Waiting for Indonesian Leadership; Fifteen years after Suharto, corruption has undercut political and economic progress at every turn

June 4, 2013, 9:38 a.m. ET

Waiting for Indonesian Leadership

Fifteen years after Suharto, corruption has undercut political and economic progress at every turn.

By JOHN KURTZ AND JAMES VAN ZORGE

A little more than 15 years ago, on May 21, 1998, Suharto stepped down from the Indonesian presidency and ended three decades of autocratic rule. Student demonstrators, white collar professionals, laborers and housewives alike poured into the streets to celebrate. Suharto’s successor, B.J. Habibie, quickly promised reform.

Today in the streets of Jakarta, the din of protest and change that defined 1998 is a distant memory. While Indonesians appreciate the voting rights and civil freedoms gained that year, many also wax eloquent about the “good old days” under Suharto.

They do so because democracy has not brought Indonesia far-sighted leadership. The good news in Indonesia has been widely recognized and recently celebrated—increases in foreign direct investment, continued press freedom, a stable banking sector, solid growth rates—but underneath lies a restlessness for real change that would affect the common person. Elections next year offer the country’s politicians a chance to restore voters’ faith in democracy and reform-–but they also create a dangerous opening for illiberal candidates to lead the country astray by playing on ill-founded nostalgia. Read more of this post

Korean government to inject $36 billion to spur ‘creative economy’

2013-06-05 18:09

Gov’t to inject $36 billion to spur ‘creative economy’

By Yi Whan-woo

The government will invest 40 trillion won ($35.8 billion) over the next five years to turn Korea into a creative economy centered on science and information technologies as well as small and mid-sized enterprises.

Unveiling the master plan to spur the transition, Choi Mun-kee, minister of Science, ICT and Future Planning, said the government’s goal is to foster an environment where creative ideas and innovative technologies lead to new jobs and markets. Read more of this post

China’s debt servicing cost and that Minsky moment; with shockingly high debt service ratio of 29.9% of GDP, no wonder that credit growth is accelerating without contributing much to real growth

China’s debt servicing cost and dat Minsky moment

Kate Mackenzie

| Jun 04 12:48 | 32 comments | Share

Part of the CHINA’S CREDIT CONUNDRUM SERIES

A little update on China’s growing debt-to-GDP ratio, which has caused much alarm and puzzlement this year. We’ve mentioned before a very interesting 2012 BIS paper on national debt servicing ratios, which found the following: …the DSRs’ peak levels are surprisingly similar across countries and time despite different levels of financial development. As a broad rule of thumb, the graph panels suggest that a DSR above 20–25% reliably signals the risk of a banking crisis. There are certainly exceptions to this — the authors of the BIS paper, Mathias Drehman and Mikael Juselius, point out that South Korea well exceeded this range before experiencing a financial crisis; while German and Greek crises occurred before 20 per cent was reached. What about China? Read more of this post

More than 40% of managers that are sent abroad fail

More than 40% of managers that are sent abroad fail

By Vickie Elmer June 4, 2013

Getting a job placement overseas sounds like a dream until it’s not.

The failure rate of expatriates is amazingly high, and experts blame a lack of corporate support and an abundance of family issues.

Some 42% of overseas assignments are judged to be failures by senior executives in a new Right Management survey. That ratio is consistent whether the manager is leaving a company based in Asia, Europe or North America. Executives used their internal targets or perspectives in judging the ex-pat assignment a success or failure. These include whether the worker hit her sales targets or returned early.

“You would think in the globalization of business, of workforce of talent mobility that clearly is at its peak today that companies would smartly invest and think and plan on how to do this,” said Bram Lowsky, group executive vice president for Right Management in Toronto. Read more of this post

Poultry Plant in Deadly Fire Won Plaudits From Chinese

June 4, 2013

Poultry Plant in Deadly Fire Won Plaudits From Chinese

By EDWARD WONG

BEIJING — A local Communist Party official called it an “inspiring” factory three years ago. Local officials later gave it the “leading enterprise” label for its innovation in processing chickens. But the official homages to the Jilin Baoyuanfeng Poultry Plant, where at least 120 people died this week in a fast-moving fire, now serve as little more than stark reminders of the blind eyes turned to the dangerous conditions facing many workers in China.

