple answer is that not all state-led intervention is the same. It's not the principle that determines outcomes but the execution. For examples of market intervention done right, consider the terrible trio of Middle East carriers gobbling up market share from European and to some extent Asian airlines: Emirates, Etihad and Qatar Airways. Their advantageous locations in the heart of Eurasia aside, they've been keen to snap up other carriers to extend their routes:

Emirates Airlines, Qatar Airways and Etihad Airways are pulling the global aviation industry's center of gravity toward the Persian Gulf. Sure, their convenient base -- at the crossroads of Asia, Europe and Africa -- has helped a great deal. But so too has their enthusiasm to radically expand their fleets and form strategic alliances with rivals from outside the Middle East.

These airlines are also fairly young, and this helps since profitability is increased by running newer, fuel-efficient designs instead of ancient airborne gas-guzzlers:

Two of the Middle East's big airlines are fledglings. Qatar Airways was established in 1994, and Etihad in 2003. These latecomers have made up ground by investing in rivals with well-established routes and customer bases. Not even Emirates, the front-runner among the Gulf carriers, can be called an old duck. Not exactly; it was established in 1985. The Dubai, UAE-based airline has grown by creating new routes on its own.

Last year, though, it entered into a strategic alliance with Qantas and began code-sharing with the Australian flag carrier. The tie-up has also made it possible for the Gulf carrier to wink and ask Qantas to quit stopping over in Singapore and start using Dubai instead. Thanks to that nudge, Emirates is now getting more code-share passengers. In 2013, it moved into third place in the world in terms of revenue passenger kilometers, a key metric in the airline industry.

Profitability in the airline business is coming down to having fuel-efficient, technologically advanced aircraft. In November, Emirates placed the largest-ever aircraft order in civil aviation history, worth $990 million. It now has $162 billion worth of jetliners on order. Qatar Airways has $50 billion worth of passenger planes on order. All three of the Gulf carriers hope to lure passengers to their long-haul flights with new planes decked out in luxury and amenities like shower rooms, all delivered with top-notch service.

It certainly helps that they have substantial advertising budgets: witness the Pele / Cristiano Ronaldo ad they recently filmed to promote their Airbus A380s. The controversy with these Middle East carriers though is what the role of the state has been in ensuring their success:

The three Gulf carriers have another advantage over their global peers: swift decision-making when it comes to making large-scale investments. Of course, pulling the trigger is easier when a company has some financial muscle, as all three airlines do. It is also easier when an airline knows it can count on government support for airport improvements or even construction.

That support can also look like subsidization. Not only are all three airlines 100% state-owned, their governments are cash-rich. Qatar and Abu Dhabi have rivers of revenue flowing from oil and natural gas exports. An Australian newspaper in May reported that Etihad had access to an interest-free $3 billion loan from Abu Dhabi's government.

Therein lies the rub: if dirigisme is so outmoded in this day and age, why is it that the world's fastest-growing national carriers are state-owned Middle Eastern airlines? As I said, it may not be dirigisme the idea that is itself faulty but the execution. Sure their governments have lavished petrodollars on them, but they have been relatively well-spent petrodollars. Witness Emirates now buying 49% of Alitalia. In a tersely worded statement:

Alitalia and Etihad Airways today confirmed that they have agreed the principal terms and conditions of a proposed transaction whereby Etihad Airways will acquire a 49 per cent equity stake in Alitalia. The airlines will now move to finalise the transactional documents, that will include the agreed upon conditions, as soon as possible. The conclusion of the investment is subject to final regulatory approvals.

Details of the conditions are to follow, but I am fairly certain that they will entail Etihad limiting the amount of "legacy" costs--debt and pensions--they are willing to take. I am sure the Italian government is nevertheless delighted to unload a large part of this money loser. Perhaps dirigisme works better when the government in question is authoritarian and not democratic? It's certainly well worth studying and may hold the key to understanding not only the future of European big business but also the commercial prospects of Middle Eastern economies as their energy reserves dwindle further.

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Latin Victimhood: From Depedencia to Suarez the Biter

♠ Posted by Emmanuel in Development,Latin America,Sports,Trade at 6/27/2014 01:30:00 AM

Adidas takes the trophy for World Cup 2014's most horrendously prescient ad campaign.

Last year, Luis Suarez hit the headlines when he bit Chelsea defender Branislav Ivanovic and was suspended for ten Premier League matches. Aside from the horrific image it creates of one of football's most prolific strikers--he's led both the Dutch Eredivisie and English Premier League in scoring--another interesting aspect is the speed at which the Uruguayan media has sprung to his defense as he bit Italian defender Giorgio Chiellini in Uruguay's 1-0 victory over Italy that saw the latter bounced out of the competition. He'd done so to others and wanted to chew on the Italian during the 2013 Confederations Cup. For those Latin Americans, it was another example of a wealthier country taking advantage of a poorer country. Sure Uruguay advanced, but it is harder to imagine how they will advance in the knockout stages absent their greatest offensive threat after he was suspended no thanks to spiteful Westerners. Witness the emergent narratives:

A EUROPEAN 'MANHUNT'
 
"I don't want to get into conspiracy theories, but it seems that FIFA isn't interested in letting small countries such as Uruguay advance," said 62 year-old lawyer Andres Ramirez. Local media have lashed out at a British-led 'manhunt' against him, and even leftist president Jose Mujica spoke up for Suarez to be left alone.

"What is incomprehensible is the vitriol with which the English press, in particular, have gone after the Uruguayan. Far worse things have happened on the pitch, even where English players are concerned," said Uruguayan Andreas Campomar, author of "Golazo! A History of Latin American Football". For many Latin Americans the ban will have wider repercussions. It will be construed as the usual high-handedness Europe employs in relation to Latin America. A case of one rule for them and one rule for us."

Uruguay captain Diego Lugano: "Indignation, impotence, I think that's what we all feel. We'd all like a fairer world, but that world simply does not exist. Those who rule, rule, and the strong ones are the strong ones... Keep feeling proud of him, he deserves it. Nothing will stop us. We will carry on with humility, union, determination, recognition of mistakes, and with our heads always high."

As it so happens, Latin narratives of victimhood have a very long history. In the late 1950s, dependency theory or dependencia became all the rage in Latin American countries. That is, trade with rich countries did not make poor countries better off as per neoclassical economic theory--comparative advantage and all that stuff--but worse off as they were exploited mercilessly:

Dependency Theory developed in the late 1950s under the guidance of the Director of the United Nations Economic Commission for Latin America, Raul Prebisch. Prebisch and his colleagues were troubled by the fact that economic growth in the advanced industrialized countries did not necessarily lead to growth in the poorer countries. Indeed, their studies suggested that economic activity in the richer countries often led to serious economic problems in the poorer countries. Such a possibility was not predicted by neoclassical theory, which had assumed that economic growth was beneficial to all (Pareto optimal) even if the benefits were not always equally shared.

Prebisch's initial explanation for the phenomenon was very straightforward: poor countries exported primary commodities to the rich countries who then manufactured products out of those commodities and sold them back to the poorer countries. The "Value Added" by manufacturing a usable product always cost more than the primary products used to create those products. Therefore, poorer countries would never be earning enough from their export earnings to pay for their imports.

By coming to the defense of the indefensible Luis Suarez, we see similar narratives: It's certainly not the fault of poor Luis...The Man is trying to keep us down by making false accusations that stick in rich people's clubs like FIFA, etc. Witness the lengthy defenses prompted by Suarez the Biter, Episode III. Conspiracy theories abound:

• Chiellini is a "snitch" trying to deflect attention away from Italy's elimination.
• Suarez's mouth inadvertently fell into Chiellini's shoulder / Chiellini thrust his shoulder into Suarez.
• the British media have "exaggerated the incident" and are untrustworthy after celebrating the country's 1966 World Cup win with "a goal that wasn't a goal".
• pictures of Chiellini's shoulder showing fresh bite marks are actually of an old scar.

