Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
- The
ASEAN
Infrastructure
Fund
- An
Update
on
the
Woes
of
the
American
Economy
- Opportunities
in
Unexpected
Territory
(Africa)
Part
2
of
2
IN COLLABORATION WITH
PROUDLY SUPPORTED BY
Note: East Asia 5=PRC; Hong Kong, China, China; Japan; Republic of Korea, Taipei,China; ASEAN 5=Indonesia, Malaysia, Philippines, Singapore,Thailand;ASIA-11=EastAsia-5,ASEAN5,andIndia. Sources: (Taken from ADBI Working Paper Series) ADB 2007, 2008; IMF 2007; and World Bank 2008b
With
the
implementation
of
the
AIF,
member
states
can
be
more
certain
in
their
borrowing
costs
involved
prior
to
engaging
in
domestic
infrastructure
developmental
projects.
As
stated
in
its
Financial
Analysis
document
from
the
Report
and
Recommendation
of
the
President
(RRP)
to
the
Board
of
Directors
of
the
ADB
report,
the
AIFs
stated
goals
for
borrowing
costs
are
to
keep
it
low
by
maintaining
the
high
investment-grade
rating
from
major
international
rating
agencies.
With
this
priority
set
by
the
ADB,
there
can
be
more
transparency
in
the
loan
process
from
the
fund
as
well
as
proper
accounting
of
funds
utilisation.
Projected Infrastructure Requirements in ASEAN 20062015 (US$ billions)
Sector Power Transport Water and Sanitation Telecom Total New Capacity 170.3 95.6 98.8 30.9 395.6 Maintenance 46.0 61.2 60.6 32.7 200.5 Total 216.3 156.8 159.4 63.6 596.1
From the table above, the projected infrastructure requirements for ASEAN for the years 2006 to 2015 are shown. A burgeoning middle class amongst its populace as well as the region constitutes an increase in aggregate demand of normal and luxury goods and services. Due to this, ASEAN states are faced with the increasing need to maintain and upgrade domestic railway lines and roads, as well as expanding ports and airports. Thus, the implementation of the AIF is timely for such changes. Hurdles to Overcome With the implementation of the AIF, ASEAN nations are able to pool resources together to address infrastructure inequality, poverty reduction and trade integration between member states. As shown in the table below, vast disparities still exist between the ASEAN member states. For an equitable growth of the region, imbalances in basic infrastructure among member states should be addressed. With equitable growth across the region, social and political instability can be addressed, and this leads to further improvement in investor sentiment for the region, leading to further growth. Infrastructure Access Indicators in Selected ASEAN Member Countries (% of total population) Infrastructure Electricity Water Sanitation Teledensity Road Density (population) Road Density (area) Cambodia 10.0 34.0 16.0 38.0 1.0 70.0 Indonesia 80.0 78.0 52.0 127.0 1.7 203.0 Myanmar 5.0 80.0 73.0 8.0 Viet Nam 60.0 73.0 41.0 88.0 1.2 287.0
Notes: Electricity: Access to electricity network; Water: access to improved water sources; Sanitation: access to improved sanitation; Teledensity: telephone subscribers per thousand population; Road density (population): road km/ 1,000 people; Road density (area): road km/ 1,000sq.km; -- where data is not available. Source: Estache and Goicoechea 2005
The cause of such imbalance in infrastructure between member states stem not just from political indecisiveness, but also in the unequal (and sometimes unfair) allocation of the costs and benefits involved in infrastructure projects between member states. Such unequal allocation of costs and benefits include the need for landlocked countries such as Laos to spend more resources to transport materials from maritime trade routes into its border. Furthermore, mountainous regions of certain countries are more prone to natural disasters such as landslides, leading to additional spending on infrastructure projects. As such, the AIFs funds usage have to be managed prudently to enable proper distribution to the members that need it the most, yet maintaining an optimal usage of resources. Note of Optimism
In conclusion, it is noteworthy that ASEAN is one step closer in realising its vision of full economic integration. However, there exists hurdles in the form of enabling inclusive growth within the region. Myanmar, one of the poorer nation of the bloc, has opted out of the AIF for the time being. An effective tool such as the AIF is able to greatly benefit the poorer countries and equalise the imbalance in development in the region. Malaysian Prime Minister Najib Razak, whos country has the greatest equity contribution to the fund (US$150 million), has stated his belief in the need for infrastructure spending. "A 1-per-cent increase in infrastructure spending in Asia can increase private consumption by 1 per cent to 2 per cent of GDP (gross domestic product), and will benefit the wider investment community as well as ASEAN nations and their people," he was quoted as saying by The Star. Also, ASEAN should remember the greater picture. China, India and even Europe are looking to engage ASEAN on a deeper level. Aside from regional integration of the bloc, the grouping should not forget to continuously strengthen and grow its international links, all the while navigating the tumulus political and economic landscape of the global economy. An intergovernmental agreement between member states of a certain region, with the stated goals of reduction in barriers to trade and freer flow of goods and services. Refers to the quality of a company or funds credit which depends on amount of debt owed , performance and outlook, among other factors. Overall economic growth where everyone benefits from, and not just a selected few. Sources: www.asean.org and related articles, www.adb.org and related articles. 4 Copyright 2011 SMU Economics Intelligence Club
