Indonesia - Seven pathways to building growth

Financial markets will be watching the new administration’s early decision on the matter of energy subsidies — failure to tackle the issue forthrightly will result in a loss of confidence. It is therefore heartening to see both presidential candidates are willing to take strong action in this area.

A more rational allocation of scarce fiscal resources is necessary — a shift is needed away from wasteful and untargeted subsidies toward more spending on health care and education that focuses directly on the poor and needy. Resources have to be released to be spent on the infrastructure improvements that alone can ensure the growth of well-paying jobs in manufacturing and services.

The new president should exert leadership by building a new consensus on the best balance of policy between (a) spending government money on immediate support for the poor through subsidies and other social spending and (b) longer term spending on constructing infrastructure and building human capital through spending on vocational institutes and universities.

Fourth, Indonesian business would like to see monetary and financial stability so that we are not thrown off track every few years by stresses related to high inflation or excessive external deficits.

Too often, a surge in Indonesia’s growth has been brought to a halt by a spike in inflation or by swelling external deficits that cause the rupiah to tumble. Indonesia must break this cycle and it can do so by giving Bank Indonesia greater independence to set monetary policies that bring inflation down and restrain the excess demand that destabilises the external accounts.

At the heart of recent challenges to the business sector, such as the sharp weakening of the rupiah in 2013 and rising costs of production, is monetary policy. Bank Indonesia should be given a target of bringing inflation down from the current 5 percent or higher to closer to 2 or 3 percent over a period of time. If this succeeds, interest rates will fall and bring the very high cost of capital for businesses down.

Such stability can only be ensured through a robust system of supervision and regulation of the banks and other financial institutions. Indonesia has made much progress since our own terrible crisis in 1997 but more needs to be done to improve financial regulation.

Fifth, we need policies to substantially boost the manufacturing sector.

We need to understand why, despite the very good headline growth of recent years, employment in the formal sector has been lackluster. One basic reason is that the manufacturing sector has been more capital intensive than labor intensive. Apart from the poor infrastructure referred to above, manufacturing has been held back by a weak business climate that scares away foreign as well as domestic investors.

One key element in the business environment is labor regulations. Well-intentioned policies to protect labor may well have hurt workers in the end - by raising the costs and risks of employment, businesses have been deterred from raising employment as much as they could have.

It takes political courage and skill to effect a transformation of labour policies and regulations - but we cannot keep deferring this decision.

Sixth, the new president should build a new consensus around a practical and hard-headed version of nationalism.

All countries pursue their own national interests and no serious leader of Indonesia is going to be anything but a nationalist. But nationalism has to be pursued in a practical manner. Recent policies in the mineral sector to accelerate the move up the value chain are to be applauded. These policies are good for Indonesia’s future and should be broadly supported. However, their implementation can be fine-tuned so that the disruptive effect on tax revenues and export volumes can be mitigated.

Seventh, Indonesia needs to engage with the rest of the world but to do so in a way that does not cause damage to local workers or businesses.

It is in the larger interest of Indonesia that it be part of the ASEAN Economic Community (AEC). The AEC is slated to take full form by the end of 2015, allowing much freer flow of goods, services, capital and people around the ASEAN region.

Only by creating such a large and more integrated market can ASEAN countries, including Indonesia, collectively and individually be able to compete against the likes of China and India, whose massive market size even a large ASEAN country like Indonesia cannot match. From a geopolitical perspective, Indonesia needs a cohesive ASEAN region as its bulwark against the world market.

However, the AEC will bring greater competition for local businesses. To facilitate a proper transition to a full-fledged AEC, the new administration should consider establishing funds to support efforts by businesses to raise their productivity and branding power.

Beyond facilitating Indonesia’s integration with the regional and global economies through such initiatives as the AEC or the Regional Comprehensive Economic Partnership (RCEP), Indonesia should also look to strengthen ties with strategic partners such as Japan. Under Prime Minister Shinzo Abe, a revitalized Japan is looking to work more closely with its Asian neighbors. Indonesia has had a long and highly productive relationship with Japan and the new president should work to secure more Japanese investment in the country as well as assistance in areas such as education and research and development.

Indonesia’s business sector is preparing to move up to the next level. It is not looking for government handouts or molly-coddling. What it needs from the next president are things it cannot do for itself, things which only a government can do. So, whether it is tackling the high inflation that drives cost pressures, or the currency and inflation shocks that come out of the blue every few years or the woeful state of infrastructure, Indonesian business looks forward to the next president building on the successes of incumbent President Susilo Bambang Yudhoyono and taking Indonesia into the next lap.

Rachmat Gobel

The writer is deputy chairman of the Indonesian Chamber of Commerce and Industry (Kadin) and president director of PT Gobel International. The views expressed are his own.