I have trouble with arguments that lay all or most of the blame on someone else for one's shortcomings. Just as generation after generation of Latin leftists refuse to accept any responsibility for the failure of their countries to advance, so too do we have footballers like Suarez who have literally millions of apologists. You cannot lay blame on others forever; at some point you have to accept personal responsibility even if there are extenuating circumstances--whether they be rapacious foreigners or an unforgiving global media. In the end, nobody will help you but yourselves.

Some people just need to grow up.

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Dirigisme Sucks: French Meddling in GE Buying Alstom

♠ Posted by Emmanuel in Energy,Europe at 6/26/2014 01:30:00 AM

Sold to the highest bidder: Alstom purchased by GE

So the deed is done: French "national champion" Alstom--a global powerhouse in passenger trains and nuclear power generation--has sold a large chunk of its prized energy assets to the American Company Making Everything, General Electric, for the princely sum of $17 billion. This, however, was done with a lot of meddling from the French government. First it asked for an unsolicited counteroffer from the German industrial powerhouse Siemens. Second it safeguarded its "veto power" over Alstom through buying a 20% stake in it:

As France prepared for a night of soccer frenzy, hoping to see its team crush Switzerland in the World Cup, Economy Minister Arnaud Montebourg appeared in Paris with a surprise announcement. His government planned to purchase a 20 percent stake in Alstom SA (ALO), the French manufacturer at the heart of a takeover battle between Fairfield, Connecticut-based General Electric Co. (GE) and Siemens AG of Munich, Montebourg told a press conference hours before kick-off on June 20. GE would gain energy assets from Alstom for $17 billion, while a competing group led by Siemens walked away empty-handed.

Montebourg’s coup stunned participants in the takeover as much as observers. Just hours earlier, GE Chief Executive Officer Jeffrey Immelt emerged from the French presidential residence after an amicable 45-minute meeting with the Socialist head of state, Francois Hollande, according to a French government official. Under the crystal chandelier of the Green Salon, with its views of the Elysee Palace gardens, Immelt learned that he would win the deal, clinching the biggest takeover in the U.S. company’s history, the official said.

The catch: the government’s demand for a stake in the rest of Alstom, which it would buy from construction group Bouygues SA. (EN) Montebourg only produced that nugget after Immelt returned from the courtyard of the Elysee to the offices of GE’s power-conversion unit on the other side of the Seine River, where the U.S. company had set up shop for its CEO during his increasingly frequent trips to the French capital. 

GE cannot possibly ask for a more interventionist partner than the French government which now holds 20% of the energy unit to the American firm's 80%. Indeed, this may occasion further French government intervention as its moribund national champions are sold one by one and the fear of its industrial base disappearing mounts:

As part of the transaction, GE will buy outright Alstom’s lucrative gas turbine business, and create joint ventures in nuclear and steam power, renewable energy, and electric grids. Those ventures will make it a long-term partner of the French state, which in addition to its direct Alstom shares will also have a veto over some decisions in the nuclear business.

The structure is much changed from GE’s initial proposal, which envisioned a more straightforward acquisition of all of Alstom’s energy assets, accounting for almost three quarters of its sales. With Hollande’s political allies congratulating themselves on averting the disappearance of a major French company into the vortex of a U.S. conglomerate, the deal may provide a blueprint for political intervention in future takeovers.

Another article from Bloomberg bemoans precisely this kind of intervention in the context of establishing startups of which there are precious few in France. If supporting "national champions" was truly the way forward, the country would obviously not find itself in the funk it is currently in:

French business has long favored corporate conformity over taking risks, says Marie Ekeland, a partner at Elaia Partners, a private-equity boutique in Paris. The CAC 40 Index (CAC) is loaded with conglomerates, banks and manufacturers -- and not one young Internet technology powerhouse. “We’ve lacked an entrepreneurial culture throughout our whole society,” Ekeland says. “That’s why we have such a problem with economic growth.”

France’s current travails have plunged the country into a deep funk. Its industrial icons are struggling; on June 22, Alstom SA, the ailing rail transport and power equipment manufacturer based in Paris, agreed to sell its energy assets to Fairfield, Connecticut–based General Electric Co. (GE) for $17 billion. Francois Hollande, the nation’s Socialist president, is foundering; his approval rating of 18 percent in recent polls was the poorest showing of any head of state in the postwar era. 

The point is this: Alstom exemplifies stodgy old France and its backward-looking corporate culture. The wildly unpopular government certainly isn't doing itself any favors. Why don't they instead focus on inspiring new firms in industries of the future instead of trying to hang on to these relics? France has been unsuccessful in engineering these national champion's future viability, that much is certain. Meanwhile, I have no qualms whatsoever with GE's purchase; this is capitalism. 

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PRC Higher Ed: German Model 1, US Model 0

♠ Posted by Emmanuel in China,Education at 6/25/2014 07:14:00 PM

Some assembly required...but not vision in putting engines together.

As we await the outcome of the upcoming World Cup match between Germany and the United States, it appears that the Europeans have already won out in another respect: China is moving away from prioritizing university education to prioritizing technical/vocational education. This is a follow-up to a recent post I made on how the Western-style university system is taking a beating even in China for not providing graduates of much worth in the job market. In the parlance of us educators who actually give a damn about whether our students find work after graduation, it's called the "job-skill mismatch." Quite frankly it reflects poorly on educators and parents alike who delude themselves into thinking that college is so great when it really isn't. That said, it's certainly true that the Chinese have some Western envy when it comes to higher education. Witness the now-famous Academic Ranking of World Universities (ARWU) compiled by Shanghai Jiao Tong University.

To make a long story short, after an aborted effort to model Chinese universities after those in the United States, they appear to be changing course. I believe the moribund US jokeonomy has played its part in dissuading the Chinese about the foolhardiness of copying America's education system: shrinking -2.9% in the most recent quarter doesn't inspire confidence in the US. Witness much higher targets now being placed for technical/vocational education:

A guideline issued by China’s State Council on Sunday aims to increase the number of students in vocational educational institutions from 29.34 million now, to 38.3 million by 2020. The total that year will be made up of 23.5 million studying at vocational high schools and 14.8 million in vocational colleges; the latter usually run programs lasting two to three years.

Where will the resources come from for much-expanded technical/vocational education? They are going to convert a lot of universities in China into vocational colleges. There will be no doubt where the PRC's priorities lie if this comes to fruition:

Some 600 universities could be converted into vocational colleges, adding to the 1,300 China already has, which graduated around 6 million students last year. While China already has the world’s largest number of vocational institutes (13,600 schools and colleges), they are underfunded, need upgraded facilities, and suffer faculty shortages, according to Ge Daokui, the director responsible for vocational studies at the education ministry.

Is it going to be a straight-up copy of the German apprenticeship model which is usually the one that comes to mind when discussing successful technical/vocational systems? Not really. Especially since PRC corporations aren't as well-established or as proven in training young people, it will be, ah, technical/vocational education with Chinese characteristics:

Liu Qiaoli, a researcher at the National Institute of Education Sciences, said traditional Chinese thought values people's morality more than skills, which makes the country's modern vocational education deficient at the start. "Now the top leadership, including Premier Li Keqiang, are redefining modern vocational education. He connects it with improving people's livelihoods and the country's development, and he acknowledges the essential role of vocational education," she said.

