Apple vs India's 30% Local Content Requirement

♠ Posted by Emmanuel in , at 5/29/2016 05:09:00 PM
Apple and India don't mix--or rather Apple and protectionist retail policies.
India remains one of the last few large economies worldwide that remain avowedly protectionist in the retail sector. Even in the modern era, lawmakers have sought to appease mom-and-pop operators from the rigors of market competition. It's a small-time mentality that the government upholds with bureaucratic ferocity. "Multibrand" retailers, or large foreign retailers in particular carrying a wide range of branded products, have been subject to restrictions on entry, foreign ownership and local content requirements. Witness the earlier travails of Walmart. As a result, retail inefficiencies result in smaller selection and higher prices. not a good combination.

Now, the retail battle against all sorts of foreign devils has moved on, pitching the world's second-largest corporation against the world's second-most-populous country. With nearly nothing it currently sells being made in India--China yes, India no since it doesn't specialize in electronics assembly and manufacture--Apple is hard-pressed to meet the 30% local content requirement there:
US company's proposal to set up Apple Stores under the singlebrand policy has been approved without any relaxation in the sourcing conditions, two officials privy to the development said. Apple can set up single-brand retail stores in India but it will have to meet the 30% local content sourcing requirement, they said. "Apple's proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here," a senior government official said.

Apple had applied for the relaxation under new foreign direct investment rules for companies bringing cuttingedge technology to India. The policy allows the sourcing condition to be waived for cutting-edge technology, a term that hasn't been clearly spelt out. The government has set up a panel to clear proposals seeking relaxation of this norm...

According to revised norms announced by the Department of Industrial Policy & Promotion in November 2015, companies that bring cutting-edge and state-of-the-art technology to India can open singlebrand outlets without meeting the local sourcing norm, subject to government approval.
In some respects India has moved forward; in retail it remains decidedly stone age--and that's not good news for modernizers like Apple.

Oklahoma Thunder, the Team Fracking Built

♠ Posted by Emmanuel in , at 5/25/2016 05:39:00 PM
It is with some sadness that Aubrey McClendon--the man who brought the Oklahoma Thunder to Oklahoma City--formerly the NBA title-winning Seattle SuperSonics--passed away under still-unexplained circumstances in March. At that time, of course, oil prices were still rather depressed, and he was also facing a federal antitrust indictment besides. Still, McClendon was instrumental to bringing the Thunder who appear NBA Finals-bound once more to Oklahoma, and of course funding the buildup of a very strong team. Even know, it remains the team fracking built:
McClendon is credited and sometimes cursed for championing the drilling technique known as hydraulic fracturing, or fracking. The technology led to a boom in U.S. oil and natural gas production from porous rock formations, known as shale, that had been hard to tap. And fracking made him a billionaire. By 2005, Chesapeake was the second-largest U.S. natural gas producer, after Exxon Mobil.McClendon had a deep impact on Oklahoma City in the years he ran Chesapeake...
He created tens of thousands of jobs and showered tens of millions of Chesapeake’s and his own dollars on the community. He helped bring the NBA’s Oklahoma City Thunder and an Olympic-class rowing venue to town. He secured the city’s first Whole Foods Market, brought upscale shopping and dining to the Chesapeake neighborhood and contributed to many charities, from local elementary schools to Boy & Girls Clubs. 
In fact, his death came almost immediately after attending the game wherein Stephen Curry sank THAT 3-pointer from nearly half-court:
Good news, though, was scarce for McClendon everywhere he went, even an outing on Saturday night to watch a Thunder game, the basketball team he partially owned and helped bring to Oklahoma City from Seattle. Wearing a blue-shirt, sleeves rolled-up, he took his usual front-row seat on the baseline near the Thunder bench.

What looked to be a brief respite from his business woes turned into a heart-breaker. McClendon could only stand with his hands at his sides as Golden State Warriors’ star Steph Curry sank a last-second three-pointer to hand the Thunder an overtime loss. McClendon left the same way he always did, walking through the private back corridor of Chesapeake Arena.
I suppose McClendon could have been affected by his team's disheartening loss on top of the indictment and the pressure in oil prices which affected his mental state. Still, the name of the Thunder's home venue remains the Chesapeake Energy Arena, and with the current push of oil prices to test the $50/bbl level, it seems oil money never went away in funding the team's success.

Without fracking, there would likely have been no Oklahoma Thunder.

