How Asia's Money Flows, Policy They Will Set

Where we are today is really not the place we have always been, by this I mean by reference to Asia's Century. Whilst this is Asia Century that there is no doubt, but it came about through a well oiled cycle. Asia initial growth was a direct result of Western funding, money or a better term investments flowed from the US and Europe directly into the two waves of growth that I refer in a previous mail.  Read here the third wave. 

It's right to say that the US and to some extent Europe kicked this process off in building Japan and Korea up from what were the ashes of the 2nd World War. To some extent the US and European funds continued to flow for the 2nd wave of growth which included Taiwan, Vietnam and later China. At this stage Japan and Korea along with the US and Europe invested their hard-earned savings building what we have today a China that will soon, if it hasn't already will take the number 1 slot for the largest economy. Without this global approach to investment I'm sure this region would have struggled. But of course this was not a one way street, as big corporations were able to leverage cheap labour as the emerging markets emerged.

Of the 3rd wave, this was heavily skewed in favour of investors from the now vibrant North and East Asia. Whilst of course East Asia were funding US and European debt through their purchase of treasuries. The economic cycle continues unabated. The dollar has secured stability and continued as the world's reserve currency. China and Japan are by far the largest holders of US treasuries holding approximately $1 Trillion each a phenomenal amount of debt. Add to this Hong Kong and Taiwan who each have $200 Billion of treasuries, then China conceivably sits on $1.4 Trillion. That's if you subscribe to the 1949 civil war split, which of course you have to as it happened. Chiang Kai-shek, of the Nationalist Party, met with Communist leader Mao Tse-tung in the south-western city of Chongqing, following which the nationalist fled china and established a beachhead across the Taiwan strait.  China have never recognized the break away province and Taiwan have not declared independence.  You could of course argue which belongs to which but to argue two separate countries would perhaps be nebulous, they are akin to North and South Vietnam.  As for US treasuries it's fair to say that 55% of US debt is held by Asian countries, this is all before you consider Asian investment funds in US equity, Japan alone have a further $1 Trillion invested. 

Note: Japan remains Asia’s largest net foreign creditor with more than $3.5 trillion in overseas assets, but with China’s annual surpluses of $1 trillion and foreign exchange reserves of $3 trillion, China is expected to catch up with Japan by 2020. Together, Japan and China hold nearly $7 trillion in foreign assets across foreign currency reserves, portfolio investment, and direct investment. In terms of total FDI stock, China’s nearly $1.4 trillion ranks just ahead of Japan.

As you can see when I refer to this Century as Asia's Century, I not only mean growth belongs to Asia the Century is owned by them lock, stock and barrel, just as the 20th was owned by the US and the 19th was the Brits.

The west should be concerned if they are not willing to seek out new markets. The UK is absorbed in chasing Brexit aligning themselves with an economy that has never been proven, for this will be a handicap as we move through the next few years. 

Asian countries are reducing their desire for Western debt and have chosen instead to invest in Asia, in themselves.  Monies from richer economies are flowing to the South to what is Asia's new factory base Indonesia. Indonesia a country of 260M people with an average factory floor salary one third of China. Indonesia is predicted, by PWC to be the worlds 5th largest economy by 2030. It will have one of the world's largest modern militaries. Indonesia will be a powerful force that will influence policy not just for Asia.  Ignore it if you wish, as one commentator to my blog has said we should ignore this region to reduce our carbon foot print. It's difficult to argue when the logic flows on that level, yet we send our North sea shell fish to Thailand... read that story if you dare it's scary.... read here

Thank you once again for taking the time to read my disjointed ramblings. Any comments you have would be greatly appreciated. Please do follow me.  I try to update on a daily basis. 

Thank you Nigel Saywell-Lee.

Where we are today is really not the place we have always been, by this I mean by reference to Asia's Century. Whilst this is Asia Century that there is no doubt, but it came about through a well oiled cycle. Asia initial growth was a direct result of Western funding, money or a better term investments flowed from the US and Europe directly into the two waves of growth that I refer in a previous mail.  Read here the third wave. 