Liu said most of the vocational schools in China still take the initiative in teaching and in course planning, rather than using the models of foreign countries, such as Germany, that rely on industry-school cooperation. "In many cases, education-related organizations are the ones that care about improving vocational education. Companies and employers don't have strong motives. It is important for them to recognize the importance of developing vocational education. It means a lot to the companies and the country."

It's a massive vote of no confidence by the world's largest nation in the increasingly irrelevant American model of higher education. Like in so many other things, it's better to follow Germany than the US.

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Open Source Firefox vs iOS, Android in Emerging Mkts

♠ Posted by Emmanuel in Development,Technology at 6/25/2014 02:00:00 AM

France's Alcatel is an also-ran handset maker seeking to capitalize on Mozilla OS.

I got on the information superhighway in 1994. Back then, our 33,600-baud modem was a high-spec model even if pictures took minutes to load and I got disconnected many times over the course of an hour. No matter; I used Netscape Navigator then like everyone else--it wasn't the most stable program either but it got the job done. Twenty years later, my preferred browser is still a son-of-Netscape in Mozilla (Netscape's Mosaic + Godzilla) Firefox. The ethos of Mozilla Firefox do appeal to me in being an open source, non-profit institution.

An area where Firefox has fallen behind though is in adopting to the move to mobile devices. While there is a Firefox version for Google Android, there's none for Apple iOS. Now, however, Firefox is harnessing its open source advantage which could appeal to hardware manufacturers to duke it out with Google and Apple in mobile OS. With Microsoft's mobile OS something of a dud, there may be room for another competitor. What's more, Firefox is being strategic in seeking out emerging markets where lower licensing fees for its newfangled OS and hardware manufacturers seeking to customize it for entry-level smartphones may play to Firefox's advantage:

Like its namesake Web browser, the Firefox OS was created by Mozilla’s army of volunteer coders as an open alternative to company-owned standards. Mozilla, a portmanteau of “Mosaic” and “Godzilla,” began as an open-source development arm of Netscape before spinning off in 2003 as a nonprofit foundation dedicated to creating code for others to commercialize. These days, though, it’s making some serious money of its own, earning $100 million on $311 million in revenue in 2012, the most recent year it disclosed results. A bit more than 90 percent of the revenue came from a search traffic deal with Google.

Mozilla’s move into the mobile OS market makes it less of an ally and more an adversary to Google and Apple (AAPL). Android dominates this market, accounting for about 78 percent, compared with 18 percent for second-place Apple’s iOS, according to market researcher IDC. But neither was designed specifically for the lower-tech smartphones that mobile carriers are trying to sell in developing markets. By simplifying data management and cutting energy use, Firefox OS aims to attract people with less money and unpredictable access to networks and electricity.

To make a long story short, the features desired in the developing world are not necessarily those of interest in the developed world. For instance, European and North American users have no problems using 3G connections to stream music on the go, but FM--free music--is still the way to go in Brazil and Mexico where 3G is mainly for rich folks. Also, a less sophisticated OS may be desired so it can run on lesser-powered devices and use less power in places where power sockets aren't ubiquitous:

Mozilla and Telefónica agreed to first target Brazil, where the carrier controls almost 30 percent of the mobile market. “If you design for Brazil, it’s going to function in Mexico,” says Gal. “If you sit in Cupertino, it’s not going to work in Brazil or Mexico.” This has led to some innovations that may seem obvious but hadn’t been high priorities for OS designs aimed at the U.S. or Europe.

Because Mozilla isn’t yet working to put its OS on high-end phones, it can keep its code simple, yielding longer battery life. Firefox OS lets people easily monitor data use to keep costs down. It supports FM radio, a valuable feature in Latin American markets. To soften the learning curve for first-time smartphone users, it can search within multiple apps at once, unlike other systems. Gal’s example is a query for Madonna that yields a bio from Wikipedia and songs from a streaming service.

Definitely, I am sympathetic to Firefox's approach and wish they succeed. Having been successively trampled on by Microsoft, Google and Apple, however, let's just say the good open source, non-profit guys have their work cut out for them since the biggies won't likely take this challenge lying down. For instance, I can see price-slashing among Android and iOS devices to preempt Firefox from taking away market share in the rest of the developing world. Indeed, some are saying Firefox is doomed to fail as entry-level competitors increase but we'll see...

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On Currencies & Hong Kong Hating PRC Tourists

♠ Posted by Emmanuel in China,Currencies at 6/24/2014 02:00:00 AM

Mostly PRC tourists queue outside the flagship LV store on Canton Road.

Believe it or not, there are places where they hate tourists. These places probably believe they have (a) too many tourists already or (b) too much money to care about catering to such visitors. Now, folks who regularly go to Hong Kong are routinely amused by how the city's resident regard PRC visitors as bumpkins. Despite owing a lot of their livelihoods to the mainland--retail, finance, trade, and so forth--certain prejudices remain: Mainlanders have bad manners. Mainlanders are obnoxious. Mainlanders are unrefined. And so on and so forth.

Given such biases against mainlanders, proposed legislation aimed at limiting mainland arrivals is under consideration. In part, PRC visitors are attracted to the lower prices of luxury goods in Hong Kong since duties applied are generally lower there than in the mainland even if prices are still elevated by Asian standards. Also, Hong Kong's currency board which fixes its exchange rate (the Hong Kong dollar) relative to the US dollar has made shopping there more favorable for PRC visitors while the yuan was strengthening. Hongkongers likely believe they have too many tourists already, and they are rich enough to do without them:

Hong Kong may limit tourist arrivals as an influx of Chinese visitors stokes discontent, Chief Executive Leung Chun-ying said. The city may need measures to “slow the gains in tourist arrivals or stop increases, or cut visitors,” Leung told reporters in Hong Kong today. “We’re making studies and will seek feedback.”

Public discontent in Hong Kong has given rise to street protests as mainland tourists pour into the city, snapping up homes, designer handbags and daily necessities. Limiting arrivals in response could crimp the city’s retail sales, about a third of which were accounted for by Chinese visitors in 2013. “This may send a wrong signal to the general public in China that Hong Kong is no longer welcoming them,” Raymond Yeung, a senior economist at Australia & New Zealand Banking Group Ltd., said by phone today. “If the government decides to impose a quota on mainland visitors, the impact would be beyond the service sector.”

A Hong Kong retail group opposed the proposed curb, saying it violates the city’s free market policy and jeopardizes more than 267,000 jobs in the retail industry. “The government should expand retail space, build more infrastructure as well as extending tourist attractions,” Hong Kong Retail Management Association said in an e-mailed statement today.

Upon hearing of this I was in disbelief. Wouldn't any other city in Asia or even the world welcome more money-wielding tourists? Unfortunately it's true as plans are still afoot to reduce PRC arrivals by 20%. This despite both Hong Kong retail sales and tourist arrivals from the mainland falling in recent months:

A recent announcement by the Hong Kong government that it is considering a 20% curb on Mainland Chinese tourist arrivals has sent shockwaves through the retail community. The 9.5% year-on-year retail sales decline in April was the sharpest drop in five years, while growth rates for total Mainland Chinese visitor arrivals slowed to 14.7% year-on-year in April from 26.7% in March, according to Hong Kong government data...

Chinese visitors are said to account for as much as half of retail spending in malls like Harbour City and Times Square. The proposal to curb visitors has prompted gloomy forecasts for mall owners  and retailers. Merrill Lynch analysts estimate sales at these malls could drop 8-10% while Goldman Sachs believes this could cost Hong Kong up to HKD25 billion (USD3.2 billion) in annual retail sales.

