Korea’s FDI at all-time low

Do foreigners view Korea as unsuitable ground for investment?In what has been noted as an alarming trend, direct investment foreign investment in Korea has hit an all time low. The Net FDI in Korea, showed a drop of US$9.25 billion in 2004 from previous years and the consecutive three years till 2007 have also shown a steady decline. In fact in 2007 the net figures for foreign investment totalled a drastic $1.58 billion.

In 2008, the amount of FDI that left Korea in the first three months was $670 million, higher than figures that came in. Plenty of foreign companies withdrew their investment from Korea. This is an unhealthy trend for the Korean market in the investment market. Some of this could be attributed to excessive government regulations, labour unions problems, high living costs and lack of proper education for children.

According to the Organization for Economic Cooperation and Development, Korea is the only country in the 30 member nations of the OECD where FDI shrink has been noticeably low for the past three years.

Other countries in this region like, Malaysia, Indonesia, India, Brazil, and China or Vietnam, have not shown such alarming figures in foreign investment. Vietnam’s FDI rise was more than eight times, from $2.1 billion to $17.9 billion. India saw a rise from $2.6 billion to $15.7 billion.

It is alarming to see that not only are new investors not investing in the country, but alarmingly those who have already invested in this country have not shown any positive growth or reinvestment.

The past few years have seen many a foreign businesses withdrawing their investments from Korea. Companies like Nokia transferred some of its facilities in South Gyeongsang Province, Masan to China and India. Motorola is another company that has also moved its plant in Icheon, to China. Yet another big name in this trend is that of Philips, which withdrew its investments from a joint venture with LG in Korea.  Following the trend, Wal-Mart and Carrefour have ended their business transactions with the country.

The trend has given rise to alarming trends of economic slowdown and rising unemployment in Korea. The youth and the workforce are those who are directly affected.

M’sia investment inflow undaunted by political climate

Fresh reports from Kuala Lumpur, suggest that Malaysia is seeing plenty of investment from foreign shores in spite of its unstable political conditions. An example of this is Vivo Bio Tech Ltd, an Indian firm case which plans to invest $140 million in Malaysia. The investment is for building a research and manufacturing plant in Malacca. Confirming this Malaysian news sources add that this is in addition to Japanese, German, and American direct foreign investments worth 16.6 billion that have taken place since March.As per reports of the Malaysian Industrial Development Authority the country’s FDI inflow will surpass last year’s 33.4 billion ringgit. This comes as much awaited good news to the Malaysian troubled people.

Ex Mida director-general R. Karunakaran, says that the first four months of 2008 has seen investment worth 23.9 billion ringgit. These investments include projects by Germany’s Q-Cell, Japanese Ibiden Co Ltd, and US-based SunPower Corp and Honeywell International Inc. This is expected to raise the investment figures to nine billion ringgit.

Malaysia attracted a large number of foreign investors from countries like Saudi Arabia, Bahrain, Qatar, Kuwait, etc belonging to the Gulf Cooperation Council.

Malaysia faced the ides of March in the form of an election upset wherein the ruling Barisan Nasional (BN), a conglomerate of the three main ethnic groups, lost its traditional two-thirds majority support in parliament.

Amidst political turmoil and rising oil prices there was enough speculation about the investment figures, but this has been proved wrong much to the relief of the financial leaders. Much required global approval in the form of the Global Competitiveness Report of 2007-2008, which placed Malaysia in the 19th position from that of the 23rd in 2007 has been timely indeed.

In another achievement of sorts Kearney’s 2007 Global Services Location Index (GLSI) indicated that Malaysia was one of the top three best destinations in the world for investment in terms of outsourcing business.

Enter the Maoists?

With the end of the monarchy in Nepal, the country is geared for a Government where one sees the participation of various political outfits of every hue and ideology. The latest to join the ranks are the Maoists who have so long been identified by their armed rebellion against, political legitimacy. Though the transition to a democratic government seems far from problems the mood is optimistic bolstered by the fight for democracy also advocated and ushered in Nepal with the blessings of the Bush administration in the US.The entry into the main political fray by the Maoists is though challenged by long-held principles of the country that have opposed to the  involvement of  states or groups thought of as rogues. The (Maoist) Communist Party of Nepal which has won the majority of seats in the constituent assembly elections, is on the U.S. Terrorist Exclusion List. This also implies that members of the same are barred from travelling or owning property in the States.