6/2 UPDATE: OK, so the Thunder ultimately didn't advance to the 2016 NBA Finals, but there is no mistaking the transformation wrought by the Thunder on its own city as the fracking boom was underway:
“But it’s not just that,” Durant continues. “I drive through downtown, through midtown, through the Asian district and see so many different businesses, so many different people. It’s a big, diverse city that’s grown with the team.” The impact of sports franchises on urban renewal is often overstated, but in Oklahoma City it’s obvious. “The Thunder has given us a worldwide brand we’ve never had before,” says the mayor, Mick Cornett, citing the area’s strong corporate recruitment and staggering influx of millennials. “The exposure has been immeasurable. You tell somebody in another country you’re from Oklahoma City, and they say, ‘Kevin Durant.’”

Bye-Bye Berlusconi? Chinese Interest in AC Milan

♠ Posted by Emmanuel in ,, at 5/22/2016 01:37:00 PM
AC Milan in its mid-1990s heyday. It's very far from there now.
Italian club AC Milan is, in a way, emblematic of wider fortunes of its home nation. For such a long time a giant of European and hence world football, it has since fallen on hard times. I recall visiting Italy in 1994 and seeing joyful celebrations as it won not only the Serie A title but also the European Cup (today's Champions League). Its owner was of course the media magnate Silvio Berlusconi, still unaffected by the later scandals that would tarnish his image and very much the industrialist of the age. How it was back in the day!

Nowadays, things are rather different. Berlusconi has made him a laughingstock in bunga-bunga land. AC Milan struggles to compete in the second-tier continental competition, the Europa League, let alone the Champions League which it used to be a dominant participant of. The weekend's loss in the Coppa Italia to Juventus, which has won the Italian league for five straight years now, means the seventh-placed AC Milan will not qualify for the Europa League. It will be three years that they have not qualified for European competition. Prior to the game, Berlusconi even threatened not to pay his players' wages if they lost:
We cannot afford to carry on making fools of ourselves. These people here [turning to point at the camera] are the ones who give us a living because they give us money as sponsors.

They have just told me now that if you keep playing the way you are, they aren't going to give us any more money. So I won't pay you. In fact, if you want your money you would have to take me to court for it, and do you know how long it takes for a civil action case to be heard in Italy? Eight years.
While I trust former Prime Minister Berlusconi on the parlous state of Italy's judicial system--not that it reflects well on him--he remains a businessperson at heart no matter what else he has become. With an asset rapidly losing its luster, a lack of money probably accounts for their inability to build a new stadium, it's perhaps time to cut losses and move on. As it so happens, the Chinese are looking into buying this still-storied name:
Former Italian prime minister Silvio Berlusconi's family company is likely to open exclusive talks next week with a group of Chinese investors interested in buying AC Milan soccer club, one of his most cherished assets, a source said on Saturday. The tycoon is under pressure to finally relax his grip on the club he calls "my Milan", which has failed to win any major silverware in the past five years and is now in the red.

However, the club remains one of the most famous names in world soccer, having being crowned champions of Europe seven times and winning 18 Italian titles. "It's very likely that an agreement will be reached next week that will lead to a deal in the next month," a source familiar with the situation said on Saturday. The agreement would be between the consortium, and Berlusconi's family holding company, Fininvest. The makeup of the Chinese group is not clear.
The club still commands a fair sum...for now:
The consortium has valued the club at 700 million euros ($798 million), including debt, another source said last week. The club had 188.5 million euros in debt at end-2015 and made a net loss of 89.3 million euros. A deal to sell all of AC Milan is still far from certain. Berlusconi, 79, has proven very reluctant to relinquish control of the club, though he has said he cannot give it the kind of additional capital that wealthy Arab and Asian investors have been pumping into AC Milan's European rivals. 
Shadowy unnamed Chinese, an Italian mogul admitting he cannot generate Middle Eastern or Asian levels of footballing's a sign of the times as the world turns. Fascinating globalization-themed stuff, no?

High-Speed Rail: Venezuela's "Red Elephant" Project

♠ Posted by Emmanuel in ,, at 5/20/2016 08:19:00 PM
Paraphrasing Enya: Rail away, rail away, rail away.
They say that you may lend a country so much that you eventually end up owning it if it cannot pay, and this belief has interesting implications for modern-day Venezuela. It is estimated--no one knows for certain what the true amount is--that China has lent the Chavista-era socialist government $50B [!] in cash-for-oil deals. It supposedly signed up to yet another such deal recently, possibly staving of Venezuela's inevitable default under current leadership.