I ultimately think commercial sense will prevail. Retail groups will probably gain more success arguing that the slump in tourism portends even worse performance if Hong Kong inexplicably applies a quota on PRC visitors. Last time I checked, the PRC absorbed Hong Kong and not the other way around. Complaints about mainlanders acting as currency arbitrageurs will likely soften. Indeed, I suspect the recent weakening of the yuan has a lot to do with Chinese visitors shopping less in Hong Kong and denting retail sales. Will the prejudices described above survive?

In most places, tourism is a welcome boost to the economy. Not in Hong Kong it seems, where a surge in mainland Chinese visitors has led simmering resentment to boil over as local protestors verbally abuse tourists.

The source of frustration is the sheer number of mainland visitors, which is expected to reach 45 million this year, and 70 million by 2017. Any city might struggle to accommodate these numbers, never mind a congested territory of 7 million. Furthermore, it’s pretty clear the majority of these visitors are not here to see Hong Kong’s undersized Disneyland but are really traders seeking bargains, courtesy of an outdated exchange-rate regime.

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Rating Countries by Mining Policy Attractiveness

♠ Posted by Emmanuel in Mining at 6/23/2014 02:00:00 AM

To no one's surprise, investors say Sweden has the best mining policies.

More so than the amount of extractable resources or the economic conditions in a particular country, I'd argue that the political climate is more important in determining its attractiveness to investors. Even in this day and age, mining remains a key industry, especially since many high-tech goods rely on certain minerals. Nor have we moved into a post-hydrocarbon age for powering the world economy. Canada's Fraser Institute produces an annual survey that ranks countries on these criteria, and the latest one shows definite trends. In general, developing countries with their poorer governance lag behind developed ones. Indeed, those concentrated at the bottom and the top are instructive. In general, poor performers have some shared characteristics:

1. The leaders are leftist nutters who may expropriate you at any time;
2. Mining regulations are unclear regarding what areas can be mined, what areas are protected and what the government's share of the revenues are;
3. Other rules regarding the environment and foreign direct investment are similarly unclear.

In other words, highly uncertain political environments tend to rate lower regarding policy perceptions. Here is a brief description from the Fraser Institute:

Policy Perception Index: A “report card” to governments on the attractiveness of their mining policies. While geologic and economic considerations are important factors in mineral exploration, a region’s policy climate is also an important investment consideration. The Policy Perception Index (PPI), referred to in previous surveys as the Policy Potential Index, is a composite index, measuring the overall policy attractiveness of the 112 jurisdictions in the survey. The index is composed of survey responses to policy factors that affect investment decisions. Policy factors examined include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system and taxation regime, uncertainty concerning protected areas and disputed land claims, infrastructure, socioeconomic and community development conditions, trade barriers, political stability, labour regulations, quality of the geological database, security, and labor and skills availability. The PPI is normalized to a maximum score of 100.

And here is the entire policy perceptions ranking. As usual, it is galling that countries that could benefit the most from stable and predictable mining policies are those which do worst:

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Will Xiaomi Be China's First Tech Superbrand?

♠ Posted by Emmanuel at 6/22/2014 12:30:00 AM

Xiaomi mascot Mitoo [L] dreams of overseas market share.

The business press is all agog over the emergence of Chinese mobile phone maker Xiaomi. Supposedly, we are on the cusp of a Chinese tech superbrand competitive with products from anywhere else in the world. Naturally I'm a bit skeptical. Aren't these Chinese the same folks who had to buy the ThinkPad name from IBM to be able to sell PCs abroad? Outside of China and B2B circles, who's heard of Alibaba and Baidu? It doesn't really count when you buy off brands others have developed or you're only big in China. Admittedly a nation of 1.3 billion is a pretty big market, but being big there doesn't make you a household name worldwide.

Enter Xiaomi. The press keeps drawing comparisons between its founder Lei Jun and Steve Jobs--he is an engaging salesperson for his products too--though he'd rather be his own man. Personally, I'm taken by their mascot Mitoo who sports an army hat bearing a red star, of all things. Let's just say Mitoo's political affiliations are being toned down for overseas markets where Communist paraphernalia is not quite as welcome (such as Taiwan). Given how racist-protectionist Americans are about foreign technology firms with Communist Party affiliations, I shudder to think how Xiaomi's reception will be Stateside if its mascot remains a red booster! In any event, some of the hype I cannot understand. For instance, they claim Xiaomi's exclusively online retail model is unique. Has Businessweek ever heard of Michael Dell?

Xiaomi’s real invention is its business model. It sells online, never in stores, and avoids conventional advertising, devoting only about 1 percent of its revenue to marketing. (By comparison, Samsung earmarks 5.4 percent.) Instead, the company relies on China’s social networks, Weibo and WeChat, and the free press Lei gets as a national tech hero.  

There's no doubt about it: to be able to boast that Xiaomi has become a global brand, it must crack Western markets. Otherwise, it will be regarded as a China-only phenomenon. For this mission they've hired former Google man Hugo Barra:

On the 11th floor in the main building, in a corner office, is the realm of Hugo Barra, the Brazilian-born Google executive who made news by joining Xiaomi in 2013 to lead its overseas expansion. As he talks, Barra paces his spare office, which overlooks the old tenements that once housed the workers of the demolished wool factories. Barra’s shelves are stocked with Mitoo dolls and other knickknacks. Evidence of his five-year tenure at Google hangs on the walls, including a framed Pac-Man doodle that once appeared on the search engine’s home page.

Barra is naturally bullish about the company’s prospects abroad, and one new weapon is the $130 Redmi smartphone, which Xiaomi introduced last year alongside the pricier Mi 3. The phones look alike, but the Redmi sports an inexpensive processor from Taiwan’s MediaTek. Barra even mulls the prospect of a $50 smartphone that might one day upend the economics of mobile. “I don’t think it’s possible today, with the quality of software and hardware that we would expect,” he says, “but I expect that could change over time.”

Xiaomi has to show it can use Western social media tools such as Twitter (TWTR) as well as it has exploited Weibo and WeChat. It must extend its supply chain across oceans and adjust its business model to countries where carriers sell handsets and customers aren’t accustomed to buying phones online. It must also overcome the association that Chinese brands have with piracy and counterfeiting. And Xiaomi will have to learn to do with less free, worshipful publicity. “Lei Jun is a relative nobody outside China, so leveraging his fame may be a little bit more difficult to do,” says Michael Clendenin, managing director of China’s RedTech Advisors. “Guerrilla marketing won’t be as easy.”

To get props as China's first tech superbrand, America awaits as the world's largest consumer market. Otherwise, Xiaomi will only be regarded as a mainly Chinese phenomenon a la Alibaba, Baidu, etc.

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Shakira, the Yoko Ono of Spanish Football

♠ Posted by Emmanuel in Entertainment,Europe,Sports at 6/21/2014 02:00:00 AM

Shakira killed Gerard Pique and Spain's double fantasy for a World Cup repeat.

[Apologies for this post not concerning IPE all that much, but it is definitely international and affects the reputation of the greatest footballing nation in recent times. Besides, it's the weekend.] Following its 5-1 drubbing at the hands of the Netherlands, Spain lost its second game 2-0 to a hungry and inspired Chilean side. Now, the reasons for Spain's decline have been endlessly rehearsed over the past few days and they all can't be ignored: Barcelona FC's decline mirrors Spain's decline. The Spanish team is now too old. Spanish tactics are by now predictable and the lack of surprise fools nobody. And so on and so forth.

