'Leadership position' helped SingTel snag iPhone contract | ||
| Telco rings up $3.96b in full-year gains despite challenging environment | ||
| By Chua Hian Hou | ||
The telco's chief executive for Singapore, Mr Allen Lew, told a conference on its results yesterday that the 'leadership position' its 2.57 million mobile customers here had conferred on it had definitely 'contributed to the iPhone deal'. SingTel announced on Monday that it will launch the iPhone later this year, ending months of speculation about whether Singapore would ever get the device. Rival telcos StarHub and M1 remain in discussions with Apple. StarHub has indicated that it was confident of securing distribution deals. Mr Lew told the conference that the company intends to ensure that its pole position in the market is 'maintained and unchallenged'. It reiterated this stance in a statement accompanying its results, where it noted the focus in Singapore is on gaining market share. SingTel underlined its strength by unveiling a solid set of numbers yesterday. Net profit for the year to March 31 was $3.96 billion, up 4.8 per cent from the year before, with revenue rising 11 per cent to $14.8 billion. Earnings per share for the year was 24.9 cents, up from 23.25 cents, while group net asset value per share rose to $1.32, from $1.312. The firm declared a final dividend of 6.9 cents per share for a total payout of 12.5 cents per share. It will revise its dividend payout ratio, from 40 per cent to 50 per cent of underlying earnings, to 45 per cent to 60 per cent. Group chief executive Chua Sock Koong said 'all our businesses are performing well and the group's fundamentals are strong' despite a challenging environment, especially in Singapore and in Australia. The results marked her first year at the helm of the Asia-Pacific's largest telecommunications group. While the company maintained its double-digit earnings growth target, Ms Chua warned that the uncertain macroeconomic environment was likely to have an impact on future growth. The chief executive for SingTel's international operations, Mr Lim Chuan Poh, said the global credit crisis had impacted the company in another way. Tighter credit meant fewer competitors for deals but also fewer deals as potential sellers pulled back, worried that they would not get a good sale price in such a climate. In the last 15 years, SingTel has spent about $18 billion acquiring stakes in foreign, high-growth telcos such as India's Bharti Airtel and Indonesia's Telkomsel. In a report issued after the results were released, DBS Vickers maintained its 'hold' rating on SingTel and set a price target of $3.98. While SingTel had shown 'strong results', said analyst Sachin Mittal, its 6.9 cent dividend 'fell short of our expectations of 15 cents'. SingTel shares fell two cents to $3.73. now my two cents worth: HAH. our blog is seriously becoming some econs bulletin. and 26 posts in like 3 days is just crazy. i don't know if the deadline's over (dr siva said 18th may but SMB says 23rd May) but whatever it is, this article was pretty interesting to me. like OKAY doesn't everyone just want an iphone! :D:D:D anyways, to make some sense out of this ECONOMICALLY, it seems monopoly (or oligopoly here) has it's advantages :D and this is just a fine example of internal (financial) EOS. except instead of the "easier to obtain loans" thing, now it's "easier to secure contracts". Is this still counted under FINANCIAL EOS then? uhh i think not right? but it's SOME kind of internal EOS. No idea what it's called though. :D:D:D but i'm glad for it anyways, since it means the IPHONE IS COMING TO SINGAPORE SOOOOOOON! | ||
Wednesday, May 21, 2008
IPHONE
Monday, May 19, 2008
America's property crisis
The hammer drops
Oct 4th 2007 MAPLE HEIGHTS AND SAN BERNARDINO
From The Economist print edition
America's houses are being repossessed at a record rate. What comes next?
Illustration by Satoshi Kambayashi
America's houses are being repossessed at a record rate. What comes next?
Illustration by Satoshi Kambayashi
AT FIRST sight, Maple Heights, just outside Cleveland, looks much like any other ageing suburb in the industrial mid-west: a patchwork of small colonial-style houses built after the second world war, with leafy streets and mown lawns. Up close, it is a community in collapse.
Every twelfth house stands empty, repossessed after its owner defaulted on a mortgage. There are no boarded windows (a local ordinance forbids them) and the city council cuts the grass around vacant homes. But the cracked panes, crumbling paint and rotting porches are hard to hide. Countless more homes sport “For Sale” signs as the remaining owners try to flee to better areas. With so many houses vacant, the property tax base has crumbled. Since 2003, the local government has laid off 35% of its staff.
As America's housing bust grows ever deeper, the big question is how far Maple Heights is a harbinger of things to come. Nationally, people are defaulting on mortgages at a faster pace than at any point in recent decades. According to the Mortgage Bankers Association, some 5% of all mortgages are delinquent and the share rises to almost 15% for “subprime” mortgages—those lent to people with shaky credit histories. In the second quarter of 2007, almost 3% of subprime loans entered foreclosure (the process of default and repossession). RealtyTrac, a company that tracks foreclosures, reckons up to 1.5m households will enter the process this year (see chart), double last year's figure. And with some 2.5m adjustable-rate mortgages resetting to higher rates before the end of 2008, everyone knows there is much worse to come.
The pain will probably be concentrated in two main areas. One, typified by Maple Heights, is the Midwest—states such as Ohio and Michigan, where the subprime bust is battering an industrial economy already in long-term decline. The other is quite different: booming states, such as Florida and California, where the subprime bonanza fuelled the biggest housing bubbles. Until recently, the highest default rates were in the industrial heartland. But that is changing fast. More than a third of all adjustable subprime loans are in California, Nevada, Arizona and Florida. California alone has 17% of them, and the numbers are soaring. In Riverside and San Bernardino counties, two sprawling counties east of Los Angeles that comprise an area called the “Inland Empire”, 1,900 houses were repossessed in August. It was 31 a year earlier.
The good news is that high default rates may be less painful in places whose sub-prime problem sits atop an economic boom. Cleveland has been losing inhabitants for years. In contrast, almost 800,000 people piled into the Inland Empire between 2000 and 2006, swelling the population by a quarter. The area is the main distribution hub for Chinese imports, and it has added 50,000 jobs in the past year.
The bad news, though, is that foreclosure is costly and high rates of it can cause plenty of collateral damage. In Cleveland, lenders incur legal fees and other costs of around $25,000, or 25% of the value of a typical subprime loan. The process of repossession takes a year or more, during which delinquent borrowers have little reason to look after their homes. A glut of repossessed houses dampens prices, and not just by adding to the supply of homes for sale. Thanks to high commodity prices, vacant homes in poorer neighbourhoods are quickly stripped of their aluminium sidings and copper fixtures. Marginal houses become uninhabitable; crime rises; whole areas are blighted.
Add these costs to the human toll of people being turfed out of their homes, and it is no surprise that America's politicians are scrambling for ways to stem the foreclosures. (All the more so because hardest-hit areas include election swing states such as Ohio and Florida.) So far, the focus is on low-cost intervention: encouraging borrowers to seek counselling and lenders to show forbearance. The Senate has appropriated $100m to help community groups advise delinquent borrowers. A national foreclosure hotline offering free advice gets 2,000 calls a day.
These efforts will help. A rough estimate is that half the people who are likely to face foreclosure in the coming months could service a renegotiated loan. But Cleveland's experience suggests the process is not easy. According to Lou Tisler, head of Neighbourhood Housing Services of Greater Cleveland, a local community group, mortgage lenders are becoming more willing to renegotiate loans. But most people seek advice only after they have been in default for months. Many are only days away from the sheriff's sale at which their home is formally lost.
Cleveland's experience also shows the limits of the small-scale public bail-outs to help “victims”. Politicians have a weakness for such schemes. Ohio's state government was the first to set up an explicit foreclosure rescue fund: it has promised $4.6m to help distressed homeowners who earn up to 125% of their county's median income. The state will put up to $3,000 towards mortgage refinancing. Some 250 people have been helped thus far; the goal is 1,500. But with 150,000 Ohio mortgages resetting over the next 12 months, the bail-out is a drop in the bucket. The only type of rescue that would prevent a surge in foreclosures would be a huge federal bailout which no politicians (as yet) are contemplating.
And the hard truth is that in many cases preventing foreclosure is a bad idea. Not all defaulting borrowers are suffering families. In the bubbliest property markets, many mortgages are held by investors, who were speculating on higher prices. In Florida, a quarter of all defaulting loans are held by non-residents. Even in Cleveland, many subprime borrowers are in houses that they cannot—and will not be able to—afford. Foreclosure is, unfortunately, the right outcome for perhaps half of America's problem mortgages.
That suggests politicians should put more emphasis on making the process more efficient. Already there are vast differences between states. In New York it takes at least 15 months for a house to be repossessed, according to Rick Sharga of RealtyTrac; in California it takes at least four months, while in Texas delinquent homeowners can lose their house less than a month after receiving a formal notice of default. That is extreme, but relatively speedy repossessions might at least reduce some of the collateral damage.
All told, the biggest unknown about America's subprime bust is how quickly, and how far, house prices will have to sink. Nationally, house prices have fallen by some 3%, while the glut of unsold homes has risen to ten months' supply. In the areas hardest-hit by defaults, the glut is far bigger. But rather than prices adjusting further, sales have simply dried up. In the Inland Empire the number of houses sold has halved in the past year. Michael Ciaravino, the mayor of Maple Heights, points out that only three houses have sold in the past two months, compared to a monthly total of between 15 and 50 a few years ago. Once prices halve, he reckons, the market will clear, new families will come in and his suburb will recover. The question, for Maple Heights and America, is how much damage is done in the meantime.
Qiao Yue
A very expensive drop of petrol...
Crash and burn situation...
Soon, i guess...Credit Crunch Nearing End
Economists see credit crisis nearing end
That's the latest outlook from forecasters in a survey to be released Monday by the National Association for Business Economics, also known by its acronym NABE. It will take time for any rays of light to poke through the economic clouds, though.
A growing number of economists believe the country is on the brink of a recession or in one already, dragged down by all the problems in housing, credit and financial markets. Now 56% of the economists think the economy has started or will enter a recession this year. That's up from 45% in a survey in February. If there is a recession, it probably will be short and shallow, economists said.
Forecasters downgraded their projections for economic growth. They now predict the economy, which grew by 2.2% last year, will slow to 1.4% this year. That's lower than the 1.8% growth projected in February. If the new figure proves correct, it would mark the weakest growth since the last recession in 2001.
Next year, the economy should grow by 2.3%, less than previously forecast and a pace that is still considered subpar.
"Although housing and credit markets will gradually loosen their grip, U.S. economic growth is expected to only slowly return to health," said Ellen Hughes-Cromwick, president of NABE and chief economist at Ford Motor Co.
Given the outlook for sluggish overall economic activity, companies are likely to remain cautious in their spending and hiring.
The unemployment rate, which averaged 4.6% last year, will move higher. Forecasters predict the jobless rate will hit 5.3% this year and 5.6% next year.
Forecasters are hopeful that the housing slump - in terms of home sales - will hit bottom this year. However, economists were divided over whether the low point would be reached in the second, third or fourth quarters of this year. House prices, though, are still expected to drop this year and next.
On the credit front, economists predict conditions will improve in the second half of this year.
"The economy is still going to be weak in the very near term, but the worst is likely to end this year with respect to the housing decline and the credit crunch," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group, who was involved in the NABE survey. The survey of 52 forecasters was conducted April 17 through May 1.
Weakness in housing was cited as the factor most responsible for the economy's troubles. That was closely followed by credit problems and high energy, food and commodity prices.
With food prices marching upward, gasoline prices closing in on $4 a gallon nationwide and oil hitting a record high near $128 a barrel, inflation should rise. Consumer prices will increase 3.6% this year, up from a previous forecast of a 3% rise. Next year, prices should calm down a bit, with the inflation rate clocking in at 2.4%.
To bolster the economy, the Federal Reserve has been cutting a key interest rate since last September. However, when the Fed last lowered rates, in April to 2%, policymakers signaled that their rate-cutting campaign may be drawing to a close. Fed policymakers are concerned that moving rates lower could aggravate inflation. At the same time, they are hopeful that their powerful rate cuts plus the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses will lift the country out of its slump.
The forecasters believe the Fed will hold its key rate steady at 2% through the rest of this year. However, they predict the Fed will start bumping up rates next year to ward off inflation. They believe the Fed's key rate will rise to 3% by the end of 2009.
Economists, meanwhile, had mixed thoughts about the extent to which tax rebates will be spent this year. The more spent, the more energizing effect they will have on the economy. Roughly 35% thought households will spend 26 to 50% of the rebates, while a quarter believe 25% or less would be spent. Thirty-one percent thought 51 to 75% would be spent.
"We're likely to see the boost from tax rebates fading later in the year," Reaser predicted. "The recovery is expected to be quite muted."