In what is being termed of as a shift in US think tanks, top U.S. diplomats met with Maoist Chairman Pushpa Kamal Dahal, though of as probable next as prime minister. This though contradicts statements made by Deputy Assistant Secretary of State, Evan Feigenbaum, who told reporters that the Maoists are still on the terrorist lists.

An electoral victory for the Maoist’s leads to problems for some of Nepal’s neighbour’s especially India which has been providing military training to the countries army. It is feared that the Maoist electoral victory will lead to strengthening of Maoist rebel activities with the Naxalities within India too. The Maoist leader Prachanda has however denied any links with Naxalites in India.

Both India and China, important neighbours for Nepal have shown keen interest in Nepalese political developments. On its part Maoist leader Prachanda has said that Nepal would try and maintain good relations with both the countries.

The new Nepalese Government will face plenty of political and economic challenges that are predominant in the country. According to sources in the Asian Development Bank, Nepal is still one of the poorest nations in the world. According to recent reports by World Food Program, about 2.5 million people in rural areas of Nepal are in need of immediate food assistance. This is in addition to an additional 3.9 million people who face a risk of starvation due to food insecurities and increasing prices of food.

Another of the major problems lies in deciding the future of twenty-three thousand guerrilla fighters of the People’s Liberation Army, who are in the UN-monitored cease-fire camps. According to Prachanda, they should be integrated into the existing 95,000 Nepalese army but this suggestion has been opposed by the military administrators.

G-8 summit’s greenhouse decision ‘unsafe’

Environmentalists downplay a decision, made by the most powerful countries in the world, to reduce greenhouse gas emissions by 50% by 2050.

The summit, held in Japan, decided to set the goal as such so that it was compliant with “economic growth and energy security,” as said by leaders in a statement. The leaders also said in order for the goal to be reached they will need the help of all major economies, including India and China.

Critics argue 50 percent reduction in the given time frame isn’t enough. The year 2020 is highly recommended as a safe target for emissions to be cut in half.

Members of Oxfam International, a group that dedicates itself to fighting poverty and injustice, dressed as leading officials and held balloons representing carbon emissions in an act to demonstrate a more serious situation regarding greenhouse emissions. “At this rate, by 2050 the world will be cooked and the G-8 leaders will be long forgotten,” Anthony Hill, a spokesperson for Oxfam International, stated. “The G-8’s endorsement of a tepid 50 by 50 climate goal leaves us with a 50-50 chance of a climate meltdown. Rather than a breakthrough, the G-8’s announcement on 2050 is another stalling tactic.”

The European Union is more eager to reach a higher target. They would like to cut the emissions as they were in 1990 by 25 to 40 percent by 2020. Japan, the United States, and Canada are opposed to such a target.

Ben Wikler, a member of the environmental campaign AVAAZ, blames the governments’ childishness and lack of responsibility for the decision. “The failure to act on 2020 targets is a failure to take responsibility, and our members around the world feel that there is a childishness to not taking responsibility.”

The director of the WWF Global Climate Initiative, Kim Carstensen, agrees the decision was an unsafe one.  “So little progress after a whole year of minister meetings and negotiations is not only a wasted opportunity, it falls dangerously short of what is needed to protect people and nature from climate change.”

The United States was the only party among 175 to reject the Kyoto Protocol, a plan to limit atmospheric levels of greenhouse gases, ten years ago. A reason given for the opposition was the protocol did not restrict emissions in India and China. Last year, at the Bali conference, the United States signed an agreement for negotiations involving a reduction in carbon dioxide emissions. The White House claimed their effort alone is useless. “The negotiations must proceed on the view that the problem of climate change cannot be adequately addressed through commitments for emissions cuts by developed countries alone. Major developing economies must likewise act.”

In 2009, in Copenhagen, Denmark, there will be another Bali pact. The event is designed to be a guide for more climate talks.