This being the World Cup, though, I have another, more entertainingly plausible hypothesis about Spain's unprecedented two losses in a row at the start of a defending campaign: it's the fault of Colombian megastar Shakira. Sure she sang the catchy 2010 World Cup song, but let's just say that her other sporting involvements have not been as profitable. When Barcelona FC and Spanish national team center back Gerard Pique famously paired with her, it was all downhill for his career as he became fat, dumb and happy--like the Americans he grew increasingly fond of being around:

Pique's problems began in Pep Guardiola's final season at Barcelona. PG and GP enjoyed an excellent relationship initially, but the coach grew frustrated at his player's attitude towards training and conditioning. As the defender's relationship with Shakira grew, so too did his waistline: Pique fell in love with one of the world's most glamorous singers - and fell out of love with the beautiful game.

Guardiola tried everything to get Pique back on board, but was increasingly irked by the player's irresponsibility off the pitch: Gerard and Shakira posted pictures of them white-water rafting - an activity strictly forbidden in the player's contract at Camp Nou. That was in the summer of 2011, and during the winter break, the two shared some snaps of them jet-skiing in Miami. That, too, was supposed to be off-limits.

Barcelona FC famously sicced private investigators on Guardiola's behalf to monitor their wayward center back as he wanted to live the glamorous life:

Pep, although a media-friendly coach, hoped his players would shun the spotlight and was concerned at Pique's priorities - especially as the defender was flouting the rules on his holidays. Gerard also incurred the wrath of his boss by leaving his car parked in a bus lane in central Barcelona with the door open ahead of a crucial Champions League trip to Bayer Leverkusen. On and off the pitch, he was becoming far too distracted.

It has since emerged that Guardiola hired private detectives to spy on the defender in a desperate attempt to learn the full extent of his off-field behaviour and, in that final season under Pep, Pique played just 22 times in La Liga and only five games in the Champions League.

Never the quickest center back in an increasingly high-tempo game, Pique looked totally out of sorts in the Netherlands game and was dropped to the bench for the Chile game. Not that it did much to help Spain's prospects, but it's kind of shameful to be washed up at the age of 27. Without a reliable central defender, Sergio Ramos notwithstanding, Spain's prospects went the way of the dodo.

Yoko Ono is famously known as the woman who allegedly broke up the Beatles, the greatest rock group of them all. In the same manner, Shakira probably cannot escape blame as the woman who destroyed Spanish footballing dominance, incredibly having won the 2008 and 2012 European championships and the 2010 World Cup to boot.

Nowadays, I guess the only thing underneath Pique's clothes is...a big gut.

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From Where Does Silicon Valley Import Its Brains?

♠ Posted by Emmanuel in Innovation,Migration at 6/20/2014 02:00:00 AM

There's an excellent infographic over at Businessweek on where its workforce comes from both inside the United States and outside of it. There are some highly interesting results: First, Mexico more than any other country or state provides the most human capital to Silicon Valley. Second, the Philippines is, after Mexico, the second-largest provider of human capital to the area. However, why is it that you rarely hear of startups from folks from those countries? Odd. By contrast, India ranks only ninth in terms of headcount, but it matters rather more in the overall picture since a third of all startups there are headed by Indian entrepreneurs.

When viewing the infographic, I am reminded of the excellent research of AnnaLee Saxenian on the link between migration and technological innovation. Her pioneering work in this area remains Silicon Valley's New Immigrant Entrepreneurs that established the case that anti-immigrant xenophobia ultimately harms the United States' future economic prospects. #7 China and #50 Taiwan are also important in the sense that many Chinese who gain experience working in Silicon Valley often apply their skills once they return. Together with the Indians, they form the backbone of another study of hers on transnational communities and the evolution of global production networks.

Good stuff.

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How the World Cup Showcases Brazilian Inequality

♠ Posted by Emmanuel in Development,Latin America,Sports at 6/19/2014 02:00:00 AM

Just as you don't see fat or old people in Ricky Martin videos, something's missing here.

Brazil has long been the unwilling keeper of an image of radically high inequality, with fabulous wealth sitting alongside wretched squalor in any number of its cities. So many years after the black football player Pele won the hearts of the world with his magnificent displays, I am afraid that not all that much has changed. To be sure, the conditional cash transfer program Bolsa Familia which gives poor households grants upon meeting health and education criteria for their children has helped. That said, inequality remains radically high there, with Gini coefficients measuring inequality well above the 50 mark.

Earlier on, protests about the social wastefulness of hosting the World Cup were bolstered by a provocative image taken during the Confederations Cup also held in Brazil in which [rich, white] matchgoing fans threw garbage into a dumpster inhabited by a [poor, black] woman. Unfortunately, the supposedly progressive Brazilian leadership of Dilma Rousseff--formerly a Marxist guerrilla fighter--appears to be tone deaf to the sensitivities about race and inequality the sport raises. Alike the United States where [rich, white] basketball and football fans pay top dollar to watch sporting events dominated by black athletes, the symbolism is not lost:

Inside the stadium, crowds have been what you might expect at these large scale sporting beanos: basically a collection of rich people. This World Cup, like much of the London Olympics, is out of reach of those who cannot pay a premium for tickets. Welcome to the world. This was always going to be the case from the moment it became clear only 400,000 of 3.3m tickets would be made available to ordinary Brazilians, with most at prices beyond the reach of the average salary. There have been comments about the lack of non-white faces in the stadiums. This is not football-specific racism so much as a reflection of wider inequities. Brazil’s middle class is predominantly and historically white. These are not so much white people as rich people.

The Guardian's Barney Ronay reads this one correctly: having ultimately funded the mega-stadiums hosting these events, the ordinary folks certainly had a right to normally priced tickets. In this day and age of media supersaturation, it simply does not look good when this supposed "melting pot" has stadiums filled with a sea of white faces. It hardly reflects the multiracial composition of the football team:

While football cannot be blamed for Brazil’s entrenched social issues, Fifa can and should be blamed for not insisting a huge tranche of tickets go on sale to Brazilians at fixed, affordable prices. And not simply over the internet, to which not all have access, but through local team memberships and stadium connections. Everyday Brazilians are often hugely passionate about club football. They should be sitting in those publicly funded seats at Brazil’s World Cup.

The attendance shocker of the World Cup so far was the group stage rematch of the last event's finalists Spain and the Netherlands featuring 3,500 seats. I'll put the no-shows down to corporate-sponsored seats. Again, what harm would it have done to sell those to average Brazilians who'd have been more than happy to attend?

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Happy 50th Birthday G-77! (Well, Sort Of)

♠ Posted by Emmanuel in Development,United Nations at 6/18/2014 02:00:00 AM

We kicked out S Korea after it joined the OECD rich country club, but its UN chief attended anyway.

 Most of you are probably thinking, those guys are still around? The G-77 was forged during a time when developing countries began to recognize their shared interests and desired to make them better known at international organizations. Even now, it remains the premier grouping among developing countries at the UN General Assembly even if it receives minimal press attention. To commemorate its fiftieth birthday, the G-77 recently held an event in Bolivia. Being perfectly honest, the G-77 has often degenerated into a mouthpiece for anti-Americanism, which is obviously not developmental in itself. Nor has it been a significant forum in developing a common platform for the Global South.

Still, the latest event proved noteworthy in a few respects. First, UN Secretary-General Ban Ki-Moon (is it just me or does he sound like a Sanrio character?) attended our shindig:

Mr Ban Ki Moon in his opening speech said the G77 and China had given the South a global voice, and the Group provides an immense contribution to the UN. He told President Morales that he appreciated his vision of Living Well, as development based on living well is humanity living in harmony with Nature and with each other. The Secretary General said the SDGs [sustainable development goals] require Global Partnership and the G77 has a key role to ensure its effectiveness. The Group should press for a fair trade regime, technology transfer and so on. The G77 and China plays a key role in the UN to formulate a post 2015 Development Agenda.