First Published: May 19, 2008: 4:54 AM EDT
Source : CNNMoney.com
Where Big Is Best
The rise of megacities has created slums and chaos elsewhere, but in China, they are cleaner and more efficient.
By Diana Farrell, Janamitra Devan, and Jonathan Woetzel NEWSWEEK
As China continues to boom in the coming decades, it would be well advised to think big. Big cities, that is. So far the migration from rural areas that has driven China's growth has fed the rise of many cities, and this scattered pattern is magnifying the key problems of urbanization: pollution, environmental destruction and the dislocation of farmers from land around cities, which is producing a growing number of agrarian protests. The development of megacities—which, granted, have produced chaos in other countries—would in fact produce a cleaner, more socially stable and faster-growing economy in China. Bigger is better for China due to its unique development pattern. Some foreign observers assume that China has urbanized successfully, so far, because it has a strong central government that can impose conformity even in the smallest village. And that was true in the past. However, after China began to embrace economic reform and openness after 1978, it relaxed the internal passport system called hukou to ensure a plentiful supply of labor in economic hot spots. To this day, China's economic liberalism has gone hand in hand with a policy of unleashing local dynamism, and explicitly encouraging entrepreneurial city leaders.
No single factor has been more powerful in driving urban expansion than the freedom cities have had to buy and sell land. That feature helps to explain why China has largely so far escaped the slums that have disfigured rapidly expanding cities elsewhere in the world. In other countries, from Brazil to India, an influx of migrants to cities has come first; local governments have then relied on the tax system to play catch-up in building the urban infrastructure.
In contrast, Chinese cities have been able to finance a "build it and they will come" approach, partly because of central-government transfers from China's prodigious savings and partly because of local land transactions. Until recently, China's city leaders have had carte blanche to acquire surrounding countryside cheaply and then sell this land, still at steep discounts, to incoming businesses and real-estate developers, using the proceeds to boost competitiveness and job creation and to build the urban infrastructure. The MGI estimates that over the past decade land sales have accounted for up to 60 percent of annual revenues in some cities. The jobs created by incoming businesses have then acted as a magnet to migrants. Since 1990, China's urban population has doubled, but its urban land area has grown by 150 percent.
The golden goose of land acquisition and sale may now have its wings clipped. Concerned by social unrest among displaced farmers, China's central government has instituted new controls on this practice. Local mayors may no longer rely on this source of revenue and will thus find it far harder in future years to finance urban construction. Yet the demands on the public purse will be growing inexorably. China's cities need to find the money to extend social coverage to its huge migrant populations (which, in many cities, will account for more than 40 percent of their populations by 2025) at a cost MGI estimates will reach an additional 1.5 trillion renminbi by 2025 (about $215 billion at today's exchange rate), or almost 2.5 percent of urban GDP. At the same time, cities need to fund the continuing buildup of infrastructure and mounting bills for tackling the dark side of urbanization: pollution and congestion.
Over the past 17 years, more than 100 million people have moved from the countryside to rapidly expanding urban centers. So far urbanization has followed a dispersed pattern, with many cities scattered across inland to coastal China and from north to south, all growing in parallel. In 2005, according to MGI's assessment, China had 858 cities and, following current trends, this will reach 939 by 2025. All are jostling for resources and historically have focused largely on a rush for GDP growth.
By 2025 we will have seen China's city populations swell by 350 million people—more than the population of the United States today—of which more than 240 million will have moved from rural areas. Urban China's demand for energy and water will double over the next 20 years compared with today. Under all circumstances, pollution will be severe. Today almost 60 percent of China's river water is already below international potable standards, and it is quite possible that urban water pollution could quintuple by 2025. Air pollution, in particular nitrous oxide, could reach critical levels in larger cities. Congestion is already compromising the smooth running of cities—Shanghai could outstrip its road capacity by a factor of three. Dispersed urbanization scenarios would result in a loss of up to 20 percent of China's available arable land.
The question now is whether the current approach will prove sustainable. MGI's research concludes that China would benefit substantially by shifting to a more concentrated urbanization pattern. One model of concentration could see China favoring the growth of 15 supercities in 2025 with average populations of 25 million people. The second could spur the further development of 11 urban "networks" of cities, linked by strong economic ties, with combined populations of 60 million-plus each on average. We have seen both models play out in some form internationally. There are supercities such as New York, London and Tokyo. And dynamic city networks have emerged including the system centered on Seoul.
MGI is not arguing that bigger cities are always the most successful. However, big may well be best for China, given both its unique history and the sheer magnitude of its population and the share of that population moving into cities. China's cities already account for 75 percent of China's gross domestic product; by 2025, that figure will have risen to more than 90 percent. But they will be richer cities if they are big. Both of the concentrated scenarios would deliver yield per capita GDP in 2025 of about 75,000 renminbi, or about $10,700 at today's exchange rate, or 20 percent higher per capita GDP than more dispersed urbanization scenarios, largely due to the productivity and efficiency advantages that have been true of larger cities in China.
How China manages its transformation will not only shape the nation but exert a powerful influence around the globe. As the world watches China's progress, there is little doubt that the sheer scale of change is impressive. But the ingenuity of city managers, their efficient use of resources and a strategic approach centered on concentrated growth and urban productivity will be the yardsticks of long-term success.
Wei Lin
By Diana Farrell, Janamitra Devan, and Jonathan Woetzel NEWSWEEK
As China continues to boom in the coming decades, it would be well advised to think big. Big cities, that is. So far the migration from rural areas that has driven China's growth has fed the rise of many cities, and this scattered pattern is magnifying the key problems of urbanization: pollution, environmental destruction and the dislocation of farmers from land around cities, which is producing a growing number of agrarian protests. The development of megacities—which, granted, have produced chaos in other countries—would in fact produce a cleaner, more socially stable and faster-growing economy in China. Bigger is better for China due to its unique development pattern. Some foreign observers assume that China has urbanized successfully, so far, because it has a strong central government that can impose conformity even in the smallest village. And that was true in the past. However, after China began to embrace economic reform and openness after 1978, it relaxed the internal passport system called hukou to ensure a plentiful supply of labor in economic hot spots. To this day, China's economic liberalism has gone hand in hand with a policy of unleashing local dynamism, and explicitly encouraging entrepreneurial city leaders.
No single factor has been more powerful in driving urban expansion than the freedom cities have had to buy and sell land. That feature helps to explain why China has largely so far escaped the slums that have disfigured rapidly expanding cities elsewhere in the world. In other countries, from Brazil to India, an influx of migrants to cities has come first; local governments have then relied on the tax system to play catch-up in building the urban infrastructure.
In contrast, Chinese cities have been able to finance a "build it and they will come" approach, partly because of central-government transfers from China's prodigious savings and partly because of local land transactions. Until recently, China's city leaders have had carte blanche to acquire surrounding countryside cheaply and then sell this land, still at steep discounts, to incoming businesses and real-estate developers, using the proceeds to boost competitiveness and job creation and to build the urban infrastructure. The MGI estimates that over the past decade land sales have accounted for up to 60 percent of annual revenues in some cities. The jobs created by incoming businesses have then acted as a magnet to migrants. Since 1990, China's urban population has doubled, but its urban land area has grown by 150 percent.
The golden goose of land acquisition and sale may now have its wings clipped. Concerned by social unrest among displaced farmers, China's central government has instituted new controls on this practice. Local mayors may no longer rely on this source of revenue and will thus find it far harder in future years to finance urban construction. Yet the demands on the public purse will be growing inexorably. China's cities need to find the money to extend social coverage to its huge migrant populations (which, in many cities, will account for more than 40 percent of their populations by 2025) at a cost MGI estimates will reach an additional 1.5 trillion renminbi by 2025 (about $215 billion at today's exchange rate), or almost 2.5 percent of urban GDP. At the same time, cities need to fund the continuing buildup of infrastructure and mounting bills for tackling the dark side of urbanization: pollution and congestion.
Over the past 17 years, more than 100 million people have moved from the countryside to rapidly expanding urban centers. So far urbanization has followed a dispersed pattern, with many cities scattered across inland to coastal China and from north to south, all growing in parallel. In 2005, according to MGI's assessment, China had 858 cities and, following current trends, this will reach 939 by 2025. All are jostling for resources and historically have focused largely on a rush for GDP growth.
By 2025 we will have seen China's city populations swell by 350 million people—more than the population of the United States today—of which more than 240 million will have moved from rural areas. Urban China's demand for energy and water will double over the next 20 years compared with today. Under all circumstances, pollution will be severe. Today almost 60 percent of China's river water is already below international potable standards, and it is quite possible that urban water pollution could quintuple by 2025. Air pollution, in particular nitrous oxide, could reach critical levels in larger cities. Congestion is already compromising the smooth running of cities—Shanghai could outstrip its road capacity by a factor of three. Dispersed urbanization scenarios would result in a loss of up to 20 percent of China's available arable land.
The question now is whether the current approach will prove sustainable. MGI's research concludes that China would benefit substantially by shifting to a more concentrated urbanization pattern. One model of concentration could see China favoring the growth of 15 supercities in 2025 with average populations of 25 million people. The second could spur the further development of 11 urban "networks" of cities, linked by strong economic ties, with combined populations of 60 million-plus each on average. We have seen both models play out in some form internationally. There are supercities such as New York, London and Tokyo. And dynamic city networks have emerged including the system centered on Seoul.
MGI is not arguing that bigger cities are always the most successful. However, big may well be best for China, given both its unique history and the sheer magnitude of its population and the share of that population moving into cities. China's cities already account for 75 percent of China's gross domestic product; by 2025, that figure will have risen to more than 90 percent. But they will be richer cities if they are big. Both of the concentrated scenarios would deliver yield per capita GDP in 2025 of about 75,000 renminbi, or about $10,700 at today's exchange rate, or 20 percent higher per capita GDP than more dispersed urbanization scenarios, largely due to the productivity and efficiency advantages that have been true of larger cities in China.
How China manages its transformation will not only shape the nation but exert a powerful influence around the globe. As the world watches China's progress, there is little doubt that the sheer scale of change is impressive. But the ingenuity of city managers, their efficient use of resources and a strategic approach centered on concentrated growth and urban productivity will be the yardsticks of long-term success.
Wei Lin
Whats written on the yellow book in the cartoon: Critics who say that biofuels take more energy to produce than to yield.
My interpretation: Mortage crisis is weighing the stock market down/causing the stock market to sink. As the anchor suggests, the mortage crisis could be possibly a dead weight that would be the main reason that hinders any upward movement of the stock market.
My interpretation: The dilemma for the US congress over green and expensive fuel(ethanol) or potentially polluting but cheap fuel(oil) However the irony is that both produces Carbon dioxide, but ethanol apparently produces 'GOOD C02' while oil apparently produces 'BAD CO2' when we know that CO2 regardless of its source, is a greenhouse gas and can increase the rate of global warming. Hence I feel that the cartoonist's tone is mockery when he drew the US congress as 'not the same difference!' (when apparently they are the same difference)
Please correct me if I'm wrong!
Thats all :D
Cartoons are from:
http://images.google.com.sg/imgres?imgurl=http://www.ocee.org/Graphics/comics_clip_image001.gif&imgrefurl=http://www.ocee.org/comics.htm&h=425&w=600&sz=53&hl=en&start=17&um=1&tbnid=RsRje5a4sW0DaM:&tbnh=96&tbnw=135&prev=/images%3Fq%3DEconomic%2Bcartoons,%2Boppurtunity%2Bcosts%26um%3D1%26hl%3Den%26sa%3DG
http://www.sundancechannel.com/UPLOADS/blog/treehugger/blogpost_data/07_31_07/ethanol-cartoon.jpg
Sunday, May 18, 2008
Many banks in Singapore are shutting the door on small depositorsby raising the minimum amounts required to open savings orfixed deposit accounts.
Reason: they are too costly to administer and not worth the trouble.The regional economic troubles and general belt-tightening haveforced banks to do more to tackle rising operational costs.
During boom in crop prices, lawmakers harvest subsidies
By Brian Riedl
Article Launched: 05/18/2008 01:35:33 AM
By Brian Riedl
Article Launched: 05/18/2008 01:35:33 AM
With food prices soaring, it takes some gall to force Americans to pay billions of dollars to millionaire agribusinesses. Yet that's what the latest farm bill would do.
Since the last farm bill was enacted in 2002, the five crops that receive the lion's share of farm subsidies have also enjoyed massive price increases: cotton (105 percent price increase), soybeans (164 percent), corn (169 percent), wheat (256 percent) and rice (281 percent). For consumers, these price increases have caused financial pain domestically and near-riots abroad. For farmers, it's a sunnier story: Total net farm income has leaped 56 percent in just two years, and helped bring the average farm household's income to a record $89,434, and its net worth to $838,875.