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Indonesia - Obama hails Indonesia democracy in turbulent Southeast Asia

U.S. President Barack Obama on Wednesday congratulated Indonesia’s presidential election victor Joko Widodo, even as the losing candidate rejected the result.

That underscored Washington’s intent to deepen ties with Jakarta and support democracy in Southeast Asia.

A peaceful transfer of power in Indonesia would buck a worrying trend in the region marred by flawed elections and military meddling. It would also serve to show that democracy thrives in the country with the world’s largest Muslim population.

Over the past year, there have been disputed elections in Malaysia and Cambodia. Thailand, once an example of democratic progress, is facing its most repressive period of military rule in decades.

Political change has been comparatively smooth in Indonesia since the end of the 30-year rule of former dictator Suharto in 1998.

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Myanmar - Burma Rep in Canada Says Doing Business With US-Sanctioned Tycoon Legal

Steven Law listens to a speech during a luncheon for Asean economic ministers in Toronto on June 5, 2014. (Photo: Asia Pacific Foundation of Canada)

Burma’s Honorary Consul to Canada, Bryon Wilfert, has responded to the controversy generated following last month’s visit to Canada by Steven Law, a Burmese billionaire who US authorities allege is tied to the drug trade, by claiming that it is legal under Canadian law to do business with the controversial tycoon.

In early June, Law (aka Tun Myint Naing) traveled to Canada as a member of the Burmese delegation taking part in an Economic Ministers Roadshow organized by the Association of Southeast Asian Nations (Asean). The Burmese delegation was led by Burma’s Minister of National Planning and Economic Development Kan Zaw and included three other Burmese businessmen in addition to Law, who, as The Irrawaddy first reported, participated using his Chinese name, Lo Ping Zhong.

During his stay in Canada, Law and the rest of the Burmese delegation attended a business round table in Toronto that was co-organized by Wilfert, a former Member of Parliament. It remains unclear if this and the other events that Law took part in resulted in Law signing any deals with Canadian firms or individuals.

“[A]nyone who met him [Law] during his time here did not break Canadian rules if they did business with him,” Wilfert wrote in a July 8 article in the Ottawa-based Embassy, a weekly newspaper that focuses on Canadian foreign affairs.

Although the US government specifically forbids US firms from doing business with Law, Asia World and a list of related front companies, Canada does not include Law or any of his aliases on a list of designated individuals with whom Canadians are barred from doing businesses. The spokesperson for Canada’s minister of international trade did not respond to The Irrawaddy’s questions regarding whether Ottawa has any plans to add Law to the list, which includes his fellow Burmese billionaire Tay Za and retired strongman Snr-Gen Than Shwe.

Despite Wilfert’s assurances, those Canadian firms that do businesses with Law could still potentially face legal difficulties with the US Treasury Department’s Office of Foreign Assets Control (OFAC) which is tasked with enforcing American sanctions. Canadian firms with significant US operations are particularly vulnerable to the scrutiny of OFAC.

Wilfert, who was appointed Burma’s honorary consul to Canada in March of this year, is a former MP representing the Toronto area who previously served as parliamentary secretary to the minister of finance. Prior to his appointment, Wilfert appears to have had little involvement in Burma. In May 2005, he was part of a group MPs who voted against a motion that called for the Canadian government to “to condemn more forcefully the repeated and systematic human rights violations committed by the military junta in power in Burma” and “impose more comprehensive economic measures on Burma.”

The motion calling on Canada’s then Liberal government, of which Wilfert was part, to take a more active stance in pushing for the release of Burmese opposition leader Aung San Suu Kyi and the restoration of civilian government, passed despite concerns from critics that it was too strong of an approach. Some two years later, Canada imposed comprehensive economic sanctions on Burma that were eventually lifted in 2012.

According to an announcement issued by the Burmese Embassy in Ottawa, Wilfert’s role is to assist the embassy in promoting economic investment and tourism.

Canadian Opposition Raises Concerns

Canada’s New Democratic Party, the largest opposition party in the national parliament, says Law’s arrival in Canada as part of the high-level trade delegation is the latest example of the Canadian government prioritizing trade over human rights.

Don Davies, an MP from British Columbia, the first stopover for the Burmese trade delegation, called Law’s visit to Canada alarming. “Given the publicly available information concerning Mr. Law, and the Conservatives’ proclaimed ‘crackdown’ on granting visas to people of questionable character, it is also puzzling,” Davies told The Irrawaddy. Davies, who serves as his party’s international trade critic for the left-of-center NDP, is frequently at odds with Steven Harper’s Conservative party government.

“The Conservatives not only do not balance human rights and trade promotion—they ignore this connection,” said Davies, who added that a recent trade agreement between Canada and Honduras, a Central American state plagued by what rights groups say are government-backed death squads, is further proof that the Harper’s Conservative government is mishandling trade policy.