Aside from the Bolivian president, Argentina's Cristina Fernandez, also took to the mic together with other stalwarts of the Latin left:

With regard to the economic order, [she] said a crisis currently persists and affects many countries of the world, “my country had been affected before, this is happening is not capitalism, it is a complete and utter distortion, qualify as anarcho-capitalism.”

[S]he finished by thanking all present [for their] intervention and President Evo Morales, for the invitation “if we do not we should remove in time” [then] good “because we have to call to reach a new world order to continue living.” Prior to the president [of] Argentina, the presidents of Venezuela, Nicolás Maduro; Cuba, Raul Castro and Uruguay, José “Pepe” Mujica, urged the G77 to move toward a new world order more just and equitable.

Speaking of the Uruguayan leader, he also went all ecological on us:

Uruguay's austere president is urging world leaders to fight a "culture of waste" in which poor nations try to emulate richer countries rather than live in balance with the environment.Speaking in Bolivia on Sunday to a summit of the Group of 77 and China, Jose Mujica calls the growth in consumerism "a trap" that will produce material gain at the cost of human development. Mujica is a former guerrilla leader and he has won attention for his no-frills lifestyle as Uruguay's president, including driving an old Volkswagen Beetle and living on a simple flower farm.

This being the G=77...and China, Vietnam took the opportunity to use this venue to decry Chinese imperialism via the PRC's expansive territorial claims in the South China Sea:

China rebutted Sunday night accusations made by Vietnam over the South China Sea, urging the Vietnamese side to immediately stop all the disruptive and destructive acts against China's legal operations in the sea. At the conclusion of the Group of 77 (G77) plus China summit in Bolivia, Le Hoai Trung, Vietnam's permanent representative to the United Nations, claimed that China operated a drilling rig "in the exclusive economic zone of Vietnam" and sent warships to drive away Vietnamese vessels, which "infringed Vietnam's sovereignty and territorial integrity."

While I certainly sympathize with the G-77--unlike South Korea we are the poor countries who stayed poor--I despair at the actual political clout we have. Reform at the IMF and World Bank remains stalled. The UN Security Council's permanent members are still the victors of WWII. We again issued a call for a new world order, but that's been the refrain for, oh, forty years now. So much has happened, but nothing's really changed I fear as the G-77 has become yet another "talk shop" with a slightly different cast of characters dominated by Latin blowhards and the like.

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Iraq's a Goner, But Kurdistan Isn't

♠ Posted by Emmanuel in Middle East,Security at 6/17/2014 01:00:00 AM

It's another fine mess we can lay on the West's doorstep: Mosul residents seek refuge in Kurdistan.

Wolfowitz of Arabia, Kimmitt the Fallujah Frog...remember those Bushites? The impending collapse of the state of Iraq--a patchwork quilt whose borders were arbitrarily drawn by scheming Westerners--has given me flashbacks of the second Gulf War I'd rather forget. For historical background, let us first recall how Iraq came about. When WWI ended, the Ottoman Empire which had encompassed Iraq was dismembered. To fulfill British wishes and grant them international legitimacy, the UK "transferred" decision-making on modern-day Iraq's fate to the short-lived League of Nations:

In the aftermath of WWI, the League of Nations (a forerunner to the United Nations) was established. One of its jobs was to divide up the conquered Ottoman lands. It drew up “mandates” for the Arab world. Each mandate was supposed to be ruled by the British or French “until such time as they are able to stand alone.” The League was the one to draw up the borders we see on modern political maps of the Middle East. The borders were drawn without regard for the wishes of the people living there, or along ethnic, geographic, or religious boundaries – they were truly arbitrary. It is important to note that even today, political borders in the Middle East do not indicate different groups of people. The differences between Iraqis, Syrians, Jordanians, etc. were entirely created by the European colonizers as a method of dividing the Arabs against each other.

Few deny that Iraq's problems stem from the impossibility of simultaneous self-determination for three ethnicities: Sunni, Shia and Kurds. Especially when energy revenues flow to the central government, it is hard to divvy up the proceeds in a manner deemed fair by all three ethnicities. Today's conflicts are motivated by sectarian violence. The Sunnis who were in power under Saddam Hussein resent the Shias newfound domination and have rebelled. Even it means supporting deranged jihadists, they are at least Sunni deranged Jihadists who seem to be capable of taking the fight to cowardly American-trained Shia "security" forces who certainly don't see the point in defending the non-entity which is Iraq.

To be blunt, Western powers have been complicit in looking the other way as the Kurds have been marginalized, first under Saddam Hussein who famously used poison gas against them to quell an uprising after the first Gulf War and then under Shia-led rule as they've been frozen out of Iraq's commanding heights. This situation may not last for long though as the Kurds have taken over state security in their lands as Shia-trained forces predictably abandoned them to their own devices. With cities falling left and right to the militants, Kurdistan has become a safe haven--although not everyone is allowed in:

An estimated half a million people from Iraq’s second largest city Mosul have fled since militants from the Islamic State and the Levant took control earlier this week. There have been chaotic scenes at border crossings entering nearby Irbil Province in the autonomous region of Kurdistan. “The situation is hopeless in Mosul,” said Waad Ali. “They burned down a police station so I’m doing my best to save my family and protect my children.”

Only those with families or invitations from Kurds are being allowed in. For those who aren’t permitted entry to the region the United Nations Refugee Agency in cooperation with the Kurdish government have provided a temporary alternative for the fleeing Iraqis.

Hence the immaculate case for Kurdistan. The only group among the three that has been shown capable of governing are the Kurds. Saddam Hussein and the current Shia leaders show all you need to know about the others' public administration chops. What will likely follow is a protracted conflict in other parts of Iraq as it descends into civil war. The United States and other Western powers have tired by now of sending troops to pacify the area. America will mount airstrikes, but it is difficult to see how these can shore up the Shia leadership in Baghdad without boots on the ground. Rather than condemn the entire Iraq to endless conflict, there is a bastion which can hold out: Kurdistan. It will become the "buffer zone" in a failed state:

The answer, I think, has to do with governance. Kurdish fighters feel that their regional government represents them and are willing to fight for it and their land. In contrast, Shiite Iraqi Army recruits do not know Sunni areas like Mosul and do not want to be there, much less die there. Sunni soldiers, meanwhile, do not feel that the government they serve is theirs. They have seen their communities shut out by Maliki and his disconnected politicians in Baghdad. The Sunni Arabs faced serious persecution in the last couple of years, seeing their peaceful protests violently put down by Maliki and their elected leaders sidelined and hunted down one by one.


Allowing constitutionally-envisioned decentralization of power and the formation of other regions could have stopped this and put locals in charge of their own security and finances. This never happened except for in Iraqi Kurdistan, and even there local governance has come under threat by Maliki’s pressure (although Washington could not care less, of course). In the rest of Iraq, promised money and governing authority from Baghdad hardly filters down to the regions, and security forces take all their orders from far-away politicians of the central government.

David Romano continues by envisioning what will happen to Kurdistan. As the rest of the country dissolves into chaos, the Kurds will be in an excellent position to extract concessions from the West:

The real threat in Iraq was never Kurdish secession, but rather renewed authoritarianism in Baghdad and the resistance this would spark in excluded communities. Instead of being so overbearingly “respectful of Iraq’s territorial unity,” the Americans should have been a bit more concerned with Iraq’s constitutional integrity and the decentralization it promised.