Direct China-Taiwan flights begin

In what is being seen as a major initiative to improve relations, by Chinese and Taiwanese Governments, first regular and direct flight services have started operation from China to Taiwan. Commenting on the same, China’s official on Taiwan affairs said that ‘this was a new start’ in trying to improve relations between Beijing and Taipei.The move comes in the wake of improved relations since Taiwan’s new president, Ma Ying-jeou, came to power in May. The arrangements for direct flights, is a big step towards improving relations between strained nations.

The flights that will operate from Friday to Monday will connect five major cities of China and Taiwan.

The first China Southern Airlines flight, a part of this arrangement had 250 passengers aboard and was met with traditional water sprinkling ceremony.

China Southern Airlines, company chairman Liu Shaoyong, described the moment as ‘a sacred’ one, even as lion dancers and aboriginal singers welcomed passengers at the airports.

The new flight agreement is being touted as a drive that will prove to be a good deal for both the new Taiwanese President Ma Ying-jeou, and the countries tourism. This brings in a ray of hope for a boost to Taiwan’s flagging economy.

Local businessmen are appreciative that this move is sure to bring in a good deal of business to the local market. In what is seen as a major achievement, the two sides have agreed to an increased number of Chinese tourists who can visit Taiwan. The number will rise to 3,000 per day from 18 of July.

Skeptical and more practical solutions were however offered by a group of those who believed that direct cargo flights, would have been a better idea to improve China-Taiwan relations.

These new chartered flights will take a round about route, through Hong Kong airspace; this is because Taiwan’s military is on constant alert for any kind of possible air attack from the mainland. This is also because civilian flights cannot be allowed to clutter cross-straits radars, says military sources.

North Korea’s nuclear future

This week many discussions among leaders will continue regarding the future of North Korea’s nuclear program. “Important issues will be discussed…including the appraisal of the declaration and the establishment of a verification mechanism,” according to Kim Sook, South Korea’s chief nuclear envoy.North Korea revealed details of its nuclear program last month, and soon after destroyed a water cooling tower in a facility used to extract plutonium for nuclear weapons. On June 26^th a 60-page declaration written in the English language was given to China describing plutonium productions from as early as 1986. North Korea admitted to producing around 40 kilograms of enriched plutonium, or roughly seven nuclear bomb’s worth. The tower was destroyed the day following the submittal of the declaration. The United States paid North Korea around $2.5 million for doing so.

Other parts of the nuclear program are being dismantled. This has gained North Korea the lifting of some U.S. sanctions and the removal of its name from the U.S. State Department’s list of state sponsors of terrorism. Other sanctions on North Korea will remain in effect. Five other nations have been watching North Korea in addition to the United States. They share a common goal of ending Pyongyang’s nuclear weapons program. Other nations are offering energy assistance and food to North Korea.

China will host talks for the first time in nine months. No details had been announced at this time. Kim claimed the talks would begin on Tuesday. Japan, Russia, the United States, and both Koreas are to be involved. North Korea’s report is not considered complete or verifiable by U.S. President George Bush, “To end its isolation, North Korea must address these concerns. It must dismantle all of its nuclear facilities, give up its separated plutonium, resolve outstanding questions on its highly enriched uranium and proliferation activities, and end these activities in a way that we can fully verify,” Bush said. He also stated, “[there are still] a number of issues of serious concern to the United States and the international community.” North Korea is still a suspect in an airliner bombing, and has not revealed details on its supplying Syria with nuclear technology.

Rising Inflation Rates

In what is being seen as a worrying phenomenon in the entire South East Asian region, inflation rates have shot up like never before. Countries like India and China have been at the butt of such astronomically high inflation rates. With the continuously rising oil rises to be primarily blamed for this state of affairs there have been demonstrations and protests by the masses all over these countries. In tune with this, China’s premier called the nations attention to a strong vigilance against inflation which he said ‘has reached 12-year high’. Meanwhile a state-run news agency, commented that the government would in all likelihood try to ensure that price increase in different quarters are accepted by the masses.China’s top economic official, Wen Jiabao tried to remind local officials that they should not be complacent about the rising inflation rates and take all necessary measures to control the situation in hand. Although fast developing nations, both India and China are rightly worried over the situation especially with the constant trend in rising fuel prices world wide.