During this crop-price boom, continuing to subsidize farmers makes as much sense as paying Apple to make another generation of iPods.
Yet instead of cutting, Congress' answer is to harvest even more farm subsidies. The latest version would increase payment rates for more than a dozen crops and increase conservation subsidies. Although the same farmers already receive massive annual subsidies, plus taxpayer-funded crop insurance, Congress would also layer a new permanent disaster aid program. Expect Congress to declare an emergency any week that it rains - or doesn't rain.
Commercial help
Farm subsidies have long been America's largest corporate welfare program. Rather than help small, struggling family farmers, the majority of subsidies go to commercial farmers, who report an average income of $200,000 and a net worth of nearly $2 million.
President Bush called on Congress to end farm subsidies for families earning more than $200,000 annually. Instead, Congress decided that married couples with less than $1.5 million in annual net farm income should be barred from one farm subsidy program - but still allowed to collect from all the rest. This is what passes for reform.
And for the vast majority of farmers and agribusiness that remain eligible for farm subsidies, bigger checks await. Agribusinesses have long exploited loopholes to evade the $150,000 annual limit on marketing loan subsidies, including dividing themselves into dozens of separate legal entities and collecting subsidies for each one.
Yet rather than better enforce this payment limit, the farm bill simply repeals it altogether. No longer would agribusinesses even need to hire attorneys and find loopholes in order to amass millions in taxpayer subsidies.
Overall, the farm bill is officially listed as adding $10 billion in new spending over the decade. But that ignores the blatant gimmicks - such as shifting costs just outside the 10-year window, and unrealistically assuming all increases will suddenly be repealed in four years - that could add more than $10 billion to the cost. Congressional Democrats who loudly denounced budget deficits are now prepared to bypass anti-deficit rules for this bloated bill.
Thus, farm subsidies will continue costing taxpayers at least $25 billion annually. And for what purpose? Subsidies don't solve farmer poverty because they go to profitable agribusinesses. They don't preserve family farms because agribusinesses use their subsidies to buy them out. They are no longer designed to stabilize crop prices.
Nor do they promote cheap food, as ethanol policies are raising prices steeply. These programs lack any coherent rationale. Instead, they cost billions in taxes and higher supermarket prices. They harm the environment by encouraging over-planting. By undermining America's trade negotiations, subsidies raise consumer prices and restrict U.S. exports. Cotton subsidies undercut impoverished African farmers desperately trying to make a living. They contribute to obesity and rising health care costs by subsidizing corn and soy (from which sugars and fats are derived) rather than healthier fruits and vegetables.
Favored industry
Farm subsidies don't produce food, but they do produce votes. Despite its economic incoherence, the farm agreement is overwhelmingly popular in a Congress that has mastered the art of distributing tax dollars to favored industries. Although Bush has pledged to veto the farm bill, Congress has stubbornly pledged to override the veto.
MEGER?Microsoft walks away from Yahoo!, and both companies lose
RATHER as John McCain cannot be displeased to have seen Hillary Clinton and Barack Obama fighting it out, Google has for the past three months enjoyed watching its only two serious rivals, Yahoo! and Microsoft, tear each other to pieces. Yahoo!, once an internet pioneer, has fallen far behind Google in web search and related advertising. Microsoft still dominates desktop computing but lags behind Google as software moves online. So Steve Ballmer, Microsoft's boss, dared ask Yahoo!: what would be wrong with making, if not exactly a dream team, at least a joint effort out of it?
But on May 3rd, after a frustrating marathon of meetings, Mr Ballmer walked away. He had raised his offer for Yahoo! from an initial $44.6 billion on January 31st to about $47.5 billion, some 70% more than Yahoo!'s value at the time of the opening bid. Jerry Yang, Yahoo!'s co-founder and boss, wanted at least $5 billion more. Mr Ballmer wrote him a bitter letter saying that “you and your stockholders have left significant value on the table.” Wall Street's verdict, on May 5th, was to cut Yahoo!'s value to $34 billion.
But on May 3rd, after a frustrating marathon of meetings, Mr Ballmer walked away. He had raised his offer for Yahoo! from an initial $44.6 billion on January 31st to about $47.5 billion, some 70% more than Yahoo!'s value at the time of the opening bid. Jerry Yang, Yahoo!'s co-founder and boss, wanted at least $5 billion more. Mr Ballmer wrote him a bitter letter saying that “you and your stockholders have left significant value on the table.” Wall Street's verdict, on May 5th, was to cut Yahoo!'s value to $34 billion.
That the sell-off was not even worse primarily reflects the possibility that a deal may yet happen. Another software company, Oracle, recently dropped a bid for a smaller rival, BEA Systems, after its board rejected the offer, but eventually had its way after BEA's angry shareholders forced their board back into negotiations and a sale. Mr Ballmer's farewell letter to Yahoo!, by recapitulating the negotiations in all their embarrassing detail, provides just the sort of fodder for Yahoo!'s investors to order Mr Yang to resume talks.
Mr Ballmer took particular pains to criticise Yahoo!'s readiness to “make Yahoo! undesirable as an acquisition for Microsoft.” By this he means Mr Yang's apparent plan to outsource Yahoo!'s search-advertising technology to, of all people, Google. In a purely mathematical sense, this could indeed make Yahoo! somewhat more valuable. Google is better than Yahoo! or Microsoft at placing relevant ads next to search results and collects more in revenue for each resulting mouse click.
Yet it is a bizarre tactic. The history of Yahoo! during this decade is of trying, failing, and trying again to catch up with Google in search advertising. Its first big failure was not to bid high enough to buy Google outright. Its next attempt, in 2003, was to buy Overture, the company that pioneered search advertising, but by then Google was pulling ahead. An outsourcing deal with Google was considered and rejected. For the past two years Yahoo! has invested oodles in a project called Panama that was meant, again, to catch Google.
Presumably Yahoo! has been exerting itself so because it believes that the advertising technology is, along with search, the source of competitive advantage in the internet era. That is certainly what Microsoft believes, which is why it bought aQuantive, an online-advertising specialist, and built its own search-ads platform, called adCenter. What Yahoo! and Microsoft lack is volume—in the number of both searches and advertisers bidding to place ads. Teaming up would help to address that problem; but a capitulation by Yahoo! to Google would merely invite antitrust regulators to look at Google's dominance.
Mr Yang could merge Yahoo! with AOL, the web portal of Time Warner, but AOL already outsources its search ads to Google and would be no help at all in catching the leader. Asserting, as Mr Yang does, that Yahoo! all by itself could become “the starting point” on the internet, and its advertising powerhouse, rings hollow.
Things look just as bleak for Mr Ballmer. He has invested billions trying to make Microsoft an internet and advertising superpower. But it seems not to matter. According to Danny Sullivan, a web-search analyst, Microsoft “literally has no brand” when it comes to its online services—nobody has ever been advised “to Live” or “to MSN” a recipe or a cute classmate. The only one having any fun continues to be Google.
Yet it is a bizarre tactic. The history of Yahoo! during this decade is of trying, failing, and trying again to catch up with Google in search advertising. Its first big failure was not to bid high enough to buy Google outright. Its next attempt, in 2003, was to buy Overture, the company that pioneered search advertising, but by then Google was pulling ahead. An outsourcing deal with Google was considered and rejected. For the past two years Yahoo! has invested oodles in a project called Panama that was meant, again, to catch Google.
Presumably Yahoo! has been exerting itself so because it believes that the advertising technology is, along with search, the source of competitive advantage in the internet era. That is certainly what Microsoft believes, which is why it bought aQuantive, an online-advertising specialist, and built its own search-ads platform, called adCenter. What Yahoo! and Microsoft lack is volume—in the number of both searches and advertisers bidding to place ads. Teaming up would help to address that problem; but a capitulation by Yahoo! to Google would merely invite antitrust regulators to look at Google's dominance.
Mr Yang could merge Yahoo! with AOL, the web portal of Time Warner, but AOL already outsources its search ads to Google and would be no help at all in catching the leader. Asserting, as Mr Yang does, that Yahoo! all by itself could become “the starting point” on the internet, and its advertising powerhouse, rings hollow.
Things look just as bleak for Mr Ballmer. He has invested billions trying to make Microsoft an internet and advertising superpower. But it seems not to matter. According to Danny Sullivan, a web-search analyst, Microsoft “literally has no brand” when it comes to its online services—nobody has ever been advised “to Live” or “to MSN” a recipe or a cute classmate. The only one having any fun continues to be Google.
POSTED by xinran
China investment pace eases but economy stays strong
By Alan Wheatley and Langi Chiang
BEIJING (Reuters) - Chinese investment in fixed assets such as property and factories slowed slightly in April but not by enough to alter the picture of a sturdy economy that is holding up well in the face of stiffening global headwinds.
Spending on fixed assets in urban areas rose 25.7 percent in the first four months from a year earlier, compared with a 25.9 percent increase in the first quarter, the National Bureau of Statistics said on Thursday. Although the reading was a touch below market forecasts of a 26.2 percent rise, there were fewer working days this April than in April 2007 because of changes to China's schedule of public holidays.
"It seems that significant momentum is being sustained in the Chinese economy despite all the global uncertainties," said David Cohen with Action Economics in Singapore. "China remains a key engine of growth for the world economy." The bureau did not issue data for April alone, but Goldman Sachs economists calculated that investment in the month was up 25.3 percent from a year earlier, against 27.3 percent in March.
"We believe the underlying growth momentum of fixed-asset investment has been robust," Yu Song and Hong Liang told clients. Policy makers have been trying to prevent over-investment, fearing an ample supply of easy money could fuel wasteful spending that might saddle banks with new bad loans.
A particular concern is real estate, where investment in the January-April period rose a strong 32.1 percent. Projects that consume a lot of energy and spew out pollution are also attracting close scrutiny. But Beijing wants to avoid too sharp a slowdown in investment, which has been the main driver of China's double-digit growth in recent years.
Beijing instead is trying to redirect spending towards the interior and to sectors where China still has great needs, such as affordable housing and rural infrastructure.That focus will sharpen given the need for reconstruction after this week's devastating earthquake in southwestern China and fierce winter storms that badly damaged transport and power supplies across southern China in January and February.
"There is a high possibility that investment will rebound in the second half," said Tang Jianwei, an analyst at Bank of Communications in Shanghai."Reconstruction after the snow disaster and earthquake will also drive investment growth, as you can see that many houses and roads were destroyed in the earthquake in Sichuan," he said.
LOOKING STRONG
The investment report was the last of China's major economic indicators for April.
In the round, they showed an economy that is proving resilient to tighter domestic policy and a slowdown that is spreading from the United States to other industrial economies.
Growth so far this year had been stronger than expected, the central bank said in a report issued on Wednesday. Annual export growth slowed to 21.8 percent in April from 25.7 percent in all of 2007, and factory output increased by less than expected because analysts had not taken account of the reduction in working days in April. But imports were strong and retail sales surged by a record 22 percent from a year earlier, comforting policy makers who are trying to stoke domestic demand and reduce the economy's reliance on exports and related investments.
The main cloud overhanging the economy is inflation, which, at 8.5 percent, is near 12-year highs. Strong money and credit growth in April mean the central bank, as it said in Wednesday's report, cannot yet afford to relax its tightening stance.
"It looks like policy makers are probably still going to have to pay attention to inflationary pressure as their most important economic priority," Cohen said. "We still are looking for some increases in interest rates together with continued toleration of a somewhat stepped-up appreciation of the yuan," he added. But the comments of senior officials suggest they are hopeful that the surge in food costs, which has been solely responsible for the spike in inflation, will soon abate. Indeed, fresh food prices fell 1.6 percent in the week ended May 11, according to the Ministry of Commerce.
"Although we are confronted by widespread price increases, there will be no hyperinflation," deputy central bank governor Su Ning said in Beijing on Thursday.
BEIJING (Reuters) - Chinese investment in fixed assets such as property and factories slowed slightly in April but not by enough to alter the picture of a sturdy economy that is holding up well in the face of stiffening global headwinds.
Spending on fixed assets in urban areas rose 25.7 percent in the first four months from a year earlier, compared with a 25.9 percent increase in the first quarter, the National Bureau of Statistics said on Thursday. Although the reading was a touch below market forecasts of a 26.2 percent rise, there were fewer working days this April than in April 2007 because of changes to China's schedule of public holidays.
"It seems that significant momentum is being sustained in the Chinese economy despite all the global uncertainties," said David Cohen with Action Economics in Singapore. "China remains a key engine of growth for the world economy." The bureau did not issue data for April alone, but Goldman Sachs economists calculated that investment in the month was up 25.3 percent from a year earlier, against 27.3 percent in March.