Last month a spokesperson for Canadian Trade Minister Ed Fast told The Irrawaddy that the Canadian government had no role in the inclusion of Law in the delegation, which she said was the responsibility of the Burmese government. Fast recently spoke out about Law’s visit to Canada for the first time, telling Abbotsford News, a weekly newspaper based in the minister’s hometown, that he was “disappointed and concerned” that Law was able to come to Canada.

“For some reason, this particular individual slipped through the cracks,” the Conservative MP said. “We don’t know why that happened. It concerns us.”

Davies is unconvinced by Fast’s explanation and points out that Law was able to come to Canada while Seng Zin, a women’s activist from Burma’s northern Kachin State, was recently denied a Canadian visa to attend a peace training program.

“The Conservatives immigration policy is one of failure, contradiction and ideological meddling.  When millionaire businessmen with suspected connections to the global drug trade can receive a visa to enter Canada, but respected human rights activists and law-abiding citizens cannot, the facts speak for themselves,” said Davies.

Law—whose father, the late Lo Hsing Han—was dubbed by US authorities the “godfather of heroin,”—is the head of Asia World, one of Burma’s largest conglomerates. The firm has been involved in some of the country’s largest construction projects, including the Shwe gas and oil pipelines and the officially stalled Myitsone dam.

Both Law and his father were added to the US sanctions list in 2008. A press release announcing their inclusion claimed that, “In addition to their support for the Burmese regime, Steven Law and Lo Hsing Han have a history of involvement in illicit activities.”

The statement went on to describe Lo Hsing Han as “one of the world’s key heroin traffickers dating back to the early 1970s.” It added that “Steven Law joined his father’s drug empire in the 1990s and has since become one of the wealthiest individuals in Burma.”

SEAMUS MARTOV / THE IRRAWADDY

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Indonesia - World leaders ‘slow’ in congratulating Jokowi

Many world leaders were apparently hesitant to contact president-elect Joko “Jokowi” Widodo, perhaps preferring to wait until the loser of the election, Prabowo Subianto, files his lawsuit with the Constitutional Court. Many big countries such as China, India and South Korea have not yet congratulated Jokowi.

Even several fellow ASEAN leaders, such as the Philippines, have not contacted the Jakarta governor.

US President Barack Obama, Singaporean Prime Minister Lee Hsien Loong, Malaysian Prime Minister Najib Razak and Australian Prime Minister Tony Abbott were among the first foreign leaders to call or send congratulatory messages.

“This morning [Wednesday], the Singaporean PM and Australian PM called me. At 11 a.m. today, Mr. Obama called and congratulated me,” Jokowi said at City Hall in Jakarta on Wednesday.

Jokowi explained that Obama, who spent a few years of his childhood in Jakarta, spoke Indonesian in their telephone conversation. Obama promised to speak with Jokowi on the sidelines of the

APEC summit in China in November.

While Obama spoke directly with Jokowi, US Secretary of State John Kerry praised the Indonesian people for uniting once again to show their commitment to democracy through free and fair elections.

“The US looks forward to working with president-elect Widodo as we deepen our partnership, promote our shared objectives globally, and expand people-to-people ties between our nations,” Kerry said in a statement made available to The Jakarta Post on Wednesday.

Kerry said that, as the world’s second- and third-largest democracies, the US and Indonesia set an example for the world. “We share many common values, including respect for human rights and the rule of law. Our two nations have worked hard to build the US-Indonesia Comprehensive Partnership, which has strengthened our bilateral relationship so we can jointly address common regional and global challenges,” Kerry added.

Meanwhile, the Australian prime minister hailed Indonesia’s election as a significant milestone for the world’s third-largest democracy, as he praised President Susilo Bambang Yudhoyono for his “vast contributions”.

“Indonesia is to be congratulated on its remarkable transition to democracy and on the conduct of the election,” Abbott said as quoted by Agence France-Presse.

Abbott said Australia’s relationship with its neighbor, with whom ties were strained last year due to spying allegations, was “extraordinarily important to us”.

“The Australian government is looking forward to working closely with [Jokowi],” Abbott stated.

Abbott underlined that the relationship was highly productive, and hoped to work closely to further strengthen bilateral ties.

“We share a long history of cooperation on a wide range of common interests and challenges,” he said.

Japanese Prime Minister Shinzo Abe invited Jokowi to visit Japan. As quoted by the Indonesian Embassy in Tokyo, the prime minister told Jokowi in their 10-minute telephone conversation that “Indonesia and Japan are strategic partners, therefore the role of the two countries with regard to security, peace, stability and prosperity in the region amid the current changing situation has become more important.”