In the meantime, the Kurdistan Regional Government will continue to secure its region and help refugees from Mosul and other places. If the Kurds are wise, they will also refuse to lift a finger for the Americans and Baghdad unless their demands are met. These demands will probably relate to ending the budget embargo on the Kurdish region, financial aid to care for the refugees, payments and weapons for peshmerga forces, recognition of Kurdistan’s hydrocarbons rights and a new government without Mr. Maliki. While the Americans and Baghdad mull over these demands, they might also consider promises regarding disputed territories they both made to the Kurds some ten years ago – before the Kurds use current events to take matters into their own hands.

Iraq as we know it is lost, and you risk incredulity to suggest only Americans can "save" it having set it on its current path. There are good reasons why they didn't try to put Humpty-Dumpty together again that apply here. For geopolitical reasons, especially longstanding Western ally and NATO member Turkey being strongly opposed to Kurdistan statehood since its own Kurdish population may also seek to join the new state, I do not think they will declare themselves to be one de jure. However, with all other vestiges of Iraqi government wiped out or dysfunctional, there will be no one else to talk to who can credibly claim to be "in charge" of their territory. The Turks understand this and now see Kurdistan as a buffer zone keeping them from bordering the militants. The Westerners will deal with the Kurds too since there will be no one else to talk to. De facto they will be the only remaining authority of consequence in (the former) Iraq.

After being trampled on for so long, Kurdistan's time will soon arrive.

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Italy, Migration & the "Balotelli Generation"

♠ Posted by Emmanuel in Europe,Migration,Sports at 6/16/2014 12:30:00 AM

Mario Balotelli: Not just a footballer but a poster boy for an entire generation.

I cheered England on as it inevitably lost to Italy 1-2 (being a true romantic, I am drawn to lost causes). I was nonetheless intrigued by the contributions of Mario Balotelli, the first black player to make the storied Italian national team, who again scored the game winner for the Azzurri. There is no doubting that "Super Mario" has a few screws loose in his head. However, his odd behavior usually arises when playing club football, hence his bouncing around club after club after club. When playing for Italy, however, he has been remarkably level-headed (credit the manager too). Don't ask me to explain how given the racial abuse he's received there. Almost singlehandedly defeating much-fancied Germany in Euro 2012 en route to the finals to make his mum happy, he has the talent to carry the national team.

Nevertheless, his flamboyant lifestyle and frequent outbursts on and off the pitch have made him a global celebrity. It is in the context of Italy's debate over migration that he has become a lightning rod for controversy. His apologists blame his excesses on having to deal with racism in Italy on a daily basis, while his detractors use him to scare whites into thinking how uncontrolled migration would be like with hundreds of thousands of nutcases calling themselves Italian. Hence his emergence as a polarizing figure emblematic of migration debates in Italy, which the press has dubbed the "Balotelli Generation":

That may be, in part, because Balotelli started to play football at the moment when Italy, buoyed by the false boom of the euro zone's party years and needing young workers to fill the deficit left by its rapidly aging population, became a magnet for economic migrants. In a photograph of Balotelli's grade-school football team, his is the only black face. It was an experience he repeated when he joined the Italian national under-21 team in 2008. His inclusion in the side reflected wider social change. Italy has become more diverse, and it has done so more rapidly than many other European countries. In 1990, the year of Balotelli's birth, just 1 Italian resident in 100 held a foreign passport. Today, that number is 1 in 12. Many of those migrants are black; many hold menial jobs. But a black middle class is also emerging as the children of migrants, born and raised in Italy and sometimes referred to as the "Balotelli generation," enter the workforce. Balotelli, the most prominent black Italian, has become a symbol of his country's uneasy transition. 

I am reminded of black pioneers in American professional leagues subject to similarly ugly racist taunts like Jackie Robinson in baseball. The difference is that quite a few of them debuted together, while Balotelli remains the sole black player on the Italian national team. He bears the brunt of it all. Speaking of America, his acquired fame allowed him to be on the cover of Sports Illustrated in a country that has next to no interest in world soccer:

This week Balotelli became just the second non-U.S. pro soccer player to appear on the cover of Sports Illustrated magazine since 1994. (David Beckham was the first, in 2007.) It's an arresting cover image by photographer Jeffrey A. Salter -- Balotelli, balanced on a plexiglass platform, appears to be walking on water—and probably one of my favorite 20 SI covers of all time.

Why is Balotelli on the cover? Well, in each of the past two years I've asked my Twitter followers: If you could pick one figure from the world of soccer to read about in a magazine profile, who would it be? On both occasions, Balotelli won in a landslide. The reasons are clear: Balotelli, 23, has shown extraordinary goal-scoring potential on the soccer field, and he has many sides off it: a symbol of the New Europe; a creator of madcap hijinks; an emerging leader in soccer's fight against racism. 

Black players have encountered racism to varying extents in other European national teams as they began to play in soccer leagues, but it has toned down somewhat as familiarity has set in. (Spain is a notable exception, while some French right-wing extremists now deny its 1998 World Cup victory happened since many of the players were colored people, not "real" French.) What separates Balotelli is that Italy's national team did not feature black players until Mario came along when most of the rest already have:

"You can't overblow that significance," says John Foot, professor of modern Italian history at Bristol University, who has written a history of Italian football. "Even when they're talking about reforming the citizenship laws in Italy, they call it the Balotelli law.

"He's not just a footballer there, he's much, much more than that. He's a massive symbol. He represents the future, which, actually, is already the present. There's a whole series of second generation black players coming through in Italy and that critical mass will make the difference; it will mean Balotelli is not the only trailblazer any more.

"Being the one black born-and-bred Italian is an enormous pressure to deal with." Yet the pressure has only increased on Balotelli since Euro 2012 when his goals, which took the Azzurri to the final, assumed what Foot calls "immense symbolic power, a sign that black Italians were here to stay, something which a strong minority of Italians have found very difficult to accept".

The choices facing European countries in demographic terms are similar to those facing Japan: It is hard to imagine economic growth in the face of depopulation given the latter's inherent tendencies towards deflation and economic stagnation. Nobody selected him to do so, but Mario is fighting the case for migrants in Italy against considerable racism. However, the question lingers: would migration be less of an issue if its most visible image in Italy was more like Jackie Robinson, a man of quiet dignity? With "Super Mario" riding high once more, I guess we'll never know. 

UPDATE: Mario Balotelli is a tad self-absorbed.

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World Cup: Spain Loses 5-1, 'Socialist Football' Ends?

♠ Posted by Emmanuel in Socialism,Sports at 6/14/2014 02:45:00 PM

Spain's old guard looked, well, old.

The rematch of the World Cup 2010 finalists Spain and the Netherlands was highly anticipated since they were paired in the group stages this year. Spain was thought to be in the ascendant, having two of its teams contest the Champions League final and another win the Europa League. The Dutch fans stayed home in droves as they didn't expect much from their aging attackers and young defenders. It was thus a shock to most that the defending champions were throttled 5-1 by the Dutch, who could hardly believe their luck. It was really ugly for Spain fans. As the world looked on stunned, Spain, winners of the last World Cup and the last two European championships, are wondering just what happened.

One of the points requiring reassessment is possession-based football popularized by Spain's most dominant team of the past few years, Barcelona, and adopted by the national team coach Vincent de Bosque. Despite Barcelona being an exceedingly rich football club--the second most valuable after Real Madrid, there is a political philosophy of unselfishness that traces its roots oddly enough to the Netherlands' "total football:"

It took the basic tenets of total football to previously unimagined extremes – in part because of an exceptional generation of players many of whom had been schooled in a particularly idiosyncratic style at La Masia [FC Barcelona's youth academy], in part because of a visionary coach in Guardiola, and in part because of the changes in the offside law that increased the size of the effective playing area and so permitted smaller, more technical players to flourish.