"We believe the underlying growth momentum of fixed-asset investment has been robust," Yu Song and Hong Liang told clients. Policy makers have been trying to prevent over-investment, fearing an ample supply of easy money could fuel wasteful spending that might saddle banks with new bad loans.
A particular concern is real estate, where investment in the January-April period rose a strong 32.1 percent. Projects that consume a lot of energy and spew out pollution are also attracting close scrutiny. But Beijing wants to avoid too sharp a slowdown in investment, which has been the main driver of China's double-digit growth in recent years.
Beijing instead is trying to redirect spending towards the interior and to sectors where China still has great needs, such as affordable housing and rural infrastructure.That focus will sharpen given the need for reconstruction after this week's devastating earthquake in southwestern China and fierce winter storms that badly damaged transport and power supplies across southern China in January and February.
"There is a high possibility that investment will rebound in the second half," said Tang Jianwei, an analyst at Bank of Communications in Shanghai."Reconstruction after the snow disaster and earthquake will also drive investment growth, as you can see that many houses and roads were destroyed in the earthquake in Sichuan," he said.
LOOKING STRONG
The investment report was the last of China's major economic indicators for April.
In the round, they showed an economy that is proving resilient to tighter domestic policy and a slowdown that is spreading from the United States to other industrial economies.
Growth so far this year had been stronger than expected, the central bank said in a report issued on Wednesday. Annual export growth slowed to 21.8 percent in April from 25.7 percent in all of 2007, and factory output increased by less than expected because analysts had not taken account of the reduction in working days in April. But imports were strong and retail sales surged by a record 22 percent from a year earlier, comforting policy makers who are trying to stoke domestic demand and reduce the economy's reliance on exports and related investments.
The main cloud overhanging the economy is inflation, which, at 8.5 percent, is near 12-year highs. Strong money and credit growth in April mean the central bank, as it said in Wednesday's report, cannot yet afford to relax its tightening stance.
"It looks like policy makers are probably still going to have to pay attention to inflationary pressure as their most important economic priority," Cohen said. "We still are looking for some increases in interest rates together with continued toleration of a somewhat stepped-up appreciation of the yuan," he added. But the comments of senior officials suggest they are hopeful that the surge in food costs, which has been solely responsible for the spike in inflation, will soon abate. Indeed, fresh food prices fell 1.6 percent in the week ended May 11, according to the Ministry of Commerce.
"Although we are confronted by widespread price increases, there will be no hyperinflation," deputy central bank governor Su Ning said in Beijing on Thursday.
Goldman Forecasts $141 Oil For Second Half of Year
This website has quite a few good articles and videos, and one article is shown below:
Source: http://www.cnbc.com/id/24664918
Goldman Sachs, the most active investment bank in energy markets, on Friday sharply raised its forecast for oil prices in the second half of this year, citing tight supply.
The bank expects U.S. crude to average $141 a barrel in the second half of 2008, up from a previous projection of $107, it said.
Goldman also forecasts prices will rise further next year to average $148.
"Tight supply conditions continue to be the primary catalyst for higher crude prices," the bank said in a research note.
"The near-term outlook for oil prices continues to be bullish." The Goldman forecast helped send crude prices to a record high of $127.82 on Friday, analysts said.
The 2009 estimate is the most bullish among more than 30 banks regularly polled by Reuters.
Goldman, one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- earlier this month said oil could shoot up to $200 within the next two years.
Its note on Friday said that despite the advent of alternative sources such as biofuels, oil supply growth has slowed to 1 percent from about 1.8 percent in 2005 and less than the bank's forecast for 2008 world GDP growth of 3.8 percent.
"Given this imbalance, long-term oil prices will need to continue to rise," Goldman said.
Goldman's view that prices are rising in response to tight supply contrasts with others in the industry that oil's rally is being driven by factors beyond supply and demand fundamentals.
The Organization of the Petroleum Exporting Countries, source of two in every five barrels of oil, has rebuffed calls from the U.S. and other industrialised countries for more oil, saying supply is sufficient.
In OPEC's view, factors like the weakness of the U.S. dollar, speculative trading, a lack of capacity at oil refineries and political tension are lifting prices, not a lack of oil.
Royal Dutch Shell Plc, the world's second-largest fully publicly traded oil company by market value, has also said current prices contain an element of speculation.
Goldman is the latest bank to raise its price outlook this week.
UBS lifted its projection on Thursday and said inflation risks from rising oil costs would put a global economic recovery in 2009-2010 at risk.
In a note, the bank said oil economist Jan Stuart had lifted the UBS oil price forecast for U.S. crude to $115 a barrel from $86.96, a 32 percent rise.
Copyright 2008 Reuters.
Source: http://www.cnbc.com/id/24664918
Goldman Sachs, the most active investment bank in energy markets, on Friday sharply raised its forecast for oil prices in the second half of this year, citing tight supply.
The bank expects U.S. crude to average $141 a barrel in the second half of 2008, up from a previous projection of $107, it said.
Goldman also forecasts prices will rise further next year to average $148.
"Tight supply conditions continue to be the primary catalyst for higher crude prices," the bank said in a research note.
"The near-term outlook for oil prices continues to be bullish." The Goldman forecast helped send crude prices to a record high of $127.82 on Friday, analysts said.
The 2009 estimate is the most bullish among more than 30 banks regularly polled by Reuters.
Goldman, one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- earlier this month said oil could shoot up to $200 within the next two years.
Its note on Friday said that despite the advent of alternative sources such as biofuels, oil supply growth has slowed to 1 percent from about 1.8 percent in 2005 and less than the bank's forecast for 2008 world GDP growth of 3.8 percent.
"Given this imbalance, long-term oil prices will need to continue to rise," Goldman said.
Goldman's view that prices are rising in response to tight supply contrasts with others in the industry that oil's rally is being driven by factors beyond supply and demand fundamentals.
The Organization of the Petroleum Exporting Countries, source of two in every five barrels of oil, has rebuffed calls from the U.S. and other industrialised countries for more oil, saying supply is sufficient.
In OPEC's view, factors like the weakness of the U.S. dollar, speculative trading, a lack of capacity at oil refineries and political tension are lifting prices, not a lack of oil.
Royal Dutch Shell Plc, the world's second-largest fully publicly traded oil company by market value, has also said current prices contain an element of speculation.
Goldman is the latest bank to raise its price outlook this week.
UBS lifted its projection on Thursday and said inflation risks from rising oil costs would put a global economic recovery in 2009-2010 at risk.
In a note, the bank said oil economist Jan Stuart had lifted the UBS oil price forecast for U.S. crude to $115 a barrel from $86.96, a 32 percent rise.
Copyright 2008 Reuters.
Global Economy May Have Tough Year in 2008
This article is a rather interesting one predicting the changes in global economy. In this article, the reasons behind the predictions were also outlined.
Source: http://www.cnbc.com/id/22187485
The U.S. economy is in the danger zone and one good shock could send it into recession next year, according to Global Insights, which released its top 10 predictions for 2008 Tuesday.
The Boston-based forecasting company said GDP growth in the fourth quarter of 2007 and first half of 2008 is expected to be very weak, and will make the United States extremely vulnerable.
Compounding the matter, it will be unlikely that the rest of the world will be able to shrug off the expected sharp deceleration in spending by American households. Global Insight currently predicts that world growth will be 3.3 percent in 2008, compared with 3.7 percent in 2007. With the potential for housing crunches in some European economies and a post-Olympics slowdown (or even bust) in China, the risks for the global economy are now overwhelmingly on the downside, the company said.
Its top 10 predictions for 2008 are:
1. U.S. Growth Will Be the Weakest Since 2002, and Possibly Since the Last Recession. Growth in 2002 was a meager 1.6 percent, as the economy struggled to recover from the twin shocks of the high-tech bust and the 9/11 terrorist attacks. Growth next year will be almost as low (1.9 percent), and there is a mounting risk that it could be lower. The main culprit is housing, which will cut real GDP growth by 1.0 percentage point during the year. However, consumer spending growth is also predicted to decelerate from 2.8 percent in 2007 to 1.7 percent in 2008. Moreover, capital spending is expected to increase a lackluster 2.6 percent. The only saving grace will be net exports, which will add 0.9 percentage point to growth. Global Insight forecasts that the U.S. economy will rebound in the second half, expanding 2.7 percent, compared with 1.3 percent in the first half.
2. Most Other Regions of the World Will Also Decelerate. Except for commodity-exporting countries and regions, world growth is expected to "re-couple" with the United States and slow down. For Canada and Mexico, weak U.S. growth will be offset by strong oil prices. However, Europe will be hit by multiple headwinds, including the global slowdown, a stronger currency, the continuing credit crunch, housing problems in some countries, and high oil prices. Japan will be similarly afflicted, although there is little evidence of fallout from the subprime and housing-related problems in the United States—so far. The fate of emerging markets will depend on if and when growth in China and the rest of Asia falters.
3. There Will Be No Significant Cooling in China and the Rest of Asia Until Late 2008. A mild global slowdown will only put a small dent in China's rapid rate of growth in 2008—10.8 percent, compared with 11.5 percent this year. Credit growth is still very strong and the Chinese government's modest tightening efforts have had little impact, with fixed asset investment growing at about a 30 percent rate in 2007. In the first half of 2008, there are likely to be further gradual interest rates hikes and currency appreciation. After the Beijing Olympics next August, however, the government may have no choice but to tighten credit conditions more dramatically. This will further slow China's growth, but there is a significant risk (at least 33 percent) that the landing could be hard. Such a scenario would hurt the rest of Asia. However, since India's growth is predominantly domestic-led, this vibrant economy should be able to sustain a growth rate around 8.5 percent.
4. Oil Prices Will Ease, But Remain at High Levels. Weaker global growth will dampen oil prices and bring them more into line with supply/demand fundamentals. These fundamentals support a price between $75 and $80 per barrel. Global Insight expects that, on average, a barrel of WTI will cost $75.67 next year, compared with $72.13 in 2007. However, with markets still tight, any type of supply disruption (actual or expected) could send prices back up again—probably only temporarily. An unknown factor in oil and other commodity markets is the role of speculation. Some have referred to the recent spike in commodity prices (especially oil) as the "next bubble." If so, the recent drop in oil prices suggests that some of these speculative positions many be unwinding.
5. Core Inflation Will Edge Down.The U.S. economy is now operating well below potential. This will begin to gradually push up the unemployment rate. This extra slack in the economy will put further downward pressure on core inflation, which Global Insight expects to fall from 2.0 percent this year to 1.8 percent in 2008 for the core personal consumption deflator and from 2.3 percent to 2.1 percent for the core CPI. The good news, so far, is that high energy prices have had very little impact on other prices and on wage inflation. This benign state of affairs can be expected to continue for at least another year.
6. The Federal Reserve Will Keep Cutting Interest Rates.With inflation not a serious threat, and the risks predominantly on the downside, the Fed will keep lowering rates. Global Insight now expects cuts of 25 basis points at the December 11 Federal Open Market Committee Meeting, 50 basis points at the January 29-30 meeting, and another 25 basis points at the March 18 meeting. Meanwhile, if the credit crunch and housing problems get worse, the Fed may have no choice but to inject more liquidity into the financial system, and support the subprime mortgage relief/freeze plan devised by the Bush administration.
7. Housing Sector Activity Will Bottom Out in Mid-2008.Housing activity will continue to slide in the first half of next year. Global Insight now expects that total starts will fall below 1 million units during 2008—less than half their level in 2005. During the second half of the year, we expect housing activity to stabilize and begin recovering gradually. The same cannot be said about home prices, which are likely to keep sliding, at least through 2009. The peak-to-trough drop in home prices (as measured by the OFHEO price index) will probably end up being more than 10 percent.
8. The U.S. Current-Account Deficit Will Continue to Improve.The long-awaited correction of the gaping global imbalances is finally happening. The deceleration in the U.S. economy is likely to be much more pronounced than that across the rest of the world. Moreover, the dollar has fallen more than 20 percent (on a real trade-weighted basis) in the past five years and should fall a little more, before stabilizing. These developments are supercharging exports and dampening imports. During the course of the next year, the positive contribution by trade will make all the difference whether the U.S. economy suffers through a recession or not. Global Insight forecasts that the current-account deficit will fall from $755 billion in 2007 to $659 billion in 2008.
9. The Dollar Will Reach a Trough Against Some Currencies in 2008.While the dollar has been on a downward trend since 2002 (mostly because of the huge current-account deficit), the recent weakness is a function of fears over the subprime crisis and a U.S. recession, combined with expectations that the Fed will cut interest rates more than other central banks. As the economy begins recover in the second half of 2008 and early 2009, though, sentiments on the dollar will turn more positive, at least against some currencies. We expect that the euro will top out around $1.55 next summer and fall to $1.49 by year-end. The Canadian dollar may have peaked already, if oil prices keep falling. However, both the Japanese yen and the Chinese renminbi should keep appreciating vis-Ã -vis the dollar, given the large current-account surpluses in both economies.