It's right to say that the US and to some extent Europe kicked this process off in building Japan and Korea up from what were the ashes of the 2nd World War. To some extent the US and European funds continued to flow for the 2nd wave of growth which included Taiwan, Vietnam and later China. At this stage Japan and Korea along with the US and Europe invested their hard-earned savings building what we have today a China that will soon, if it hasn't already will take the number 1 slot for the largest economy. Without this global approach to investment I'm sure this region would have struggled. But of course this was not a one way street, as big corporations were able to leverage cheap labour as the emerging markets emerged.

Of the 3rd wave, this was heavily skewed in favour of investors from the now vibrant North and East Asia. Whilst of course East Asia were funding US and European debt through their purchase of treasuries. The economic cycle continues unabated. The dollar has secured stability and continued as the world's reserve currency. China and Japan are by far the largest holders of US treasuries holding approximately $1 Trillion each a phenomenal amount of debt. Add to this Hong Kong and Taiwan who each have $200 Billion of treasuries, then China conceivably sits on $1.4 Trillion. That's if you subscribe to the 1949 civil war split, which of course you have to as it happened. Chiang Kai-shek, of the Nationalist Party, met with Communist leader Mao Tse-tung in the south-western city of Chongqing, following which the nationalist fled china and established a beachhead across the Taiwan strait.  China have never recognized the break away province and Taiwan have not declared independence.  You could of course argue which belongs to which but to argue two separate countries would perhaps be nebulous, they are akin to North and South Vietnam.  As for US treasuries it's fair to say that 55% of US debt is held by Asian countries, this is all before you consider Asian investment funds in US equity, Japan alone have a further $1 Trillion invested. 

Note: Japan remains Asia’s largest net foreign creditor with more than $3.5 trillion in overseas assets, but with China’s annual surpluses of $1 trillion and foreign exchange reserves of $3 trillion, China is expected to catch up with Japan by 2020. Together, Japan and China hold nearly $7 trillion in foreign assets across foreign currency reserves, portfolio investment, and direct investment. In terms of total FDI stock, China’s nearly $1.4 trillion ranks just ahead of Japan.

As you can see when I refer to this Century as Asia's Century, I not only mean growth belongs to Asia the Century is owned by them lock, stock and barrel, just as the 20th was owned by the US and the 19th was the Brits.

The west should be concerned if they are not willing to seek out new markets. The UK is absorbed in chasing Brexit aligning themselves with an economy that has never been proven, for this will be a handicap as we move through the next few years. 

Asian countries are reducing their desire for Western debt and have chosen instead to invest in Asia, in themselves.  Monies from richer economies are flowing to the South to what is Asia's new factory base Indonesia. Indonesia a country of 260M people with an average factory floor salary one third of China. Indonesia is predicted, by PWC to be the worlds 5th largest economy by 2030. It will have one of the world's largest modern militaries. Indonesia will be a powerful force that will influence policy not just for Asia.  Ignore it if you wish, as one commentator to my blog has said we should ignore this region to reduce our carbon foot print. It's difficult to argue when the logic flows on that level, yet we send our North sea shell fish to Thailand... read that story if you dare it's scary.... read here

Thank you once again for taking the time to read my disjointed ramblings. Any comments you have would be greatly appreciated. Please do follow me.  I try to update on a daily basis. 

Thank you Nigel Saywell-Lee.

Trump's Naughty List Drives Asia Growth

Trump's cross hairs, there's a pun but not intended. China, South Korea and India on Trump's naughty list it's not difficult to see who the beneficiaries are: For sure Indonesia but not just Indonesia, Vietnam has benefited. Asia have redoubled their efforts to increase trade and trade relationships, 28 from 44 FTAs “Free Trade Agreements” proposed are between Asian nation states. Cohesive active even pro-active dyads, trade relationships have grown significantly since the global crisis, weathered, even ignored the Trump doctrine, this is set to only improve further.