Shortly after the announcement of the final election result by the General Elections Commission (KPU) on Tuesday night, Malaysian Prime Minister Najib congratulated Jokowi via his Twitter account.

Singaporean Prime Minister Lee also used social media to congratulate Jokowi.

UK Foreign Secretary Philip Hammond warmly congratulated Jokowi and Indonesians for another successful exercise in democracy.

“Indonesia is important to the UK: it is the world’s third-largest democracy and a close G20 [Group of 20] partner. We share many values as democratic, diverse, island trading nations that are strongly reflected in our growing relationship. We work together to promote trade, security, combat climate change, and in many other areas, and that will continue,” said the newly promoted minister.

European Commission President José Manuel Durão Barroso said the active participation of Indonesian civil society and professional management by the election authorities in Indonesia had illustrated the strength and dynamism of the country’s democracy.

“We are looking forward to working with you to further strengthen our cooperation in the years to come. Please accept the assurances of my highest consideration,” he added.

Shortly after being sworn in as the country’s seventh president in October, Jokowi will embark on foreign visits for meetings with regional and world leaders.

Jokowi will have a busy schedule with a series of ASEAN meetings, the ASEAN Summit, followed by the East Asia Summit in Naypyidaw, Myanmar in November 2014.

The East Asia Summit is an annual meeting of national leaders from the East Asian region and adjoining countries.

The two other summits are the G20 Summit, scheduled to be held in Brisbane, Australia in November and the Asia-Pacific Economic Cooperation Economic Leaders’ Meeting (APEC) in the same month in

Beijing.

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India - Redefining the idea of world trade

Where things come from or go to is not as important as how much value is added within your borders

At last week’s meeting of trade ministers from the G20 countries — the grouping of the largest advanced and emerging economies, which together account for 85 per cent of the world’s GDP and more than three-quarters of trade — the talk, expectedly, was around getting some sort of agreement on the ongoing world trade talks so that a new, overarching deal on world trade could be reached.

More immediately, the G20 meeting was also supposed to get its own mini sets of agreements going, so that even if an all-encompassing global deal was some distance away, the members could at least ensure that their own trade could grow faster, in order to ensure that the G20’s self-imposed target of increasing growth (by 2 per cent over the forecast average across member countries over five years) could be met.

Although the shooting down of a Malaysian Airlines aircraft by pro-Russian separatists in Ukraine almost derailed the agenda at last week’s summit of G20 trade ministers in Sydney, India also managed to contribute its mite to the drama a little bit, by threatening to not implement the trade facilitation agreement by the July 31 deadline if its concerns over its food security programme were not met.

Eventually, India was given some assurances and in turn, “committed” itself to the agreements already reached, and all was well — at least on paper.

However, one got the distinct impression that even if the threat had been carried out — and India, say, fails to implement the trade facilitation agreement on deadline — it may not have been the end of world trade as we know it.

Changed nature of trade

The real issue is the future of multilateral trade agreements itself. Although trade has been at the centre of the global growth story over the past 50 years or so, its nature, and components, are remarkably different from the immediate post-colonial trade system after World War II. It’s no longer a case of selling silks and spices in exchange for horses and diamonds, or even importing iron ore and exporting automobiles.

Today’s global economy is driven by transnational corporations, which have built not just worldwide manufacturing, but have developed global value chains. It’s a complex network of raw materials, intermediate and finished products, services and money criss-crossing borders on their way to the final consumer.

So, while your iPhone may be manufactured in China, it is designed in the US, its software may have components engineered in India, the display actually made in Korea and the lithium in its battery imported from Argentina.

The ad campaign may well have been conceptualised in London and finished in a post-production facility in Shanghai or Hyderabad, and sold by an online retailer supported by venture funding from the US. It, in other words, sold in India, but ‘made in the world’.

Protectionism playing up

The trouble is, the multilateral agreements which made all this possible, and opened up markets like India and China to globally manufactured products — but also opened up global markets for India-made manufactures and Indian services — is running out of steam. The post financial crisis period actually saw a rise in protectionism as countries struggled to insulate their economies and sought to protect jobs.

Since the global crisis, the World Trade Organisation says, 1,185 restrictive measures have been imposed — and only some 200-odd removed. The G20 countries themselves imposed over a hundred new restrictive measures in the first six months of this year alone!

As a result, everybody has looked to workarounds. Increasingly, the focus has been on working out bilateral agreements and free trade pacts with specific countries or groupings of countries.

The US, for instance, is working on two major agreements: the Trans Atlantic Trade and Investment Partnership agreement with the EU, and the Trans Pacific Partnership with the Pacific Rim countries, including Australia, the G20 chair for this year.

India has signed, or is in the process of signing, a number of bilateral and free trade agreements (FTAs) with economies of interest to it. There is an Asean FTA in the works, as well as one with Australia, not to speak of the Asean+3 deal being negotiated, with will include Asean, Australia, India and New Zealand, while Australia’s FTA with China may be signed within this year itself.