That said, the Chinese are not totally suckers in every respect. Sure, they may eventually "own" Venezuela with among the world's largest oil reserves--handy for when oil prices rise again in the future. But, for a "red elephant" project--a high-speed rail link in the country's even less-developed interior--the Chinese have already stopped work. Instead of being a "white elephant" project--a government vanity project which gobbles up public funding for not much public benefit, if at all--what we have here is a "red elephant" project: a communistic endeavor which ends up being of use to precisely no one:
As with many unfinished politically motivated projects dotting Venezuela — government critics call them "red elephants" — the decaying infrastructure contrasts with the railway's promising beginnings. A decade ago then-President Hugo Chavez dreamed up the Tinaco-Anaco railway as a way to populate the plains and attract development from long-dominant coastal areas.

Stretching 300 miles (468-kilometers), it was intended to move 5 million passengers and 9.8 million metric tons of cargo a year at speeds up to 135 miles (220 kilometers) per hour. Chavez turned to China, one of his closest ideological allies, for engineering and financing for the project, part of a $7.5 billion deal that has made Venezuela the world's top recipient of Chinese loans. A consortium of state-run companies led by China Railway Group Ltd, the world's largest train maker, was tasked with carrying out construction. 
At this rate, it's likely that nothing will become of it, to no one's real surprise:
But completion is four years overdue, and work, when it happens at all, has slowed to a crawl. At one barracks facility visited by The Associated Press, half a dozen workers huddled under the shade of a giant cement mixer, while two shirtless managers lounged at a control panel smoking cigarettes. Nowhere are the project's declining fortunes more visible than in Zaraza, a sweltering crossroads town of 75,000 where what used to be an arena-sized factory churning out concrete railroad ties was located.

In government news reels from 2013, the complex can be seen towering over manicured lawns and outdoor basketball courts where Chinese and Venezuelan workers socialized. Shortly after the last Chinese managers left in January 2015, a mob of local residents — some of them armed — ransacked the site and hauled away everything of value. First to go were power generators, computers and air conditioners on the back of pick-up trucks. Vandals then tore apart dozens of buildings to scavenge for metal siding, copper wiring and ceramic tiles, some of which are now on sale at roadside stalls. 
While the Chinese are not exactly shy about spreading state largesse to win friends and influence people, what could have led them to believe this project could ever amount to anything but a total waste of time and money?

Ah well, maybe it helped secure their chance to "own" Venezuela in the near future. In which case, it was just a rather costly bribe of sorts.

The End: Thailand Dumps Yingluck-Era Rice Hoard

♠ Posted by Emmanuel in , at 5/15/2016 06:49:00 PM
Getting rid of Thailand's massive Yingluck-era rice stockpiles.
Although political polarization has been a constant feature of Thai politics, the Shinawatra clan--big brother Thaksin and little sister Yingluck--have used above-market government purchases of rice as a way to gain support from rural voters. Unsurprisingly, spending public monies on a surefire money loser--nobody is expecting rice prices to rise anytime soon as other major rice-exporting countries like Vietnam and India ramped up production--has been a rallying cry for the royalists opposed to Shinawatra rule. Agricultural populism has its costs, they say.

So here we find ourselves a couple of years after the military junta overthrew Yingluck. Instead of letting the government's Yingluck-era hoard spoil, they are now going to unleash more of it much faster on an already-saturated market. This forthcoming action is causing concern in Vietnam:
Thailand's plan to accelerate sales of 11.4 million tonnes of rice in stockpiles within two months sparked concerns that it would hurt prices as well as Viet Nam's rice exports. However, some people were optimistic that the impact would not be significant. Thailand planned to sell the amount of rice in a government stockpile in May and June to generate US$2.8 billion, at an average price of US$245 per tonne, in what could be the biggest rice sale clearance ever of the world’s second largest rice exporter after India.
Actually, the expected fallout from Thailand's impending sale are not expected to be all that great on the world rice market. For one thing, most rice contracts have already been secured well in advance:
According to Le Van Banh, director of the Department of Agro-Fisheries Processing and Salt Production, the biggest stockpiled rice sell-off from Thailand would certainly have an impact on the global rice market following the law on supply and demand, as well as on Viet Nam’s rice market. However, the impact on Viet Nam’s rice exports would not be significant, at least in the short term, Banh said.