10. With U.S. Growth Barely Positive Through Mid-2008, Even a Small Shock Will Push the Economy over the Edge.For the past two years, Global Insight has been saying that it would take two or more shocks to trigger a U.S. recession. There is a growing risk that such a scenario may be about to unfold. The combination of the housing/subprime crisis and higher oil prices could be enough to push growth into negative territory. If oil prices continue to fall, and end up in the $75–80/barrel range early in 2008, the U.S. economy will probably be able to escape recession. However, either another rise in oil prices or some other shock (even a small one) could be the straw that breaks the camel's back. Global Insight has raised the probability of a U.S. recession from 35 percent to 40 percent.
Nariman Behravesh, chief economist for Global Insight, compiled the information in this report.
© 2008 CNBC.com
Source: http://www.cnbc.com/id/22187485
The U.S. economy is in the danger zone and one good shock could send it into recession next year, according to Global Insights, which released its top 10 predictions for 2008 Tuesday.
The Boston-based forecasting company said GDP growth in the fourth quarter of 2007 and first half of 2008 is expected to be very weak, and will make the United States extremely vulnerable.
Compounding the matter, it will be unlikely that the rest of the world will be able to shrug off the expected sharp deceleration in spending by American households. Global Insight currently predicts that world growth will be 3.3 percent in 2008, compared with 3.7 percent in 2007. With the potential for housing crunches in some European economies and a post-Olympics slowdown (or even bust) in China, the risks for the global economy are now overwhelmingly on the downside, the company said.
Its top 10 predictions for 2008 are:
1. U.S. Growth Will Be the Weakest Since 2002, and Possibly Since the Last Recession. Growth in 2002 was a meager 1.6 percent, as the economy struggled to recover from the twin shocks of the high-tech bust and the 9/11 terrorist attacks. Growth next year will be almost as low (1.9 percent), and there is a mounting risk that it could be lower. The main culprit is housing, which will cut real GDP growth by 1.0 percentage point during the year. However, consumer spending growth is also predicted to decelerate from 2.8 percent in 2007 to 1.7 percent in 2008. Moreover, capital spending is expected to increase a lackluster 2.6 percent. The only saving grace will be net exports, which will add 0.9 percentage point to growth. Global Insight forecasts that the U.S. economy will rebound in the second half, expanding 2.7 percent, compared with 1.3 percent in the first half.
2. Most Other Regions of the World Will Also Decelerate. Except for commodity-exporting countries and regions, world growth is expected to "re-couple" with the United States and slow down. For Canada and Mexico, weak U.S. growth will be offset by strong oil prices. However, Europe will be hit by multiple headwinds, including the global slowdown, a stronger currency, the continuing credit crunch, housing problems in some countries, and high oil prices. Japan will be similarly afflicted, although there is little evidence of fallout from the subprime and housing-related problems in the United States—so far. The fate of emerging markets will depend on if and when growth in China and the rest of Asia falters.
3. There Will Be No Significant Cooling in China and the Rest of Asia Until Late 2008. A mild global slowdown will only put a small dent in China's rapid rate of growth in 2008—10.8 percent, compared with 11.5 percent this year. Credit growth is still very strong and the Chinese government's modest tightening efforts have had little impact, with fixed asset investment growing at about a 30 percent rate in 2007. In the first half of 2008, there are likely to be further gradual interest rates hikes and currency appreciation. After the Beijing Olympics next August, however, the government may have no choice but to tighten credit conditions more dramatically. This will further slow China's growth, but there is a significant risk (at least 33 percent) that the landing could be hard. Such a scenario would hurt the rest of Asia. However, since India's growth is predominantly domestic-led, this vibrant economy should be able to sustain a growth rate around 8.5 percent.
4. Oil Prices Will Ease, But Remain at High Levels. Weaker global growth will dampen oil prices and bring them more into line with supply/demand fundamentals. These fundamentals support a price between $75 and $80 per barrel. Global Insight expects that, on average, a barrel of WTI will cost $75.67 next year, compared with $72.13 in 2007. However, with markets still tight, any type of supply disruption (actual or expected) could send prices back up again—probably only temporarily. An unknown factor in oil and other commodity markets is the role of speculation. Some have referred to the recent spike in commodity prices (especially oil) as the "next bubble." If so, the recent drop in oil prices suggests that some of these speculative positions many be unwinding.
5. Core Inflation Will Edge Down.The U.S. economy is now operating well below potential. This will begin to gradually push up the unemployment rate. This extra slack in the economy will put further downward pressure on core inflation, which Global Insight expects to fall from 2.0 percent this year to 1.8 percent in 2008 for the core personal consumption deflator and from 2.3 percent to 2.1 percent for the core CPI. The good news, so far, is that high energy prices have had very little impact on other prices and on wage inflation. This benign state of affairs can be expected to continue for at least another year.
6. The Federal Reserve Will Keep Cutting Interest Rates.With inflation not a serious threat, and the risks predominantly on the downside, the Fed will keep lowering rates. Global Insight now expects cuts of 25 basis points at the December 11 Federal Open Market Committee Meeting, 50 basis points at the January 29-30 meeting, and another 25 basis points at the March 18 meeting. Meanwhile, if the credit crunch and housing problems get worse, the Fed may have no choice but to inject more liquidity into the financial system, and support the subprime mortgage relief/freeze plan devised by the Bush administration.
7. Housing Sector Activity Will Bottom Out in Mid-2008.Housing activity will continue to slide in the first half of next year. Global Insight now expects that total starts will fall below 1 million units during 2008—less than half their level in 2005. During the second half of the year, we expect housing activity to stabilize and begin recovering gradually. The same cannot be said about home prices, which are likely to keep sliding, at least through 2009. The peak-to-trough drop in home prices (as measured by the OFHEO price index) will probably end up being more than 10 percent.
8. The U.S. Current-Account Deficit Will Continue to Improve.The long-awaited correction of the gaping global imbalances is finally happening. The deceleration in the U.S. economy is likely to be much more pronounced than that across the rest of the world. Moreover, the dollar has fallen more than 20 percent (on a real trade-weighted basis) in the past five years and should fall a little more, before stabilizing. These developments are supercharging exports and dampening imports. During the course of the next year, the positive contribution by trade will make all the difference whether the U.S. economy suffers through a recession or not. Global Insight forecasts that the current-account deficit will fall from $755 billion in 2007 to $659 billion in 2008.
9. The Dollar Will Reach a Trough Against Some Currencies in 2008.While the dollar has been on a downward trend since 2002 (mostly because of the huge current-account deficit), the recent weakness is a function of fears over the subprime crisis and a U.S. recession, combined with expectations that the Fed will cut interest rates more than other central banks. As the economy begins recover in the second half of 2008 and early 2009, though, sentiments on the dollar will turn more positive, at least against some currencies. We expect that the euro will top out around $1.55 next summer and fall to $1.49 by year-end. The Canadian dollar may have peaked already, if oil prices keep falling. However, both the Japanese yen and the Chinese renminbi should keep appreciating vis-Ã -vis the dollar, given the large current-account surpluses in both economies.
10. With U.S. Growth Barely Positive Through Mid-2008, Even a Small Shock Will Push the Economy over the Edge.For the past two years, Global Insight has been saying that it would take two or more shocks to trigger a U.S. recession. There is a growing risk that such a scenario may be about to unfold. The combination of the housing/subprime crisis and higher oil prices could be enough to push growth into negative territory. If oil prices continue to fall, and end up in the $75–80/barrel range early in 2008, the U.S. economy will probably be able to escape recession. However, either another rise in oil prices or some other shock (even a small one) could be the straw that breaks the camel's back. Global Insight has raised the probability of a U.S. recession from 35 percent to 40 percent.
Nariman Behravesh, chief economist for Global Insight, compiled the information in this report.
© 2008 CNBC.com
Inside Outsourcing In India
This article was taken from http://www.cio.com/article/31928/Inside_Outsourcing_In_India, and it highlights the economics behind outsourcing of IT to India.
Outsourcing to India can provide a huge payback -- if you're willing to work at it. Two offshore veterans share their hard-earned lessons to help you determine if Indian outsourcing is right for your company.
By Stephanie Overby
June 01, 2003 — CIO— Don’t bother trading horror stories about outsourcing to India with John Doucette. He’ll trump you every time. "I was doing this back when you didn’t want to be doing this," says Doucette, CIO of Hartford, Conn.-based United Technologies, who first sent coding work to India more than a decade ago when he worked at General Electric. "Most CIOs don’t have any clue what it used to be like. You had people who couldn’t speak English. The telecommunications were terrible. It was awful trying to transfer files back and forth."
Head down the highway 10 miles to Otis Elevator in Farmington, one of United Technologies’ six business units, and you won’t get much sympathy from offshore veteran David Wood either. "Back then, there was not a lot of capability in India," says Wood, who set up a captive development center in India in the early ’90s when he was CIO of Otis Asia Pacific in Singapore. "It was a phenomenon that was only just starting," adds Wood, now Otis’s director of systems development.
Today, however, Indian outsourcing is one of the best ways for CIOs to cut application development and maintenance costs, deal effectively with the peaks and valleys of software demands, and focus on more strategic work. Depending on whom you ask, anywhere from one-half to two-thirds of all Fortune 500 companies are already outsourcing to India, and, according to Forrester Research, the amount of work done there for U.S. companies is expected to more than double this year. If you’re not already sending some development or maintenance work to Mumbai or Chennai, chances are you’re either looking into it or your CFO, salivating over potential labor cost savings of 70 percent, is wondering why you aren’t.
But despite its popularity, successful outsourcing to India is still difficult. While the market has matured, telecommunications have improved and English fluency in India has flourished, challenges still remain. Cul-tural issues creep in, service-level expectations are set too high, transitional costs can be foreboding, and ongoing relationship management is expensive and labor-intensive. And although United Technologies is an Indian outsourcing success story, to be sure -- the company has already saved $50 million and attributes $30 million annual savings to it -- United has had to overcome some obstacles. Even old hands like Doucette and Wood make missteps, and they agree that outsourcing to India is a work in progress -- a journey, not a destination. But they are still big believers of the India phenomenon. They recently shared with CIO some of the lessons they’ve learned along the way.
Outsourcing to India can provide a huge payback -- if you're willing to work at it. Two offshore veterans share their hard-earned lessons to help you determine if Indian outsourcing is right for your company.
By Stephanie Overby
June 01, 2003 — CIO— Don’t bother trading horror stories about outsourcing to India with John Doucette. He’ll trump you every time. "I was doing this back when you didn’t want to be doing this," says Doucette, CIO of Hartford, Conn.-based United Technologies, who first sent coding work to India more than a decade ago when he worked at General Electric. "Most CIOs don’t have any clue what it used to be like. You had people who couldn’t speak English. The telecommunications were terrible. It was awful trying to transfer files back and forth."
Head down the highway 10 miles to Otis Elevator in Farmington, one of United Technologies’ six business units, and you won’t get much sympathy from offshore veteran David Wood either. "Back then, there was not a lot of capability in India," says Wood, who set up a captive development center in India in the early ’90s when he was CIO of Otis Asia Pacific in Singapore. "It was a phenomenon that was only just starting," adds Wood, now Otis’s director of systems development.
Today, however, Indian outsourcing is one of the best ways for CIOs to cut application development and maintenance costs, deal effectively with the peaks and valleys of software demands, and focus on more strategic work. Depending on whom you ask, anywhere from one-half to two-thirds of all Fortune 500 companies are already outsourcing to India, and, according to Forrester Research, the amount of work done there for U.S. companies is expected to more than double this year. If you’re not already sending some development or maintenance work to Mumbai or Chennai, chances are you’re either looking into it or your CFO, salivating over potential labor cost savings of 70 percent, is wondering why you aren’t.
But despite its popularity, successful outsourcing to India is still difficult. While the market has matured, telecommunications have improved and English fluency in India has flourished, challenges still remain. Cul-tural issues creep in, service-level expectations are set too high, transitional costs can be foreboding, and ongoing relationship management is expensive and labor-intensive. And although United Technologies is an Indian outsourcing success story, to be sure -- the company has already saved $50 million and attributes $30 million annual savings to it -- United has had to overcome some obstacles. Even old hands like Doucette and Wood make missteps, and they agree that outsourcing to India is a work in progress -- a journey, not a destination. But they are still big believers of the India phenomenon. They recently shared with CIO some of the lessons they’ve learned along the way.
another price hike?!
March 21, 2008
Home makeovers hard hit by price hikes
Spike in building material prices, labour crunch pushing renovation costs up by 20% this year
By Jessica Cheam
PLANNING to renovate your home? If so, be prepared to pay 20 per cent more.
