1 Sluggish global demand hits Japan exports (Straits
Times) Japan's exports fell 10.3 per cent in October from a year earlier,
Ministry of Finance data has shown, in a sign of sluggish external demand.
The result compared with the median forecast for an
8.6 per cent fall in a Reuters poll of economists, and followed a 6.9 per cent
decline in September. Imports fell 16.5 per cent, versus economists' estimate
for a 16.3 per cent fall. The trade balance came to a surplus of 496.2 billion
yen, versus the median estimate of a 615.4 billion yen surplus.
2 India demonetization loaded with risks (Mihir
Sharma in Gulf News) One week after India’s sudden declaration that 500- and
1,000-rupee notes were no longer legal tender, the economy is in chaos. And
that’s perhaps because the policy was designed as much to shock and awe
observers with the government’s command of the Indian economy as to control
India’s “black money” problem.
What seemed at first to be a masterstroke by Prime
Minister Narendra Modi now looks like a grave miscalculation. What’s changed in
a week? Well, for one, it’s become clear that the government was simply too
cavalier in its planning. Now that 86 per cent of India’s currency is no longer
valid, the central bank has struggled to print replacement denominations.
You have to wonder if Modi truly sought expert
advice, or relied once again on a small and trusted set of politicians to
determine policy. India’s simply too big and complex for shock and awe. Large
parts of the rural economy use cash for 80 per cent of transactions and have
been hard-hit.
The government’s plan is likely to be ineffective in
the long term. Economists agree it will have no effect on the generation of
black money through corruption. Even in the best case scenario — that a significant
proportion of the outstanding currency is destroyed — there’s no reason to
suppose it was all black money and not the savings of regular citizens scared
of harassment by tax authorities.
Modi has dropped dark hints that this is just the
beginning, raising fears that business should now worry about of constant tax
raids and the reopening of decades-old cases. In fact, that dark new age may
already be here.
Even setting aside the painful adjustment, the
long-term effects of this monetary shock on India’s informal economy could well
be severe; a large proportion of marginal firms may not survive the loss of a
fortnight of income. The informal financial sector — unregistered moneylenders
who provide loans to businesses worth 40 per cent of total bank lending — will
be decimated.
The costs to the government could be equally high.
Modi’s administration has put political considerations over economic detail
once too often — and this time, it’s severely dented its image for efficiency
and practicality. Even if the long queues vanish in the next few weeks, that
damage to the government’s reputation is permanent.
3 The rise of Indonesia (Elizabeth Pisani in The
Guardian) Despite being a country of superlatives – most populous
Muslim-majority nation, biggest exporter of numerous commodities dug or grown
out of its generous earth, one of the world’s most enthusiastic users of
Twitter and Facebook – Indonesia also remains, in the words of Indonesian
businessman John Riady, the biggest invisible thing on the planet.
I’ve been hearing those same arguments since I first
covered Indonesia for Reuters and the Economist in the late 1980s. Over the
intervening three decades, per-capita income in Indonesia did indeed rise
steeply to $3,300, over five times its level when I first lived there.
Which is great, but not as great as Thailand or
Vietnam (between seven and eight times higher), let alone China (where per
capita income is now close to $8,000 a year, 26 times its 1985 value).
For a country that has such extraordinary natural
resources, and such an abundance of labour,
Indonesia is arguably
underperforming economically. This is in part because the scatter of its 7,000
inhabited islands creates extraordinary infrastructure challenges, in part
because a torpid bureaucracy squashes innovation, and in (large) part because
Indonesia’s miasmic legal system means no contract is secure.
The much vaunted “demographic dividend” will not
deliver the pot of gold at the end of the Indonesian rainbow until all three of
these things change. Now, for the first time since a brave but ill-prepared
Indonesia declared its independence from Dutch colonists in 1945, at least two
of these changes are under way.
That’s no small achievement in a nation as
kaleidoscopic as Indonesia, where there are almost as many ethnicities,
languages and belief systems as there are islands. The improvements in both
infrastructure and governance are especially worthy of global attention because
they are being propelled by the twin engines of democracy and decentralisation,
both relatively new to Indonesians.
Though Indonesia’s current president, Joko Widodo,
known as Jokowi, has made much of his support for infrastructure development,
it is driven less by a well-planned push from Jakarta than by active demand
from politicians directly elected in district and provincial governments.
Though progress is slow, those demands are gradually overcoming the hurdles
raised by the country’s geography.
However, neither decentralised democracy nor Jokowi
himself have managed an assault on the third major hurdle to Indonesia’s
self-actualisation: the legal quagmire referred to by his predecessor as the
“judicial mafia”.
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