Banh also said that Thailand’s plan to sell 11.4 million tonnes of rice within just two months was not feasible. He said that Thailand exported on an average 400,000 tonnes to 500,000 tonnes of rice per month. "To sell 11.4 million tonnes in just two months sounds unrealistic," Banh said as quoted by The Viet Nam Food Association said that the impact on rice exports would not be huge in the second and third quarters as most contracts had been signed in the last quarter of 2015, and there were estimated to be 1.4 million tonnes of rice remaining to be shipped abroad following existing signed contracts.
Aside from the sheer difficulty of selling rice in such huge quantities immediately, also consider that these incentives were attractive to farmers for a reason: it made selling lower-quality rice at higher prices feasible:
According to Banh, the stockpiled rice for this clearance would mainly be "sub-standard" quality that the government had purchased following the 2012-2013 rice mortgage programme and Thailand would target the not too demanding markets such as in Africa. Since May 2014, Thailand has auctioned off 5.05 million tonnes of rice worth $1.5 billion.

The Thai government had previously said it aimed to clear the stockpile by the end of 2017. Meanwhile, major import markets of Vietnamese rice were China, the Philippines and Indonesia which had standards for rice quality and preferred newly-harvested Vietnamese rice, he said. "Rice exports from Viet Nam would not be significantly affected by Thailand’s sell-off in the coming months," he said. 
Shianwatras and their allies are popular and persistent. They get thrown out of office by coups and other machinations, but not by the Thai electorate. I hardly think this ends the story of "rice-pledging" as a political ploy to gain agricultural votes since the royalists have demonstrated they cannot win an election against the Shinawatras in a straight-up contest. If and when another Shinawatra or their followers gain office, don't be surprised to see this rice giveaway implemented again.

Some things never change. 

Bolivar Showdown: Venzuelan Gov't vs Dolar Today

♠ Posted by Emmanuel in at 5/13/2016 04:16:00 PM
The mighty says it's now over a thousand bolivars to the buck.

Those following goings-on in Venezuela's slow-motion descent into financial oblivion should be familiar with the website While the "official" rates posted by the Venezuelan government are regarded with deep suspicion as to their veracity--all four (or is that 40?) of has become the more believable source on what the true exchange rate is at which real Venezuelans can change bolivars can change dollars into. The parallel market does not lie, does it?

Aside from the prevailing exchange rate, I also like the illustration of money supply growth (M2), the country's nearly non-existent reserves, and spiraling foreign debt.

As it turns out, the Venezuelan authorities have been trying to put US-based site--out of business for quite a while now. In true hyperventilating loonie left ranting-and -raving style, the site's proprietors are accused of insurrection and generally being Satan's emissaries on Earth:
DolarToday — the Venezuelan website that Caracas has been trying to sue into silence — has survived the latest legal assault. The U.S. District Court of Delaware this week dismissed “with prejudice” an amended suit by the Central Bank of Venezuela, which alleged that DolarToday was undermining the economy and helping fuel Venezuela’s record-breaking inflation...

DolarToday, which is registered in Delaware and run by three Venezuelan exiles, publishes the bolivar-dollar exchange rate that’s being offered in the Colombian border town of CĂșcuta, Colombia. But Venezuela claims the site is undermining the currency with fake rates. In its lawsuit, it called DolarToday an “illegal conspiracy to manipulate the value of Venezuela’s currency by widely publicizing false and misleading information about it.” It has also referred to the site as an act of “cyber-terrorism.”

Adam Fox — with Squire Patton Boggs, which represents the Central Bank — said the institution is still “reviewing its options” with respect to an appeal. “While we respect the court, we also vigorously disagree with its assessment of its own power to consider the controversy, which continues to impact the lives of millions of Venezuelans as well as the Central Bank,” he said in a statement. 
The thing is, if were misrepresenting the true exchange rate at which everyday Venezuelans can avail USD at, wouldn't folks be selling instead of buying dollars to make a profit out of this website's misrepresentation?

I believe it's a fairly straightforward thing to understand what's going on here: Like pretty much all lse that's happening in Venezuela, the government is attempting to blame its economic collapse on foreign devils for almost entirely self-inflicted troubles. is merely holding up a mirror to what's happening there, and it so happens the Venezuelan government cannot stand the sight of its own economic handiwork.

Shooting the messenger will hardly fix things.