Construction costs - for both big projects and home renovations - have risen due to a rise in raw material prices and labour costs. And they are expected to increase even more this year.
Industry experts say overall construction costs are expected to rise by another 15 to 20 per cent this year - following a 40 per cent spike in the last two years.
A global spike in raw material prices, and a construction resources and manpower crunch here, are to blame for the relentless rise, say market players.
In particular, prices of reinforcing steel bars - used extensively in construction - have soared 64 per cent from $753 per tonne in January last year to $1,235 this January, according to data from the Building and Construction Authority (BCA).
Rising global demand for steel, fuelled by a building boom in developing countries such as China, India and Vietnam, is pushing prices up sharply.
The price of cement rose 30 per cent to $117 per tonne in the same period.
Consumers' pockets are hard hit by the price hikes. Contractors say home owners now have to fork out up to 20 per cent more for renovation works.
Renovating a 110 sq m five-room HDB flat, for example - which would have cost $80,000 at most at the start of last year - would now mean forking out $100,000, said contractor Steven Koh, 51, of Colorado Design.
But there is good news: the extra cost of building a new home is unlikely to be passed on to flat buyers.
Real Estate Developers Association of Singapore executive director Chia Hock Jin said developers cannot simply pass on the costs: 'It's the market that determines the prices.'
Given the recent cooling of the property market, price hikes for homes are also unlikely.
Local developer Frasers Centrepoint Homes said it has partly absorbed the rising costs and has also tried to mitigate them by adopting more efficient ways of building and securing raw material in bulk.
Construction costs typically make up 20 to 25 per cent of the total cost of a development, with the bulk coming from land cost, said Mr Seah Choo Meng, executive chairman of quantity surveying firm Davis Langdon & Seah Singapore.
Meanwhile, main contractors are starting to feel the pinch, with price rises eating into their profit margins. Wacon Construction & Trading, hired for a $5million spruce-up of MacRitchie Reservoir, was recently reported to have gone bust due to the hikes in raw material prices.
Mr Simon Lee, executive director of the Singapore Contractors Association Limited, said contractors had only a small margin in factoring such rises into building tenders.
One source of relief is the stabilising prices of sand, granite and concrete. BCA's latest data show prices of these materials are easing, after an artificial spike following Indonesia's abrupt ban of land sand exports last February. Still, compared to January last year, these prices have escalated and, in some cases such as sand, even doubled.
Mr Lee said there was concern that developers were slow in paying contractors, especially those affected by the sand ban, which might exacerbate contractors' cash-flow problems.
Mr Seah said he does not expect the construction crunch to abate, predicting that constructing demand will go up to $27 billion this year.
Home makeovers hard hit by price hikes
Spike in building material prices, labour crunch pushing renovation costs up by 20% this year
By Jessica Cheam
PLANNING to renovate your home? If so, be prepared to pay 20 per cent more.
Construction costs - for both big projects and home renovations - have risen due to a rise in raw material prices and labour costs. And they are expected to increase even more this year.
Industry experts say overall construction costs are expected to rise by another 15 to 20 per cent this year - following a 40 per cent spike in the last two years.
A global spike in raw material prices, and a construction resources and manpower crunch here, are to blame for the relentless rise, say market players.
In particular, prices of reinforcing steel bars - used extensively in construction - have soared 64 per cent from $753 per tonne in January last year to $1,235 this January, according to data from the Building and Construction Authority (BCA).
Rising global demand for steel, fuelled by a building boom in developing countries such as China, India and Vietnam, is pushing prices up sharply.
The price of cement rose 30 per cent to $117 per tonne in the same period.
Consumers' pockets are hard hit by the price hikes. Contractors say home owners now have to fork out up to 20 per cent more for renovation works.
Renovating a 110 sq m five-room HDB flat, for example - which would have cost $80,000 at most at the start of last year - would now mean forking out $100,000, said contractor Steven Koh, 51, of Colorado Design.
But there is good news: the extra cost of building a new home is unlikely to be passed on to flat buyers.
Real Estate Developers Association of Singapore executive director Chia Hock Jin said developers cannot simply pass on the costs: 'It's the market that determines the prices.'
Given the recent cooling of the property market, price hikes for homes are also unlikely.
Local developer Frasers Centrepoint Homes said it has partly absorbed the rising costs and has also tried to mitigate them by adopting more efficient ways of building and securing raw material in bulk.
Construction costs typically make up 20 to 25 per cent of the total cost of a development, with the bulk coming from land cost, said Mr Seah Choo Meng, executive chairman of quantity surveying firm Davis Langdon & Seah Singapore.
Meanwhile, main contractors are starting to feel the pinch, with price rises eating into their profit margins. Wacon Construction & Trading, hired for a $5million spruce-up of MacRitchie Reservoir, was recently reported to have gone bust due to the hikes in raw material prices.
Mr Simon Lee, executive director of the Singapore Contractors Association Limited, said contractors had only a small margin in factoring such rises into building tenders.
One source of relief is the stabilising prices of sand, granite and concrete. BCA's latest data show prices of these materials are easing, after an artificial spike following Indonesia's abrupt ban of land sand exports last February. Still, compared to January last year, these prices have escalated and, in some cases such as sand, even doubled.
Mr Lee said there was concern that developers were slow in paying contractors, especially those affected by the sand ban, which might exacerbate contractors' cash-flow problems.
Mr Seah said he does not expect the construction crunch to abate, predicting that constructing demand will go up to $27 billion this year.
Economics Cartoon!
Some relevant cartoons to brighten up your economics life. (:
Oil Prices / Government taxation & expenditure
Now we know why oil companies are always setting sky-high prices that never once went down.
IF someone gives this man some money, he and the giver should benefit. However, when the government forcibly redistributes money from taxpayers to the sign holder, it's another story.
It is often thought that government spending will stimulate spending, increasing economic activity. But this forgets that government spending is financed by taxation, thus decreasing economic activity by the same amount. This is a common issue with government policy-- obvious benefits and subtle costs. The upshot is that the public is far too likely to support such governmental policies which harm individuals and society.
George Bush should learn to think twice before escaping reality.
Oil Prices / Government taxation & expenditure
Now we know why oil companies are always setting sky-high prices that never once went down.
IF someone gives this man some money, he and the giver should benefit. However, when the government forcibly redistributes money from taxpayers to the sign holder, it's another story.
It is often thought that government spending will stimulate spending, increasing economic activity. But this forgets that government spending is financed by taxation, thus decreasing economic activity by the same amount. This is a common issue with government policy-- obvious benefits and subtle costs. The upshot is that the public is far too likely to support such governmental policies which harm individuals and society.
George Bush should learn to think twice before escaping reality.
The high cost of doing business
Small business faces a gauntlet of obstacles. eg. high taxes,high rents...It is also unable to spread out fixed costs over larger output due to its size.
Why productivity dip may compound inflation woes
Economic downturn paired with rising costs would hit firms, workers hard: NWC
Lin Yan Qinyanqin@mediacorp.com.sg
LAGGING labour productivity — while red-flagged by the National Wages Council (NWC) — appears to have taken a backseat this year to inflationary pressures that threaten to spiral out of control, according to some analysts.
And yet if the economy were to undergo a downturn, falling productivity could compound the problem for inflation-hit workers if their jobs are cut, they say.
"If the economy slows down and demand falls while costs continue to rise, profit margins would be squeezed — then low productivity would become a problem," said Dr Chua Hak Bin, the chief Asian strategist at Deutsche Bank Private Wealth Management.
"Job cuts would become serious because maybe firms have found that they have hired too many workers." .The tight labour market last year resulted in high wage costs as firms competed for skilled manpower, leading to a drop in productivity because each unit of output cost more to produce. In its recommendations and guidelines for 2008 and 2009 released on Friday, the NWC said that labour productivity growth declined from 1.5 per cent in 2006 to -0.9 per cent in 2007, due partly to the record employment gains last year.
The NWC noted that the growth in real basic wages outpaced productivity gains for the second consecutive year in 2007. While it was concerned about the emergence of this disturbing trend, it said that over a five-year period, productivity still exceeded the growth in real basic wages.
Real wages are wages adjusted for inflation using the consumer price index.
Referring to the fall in productivity last year, Singapore Business Federation president Stephen Lee said: "When we look at the trend, the gap between productivity and wage growth is now narrowing. We need to be more cautious. The only way to sustain wage increases is through productivity improvements." Others were more sanguine about the future.
Mr Robert Prior-Wandesforde, senior economist at HSBC, felt that continued hiring by employers reflected their optimism about the economy. "I think they are hiring in anticipation of growth and expansion. They could be worried that if the economy picks up, they might have difficulty hiring in a tight labour market," he said. "I don't think employers would be hiring if they were expecting a recession." In its recommendations, the NWC stressed the importance of improving productivity through helping workers acquire more skills and upgrading existing skills, as well as through job re-design and innovation.
Employers were possibly not doing enough of these, suggested Deutsche's Dr Chua.
"The Government has relaxed the terms for hiring foreigners, so maybe the incentive to improving productivity may not be that great, as firms can simply hire more from elsewhere," he said.
"Looking at the situation, it could be an indication that employers are not doing enough to bring up productivity."
In its statement accepting the NWC's guidelines, the Government said yesterday it would work with its tripartite partners to improve productivity and raise skills levels through the implementation of the Continuing Education and Training Masterplan.
Lin Yan Qinyanqin@mediacorp.com.sg
LAGGING labour productivity — while red-flagged by the National Wages Council (NWC) — appears to have taken a backseat this year to inflationary pressures that threaten to spiral out of control, according to some analysts.
And yet if the economy were to undergo a downturn, falling productivity could compound the problem for inflation-hit workers if their jobs are cut, they say.
"If the economy slows down and demand falls while costs continue to rise, profit margins would be squeezed — then low productivity would become a problem," said Dr Chua Hak Bin, the chief Asian strategist at Deutsche Bank Private Wealth Management.
"Job cuts would become serious because maybe firms have found that they have hired too many workers." .The tight labour market last year resulted in high wage costs as firms competed for skilled manpower, leading to a drop in productivity because each unit of output cost more to produce. In its recommendations and guidelines for 2008 and 2009 released on Friday, the NWC said that labour productivity growth declined from 1.5 per cent in 2006 to -0.9 per cent in 2007, due partly to the record employment gains last year.
The NWC noted that the growth in real basic wages outpaced productivity gains for the second consecutive year in 2007. While it was concerned about the emergence of this disturbing trend, it said that over a five-year period, productivity still exceeded the growth in real basic wages.
Real wages are wages adjusted for inflation using the consumer price index.
Referring to the fall in productivity last year, Singapore Business Federation president Stephen Lee said: "When we look at the trend, the gap between productivity and wage growth is now narrowing. We need to be more cautious. The only way to sustain wage increases is through productivity improvements." Others were more sanguine about the future.
Mr Robert Prior-Wandesforde, senior economist at HSBC, felt that continued hiring by employers reflected their optimism about the economy. "I think they are hiring in anticipation of growth and expansion. They could be worried that if the economy picks up, they might have difficulty hiring in a tight labour market," he said. "I don't think employers would be hiring if they were expecting a recession." In its recommendations, the NWC stressed the importance of improving productivity through helping workers acquire more skills and upgrading existing skills, as well as through job re-design and innovation.
Employers were possibly not doing enough of these, suggested Deutsche's Dr Chua.
"The Government has relaxed the terms for hiring foreigners, so maybe the incentive to improving productivity may not be that great, as firms can simply hire more from elsewhere," he said.
"Looking at the situation, it could be an indication that employers are not doing enough to bring up productivity."
In its statement accepting the NWC's guidelines, the Government said yesterday it would work with its tripartite partners to improve productivity and raise skills levels through the implementation of the Continuing Education and Training Masterplan.
Cinema goes feel pinch of ticke price hike
Cinema goers feel pinch of ticket price hike
http://www.straitstimes.com/Latest%2BNews/Singapore/STIStory_221403.html
SALES executive Pearlyn Lee is feeling the pinch of the latest rise in movie ticket prices.
The mother of two children, aged seven and 10, says that most families would only have time to watch a movie together on the weekends.
But that is when the price of a ticket is the highest -it can go up to $10.50. There is also the Internet and phone-booking charge which adds $1 to the total cost.
Two months after Cathay raised its prices by between 50 cents and $1, Golden Village upped its ticket prices by 50 cents on Thursday.
GV last raised prices - together with Shaw and Eng Wah - in May 2005.
http://www.straitstimes.com/Latest%2BNews/Singapore/STIStory_221403.html
SALES executive Pearlyn Lee is feeling the pinch of the latest rise in movie ticket prices.