I bring you back to an earlier note of mine, one where I talk about Asia's third wave, it's worth a read, click here. The other where I cover PWC, their forecast for the World Economic growth, in a few short years PWC claim on a measure of GDP that 4 of the top 5 countries will be Asia. China, USA, Japan, India and Indonesia.

Two situations are emerging, in reality they are already upon us. One technology is no longer the domain of the USA, perhaps it's too early to write  the US off, for innovation or R&D. For several decades North Asia has maintained the industrial mantle for mass production with labour split between Japan, South Korea and China adding Taiwan and Hong Kong at a later stage.  From these five countries they account for $4.2 Trillion Asian exports, this is equivalent to North America, the European Union combined.

In the year 2000 China represented less than 10% of Asia's technology exports, today 44%. Huawei, Lenovo, Haier, and BYD Automobile Company all rank ahead of their Asian peers and Western rivals in categories such as telecom equipment, laptops, appliances, and electric cars. But of course their manufacturing links are all highly integrated as China relies on South Korea and Japan for their semi-conductors.

What Asia is aware of, their markets were once primarily the West this is no longer the case, their markets today are other Asian countries. Hence, the dawning of an age in shifting manufacturing to the south productivity grew, whilst opening new markets to export too. 

Cost of labour to the north has increased as has the cost of living. I've mention in an earlier document that average daily rate on the manufacturing shop floor is $30, Indonesia and Vietnam are still able to maintain $10 per day, with a substantial workforce, a median age below 30.

Indonesia has vast Industrial parks one of which can be seen in the image above. Companies from the west such as Siemens, ABB are already established, but, also from Asia Foxconn, JVC, Omron etc.  Pegatron will invest $300M opening a 2 hectare manufacturing plant in just one of Indonesia's industrial zones. Foxconn and Pegatron manufacture in excess of 80% of the world's iPhones. Hyundai announced in Dec 2018 plans to move electric car manufacturing to Indonesia with an investment of $800M. Hyundai anticipate 53% of their cars will head to Asia and Australia, the remainder serving the Indonesian domestic market. Not to be out done VW will build the Tiguan in Indonesia with a €50M investment.

Japan since the 1970s have invested in Southeast Asia but in recent years has increased its investment to $20billion, they are looking to manufacture Nissan electric and flexfuel (Ethanol and other biofuel) vehicles. 

I reaffirm the west should look to join their compatriots, explore the possibilities of cheaper markets for manufacture. Positioning for a burgeoning middle class able to consume at the rate that a westerner used to be able to. 

Since 2014, US, European, and even Chinese companies have outsourced to Asian nations, Japan and South Korea have led the way in moving manufacturing to this region. South East Asia has attracted more annual investment than China.  Asian’s total annual trade amounts to nearly $2.2 trillion, one-quarter of which is within Asian, 15 percent with China, and 10 percent with Japan.

Since the Asian-China Free Trade Area (ACFTA) established in 2000 this created by population (combined population of 2.5 billion people) the largest free-trade agreement in the world, South East and East Asia has become China’s third largest trading partner with $400 billion in annual trade. Don't be surprised if Asia displaces Europe and North America as the primary destination for Asia exports.

Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead. 

Can you afford to miss Indonesia in the 21C.

Trump's cross hairs, there's a pun but not intended. China, South Korea and India on Trump's naughty list it's not difficult to see who the beneficiaries are: For sure Indonesia but not just Indonesia, Vietnam has benefited. Asia have redoubled their efforts to increase trade and trade relationships, 28 from 44 FTAs “Free Trade Agreements” proposed are between Asian nation states. Cohesive active even pro-active dyads, trade relationships have grown significantly since the global crisis, weathered, even ignored the Trump doctrine, this is set to only improve further.