The tragedy, which some state media reports attributed to an ammonia leak, was China’s worst workplace fire in many years. That, coupled with the earlier glowing assessments of the factory, underscored how government regulation in China is weakened by an evaluation system that bases the promotion of officials on economic growth above virtually all else. How well companies expand the local economy trumps workplace conditions, product safety and pollution — top concerns for many ordinary Chinese and growing sources of unrest. Read more of this post

Confronting China’s Cadmium-Laced Rice Crisis: Doing nothing about toxic cadmium in rice paddies appears to be no longer an option in Hunan Province

06.05.2013 18:31

Confronting China’s Cadmium-Laced Rice Crisis

Doing nothing about toxic cadmium in rice paddies appears to be no longer an option in Hunan Province

By staff reporters Pang Jiaoming, Gong Jing and Liu Hongqiao

Seller’s stalls are empty and aisles have fallen silent at one of China’s largest wholesale markets for rice, the Lianxi Rice Market in the city of Yiyang, north-central Hunan Province. Business at the market – traditionally a trading center for about 20 percent of all rice grown in Hunan – has come to a standstill in the face of a heavy-metal contamination scare. The scare lay dormant for years before exploding onto the public stage in February with frightening media stories about high levels of the heavy metal cadmium in Hunan-grown rice. Follow-up reports were continuing in June as consumers, wholesalers, retailers and farmers digested results of government lab tests and mulled over reports of entire villages being poisoned over the past decade. Read more of this post

A nationwide boom in campus construction in China has provided ample opportunity for graft

Corruption on College Campuses

By Shen Nianzu (沈念祖)
Issue 622, June 2, 2013
In May, Nanchang University President Zhou Wenbin (周文斌) was detained and removed from the 12th National People’s Congress. A source close to the Jiangxi provincial Commission for Discipline Inspection revealed that the case is related to construction of the school’s new campus.

In the past five years, 14 university officials in Jiangxi have been involved in corruption related to campus construction – three of whom were university presidents.

Du Zhizhou (杜治洲), vice-director of the Clean Politics Institution in Beijing University of Aeronautics & Astronautics, found that from 1988 to 2009, out of 200 corruption cases in public universities nationwide, 34 percent were related to construction. Read more of this post

For the first time in a decade, Wall Street is shrinking their footprint in the natural-gas storage business, as booming output damps price volatility and potential profits

June 4, 2013, 6:52 p.m. ET

Wall Street Takes Foot Off the Gas

By DAN STRUMPF

For the first time in a decade, Wall Street banks and trading firms are shrinking their footprint in the natural-gas storage business, as booming output damps price volatility and potential profits. Banks stampeded into commodities in the past two decades in search of big bets. Natural gas held a particular allure because for years the heating fuel was scarce and vulnerable to output disruptions that allowed traders to capitalize on big price swings. But that allure is fading for some. At the end of the first quarter, the amount of storage space leased by financial firms declined 0.8%, the first such drop since 2003, according to an analysis of Federal Energy Regulatory Commission data conducted by BNP Paribas BNP.FR -0.14% . “It’s really difficult for commodities traders to make the kind of money they used to make,” said Brad Hintz, an analyst who tracks investment banks for Sanford C. Bernstein. “The dynamic is changing, and it’s pretty tough for the traders to generate the profitability they’re used to.” Read more of this post

The Threat to the Central-Bank Brand

The Threat to the Central-Bank Brand

04 June 2013

Mohamed A. El-Erian

NEW YORK – The “branding” of modern central banking started in the United States in the early 1980’s under then-Federal Reserve Board Chairman Paul Volcker. Facing worrisomely high and debilitating inflation, Volcker declared war against it – and won. In delivering secular disinflation, he did more than change expectations and economic behavior. He also greatly enhanced the Fed’s standing among the general public, in financial markets, and in policy circles.

Volcker’s victory was institutionalized in legislation and practices that granted central banks greater autonomy and, in some cases, formal independence from long-standing political constraints. To many, central banks now stood for reliability and responsible power. Simply put, they could be trusted to do the right thing; and they delivered. Read more of this post

Don’t Sell Your Soul for Yield, Pimco’s Simon Says; “The road to hell is paved with positive carry”

Jun 3, 2013

Don’t Sell Your Soul for Yield, Pimco’s Simon Says

By Al Yoon

Eking out a little bit of extra yield might be the death knell for an investment manager. That sums up some parting words from Scott Simon as he approached his May 31 retirement after three decades of mortgage-backed securities trading and investing, including the last 13-and-a-half years at bond fund giant Pacific Investment Management Co. Buying bonds for their yield, or “carry” over and above the cost of buying them is not the best approach if investors are sacrificing attention to the bonds’ prices, Simon said. Investors too often mistakenly focus on buying bonds for the interest they pay rather than their fundamental value, particularly after a period of prolonged low interest rates when buyers become starved for higher yields, he said.

“The road to hell is paved with positive carry,” he said, repeating a mantra that traders say he’s proffered before. Read more of this post