The mother of two children, aged seven and 10, says that most families would only have time to watch a movie together on the weekends.
But that is when the price of a ticket is the highest -it can go up to $10.50. There is also the Internet and phone-booking charge which adds $1 to the total cost.
Comment: This shows that there is a rise in price of movie tickets. Output however, does not decrease as movie theatre seats remain the same. Hence audience filling up the seats and ticket issued out will still stay the same. Demand may decrease as it faces a rather price elastic curve since there are plenty of substitues e.g. other movie theatres, consumers can wait for the movie to appear in DVD, or consumers can turn to online movies, albeit illegally.
For her family of four, a weekend movie outing will cost $43. At such a price, the 35-year-old says that the cinema should throw in free drinks and snacks.
'The price increase kills our viewing pleasure in the cinema.'
Comment: Due to rise in price of movie tickets, consumer surplus decreases and demand is likely to decrease too.
Two months after Cathay raised its prices by between 50 cents and $1, Golden Village upped its ticket prices by 50 cents on Thursday.
GV last raised prices - together with Shaw and Eng Wah - in May 2005.
Comment: Firms in the movie industry makes use of cross-elasticity concept to a certain extent so as to decide on whether to raise prices when rival firms raise their price. E.g. when Cathay raised its price, Golden Village decided to raise its price too. However CED is not useful in helping the cinemas decide on how much they should raise the price to stay competitive. Thus cost is not considered or factored in when using CED.
Comment: Singapore also faces an oligopolistic cinema industry as there are only a few large cinemas dominating the market, namely Shaw, Eng Wah, Golden Village and Cathy with Golden Village with the biggest market share.
Asked why it raised ticket prices, its managing director David Glass cited 'rising business costs, goods, services, labour and film rentals'.
Comment:
- Rise in average cost and marginal cost due to
- 'rising business costs, goods, services, labour(average variable costs) and film rentals.(average fixed costs)'.
Average cost curve shifts up thus marginal cost curve also shifts up.
The GV cinema chain - with nine cineplexes and a 47 per cent share of the market - was not able to provide a breakdown of costs by press time.
But according to the Cathay website, 35 per cent of a ticket's cost goes to operating expenses and 47 per cent to film rentals.
- increase, if demand curve stays stagnant(possibly due to various rather price-inelastic movie, e.g. blockbusters)or even better, shifts to the right. Firm will enjoy even more supernormal profits than before.
- decrease, if demand curve shifts to the left drastically, so much so that the decrease in demand is more than the rise in AC and MC.
- stay the same, if demand curve's change is able to cover the rise in AC and MC.
Suggestions: Cinemas can use 2nd or 3rd degree price discrimmination to attract a larger crowd. E.g. Golden Village has student and senior citizen prices. Cathy allows babies on arms to go into the cinema free of charge.
Saturday, May 17, 2008
Orchard Turn to launch 177 luxury residences next year
SINGAPORE: Orchard Turn looks set to be more than just a mega-mall and high-end residential complex along Singapore's prime shopping street.
The developer is promising a striking landmark that will draw in the crowds.
More details about the development were unveiled on Tuesday, including plans to launch 177 luxury residences in the first half of next year.
It is the first major retail development on Orchard Road in more than 10 years, and Orchard Turn plans to literally tower over the competition.
Standing at a projected 218 metres, or 56 storeys high, the $2b mall-cum-luxury residential landmark will be the tallest building along Orchard Road.
The developer is confident it will be one of the most sought-after addresses in Singapore.
Ms Soon Su Lin, CEO of Orchard Turn Developments Pte Ltd, says: "We have an excellent location; our residential tower is going to be the tallest building in the Orchard Road micro-market, so it will have a very commanding presence.
"It will have panoramic views all round, totally unobstructed. In terms of pricing, we will take the cue from the market when we launch it next year."
In addition to the residential apartments, Orchard Turn will boast more than 450 shops and restaurants, in a 942,000 sq ft retail mall.
That capacity rivals the size of nearby Ngee Ann City.
Comment: I believe that all these are part of the company's measures to differentiate its product(the Orchard ION) from rival malls such as Ngee Ann City. With the wide media coverage on the Orchard ION and catchy advertisements, Orchard ION may enjoy a temporary inelastic demand curve upon its launch as it is perceived as the most 'in' place in town. However as the effect gradually wear off, Orchard ION would have to look into new ways in promoting its mall, for e.g. Holding storewide sales or hosting variety shows in its mall.
CapitaLand is aiming to attract both retail brands new to the Singapore market as well as the flagship stores of familiar international brands.
Talks with interested retailers will begin in December, and the leasing of the mall will be launched in the second quarter of 2007.
Prices for both the residences and the retail space will be set closer to the launch dates.
Despite growing competition in the retail sector, Orchard Turn believes that it will be able to draw in the crowds.
"I think Orchard Turn with its ultimate location on Orchard Road will offer tremendous opportunity for retailers, both local and foreign," says Ms Soon.
"The design concept that we've unveiled today is a very exciting organic building that will allow top local brands to showcase their brand identity on the external facade of the building," she adds.
UK-based, award-winning architecture firm, Benoy, has been roped in to develop a striking, iconic design for the landmark development.
Orchard Turn will feature a two-tier observation deck, a new public square, and an integrated art space.
The project is being jointly developed by CapitaLand and Hong Kong-based Sun Hung Kai. - CNA/so
SINGAPORE: Orchard Turn looks set to be more than just a mega-mall and high-end residential complex along Singapore's prime shopping street.
The developer is promising a striking landmark that will draw in the crowds.
More details about the development were unveiled on Tuesday, including plans to launch 177 luxury residences in the first half of next year.
It is the first major retail development on Orchard Road in more than 10 years, and Orchard Turn plans to literally tower over the competition.
Standing at a projected 218 metres, or 56 storeys high, the $2b mall-cum-luxury residential landmark will be the tallest building along Orchard Road.
The developer is confident it will be one of the most sought-after addresses in Singapore.
Ms Soon Su Lin, CEO of Orchard Turn Developments Pte Ltd, says: "We have an excellent location; our residential tower is going to be the tallest building in the Orchard Road micro-market, so it will have a very commanding presence.
"It will have panoramic views all round, totally unobstructed. In terms of pricing, we will take the cue from the market when we launch it next year."
In addition to the residential apartments, Orchard Turn will boast more than 450 shops and restaurants, in a 942,000 sq ft retail mall.
That capacity rivals the size of nearby Ngee Ann City.
Comment: I believe that all these are part of the company's measures to differentiate its product(the Orchard ION) from rival malls such as Ngee Ann City. With the wide media coverage on the Orchard ION and catchy advertisements, Orchard ION may enjoy a temporary inelastic demand curve upon its launch as it is perceived as the most 'in' place in town. However as the effect gradually wear off, Orchard ION would have to look into new ways in promoting its mall, for e.g. Holding storewide sales or hosting variety shows in its mall.
CapitaLand is aiming to attract both retail brands new to the Singapore market as well as the flagship stores of familiar international brands.
Talks with interested retailers will begin in December, and the leasing of the mall will be launched in the second quarter of 2007.
Prices for both the residences and the retail space will be set closer to the launch dates.
Despite growing competition in the retail sector, Orchard Turn believes that it will be able to draw in the crowds.
"I think Orchard Turn with its ultimate location on Orchard Road will offer tremendous opportunity for retailers, both local and foreign," says Ms Soon.
"The design concept that we've unveiled today is a very exciting organic building that will allow top local brands to showcase their brand identity on the external facade of the building," she adds.
UK-based, award-winning architecture firm, Benoy, has been roped in to develop a striking, iconic design for the landmark development.
Orchard Turn will feature a two-tier observation deck, a new public square, and an integrated art space.
The project is being jointly developed by CapitaLand and Hong Kong-based Sun Hung Kai. - CNA/so
market structure
VALUING DIVERSITY
This year, an incredible 800,000 skilled technology jobs in the United States will go unfilled because there are not enough qualified people to fill them. This shortage is expected to worsen over the next few years as the demand for information technology workers across the spectrum of business and government continues to expand rapidly. The consequences for the U.S. economy are significant. By one count, the shortfall in high-tech workers may cost as much as $4 billion per year in lost production.
The same situation exists at almost every company in the high-tech industry -- demand exceeds supply. For example, Microsoft hired 9,700 new employees last year, yet still has openings for 5,600 people in technical jobs.
Although there is no quick fix, leaders in the high-tech industry, the academic community and government believe that continuing to expand diversity outreach efforts is a critical step toward addressing the shortage of skilled workers. Recently, the Congressional Commission on the Advancement of Women and Minorities in Science, Engineering and Technology Development issued a report, which stated: "If women, underrepresented minorities, and persons with disabilities were represented in the U.S. science, engineering and technology workforce in parity with their percentages in the total workforce population, this shortage could largely be ameliorated."
A culturally diverse workforce provides companies with better decision-making based on multiple perspectives and varied approaches to product development. Not all cultures, for example, use technology in the same way. Understanding and factoring in such differences will enable companies to become more competitive in the global economy.
According to the most recent information available, women represented only 19 percent of science, engineering and technology workers in 1997, compared with their nearly 46 percent representation in the U.S. workforce as a whole. African Americans and Hispanics each made up about 3 percent of the science, engineering and technology workforce, while their representation in the workforce as a whole was 11 percent and 10 percent respectively. And according to other research, people with disabilities comprised 14 percent of the U.S. workforce but only 6 percent were in technical fields. One positive trend is representation of Asians in the technology workforce.
Although significant effort has been put into increasing educational opportunities for women and minorities in technical fields during the past quarter century, the "pipeline" is far from overflowing. Women, African Americans and Hispanics are still underrepresented among people earning computer and information science degrees.
There are many factors that experts believe contribute to these imbalances. These include lack of access to computer-related education and equipment among underrepresented groups, few role models for women and minorities among teachers and professionals in science and engineering fields, and a perception of the IT industry as "uncool" and the domain of some kind of highly educated technical elite.
Diversity is one of the core values that define Microsoft's business practices and operating philosophy. To that end, Microsoft is working with a wide range of schools and organizations to increase technology training and educational opportunities for women and minorities. These efforts include:
* More than $90 million in grants, software and scholarships to colleges and universities serving African-American, Hispanic and Native American populations;
* $6 million in grants to the Minority and Women's Technical Scholarship program;
* Working Connections, a $40 million effort to help disadvantaged people prepare for information technology jobs at community colleges.
* In addition to our focus on developing technologies that enable people with disabilities, Microsoft is a cofounder of the Able to Work Consortium, which is dedicated to increasing employment opportunities for people with disabilities.
Microsoft also helped form the Professional Technical Diversity Network, a partnership with other corporations and minority professional organizations that focuses on effective networking and recruitment to support career development in technical disciplines. The company also recruits from among more than 20 minority-oriented professional organizations.
While we are proud of the efforts that we and other high-tech companies have made in recent years, there is clearly more work that the IT industry, nonprofit organizations, educational institutions and government must do to ensure full and equitable participation of all Americans in science, engineering and technology fields, irrespective of gender, race, sexual orientation or disability. It is not only the right thing to do -- it is imperative if America is to maintain its technology-driven economy and its economic and intellectual preeminence.
One in a series of essays on technology and its impact on society. More information is available at microsoft.com/issues.
This year, an incredible 800,000 skilled technology jobs in the United States will go unfilled because there are not enough qualified people to fill them. This shortage is expected to worsen over the next few years as the demand for information technology workers across the spectrum of business and government continues to expand rapidly. The consequences for the U.S. economy are significant. By one count, the shortfall in high-tech workers may cost as much as $4 billion per year in lost production.
The same situation exists at almost every company in the high-tech industry -- demand exceeds supply. For example, Microsoft hired 9,700 new employees last year, yet still has openings for 5,600 people in technical jobs.
Although there is no quick fix, leaders in the high-tech industry, the academic community and government believe that continuing to expand diversity outreach efforts is a critical step toward addressing the shortage of skilled workers. Recently, the Congressional Commission on the Advancement of Women and Minorities in Science, Engineering and Technology Development issued a report, which stated: "If women, underrepresented minorities, and persons with disabilities were represented in the U.S. science, engineering and technology workforce in parity with their percentages in the total workforce population, this shortage could largely be ameliorated."
A culturally diverse workforce provides companies with better decision-making based on multiple perspectives and varied approaches to product development. Not all cultures, for example, use technology in the same way. Understanding and factoring in such differences will enable companies to become more competitive in the global economy.
According to the most recent information available, women represented only 19 percent of science, engineering and technology workers in 1997, compared with their nearly 46 percent representation in the U.S. workforce as a whole. African Americans and Hispanics each made up about 3 percent of the science, engineering and technology workforce, while their representation in the workforce as a whole was 11 percent and 10 percent respectively. And according to other research, people with disabilities comprised 14 percent of the U.S. workforce but only 6 percent were in technical fields. One positive trend is representation of Asians in the technology workforce.