I bring you back to an earlier note of mine, one where I talk about Asia's third wave, it's worth a read, click here. The other where I cover PWC, their forecast for the World Economic growth, in a few short years PWC claim on a measure of GDP that 4 of the top 5 countries will be Asia. China, USA, Japan, India and Indonesia.

Two situations are emerging, in reality they are already upon us. One technology is no longer the domain of the USA, perhaps it's too early to write  the US off, for innovation or R&D. For several decades North Asia has maintained the industrial mantle for mass production with labour split between Japan, South Korea and China adding Taiwan and Hong Kong at a later stage.  From these five countries they account for $4.2 Trillion Asian exports, this is equivalent to North America, the European Union combined.

In the year 2000 China represented less than 10% of Asia's technology exports, today 44%. Huawei, Lenovo, Haier, and BYD Automobile Company all rank ahead of their Asian peers and Western rivals in categories such as telecom equipment, laptops, appliances, and electric cars. But of course their manufacturing links are all highly integrated as China relies on South Korea and Japan for their semi-conductors.

What Asia is aware of, their markets were once primarily the West this is no longer the case, their markets today are other Asian countries. Hence, the dawning of an age in shifting manufacturing to the south productivity grew, whilst opening new markets to export too. 

Cost of labour to the north has increased as has the cost of living. I've mention in an earlier document that average daily rate on the manufacturing shop floor is $30, Indonesia and Vietnam are still able to maintain $10 per day, with a substantial workforce, a median age below 30.

Indonesia has vast Industrial parks one of which can be seen in the image above. Companies from the west such as Siemens, ABB are already established, but, also from Asia Foxconn, JVC, Omron etc.  Pegatron will invest $300M opening a 2 hectare manufacturing plant in just one of Indonesia's industrial zones. Foxconn and Pegatron manufacture in excess of 80% of the world's iPhones. Hyundai announced in Dec 2018 plans to move electric car manufacturing to Indonesia with an investment of $800M. Hyundai anticipate 53% of their cars will head to Asia and Australia, the remainder serving the Indonesian domestic market. Not to be out done VW will build the Tiguan in Indonesia with a €50M investment.

Japan since the 1970s have invested in Southeast Asia but in recent years has increased its investment to $20billion, they are looking to manufacture Nissan electric and flexfuel (Ethanol and other biofuel) vehicles. 

I reaffirm the west should look to join their compatriots, explore the possibilities of cheaper markets for manufacture. Positioning for a burgeoning middle class able to consume at the rate that a westerner used to be able to. 

Since 2014, US, European, and even Chinese companies have outsourced to Asian nations, Japan and South Korea have led the way in moving manufacturing to this region. South East Asia has attracted more annual investment than China.  Asian’s total annual trade amounts to nearly $2.2 trillion, one-quarter of which is within Asian, 15 percent with China, and 10 percent with Japan.

Since the Asian-China Free Trade Area (ACFTA) established in 2000 this created by population (combined population of 2.5 billion people) the largest free-trade agreement in the world, South East and East Asia has become China’s third largest trading partner with $400 billion in annual trade. Don't be surprised if Asia displaces Europe and North America as the primary destination for Asia exports.

Whilst Europe squabbles over regulation and authoritarianism Asia is racing ahead. 

Can you afford to miss Indonesia in the 21C.

For Success First Appreciate The Past

To do business in Indonesia you first have to understand certain elements of history. Struggles, Occupation, Independence, Communist tendencies and Authoritarian regimes, which have led to this point today.

Indonesia's technically was colonized by the Dutch for a 126 years. Indonesia’s view is this period ended in 1942 as the Japanese rolled in taking control for a further 3 years. It's important to point out the vastness of the Indonesian archipelago, overlaid on Europe it would stretch from London to Tehran. The Dutch cherry picked parts of Indonesia which were important for trade and logistics, they never really took total control. In fact the Indonesian were grouped into Kingdoms with each leader taking responsibility for their individual part corralling their like-minded people into tribes, led by a sultan or King.

