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2point6billion.com discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.



Monthly Archives: December 2012

Foreign Direct Investment In Asia: A Balancing Act (Part 2/2)

Though FDI remains a key factor that drives economic growth in Asia, at the same time decision makers need to prioritize growth of domestic industries and products.

By Anthony Gokianluy

Many nations in Asia are considered highly entrepreneurial, with poverty cited as the main reason for this entrepreneurial spirit. In the Philippines, small and medium-sized enterprises comprise the majority of all business establishments and about 60% of the exporting firms in the Philippines. 55% of the Philippine labor force is employed by SMEs, contributing approximately 30% to total domestic volume sales.

However, many entrepreneurs face challenges expanding their businesses in developing countries in Asia due to a lack of research and development, and inadequate access to technology. These are advantages inherent to many large multinational companies. Financing is a grave concern for most start-ups, since most entrepreneurs starting small business in competitive markets have difficulty acquiring capital and suffer from a lack of good marketing advice and various logistical problems. Continue reading

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Foreign Direct Investment In Asia: A Balancing Act (Part 1/2)

Foreign direct investment (FDI) has helped to boost the economies of many states in Asia. At the same time, however, it has also had a negative effect on local businesses who may experience lower sales and slower growth rates.

By Anthony Gokianluy

FDI has long been a staple source of income for many nations in Asia. In Southeast Asia, FDI is particularly important in stimulating economic growth, capitalizing on human and material resources to manufacture goods for local consumption or for export. This FDI, as the currency of multinational companies, may also increase employment rates in particular industries.

However, most FDI seeks to penetrate Asian markets specifically for the purpose of capturing market share and introducing new products to untapped consumer bases. Many of the multinational companies that provide a majority of the FDI bring highly advanced production processes and marketing techniques in order to dominate certain industries, such as the food industry. Local businesses, in comparison, do not have the resources or the technological expertise to compete with these multinational companies and end up falling behind in sales and overall competitiveness. Continue reading

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From China To ASEAN: Rebalancing India’s Trade

New Delhi has actively worked with Beijing to address its massive bilateral trade deficit. However, it has another option. India can seek greater economic integration with ASEAN and substitute its imports from China with that of ASEAN. The India-ASEAN Summit on December 20 would be a good place to start.

By Spike Nowak & Daniel Jacobius Morgan

Dec. 19 – In August 2012, at the ninth meeting of the India-China Joint Group on Economic Relations, Trade, Science and Technology in New Delhi, the main point of concern for India’s Minister of Commerce and Industry, Anand Sharma, was the widening trade deficit between the two countries – $40 billion for the year ending in March 2012. India’s trade deficit with China has increased by a massive 4,000% in the last 10 years.

At the meeting, the Indian and Chinese commerce ministers agreed to set up a joint working group to address trade issues, including the trade deficit. However, India has another option. Instead of relying on the working group to fix India’s trade woes, New Delhi can actively seek greater economic integration with the Association of Southeast Asian Nations (ASEAN). It is important for India to pursue this option at the next ASEAN-India Summit scheduled to be held in New Delhi on December 20-21. Continue reading

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Singapore-European Union Conclude Free Trade Agreement

Dec. 18 – Singapore concluded an agreement with the European Union (EU) this weekend in a deal that will grant both parties improved access to each other’s markets. Singapore is the first Southeast Asian nation to conclude such a deal, with the agreement seeing the EU eliminating tariffs on all imports from Singapore over a five-year period.

The FTA will remove 80 percent of all Singapore-EU tariffs, with exporters of electronics, pharmaceuticals, chemicals and processed foods benefiting the most. Government procurement will also be affected with both sides making extensive commitments that guarantee access to the other’s services markets – good news also for the financial services industry. Continue reading

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Indonesia to Redenominate Rupiah in 2014

The 100,000 Rupiah Bill Will Become 100 Rupiah

Dec. 17 – The Indonesian government has announced plans to reduce the number of zeros on the rupiah by three beginning in 2014. The redenomination will simplify payment processes in a national currency upon which many people already ignore the last three zeroes.

The country has one of the highest value denominated currencies in Asia, with only Vietnam and Mongolia having higher denominated banknotes. The phasing in of new banknotes will begin in 2014 and will continue until 2016. This means that for a three-year period there will be notes showing both units of measurement that will continue to be legal tender. Continue reading

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Indian Firms Encouraged to Access China’s Growing Import Market

Dec. 12 – Chinese diplomat Dai Bingguo has recently said that Indian firms should seize the opportunities offered by the Chinese import market as a method to combat India’s large trade deficit with China. China has similarly been encouraging its own companies to buy more from India to ensure that the current trade imbalance does not spin out of control.

“China pays close attention to the trade imbalance. We have already encouraged Chinese companies to import more from India and will continue to do so,” said Dai.

China’s total imports are estimated to reach US$10 trillion during the implementation of China’s 12th Five-Year Plan. This projection is based on China altering its economy as it transitions from dependency on exports to domestic consumption. Continue reading

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Retail Reform Policy Approved by Indian Parliament’s Lower House

By Daniel Fleishman

Dec. 7 – MPs in India’s Lok Sabha (lower house) on Wednesday voted to approve a government decision allowing foreign supermarkets to expand into India. Considered one of the most momentous reforms in the last 20 years, this decision opens the door for FDI of up to 51 percent in India’s multi-brand retail industry.

Despite the fact that the government does not legally require lawmaker approval to enact this policy, the legislative endorsement carries significant symbolic value as a seal of approval for the continuation of the pro-business economic policy championed by Prime Minister Manmohan Singh. Continue reading

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