Although significant effort has been put into increasing educational opportunities for women and minorities in technical fields during the past quarter century, the "pipeline" is far from overflowing. Women, African Americans and Hispanics are still underrepresented among people earning computer and information science degrees.
There are many factors that experts believe contribute to these imbalances. These include lack of access to computer-related education and equipment among underrepresented groups, few role models for women and minorities among teachers and professionals in science and engineering fields, and a perception of the IT industry as "uncool" and the domain of some kind of highly educated technical elite.
Diversity is one of the core values that define Microsoft's business practices and operating philosophy. To that end, Microsoft is working with a wide range of schools and organizations to increase technology training and educational opportunities for women and minorities. These efforts include:
* More than $90 million in grants, software and scholarships to colleges and universities serving African-American, Hispanic and Native American populations;
* $6 million in grants to the Minority and Women's Technical Scholarship program;
* Working Connections, a $40 million effort to help disadvantaged people prepare for information technology jobs at community colleges.
* In addition to our focus on developing technologies that enable people with disabilities, Microsoft is a cofounder of the Able to Work Consortium, which is dedicated to increasing employment opportunities for people with disabilities.
Microsoft also helped form the Professional Technical Diversity Network, a partnership with other corporations and minority professional organizations that focuses on effective networking and recruitment to support career development in technical disciplines. The company also recruits from among more than 20 minority-oriented professional organizations.
While we are proud of the efforts that we and other high-tech companies have made in recent years, there is clearly more work that the IT industry, nonprofit organizations, educational institutions and government must do to ensure full and equitable participation of all Americans in science, engineering and technology fields, irrespective of gender, race, sexual orientation or disability. It is not only the right thing to do -- it is imperative if America is to maintain its technology-driven economy and its economic and intellectual preeminence.
One in a series of essays on technology and its impact on society. More information is available at microsoft.com/issues.
Taiwan Tobacco and Wine monopoly
Taiwan's tobacco monopoly loses its key props.(Taiwan Tobacco and Liquor Corp.).Keith Bradsher.
The future has rarely been so cloudy for Taiwan's sprawling century-old tobacco and alcohol monopoly, which the government has begun converting into a publicly traded company competing in a free market.
The loss of generous tax breaks for the enterprise, which on July 1 was reorganized from a government agency into a state-owned company, the Taiwan Tobacco and Liquor Corporation, threatens to sharply reduce its sales, both directly and through contributing to an overall reduction in smoking in Taiwan.
Also, the company may be forced to rename its 53-year-old flagship cigarette brand, Long Life, which commands more than 40 percent of the market, because of a proposed law forbidding any marketing claim or suggestion that cigarettes are clean, safe or healthy.
Privatization of the monopoly and withdrawal of privileged tax treatment were steps Taiwan promised to take when it was negotiating its entry last November into the World Trade Organization. Now that it is organized as a corporation, Taiwan Tobacco and Liquor will be publicly floated in stages, beginning with an initial public offering in 2005.
In the meantime, fierce competition is already beginning. On the alcohol side, a number of local companies are setting up breweries and distilleries. But the big changes are in cigarettes, in a country where half the men smoke (but only one in 20 women do).
Though Taiwan Tobacco has been the sole domestic manufacturer, it has competed with imported brands since 1987, when the government took away its monopoly of the retail distribution of tobacco and liquor products. But the imports were much more expensive, in large part because they were subject to high taxes while the state monopoly was not.
To the delight of antismoking activists, the government chose to level the playing field by ending Taiwan Tobacco's tax exemption, not lowering the taxes. It also added a 15-cents-a-pack ''health tax'' to all cigarettes, domestic and foreign, earlier this year. As a result, smoking is suddenly much more expensive here, and consumption is expected to decline.
The antismoking crusaders are delighted, too, at the regulatory threat to the brand name of one of Taiwan Tobacco and Liquor's best-selling products. ''In the past, there had been strong criticism of the government that it carried on antismoking campaigns while selling cigarettes at the same time, just like a soccer player being a referee at the same time,'' said Judy Lin, the chief of tobacco control at the John Tung Foundation, a nonprofit group in Taiwan that has led the fight against smoking here.
Ms. Lin said that the Long Life brand name implied that the cigarettes could prolong life, or at the least were less dangerous than other cigarettes.
While the ''no health claims'' bill before the Taiwan legislature does not single out Long Life, it nonetheless alarms Taiwan Tobacco and Liquor, which is determined to preserve the name. ''The brand name is an asset,'' said Chan Shih-chu, the company's director of tobacco products. ''Changing the name would have a substantial effect on our business.''
The monopoly bureau chose Long Life as an auspicious name when the cigarette was first introduced in 1959, and never intended to suggest any health benefit, Mr. Chan said. ''No smoker will buy the cigarettes because they believe it will bring long life,'' he said. He acknowledged that cigarette smoking could impair health.
The tax changes have pushed up the retail cost of a 20-cigarette pack of Long Lifes by 32 percent in a matter of months, making a pack cost $1 to $1.20 -- still cheap by American standards, but quite a lot in Taiwan, where economic output per person is about $13,000 a year, one-third of that in the United States.
Mr. Chan said Long Life sales plunged this year, though he would not give figures. He said the company hoped that some of the drop-off reflected consumers' having bought in bulk just before the widely publicized tax increases, and that sales would climb again when smokers' hoards were exhausted.
But Chen Tze-shu, owner of a small grocery store in Taipei, said that Long Life cigarettes had another problem: ''Nowadays, none of the young people smoke Long Life -- it's the middle-aged and older men.''
Taiwan Tobacco and Liquor's sales slowly eroded in the 1990's after it lost its retail distribution monopoly. But with annual sales of more than $2 billion, it remains one of Taiwan's largest companies.
The company's share of the domestic cigarette market fell from 80 percent 10 years ago to about half now, Mr. Chan said. But it has held on to most of the domestic market for alcoholic beverages, mainly because of Taiwan Beer, a popular, high-quality brew belied by its generic name and bland label.
The former monopoly, whose huge mansion headquarters are across the street from the presidential compound in Taipei, has played an outsize role in Taiwan history. After Japan took the island from China in a war in 1894, it set up the monopoly bureau as a government agency with the exclusive right to a range of goods from cigarettes and beer to salt and camphor. Steep mark-ups on the products were used to defray the cost of Japan's colonial administration of Taiwan.
The monopoly bureau's marketing of opium in Taiwan at a time when the drug was illegal both in mainland China and in Japan was especially controversial. International pressure on Tokyo brought opium sales to an end in the 1930's.
When Japan's World War II surrender returned the island to China, some Taiwan entrepreneurs began selling cigarettes and other monopoly products in defiance of the monopoly bureau, which was seen as a colonial vestige. But the Nationalist government under Chiang Kai-shek, pressed hard by the Communists in the Chinese civil war and looking to Taiwan as a possible refuge, responded with tightened control.
On Feb. 27, 1947, an agent of the monopoly bureau beat up a woman selling cigarettes on the street in Taipei. Local residents staged a large protest the next day, and were machine-gunned by Nationalist troops.
The incident touched off rioting across Taiwan that was bloodily suppressed with the loss of as many as 20,000 lives, mainly among Taiwan's social and intellectual elite, engendering decades of hostility between Nationalists from the mainland and many local Taiwanese.
The future has rarely been so cloudy for Taiwan's sprawling century-old tobacco and alcohol monopoly, which the government has begun converting into a publicly traded company competing in a free market.
The loss of generous tax breaks for the enterprise, which on July 1 was reorganized from a government agency into a state-owned company, the Taiwan Tobacco and Liquor Corporation, threatens to sharply reduce its sales, both directly and through contributing to an overall reduction in smoking in Taiwan.
Also, the company may be forced to rename its 53-year-old flagship cigarette brand, Long Life, which commands more than 40 percent of the market, because of a proposed law forbidding any marketing claim or suggestion that cigarettes are clean, safe or healthy.
Privatization of the monopoly and withdrawal of privileged tax treatment were steps Taiwan promised to take when it was negotiating its entry last November into the World Trade Organization. Now that it is organized as a corporation, Taiwan Tobacco and Liquor will be publicly floated in stages, beginning with an initial public offering in 2005.
In the meantime, fierce competition is already beginning. On the alcohol side, a number of local companies are setting up breweries and distilleries. But the big changes are in cigarettes, in a country where half the men smoke (but only one in 20 women do).
Though Taiwan Tobacco has been the sole domestic manufacturer, it has competed with imported brands since 1987, when the government took away its monopoly of the retail distribution of tobacco and liquor products. But the imports were much more expensive, in large part because they were subject to high taxes while the state monopoly was not.
To the delight of antismoking activists, the government chose to level the playing field by ending Taiwan Tobacco's tax exemption, not lowering the taxes. It also added a 15-cents-a-pack ''health tax'' to all cigarettes, domestic and foreign, earlier this year. As a result, smoking is suddenly much more expensive here, and consumption is expected to decline.
The antismoking crusaders are delighted, too, at the regulatory threat to the brand name of one of Taiwan Tobacco and Liquor's best-selling products. ''In the past, there had been strong criticism of the government that it carried on antismoking campaigns while selling cigarettes at the same time, just like a soccer player being a referee at the same time,'' said Judy Lin, the chief of tobacco control at the John Tung Foundation, a nonprofit group in Taiwan that has led the fight against smoking here.
Ms. Lin said that the Long Life brand name implied that the cigarettes could prolong life, or at the least were less dangerous than other cigarettes.
While the ''no health claims'' bill before the Taiwan legislature does not single out Long Life, it nonetheless alarms Taiwan Tobacco and Liquor, which is determined to preserve the name. ''The brand name is an asset,'' said Chan Shih-chu, the company's director of tobacco products. ''Changing the name would have a substantial effect on our business.''
The monopoly bureau chose Long Life as an auspicious name when the cigarette was first introduced in 1959, and never intended to suggest any health benefit, Mr. Chan said. ''No smoker will buy the cigarettes because they believe it will bring long life,'' he said. He acknowledged that cigarette smoking could impair health.
The tax changes have pushed up the retail cost of a 20-cigarette pack of Long Lifes by 32 percent in a matter of months, making a pack cost $1 to $1.20 -- still cheap by American standards, but quite a lot in Taiwan, where economic output per person is about $13,000 a year, one-third of that in the United States.
Mr. Chan said Long Life sales plunged this year, though he would not give figures. He said the company hoped that some of the drop-off reflected consumers' having bought in bulk just before the widely publicized tax increases, and that sales would climb again when smokers' hoards were exhausted.
But Chen Tze-shu, owner of a small grocery store in Taipei, said that Long Life cigarettes had another problem: ''Nowadays, none of the young people smoke Long Life -- it's the middle-aged and older men.''
Taiwan Tobacco and Liquor's sales slowly eroded in the 1990's after it lost its retail distribution monopoly. But with annual sales of more than $2 billion, it remains one of Taiwan's largest companies.
The company's share of the domestic cigarette market fell from 80 percent 10 years ago to about half now, Mr. Chan said. But it has held on to most of the domestic market for alcoholic beverages, mainly because of Taiwan Beer, a popular, high-quality brew belied by its generic name and bland label.
The former monopoly, whose huge mansion headquarters are across the street from the presidential compound in Taipei, has played an outsize role in Taiwan history. After Japan took the island from China in a war in 1894, it set up the monopoly bureau as a government agency with the exclusive right to a range of goods from cigarettes and beer to salt and camphor. Steep mark-ups on the products were used to defray the cost of Japan's colonial administration of Taiwan.
The monopoly bureau's marketing of opium in Taiwan at a time when the drug was illegal both in mainland China and in Japan was especially controversial. International pressure on Tokyo brought opium sales to an end in the 1930's.
When Japan's World War II surrender returned the island to China, some Taiwan entrepreneurs began selling cigarettes and other monopoly products in defiance of the monopoly bureau, which was seen as a colonial vestige. But the Nationalist government under Chiang Kai-shek, pressed hard by the Communists in the Chinese civil war and looking to Taiwan as a possible refuge, responded with tightened control.
On Feb. 27, 1947, an agent of the monopoly bureau beat up a woman selling cigarettes on the street in Taipei. Local residents staged a large protest the next day, and were machine-gunned by Nationalist troops.
The incident touched off rioting across Taiwan that was bloodily suppressed with the loss of as many as 20,000 lives, mainly among Taiwan's social and intellectual elite, engendering decades of hostility between Nationalists from the mainland and many local Taiwanese.
Subscribe to:
Posts (Atom)