I say the Dutch colonial period terminated in 1942, which is not strictly true. After the war ended and the Japanese surrendered the Dutch attempted a return.  By now the Indonesian had mustered a kind of guerrilla warfare experience whilst making life difficult for the Japanese.  Needless to say colonial incursion were no longer tolerated.

The period that followed was brutal the Dutch Army were in many instances likened to the Nazi's with their behaviour and atrocities that followed prior to full independence. No story can be complete until you write about Christmas of 1946. A Battalion under the command of Captain Raymond Westerling moved on the South Celebes, now known as Sulawesi over a two-month period they wiped villages off the map killing 4,000 people.  This was a war crime which has never been atoned for.  The irony in this situation was that whilst this barbaric act took place.  Nazis were being tried at The Hague for similar atrocities. President Sokarno declared Independence upon the Japanese surrender it took a further 3 years to rid the archipelago of the murderous atrocities to finally win freedom.

The Asia struggles were far from over as the Russian army were sweeping down through Manchuria and into the Korean Peninsula. China was in a state of civil war ending in 1949 with the victor being the Communist leader Mao Zedong over the Nationalist army of Chiang Kai-shek, whose Kuomintang retreated from the mainland onto Taiwan. Taiwan was given tolerance as Mao was unwilling to pursue further allowing Chiang Kai-shek to save face in a way the Chinese only understand.

Of course Vietnam became a focus as did South Korea. Much has been documented on this point. In the 60s Indonesia fell under the control of Suharto a brutal dictator given free rein by his American backers.  Suharto ruled for a further 32 years, that is until the end of the cold war. Some would say he was kept in power for the few years following the fall of the Berlin wall by his very canny wife Siti (Tien) Hartinah m. 1947–1996. Tien Suharto was widely reported as the power behind her husband’s throne, a meddling and unscrupulous woman who gave a new meaning to financial corruption. She was called Ibu Negara, Mother of the Nation, and she never let anyone forget that she, unlike her husband, was descended from royal stock. According to local belief it was she, because of her descent, who possessed the wahyu, or gift of power. Now that she was dead, her husband can no longer lay claim to it.

After her death the Soharto dynasty was collapsing giving way in 1998 to a true democracy in transition, not glossing over this as the fall of Soharto was not a smooth affair.  The country erupted into a short civil war. Students were rioting, gangs were forming on all major arteries, I remember this well as I was in the heart of the city on the 24th floor of a major telecom operators office building putting together a 5-year plan, we abandoned the meeting recognizing the stupidity of the situation as no one could be clear as to the next day let alone look 5 years out.  The brunt of the anger was metered out to the Chinese communities many were killed others fled for their lives. My journey that day was onto London but my trip through the marauding masses was not so easy. My driver Wayan was excellent, and we made it to the airport unscathed. Many Indonesian Chinese were also there, their journey more fraught than mine. Most had travelled in the boot of their car, some wrapped in carpets.  On my arrival in London I was met by the MOD who later visited me in my hotel to strategies a military led evacuation of Brits in Jakarta. Strange times indeed.

Here we are some 20 years later with a leader, imaginative, honest and intent on breaking the elites past strangle hold, this he is doing at incredible speed.

This is just a potted history lesson, over time I may embellish in greater detail but for now the purpose of this blog is to show the future this dynamic democracy has and the opportunities it holds to those that are prepared to step a toe into this country deemed to be the 5th biggest economy.  It would be wrong to say take a risk on this market because that would be a phrase you could use some 20 years ago.  This is now a maturing market full of opportunity. As the saying goes the best time to plant a tree was 20 years ago the 2nd best time is now!

To do business in Indonesia you first have to understand certain elements of history. Struggles, Occupation, Independence, Communist tendencies and Authoritarian regimes, which have led to this point today.