Australia’s trade minister Andrew Robb pointed out to this writer during an interaction after the G20 meet in Sydney last week that there are as many as 370 such deals already in place around the world and more than a hundred under negotiation.

With nearly 500 agreements girdling the globe, who needs an overarching multilateral?

In fact, tariffs and trade deals, with their focus on protecting the ‘here’ from the ‘made there’, are becoming increasingly irrelevant to actually increasing world trade.

Who’s afraid of tariffs?

Tariffs are no longer the impediment to trade as they have already been reduced — if not for all, then for most key players — through domestic tax reforms and preferential trade pacts.

But, as Peter Draper, former chair of the Global Agenda Trade Council noted in a paper (‘The shifting geography of global value chains: Implications for developing countries and trade policy’, Vox, July 2012): “Current trade rules are based on the notion that firms in one nation sell things to customers in another nation. Hence the rules framework concerns product-trade rather than process-trade. As such they do not account for a range of policies and barriers that do not inhibit selling things per se, but do hinder moving things.”

Policy responses to these changes call for a sea change in perspective. India’s domestic policy response, including taxes and incentives, for instance, has been predominantly skewed towards protecting or enhancing the domestic manufacturing sector, because the manufacturing sector is seen as the job creator.

But, according to UNCTAD, the manufacturing sector’s share of domestic value added in exports actually declined by over 12 per cent between 1995 and 2009, while the share of domestic value addition exports actually grew to over 50 per cent during roughly the same period.

What this means is that trade, exports and tariff deals are only a part of the growth story. The Government needs to recognise how India fits into the complex jigsaw, and how best one can ensure that we get a larger share of this pie.

R SRINIVASAN

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Myanmar - Lingering Fears About Myanmar's Political And Economic Realities May Hinder Direct Investment

Leaders from the Association of Southeast Asian Nations (ASEAN) are meeting in Yangon, Myanmar this week to discuss economics, trade and investment. But critics say the country has a long way to go before it can truly meet the standards of this and other internatinoal economic organizations.

Despite a concerted effort from Myanmar’s post-dictatorship administration, recent political developments and uneasiness with a lingering military elite may hinder the nation's efforts to attract foreign capital to one of the world’s last truly frontier markets.

“The rich and powerful find it very easy to get whatever they want.; that’s fine for today but leads to problems down the road,” said Lex Rieffel, Southeast Asia expert and former U.S. Treasury economist.

More recently, the country has been wooing foreign investment through banking reforms and a push towards developing its vast stores of natural resources. But large amounts of cash from abroad may do more harm than good if handled incorrectly.

“If you get the wrong kind of foreign investment in the wrong way at the wrong time, it could be damaging,” Rieffel said. “The good investors aren’t always the ones that pay the most money.”

Myanmar emerged from a generation of dictatorship just four years ago, and has made some positive steps.

“Myanmar is leaving behind decades of isolation, fragility and conflict,” the World Bank wrote in its 2012 profile of the nation noting the history of tight economic nationalization and severed ties with the outside world that started after a 1962 military coup by General Ne Win. Even after he resigned in 1988, the government’s violent suppression of political opposition incited strong Western sanctions, which further isolated the economy.

But President Thein Sein, elected in 2010, signaled a relatively new direction, World Bank analysts wrote. Along with the release of Aung San Suu Kyi and other high-profile political prisoners, he halted controversial development projects, and made a few notable steps toward decentralizing the country’s economy and opening the markets to foreign investment and the international community through the World Bank, IMF and the Asian Development Bank.

The World Bank projected its economy to grow 6.8 percent this year.

But despite reforms, it’s not all rosy in Myanmar. The nation ranks 157th out of 177 countries on Transparency International’s Global Corruption Perceptions Index.  Last week, the leading opposition party recently said it collected five million signatures on a petition to reduce powers of unelected military parliament members, which seems to be an ongoing trend.

“Economic liberalisation can perpetuate the political and economic dynamics of the resource curse,” wrote Stuart Larkin of the Institute of Southeast Asian Studies, in a Financial Times op-ed on Wednesday.

“Foreign direct investment can fall into resource enclaves while the elite benefit from increased resource rents and their recycling into real estate and consumer import booms. Under this dynamic, the elite’s power is enhanced, allowing them to adapt and to exploit Myanmar’s nascent democracy,” he wrote.

In recent years, most foreign direct investment in the country has been concentrated in extractives, with oil, gas and hydropower taking the top spot, followed by mining. But this resource wealth is also a major potential problem.