Inflation rates in India jumped to 11.6% in late June, with the increase in sectors such as food, oil and cement prices, this in comparison to inflation rates at a 4.32% just a year ago.

Most economists and manufacturers in the area are concerned that if inflation continues to rise it will push up production costs and diminish the competitiveness of exports, leading to massive business loss.

However financial analysts are positive that the rates in the United States should come down soon, this is in reference to the fact that most Southeast Asian currencies are closely connected to the dollar. Speculations are on that Indonesia, Thailand, Philippines and Vietnam have also starting feeling the impact of inflation.

In a bid to reduce inflation rates the Malaysian Government has launched an anti- inflation drive. The bid tries to exert strict surveillance on excessive profiteering, liberalization of food imports, and warning that more goods will subject to price controls.

Confirmation of a high rate of inflation in Vietnam has been reported as well. Authorities in Vietnam conceded that the country had exceeded its full-year target of less than 10 percent inflation just in five months. Shortage of agricultural products, particularly rice in various countries, leading to floods, drought and poor condition of farm lands have given rise to more of such conditions.

India ‘Star Wars’ in Space

The defense department in India is considering outer space as a new military medium. Arackaparambil Kurian Antony, India’s Defense Minister, announced the creation of the Integrated Space Cell. The reason given for this construction was a supposed threat to India’s assets in space.

The cell will be operated by representatives of India’s three sectors of military forces, the Indian Space Research Organization (ISRO,) and the civilian Department of Space. The threats will be examined in more detail once the cell is built. The defense minister said “Offensive counter-space systems like anti-satellite weaponry, new classes of heavy-lift and small boosters and an improved array of military space systems have emerged in our neighborhood.” Of course, he would like to take measure to counter these efforts before they become more of an issue. 

The cell has supposedly been in operation for a number of months, but was only recently announced. The Integrated Defense Services headquarters of India’s Ministry of Defense leads the project.

Around 16 months prior to the previous chief of air staff, Air Chief Marshal Shashi Tyagi, stated that India was “in the process of setting up an aerospace command to exploit outer space by integrating its capabilities” the defense minister revealed the cell plans.

Tyagi’s statement came shortly after China used a ballistic missile to shoot down one of its own outdated satellites. This proved that China was among one of three known countries with the technology to take out a satellite. This probably hastened India’s decision, but more general reasons such as the reliance on space communcations.

Lawrence Prabhakar, a professor of political science said “such a cell is an organizational initiative, essential to the operational requirements of space-based assets for dual civilian-military operations and applications.” Prabhakar also stated “with the army, the air force and the navy relying on space-based communication satellites for reconnaissance, surveillance or operations and the Indian armed forces adopting a joint doctrine that enhances greater lateral integration between the three services, an Integrated Space Cell has become a necessity.”

India does have quite a bit of investment in space technology. It has had great success in satellite launching. In March it set a world record for successfully placing 10 satellites in one mission. The space program plans to have mission to space, the moon, and possibly even Mars. Currently India’s satellites contribute to development, education, weather, defense, and emergency communications. It is 40% cheaper to build a satellite in India compared to the US and European countries.

Aerospace command had been more loosely discussed in the Indian Air Force since the late 1990’s. Now, at least according to Prabkar, it will probably still be another 15 or 20 years before the systems are fully in place.

Buy Call on the China market

Jim Rogers, investment guru, issued a “buy call” recently on the market in China. The mainland’s benchmark CSI index is decreased by more than 50% from its peak in October. Experts wonder if the market has finally hit bottom.Technically and fundamentally analyzing a market is a dual-effort that is considered to be the most effective form of analysis. Pressure builds from inflation, and the stronger currency and rising interest rates and hindering Shanghai and Hong Kong exchange. Fundamentally, however, China has an expansive economy.

Higher interest rates in China would damage the majority of the market, especially financial firms. The yuan’s value has risen 6.5% compared to the US dollar. This strengthening is however harming Chinese exports. On the other hand many Chinese companies are benefiting from the new strength because it makes manufacturing such things as oil, steel, and copper cheaper and therefore turning more of a profit.