$1B Tech IPO: Welcome to the ($5) Hostel Japonia

♠ Posted by Emmanuel in at 5/07/2016 08:46:00 PM
Watch out eBay, Japan's Mercari is out to beat you.
What's the first $1 billion startup in Japan? Judging by its national history, you'd say it's some sort of manufacturing firm, but you would be wrong. At a time when globally notable or competitive startups from Japan are quite rare, what you have instead is an e-commerce pioneer from a country largely unrecognized for minting such individuals. Enter Shintaro Yamada of Mercari, who got the idea for his service while finding $5 hostels around the world:
The trip left him determined to start a company that would let people in different countries connect with each other. He saw that even the poorest villages had mobile phones and everyone craved technology for reaching the wider world. That led him to found Mercari Inc., a mobile e-commerce site that matches individual buyers and sellers and this month became the first Japanese startup worth at least $1 billion.
Though the valuation is an accomplishment for Mercari, it also highlights the dearth of major private startups in the world’s third-largest economy. There are 155 so-called unicorns in the world, according to CB Insights, with 92 in the U.S., 25 in China and seven in India. Japan has suffered from a lack of venture capital and a risk-averse culture where the best and brightest strive for stable jobs at big companies and then stay for life.

Yamada thinks the problem isn’t quite as dire as it may appear. Many tech companies in Japan go public well before they reach the $1 billion valuation mark because the country has lenient listing requirements for small, high-growth businesses. The TSE Mothers market requires just $10 million in capitalization and has no income prerequisite; companies going public on the tech-heavy Nasdaq must clear $50 million market cap or $750,000 in profit.
To make a long story short, Mercari is a mobile marketplace app. While eBay and others also have apps of their own, the difference with Mercari is that its native interface is an app. Add this to understanding Japanese consumer habits better and you have a competitive advantage:
Mercari’s edge has been that it’s designed specifically for mobile phones and lets individuals easily browse through items for sale or post their own. People sell everything from clothes and electronics to baseball tickets. While its staying power remains unproven, the app has been downloaded 32 million times and generates 10 billion yen in monthly transactions, Yamada said. Mercari takes a cut of each sale.

“The market for business-to-consumer services is already quite developed, but user-to-user applications still have a lot of room to grow,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “Mercari is already in the lead in Japan. There are significant benefits for early movers.”
Users of Mercari laud its simpler user interface and not having to compete with big retailing operations in comparison to eBay. As the saying goes, competition improves the (e-tailing) breed.

Today's PRC Pt III: Building a Creative Economy

♠ Posted by Emmanuel in , at 5/03/2016 06:49:00 PM
Yes, Kung Fu Panda 3 qualifies as a PRC production.
The current Chinese leadership's plans to make a transition from a manufacturing- and export-oriented economy to a services- and domestic-oriented one are well-known by now. Encouragingly, the so-called "creative economy" may be coming online just when the old-style economy appears to be faltering. So the creative economy's scale is nowhere near that of manufacture-for-export yet, but China does have to start from somewhere:
The new engines of China’s economy are humming as social media, movie theaters, karaoke bars and art galleries shrug off the nation’s slowdown, according to a new report from the nation’s statistics authority.

First-quarter revenue from cultural industry companies rose 8.6 percent in the from a year earlier to 1.67 trillion yuan ($258 billion), the National Bureau of Statistics said Friday. The report based on surveys of 47,000 companies is the first such quarterly tally and comes as the agency strives to improve coverage of the "new economy."

Revenue from "cultural information transmission services," which include Internet companies and some satellite and telecommunication providers, surged 27.8 percent from the first quarter of 2015. Firms in "cultural, leisure and entertainment services" including travel agencies, parks and karaoke bars, saw sales jump 25 percent.
In some ways, the contributions from marketing culture are still understated in China. Remember, China ranks fourth worldwide in the number of tourists it attracts. It is also mentioned in the article above that the Kung Fu Panda 3 movie became the highest-grossing film in China recently. This outcome is likely due to the extensive partnership its producer had with PRC-based firms:
The record is an important milestone for [Jeffrey] Katzenberg and DreamWorks Animation. Kung Fu Panda 3 is the first film from the studio's burgeoning Shanghai-based venture, Oriental DreamWorks, which was established in 2012 in partnership with two state-backed Chinese companies with a combined investment of $350 million in cash and intellectual capital.
If it helps with China's transition, then I don't see any harm in it.