Indonesia's technically was colonized by the Dutch for a 126 years. Indonesia’s view is this period ended in 1942 as the Japanese rolled in taking control for a further 3 years. It's important to point out the vastness of the Indonesian archipelago, overlaid on Europe it would stretch from London to Tehran. The Dutch cherry picked parts of Indonesia which were important for trade and logistics, they never really took total control. In fact the Indonesian were grouped into Kingdoms with each leader taking responsibility for their individual part corralling their like-minded people into tribes, led by a sultan or King.

I say the Dutch colonial period terminated in 1942, which is not strictly true. After the war ended and the Japanese surrendered the Dutch attempted a return.  By now the Indonesian had mustered a kind of guerrilla warfare experience whilst making life difficult for the Japanese.  Needless to say colonial incursion were no longer tolerated.

The period that followed was brutal the Dutch Army were in many instances likened to the Nazi's with their behaviour and atrocities that followed prior to full independence. No story can be complete until you write about Christmas of 1946. A Battalion under the command of Captain Raymond Westerling moved on the South Celebes, now known as Sulawesi over a two-month period they wiped villages off the map killing 4,000 people.  This was a war crime which has never been atoned for.  The irony in this situation was that whilst this barbaric act took place.  Nazis were being tried at The Hague for similar atrocities. President Sokarno declared Independence upon the Japanese surrender it took a further 3 years to rid the archipelago of the murderous atrocities to finally win freedom.

The Asia struggles were far from over as the Russian army were sweeping down through Manchuria and into the Korean Peninsula. China was in a state of civil war ending in 1949 with the victor being the Communist leader Mao Zedong over the Nationalist army of Chiang Kai-shek, whose Kuomintang retreated from the mainland onto Taiwan. Taiwan was given tolerance as Mao was unwilling to pursue further allowing Chiang Kai-shek to save face in a way the Chinese only understand.

Of course Vietnam became a focus as did South Korea. Much has been documented on this point. In the 60s Indonesia fell under the control of Suharto a brutal dictator given free rein by his American backers.  Suharto ruled for a further 32 years, that is until the end of the cold war. Some would say he was kept in power for the few years following the fall of the Berlin wall by his very canny wife Siti (Tien) Hartinah m. 1947–1996. Tien Suharto was widely reported as the power behind her husband’s throne, a meddling and unscrupulous woman who gave a new meaning to financial corruption. She was called Ibu Negara, Mother of the Nation, and she never let anyone forget that she, unlike her husband, was descended from royal stock. According to local belief it was she, because of her descent, who possessed the wahyu, or gift of power. Now that she was dead, her husband can no longer lay claim to it.

After her death the Soharto dynasty was collapsing giving way in 1998 to a true democracy in transition, not glossing over this as the fall of Soharto was not a smooth affair.  The country erupted into a short civil war. Students were rioting, gangs were forming on all major arteries, I remember this well as I was in the heart of the city on the 24th floor of a major telecom operators office building putting together a 5-year plan, we abandoned the meeting recognizing the stupidity of the situation as no one could be clear as to the next day let alone look 5 years out.  The brunt of the anger was metered out to the Chinese communities many were killed others fled for their lives. My journey that day was onto London but my trip through the marauding masses was not so easy. My driver Wayan was excellent, and we made it to the airport unscathed. Many Indonesian Chinese were also there, their journey more fraught than mine. Most had travelled in the boot of their car, some wrapped in carpets.  On my arrival in London I was met by the MOD who later visited me in my hotel to strategies a military led evacuation of Brits in Jakarta. Strange times indeed.

Here we are some 20 years later with a leader, imaginative, honest and intent on breaking the elites past strangle hold, this he is doing at incredible speed.

This is just a potted history lesson, over time I may embellish in greater detail but for now the purpose of this blog is to show the future this dynamic democracy has and the opportunities it holds to those that are prepared to step a toe into this country deemed to be the 5th biggest economy.  It would be wrong to say take a risk on this market because that would be a phrase you could use some 20 years ago.  This is now a maturing market full of opportunity. As the saying goes the best time to plant a tree was 20 years ago the 2nd best time is now!