The government in China hasn’t raised interest rates this year, mostly because it already raised them six times last year. Inflation was at around 8.1% for the first five months of the year. Gains made in the consumer price index slowed this to 7.7% in May, while in February it was 8.7%. According to a Bloomberg report May was the record month for the past three years for rises in producer prices.

On a more technical side, things are a little better. Markets in China are fading since the October high. This fade is similar to the fade shown by US technology, but worse. This is because individual investors in China are behaving with more anxiety, apparently from lack of experience. This seems to be even more of an issue than it was in 2000 regarding technology.

Between 2005 and 2007 China exhibited a huge market run-up. The Shanghai market rose nearly 500% during that time. Indicators during this time showed a short sell of the market.

Even with this result of a fundamental and technical analysis, it is not necessarily recommended that investors stay out of China. One should consider stocks in sectors that are unphased by the business cycle that exhibit a strong rising secular trend in cases like this. A sector that seems to next to immune to the business cycle in this case is health care. As China attempts to make its economy more private the system is becoming dismantled, and that is the problem. China spends only 6% of its GDP on healthcare. This is even lower than Japan and the US, and in the US the amount (14%) is commonly criticized for being far lower than Canada and European countries.

Ill Chinese citizens are forced to pay their healthcare upfront, and there is a serious shortage of doctors. Citizens without funds are not permitted to receive treatment even in emergency cases. The cost of medical insurance is too high for low and even many middle class citizens. Furthermore, hospitals and pharmacies have been raising prices of medicines up to 20x cost. Often drugs are ridiculously overprescribed, and thus the medical system is being turned into a profit center. Over half of what patients in China pay for healthcare goes to pharmacy. Many people are resorting to bribery to get proper care.

To keep this situation from getting worse, the Chinese government is going to have to significantly increase spending on healthcare.

Biofield signed a deal to provide new breast cancer technology to a Chinese healthcare network and has gained technical strength in doing this. More of these opportunities are going to reveal themselves in China, and it is predicted there will be a great number of them with time. 

Biotech in general is good in China, in addition to healthcare. Stock here is not driven by the business cycle but instead is reliant on media and pharmaceutical advancements.

The US Food and Drug Administration agreed with China to open three offices, in China, this year. A significant portion of US biotech is going Chinese, due to lower costs in development, testing, and drug research. The regulations are also less stringent, which speeds up the whole process.

This isn’t in support of swan diving into healthcare and biotech investment, but the propects are promising nonetheless. Some things need to give in the Chinese economy and healthcare system, the causes are there and the effects will be revealing themselves very soon.

Sino-Tibet ‘Fence-mending Talks’

BEIJING: In a move that brings hope to the hearts of many, after the prolonged protests of the Tibetans, China resumed talks with the Tibetan leader the Dalai Lama, in what is being termed as ‘fence-mending talks’. This is being widely seen as an image building exercise By China, in the wake of a large scale international protest against the treatment meted out to the Tibetans. The timing is a perfect match to subside some of the protests over the holding of Olympics in China; reportedly it will improve the image of China, desperately seeking international coverage with the soon to be held Olympics.

With China still refusing to confirm details, what is supposedly a much closed door meeting, an aide of the Dalai Lama however confirmed the news. Tenzin Taklha added that the talks started on Tuesday morning and that the envoys are expected to return on Thursday.

Chinese Foreign Ministry spokesman Liu Jianchao, reiterated that Tibet was an internal issue, when he was asked to comment on the French President Nicolas Sarkozy’s statement that his decision about attending the Beijing Olympics would be based on the progress of Chinese talks with Tibet.

In what seemed a clear indication of the issue, answering reporters, Liu said, “Tibet is our internal affair, and the Chinese government’s relevant department’s contacts with the Dalai Lama’s representatives are an internal affair, and we oppose any foreign leader meeting the Dalai Lama in any setting and oppose linking the Olympic Games to the Tibet issue” The current talks, was supposedly delayed by the deadly earthquake in China. Supposedly it was preceded by a goodwill motion mostly by the, Dalai Lama.

Commenting on the situation, UN Secretary General Ban Ki-moon, on a three-day visit to China, said he was looking forward to a fruitful round of talks between the envoys of the Dalai Lama and the Chinese delegation.

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