“How the government receives, manages, or uses oil and gas revenues is not publicly disclosed, the role that military enterprises play in revenue management and use remains unaccountable, and a total lack of benefit sharing is prolonging Burma’s resource curse,” wrote researchers from Arkan Oil Watch, a Myanmar-based NGO,  in a 2012 report on the issue.

Exports  of natural gas is Myanmar’s  single largest source of foreign income, accounting for more than 40 percent of its total exports. It has been sending gas to Thailand since the 1990s, and was ranked the largest gas exporter via pipeline in the Asia-Pacific by BP in 2007.

Kathleen Caulderwood

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Philippines - A lesson about innovation

Innovation is the best way to make the global economy grow. Hope is pinned on major technology regions around the globe.

But where will these innovations that can trigger the next wave of sustained growth come from? Which ideas will put the global economy back on track? And which regions are actually creating new things? In other words, where are the world’s new hotspots?

The model of Silicon Valley—where technology companies, elite universities and venture capitalists have been working in fruitful symbiosis for decades to create new companies and products—has been copied around the globe, including the Association of Southeast Asian Nations (Asean).

In this context it is unfortunate that the Philippines just dropped 10 places in the global innovation rankings. Based on the results of the Global Innovation Index 2014, the Philippines’s scores and rankings declined in five of the seven main indicators, namely, human capital and research (this needs to be addressed immediately in view of the country’s aspiration in knowledge-process outsourcing/creative industries), infrastructure (not surprising—we need a Department of Information and Communications Technology urgently), business sophistication, knowledge and technology outputs and creative outputs. The country advanced its rankings under institutions and market sophistication.

The index recognizes the “key role of innovation as a driver of economic growth and prosperity, and the need for a broad vision of innovation applicable to developed and emerging economies.” It is worrisome that the Philippines’s ranking in human capital and research dropped; we have to realize the important role of human capital in the innovation process, underlining the growing interest that firms and governments have shown in identifying and energizing creative individuals and teams.

In order to reverse this trend, it may be worthwhile to study the “innovation experiment” of Chile, which was launched in 2010: Chile paid foreign entrepreneurs to come and visit for six months; it offered them $40,000 plus free office space, Internet access, mentoring and networking. And they would get to live in one of the most beautiful places on this planet, where housing was relatively cheap and where corruption and crime were almost nonexistent. All Chile asked in return was that the foreigners interact with local entrepreneurs and consider making the country their permanent home. Chile made a bet that the foreign entrepreneurs would transform its entrepreneurial culture by teaching the locals how to take risk, help each other and form global connections.

The experiment, called “Start-Up Chile,” was such a runaway success that, in October 2012, The Economist dubbed it Chilecon Valley. Santiago is today buzzing with entrepreneurial activity; university students often look to join start-ups rather than big companies; Start-Up Chile has gained brand recognition in innovation circles worldwide; and local entrepreneurs are becoming more ambitious and looking for opportunities abroad. Start-Up Chile has also been flooded with applications—more than 12,000 from 112 countries; 810 start-ups from 65 countries have so far been admitted into the program. The first 199 companies that visited Chile and returned home reported that they have raised a total of $72 million in funding. A batch of 132 companies that chose to stay in Chile reported that they had raised US$ 26 million. Several start-ups have had successful exits and hundreds of others expect to make it big.

There surely are lessons for regions all over the world, including Asean, in Start-Up Chile’s success. To foster economic growth and innovation, the focus needs to be on people. They need to empowered, enabled, and connected!

Henry J. Schumacher

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ASEAN - Territorial tensions, ethnic conflicts undermine ASEAN unity: ADB think tank

Simmering tensions over territorial disputes in the South China Sea and ethnic conflicts pose serious threats to regional unity and could undermine efforts to promote closer cooperation among Southeast Asian economies, the Asian Development Bank Institute said in a study released this week.

"Unresolved territorial and ethnic conflicts -- within ASEAN and on its periphery -- remain serious threats to regional unity and harmony," the ADBI report said.

Longstanding territorial disputes over the Spratly Islands, Paracel Islands and Scarborough Shoal pit China against four ASEAN members -- Brunei, Malaysia, the Philippines and Vietnam.

"Managing and resolving these disputes will increasingly test the effectiveness of political mechanisms to maintain peace and security in the region," the study says.

The Association of Southeast Asian Nations is home to about 620 million people with a combined gross domestic product of more than $2.3 trillion, or 3.3 percent of the world total.

ASEAN plans to establish an economic community by next year to promote the flow of goods, services, investments and skilled labor among its 10 member countries, but the ADB has earlier said it is "highly unlikely" that ASEAN will attain the goal by the target date.

The ADBI report also criticizes what it calls a lack of internal cohesion to formulate a long-term regional development strategy, its loss of "centrality" in the regional economic and geopolitical context due to the rise of China and India, and the region's inability to collectively manage climate change, energy security, and regional natural disasters.