Bernanke has requested that Congress work on legislation that targets the following areas: improving the housing sector, promoting trade and improving an overly complex tax code, creating jobs, planning for the government owned Fannie Mae and Freddie Mac, increasing the ease in refinancing mortgages and making it easier for banks to rent out properties they have come to own on defaulted mortgages. 5 Copyright 2011 SMU Economics Intelligence Club
As important as the domestic factors are to the U.S recovery, the considerable pressures of the undervalued Chinese currency and Europes debt crisis still loom over investor confidence in the U.S. The push for punishment of the Chinese undervaluation of the Yuan is rooted in the fact that a cheaper currency makes trade with that currency more attractive, thereby crowding out other exporters. Bernanke highlighted that this could be a serious threat to a global economic recovery. Of course such legislation has been highly debated and has caused international animosity. However, the outcome of the legislation is not as important as the concern it highlights: Chinas Yuan is a major opposing factor on the recovery of the global economy. Finally, the Euro-zone crisis continues to cause investor shakiness in the U.S. especially with the most recent news of the possible government-backed break up of one the largest banks in Europe, Dexia SA. Due to the unpredictability of the outcome of the Euro-zone situation, as seen from the graph below, equity markets have been spiking and dropping based purely on speculation. It seems that volatility is the only commonality in the contemporary economy. This instability and the distress Americans are facing are embodied in the protests against Wall Street. With unemployment at these levels and little being done to improve the situation, one can only sympathize with these individuals.
As we move forward, we should be watching moves by Congress and what legislation will be created to fuel the economy, specifically, job creation and the housing market. We should also be watching the Feds actions and the slim possibility of a third round of QE. Finally, we should be watching Europe and China carefully as the consequences of their actions weigh heavily on the American economy. A monetary policy used by a central bank to inject money into an economy in order to stimulate it to engage in more investment and consumption. Financial obligations and loans lasting more than one year. Using Purchasing Power Parity calculation method, the Yuan is calculated as being too cheap with respect to the U.S. dollar. Sources: Bloomberg, Wall Street Journal 6 Copyright 2011 SMU Economics Intelligence Club
through developing itself as a land port for the region and moving upstream into processing of diamonds. Rwanda, a country with no natural resources, is today one of the best managed countries in Africa, achieving 4.1% growth in 2009 under a government with popular support. Africas future growth path Whilst foreign investment remains primarily resource-driven, the development of infrastructure and the influx of capital into Africa should reduce the costs of doing business. Better managed countries with lower levels of corruption will be more likely to attract non- resource related industries. Similarly, increased urbanization itself the result of growth will make it easier for manufacturers to find workers and for businesses to reach a critical mass of consumers. The responsibility is on the various levels of government within each African state to adopt the right policies to support future growth. Those who seek to write themselves into Africas growth story would do well to remember the diversity of Africa and be selective about where they go. And those who stick to the view of a homogenous Africa mired in poverty and violence will be overlooking what is likely to be the fastest growing region in the world. A monetary policy used by a central bank to inject money into an economy in order to stimulate it to engage in more investment and consumption. Financial obligations and loans lasting more than one year. Using Purchasing Power Parity calculation method, the Yuan is calculated as being too cheap with respect to the U.S. dollar.
Sources: Ernst and Young, Harvard Business Review, UNCTAD Stat Database, The Economist 8 Copyright 2011 SMU Economics Intelligence Club
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large- cap common stocks actively traded in the United States. It has been widely regarded as a gauge for the large cap US equities market The MSCI Asia ex Japan Index is a free float-adjusted market capitalization index consisting of 10 developed and emerging market country indices: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. The STOXX Europe 600 Index is regarded as a benchmark for European equity markets. It represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
Correspondents Shane Ai Changxun changxun.ai.2010@smu.edu.sg Singapore Management University Singapore Kwan Yu Wen (Designer) ywkwan.2010@economics.smu.edu.sg Singapore Management University Singapore George Lee george.lee.2009@economics.smu.edu.sg Singapore Management University Singapore
Ben Lim ben.lim.2010@smu.edu.sg Singapore Management University Singapore Gabriel Tan gtan@bu.edu Boston University USA
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