When totaalvoetbal emerged as a term in the Netherlands in the early 70s, the totaal aspect of it was part of a wider movement in Dutch culture, particularly architecture. JB Bakema, one of the theory's prime exponents, argued that all buildings should have individual characteristics but should be designed with their place in the overall environment in mind. The application of the term to football made sense in terms of Bakema – the whole point of it was that players were aware of their positions within the system and were constantly renegotiating it for themselves; but there was also, at least outside of the Netherlands, a more popular resonance. This was total football because everybody, it seems, could do everything: defenders could attack and attackers could defend.

Some football commentators describe it as sporting socialism, with the aging superstar Xavi Hernandez as its guru:

And if tiki-taka [shorthand for passing and possession-based football] is Marxist, then Xavi is its Trotsky. He is tiki-taka's idealistic radical. He simply can't conceive of why any team wouldn't play possession-based football. But like Trotsky, he is being exiled. Whether he starts or not is one of the major issues in Spain at the moment. His level has dropped significantly in the past two years, as he is no longer able to provide the obsessive defensive pressure that he used to.

The opposite, of course, is the Jose Mourinho brand some have dubbed "anti-football" perversely designed to give the other team possession. Being in possession according to Mourinho makes it more likely they will make mistakes you can capitalize on. Oddly enough, these extremes of total possession and giving the opponent most of it are unliked by fans:

That's a natural part of evolution. A thesis (radical possession) arises, an antithesis (radical non-possession) arises to combat it and at some point a synthesis is achieved that will govern the consensus of how the vast majority of clubs will play for the next few years. That the two extremes are so seemingly unpopular is revealing, less in the preference it suggests on the part of the majority of fans for football with a more traditional narrative of cut and thrust, than in the depth of the hostility.

The funny thing is that the current Spanish team has the players it needs to overhaul the aging Barcelona backbone of the national squad. Atletico Madrid's forward Diego Costa featured but did not really play as well as he could in a tiki-taka-esque style alien to him. There were also the midfielder Koke--anointed by no less than Xavi as his successor--and right back Juanfran on the bench from Atletico Madrid, a team on a shoestring budget that unexpectedly beat the world's two richest clubs to the Spanish championship and came within three minutes of besting Real Madrid in the Champions League final.

Bottom line: teamwork still wins games, but tenacious team defending Atletico Madrid style instead of superfluous team passing Barcelona style is probably the way forward for Spain. It's too bad del Bosque chooses to dwell in past glories with his team selections since football has moved on and its golden generation is not young anymore. It is fitting that Holland, the home of total football that gave rise to tiki-taka, brings the message to Spain so graphically that there are different ways of playing the game. Evolve or die, and Spain looks to be doing more of the latter given its coach's druthers.

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Philippine Call Center Ascendancy & 'Accent Neutralization'

♠ Posted by Emmanuel in Outsourcing,Southeast Asia at 6/13/2014 02:00:00 AM

"Shuur, no prob...yeh, got that rite!"

Oy, I was reluctant to say this myself for fear of bias, so it's good to relate the same idea through another source. In the past I've posted about how the Philippines has surpassed India in terms of both call center employees and revenues even if India still retains an advantage in higher value-added business process outsourcing services. Working in a call center isn't exactly considered a glamor job by any stretch of the imagination: You have to work the night shift and field complaints from ornery Americans who can't distinguish a phone socket from a Ethernet socket. That said, starting salaries can be quite high, and pay-for-performance packages quite lucrative.

What is the Philippines' secret of success? Simply put, they can easily pretend to be American over the phone--something which Indians cannot supposedly do as readily. Yesterday being Philippine Independence Day celebrated all over the Internet, it bears remembering that the Yanquis colonized the Philippines in 1898 and stayed there after supposedly "liberating" it during the Spanish-American War, delaying its sovereignty for half a century. It wasn't such a good thing to do for a nation priding itself on not following European imperialism, but hey, it did wonders for preparing Filipino call center workers a century later. Indeed, Filipinos have managed to not only imbibe American pop culture but to be among its architects. Despite making America-bashing a blog pastime, even your humble blogger knows what a "flea flicker pass" is as well as a "4-6-3 double play." Gotta relate to the throngs of US-based readers, see.

Even in the impersonal world of call centers, familiarity with the customer goes a long, long way. Though it's an exceedingly politically incorrect term from a cultural studies perspective, "accent neutralization"--sounding like someone from the United States' Midwest obviously ignores diversity and downplays the fact that English came from, well, England--is now recognized as an advantage:

It’s no secret that Indian call centers have an accent problem. That problem is now proving to be incredibly costly. Accents, according to one of the nation’s top trade associations, are largely to blame for India losing 70 percent of its call center industry to the Philippines. Call centers shifting from India to the Philippines will be responsible for $30 billion in lost foreign exchange earnings this decade.

The head of India’s Associated Chambers of Commerce offers a blunt assessment of his nation’s accent-related woes. “Employees in Philippines call centers speak English fluently with a neutral accent, which is what customers look for and that is something missing in Indian accents,” said D.S. Rawat, the group’s general secretary. “That is a prime reason why [call center] business is thriving in that country.”

Most of the time, Americans don't even know they're speaking to someone from the Philippines:

Americans on the line with one of the Philippines’ rapidly expanding call centers may have no idea they’re connected to a tropical archipelago in Southeast Asia. To the American ear, Filipino speech can sound similar to the Latino accent, a linguistic legacy of three centuries of Spanish rule in the Philippines. “Accent is a big part of the story,” said Gillian Virata, senior executive director of the IT and Business Process Association of the Philippines, or IBPAP. “We have a ‘neutral’ accent and we don’t speak fast. Some Indians do because their dialect affects the way they speak English.”

Aside from speaking like Americans, making small talk goes a surprisingly long way towards relating to Americans and their idioms. This skill can be traced again to the colonial era and the proliferation of US culture:

The English language proliferated in the Philippines after the US triumphed in the Spanish-American war in 1898 and took the island nation as its spoils. The next five decades of US occupation were characterized by gruesome subjugation but also the rise of a public education system emphasizing English. The outcome: American cultural fingerprints are still easy to see in the modern Philippines. The nation adores basketball and cheeseburgers. Unlike in India, where a call center agent named Vikram may transform into “Victor” when he comes to work, a Filipino is more likely to have a Christianized name familiar to Americans (such as Mark or Maria) in real life.

Many Filipinos are already primed on American pop culture. But call centers try to fill in the gaps. “When I’ve visited call centers, they might have the TV turned to the Rose Bowl,” Virata said. “We’re not very familiar with American football and they need to know what’s exciting the people they’re speaking with.”

Personally, I don't care where the person I'm speaking to comes from as long as the query I have is addressed, hence my reluctance to write this post. That said, racist-protectionist Americans are waking up to the new threat. Whereas India used to be the bogeyman for them, the Philippines is rapidly becoming the new one, especially since most can't tell Filipino call center respondents from American ones. There is the unwarranted assumption that call center workers from abroad are out to defraud Americans in bills proposed regarding "consumer protection."

Just to show you how the "threat" has changed, consider the AFL-CIO's latest salvo in getting such a bill passed as they now fear Philippine, not Indian call centers:

Disclose Call Center Location to U.S. Consumers: It would require the relocated overseas call center agent to disclose their name and physical location of their operation. For example, a customer may hear, "Hello, this is Jane in Manila."

I guess you must be doing something right when racist-protectionists without anything better to do than rent-seek start ganging up on you.

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