Aside from Brunei, Malaysia, the Philippines and Vietnam, ASEAN also includes Cambodia, Indonesia, Laos, Myanmar, Singapore and Thailand.

Kyodo

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Singapore - 20th ASEAN-EU ministerial meeting comes to an end

Ms Grace Fu, Minister in the Prime Minister's Office, Second Minister for the Environment and Water Resources and Second Minister for Foreign Affairs. (Photo: PAP website)

Minister in the Prime Minister's Office and Second Minister for Foreign Affairs Ms Grace Fu met with various MEPs, as well as the Foreign Ministers of Latvia and Greece at the sidelines of the 20th AEMM.

SINGAPORE: The two-day 20th ASEAN-European Union (EU) Ministerial Meeting (AEMM) ended in Brussels, Belgium on Wednesday (July 23). Singapore was represented by Minister in the Prime Minister's Office and Second Minister for Foreign Affairs Ms Grace Fu.

At the meeting, the ministers unanimously conveyed their heartfelt condolences to the countries and families affected by the tragic downing of flight MH17. They also reviewed the progress made in furthering the ASEAN-EU relationship under the Bandar Seri Begawan Plan of Action to Strengthen the ASEAN-EU Enhanced Partnership (2013-2017) and discussed ways to build on the strong level of cooperation between the two regions.

A statement from Singapore Foreign Affairs Ministry said the ministers also emphasised the importance of developing connectivity between both regions, and welcomed the Joint Declaration on EU-ASEAN Aviation Co-operation adopted at the EU-ASEAN Aviation Summit in Singapore in February 2014. In addition, the ministers exchanged views on regional and international issues of mutual concern.

Ms Fu met Member of European Parliament (MEP) Werner Langen and had lunch with key MEPs at the sidelines of the 20th AEMM. Former Rapporteurs for the EU-Singapore Partnership and Cooperation Agreement (ESPCA) Reinhard Butikofer and Ana Gomes, AFET (Committee of Foreign Affairs) Chair Elmar Brok, and European People's Party Group Coordinator on Foreign Affairs Cristian Dan Preda were present at the lunch. Ms Fu exchanged views on regional developments and strategies to further ASEAN-EU ties with the MEPs.

She also met with the Foreign Ministers of Latvia and Greece. With Latvian Foreign Minister Edgars Rinkēvičs, Ms Fu discussed suggestions to further bilateral cooperation in education. Mr Rinkēvičs also reaffirmed Latvian support for the EU-Singapore Free Trade Agreement (EUSFTA), in view of the Latvian EU presidency in 2015.

Ms Fu and Greek Deputy Prime Minister and Foreign Minister Evangelos Venizelos noted the warm relations between both countries. Mr Venizelos reaffirmed Greek support for the EUSFTA.

- CNA/ac

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

South Korea - Korea's Paris Baguette opens first store in Paris

SPC Group’s bakery brand Paris Baguette landed in Paris on Wednesday with hopes of wooing French customers in their home country.

The new store, named Paris Baguette Chatelet, is located near the Pont Neuf Bridge, Notre Dame Cathedral, Louvre Museum and other tourists’ destinations, according to SPC. It is the first Paris Baguette outlet to open in Europe.

“We regard France as the spiritual home of our bakery products,” said SPC Group chairman Hur Young-in.

“The opening of our Paris store highlights our commitment to continually improving and perfecting the quality of our European-style bread and pastries.”

SPC operates South Korea's leading bakery and pastry brands including Paris Baguette and Paris Croissant.

In order to stay true to the French breadmaking DNA, experienced French bakers using traditional French ingredients and methods work at Paris Baguette Chatelet. They are set to dish up exclusive menus such as fresh cream chiffon cakes and special stuffed breads, on top of universal French-style breads, pastries and sandwiches.

Paris Baguette Chatelet is also a member of the Chambre Professionnelle des Artisans Boulangers Patissiers, the professional French bakery association that requires all members to adhere to the traditional French baking standards.

The Paris outlet is expected to serve as the company’s global flagship store, SPC said, adding that it hoped for it to serve as a stepping stone for the Canadian and European markets.

“Paris Baguette has been introducing authentic French-style bakery products to Korea. But in the future, we will actively reach out to the global market by leveraging our experience in France,” Hur said.

Established in 1988, Paris Baguette has more than 3,000 stores at home, 125 in China, 37 in the US, 11 in Vietnam and six in Singapore.

Bae Ji-sook

The Korea Herald

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

China - Redmi Note may leak data to China

Chinese-made smartphone Redmi Note allegedly connects automatically to  a mainland Chinese server unbeknownst to users, prompting various concerns regarding personal information being leaked to the communist government.

This was revealed in a Hong Kong cellphone forum.

The phone is part of a line of smartphones launched by Xiaomi Inc., the largest privately owned mainland Chinese electronics company. Headquartered in Beijing, Xiaomi itself designs, develops and sells smartphones, mobile apps and consumer electronics.

Hong Kong cellphone discussion forum IMA-Mobile user Kenny Li said that when the Redmi Note was in Wi-Fi mode, it would connect to a server with an IP address based in mainland China without notifying its user. After connecting to the Chinese server, the phone will upload photos, chat messages and information from the user.

Li said he discovered that even after removing the default software installed by Xiaomi, the Redmi Note would continue the automatic connection and the file uploads.

Reportedly, Li's findings have become a widely debated topic in Taiwanese forums. Taiwanese netizens allegedly attributed the problem to Xiaomi's built-in cloud service, stating that it was not surprising for Chinese-made products to be filled with glitches. However, some netizens also rebuffed the comments, stating that it was suspicious that the Redmi Note would continue to upload files even after a software reinstallation and replacement.

During the public announcement for Xiaomi new smartphone Xiaomi 4, the company addressed and responded to the recent discussions of the Redmi Note's automatic upload function, which connects to a Chinese server.

The company cited its users' agreement policy, stated that no invasion of privacy has ever occurred in their service and said that the alleged user information infringement is false and untrue.

Xiaomi did not, however, dismiss the automatic connection and upload feature and said that Redmi Note does not upload personal information from its users but only calculations of the user's personal preferences so that the company can send appropriate upgrade and app recommendations to their users so as to improve customer service.

The company also said that all phones come with automatic back-up and cloud features disabled, and they will only perform the functions with users' consent. Backed-up information will also not be used by the company or against the user, the company said.

In hopes of further guaranteeing the company's product safety, Xiaomi said that all of their services are in compliance with the privacy laws of the countries in which their products are sold. Complex encryptions and algorithms, the company said, also protect the products themselves.

Chi-hao James Lo

The China Post

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. 

Taiwan - Business revenues in Taiwan grow for 10th month in row

Local business revenues totaled NT$1.2337 trillion (US$41 billion) in June, representing a 4.1-per cent growth, and marked the 10th consecutive month of growth, according to a report released by the Ministry of Economic Affairs (MOEA) yesterday.

Thanks to growing demand for smartphones, computers and plasma TVs, the wholesale sector's revenues grew 3.6 per cent to reach NT$865.4 billion. Higher exports of stainless iron and construction steels also contributed to the growth, the MOEA said.

The retail sector's sales grew 5.5 per cent to reach NT$333 billion, as sales pick up for cars, summer products and FIFA World Cup-related products and services.

Sales in the food sector grew 3.8 per cent to reach NT$35.3 billion. The growth was attributed to more frequent wedding ceremonies, chain restaurant expansion, the launch of new brands and tourism-related promotion.

The MOEA forecast revenues to climb further in July. The whole sector is likely to benefit from growing demand for personal computers, smart devices and electronic parts and components, the MOEA said. The retail sector and food sector may see revenue growth as the summer travel season begins in July as well as with car dealers launching promotions.

According to the MOEA's survey, 8.7 per cent of firms forecast higher sales in July than in June, while 86 per cent expect the same level and 5.3 per cent forecast lower sales.

The industrial production index was pegged at 107.93 in June, up 8.63 per cent from a month ago.

The index of the manufacturing sector, which constitutes over 90 per cent of industrial production, was pegged at 108.13. The manufacturing index is the third highest figure on record. It grew 8.93 per cent year-on-year and marked the fifth consecutive month of growth.

The growth in the manufacturing sector was mostly attributed to increased production of semiconductors, LEDs, computers and related parts and components, optical instruments, steel, machinery and cars.

Production growth across product lines in the first half of 2014, from highest to lowest, are cars and related parts at 12.4 per cent, electronics products at 8.9 per cent, machinery equipment at 6.5 per cent, computers and optical electronics at 2.9 per cent, base metal at 2.6 per cent and chemical materials at 1.1 per cent.

The production index in the second quarter was pegged at 107.95, which reached a new record in terms of quarterly performance. The index represented a 6.71-per cent growth year-on-year, which was the biggest margin of growth in three years.

Still, the MOEA forecast further expansion in the third quarter. The ministry pointed to a number of positive factors that will support the growth momentum: a global economy on track for recovery, strong car sales around the world, higher demand for machinery, the upcoming launch of new handheld devices, renewed demand for personal computers, growing demand for electronics products related to cloud computing and Internet of Things technologies.

According to the MOEA survey, 14.2 per cent of firms expect higher a production volume in July than in June, while 71.6 per cent forecast about the same level and 14.3 per cent expect lower production.

US$1:NT$29.963

John Liu

The China Post

Business & Investment Opportunities 

Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994.