Afghanistan’s peace needs capital to endure
There is intense focus now on how to reach a peace agreement in Afghanistan, but little on how to sustain peace, particularly in an area that bores so many policymakers and pundits: economics. Yet peace with inadequate economic support risks adding demobilized soldiers and Taliban to the large numbers of unemployed Afghans. Massive social resentment easily can lead to a return to violence with space for terrorist movements such as al Qaeda and ISIS (more than 20 in all), to strengthen their foothold.
Avoiding this danger requires international support and private investment. Both demand Afghan reform. And the international community needs to think about all three— aid, investment and reform — now.
Afghanistan does have a basis for prospering someday, but developing abundant natural resource deposits (copper, iron, gold and rare earth minerals), improving the Silk Road trade routes (rail, road, air and pipelines), expanding power generation, creating agricultural infrastructure, stimulating construction projects, and broadening the services sector will require large sums of money through aid and new private-sector investment.
In the peaceful mid-1970s, Afghanistan matched Pakistan and India in per capita income. Since then, a chaotic Afghanistan has badly lagged in growth. To achieve a more rapid pace of economic expansion, any “new” Afghanistan must earn the public’s confidence anew.
Today’s growth is simply inadequate to fund solutions to the nation’s overall challenges, especially security. The World Bank reports, “Afghanistan continues to face major economic headwinds, with growth slowing to an estimated 1.8 percent in 2018. Only modest improvement in economic growth is anticipated in 2019.”
That scenario simply doesn’t cut it for a poor nation of around 35 million, with 25 percent unemployment overall (31 percent among the young). Three-quarters of the population are below age 30 (25 percent of the population is between ages 15-30), and only 54 percent of young Afghans are literate. Of immediate concern, the United Nations just reported one-third of Afghans need urgent humanitarian aid.
The $3.8 billion in annual international aid commitments— expiring in 2020 — have helped to keep a lid on any civil unrest that might result from such a troublesome mix of economic indicators. Even with the prospect of peace, billions of dollars more in aid will be needed for years to come.
Commitments to such aid need to be part of negotiations, not an afterthought when donors have lost interest. And Afghans need to understand the reality that foreign aid alone will not generate enough to make the country’s economy grow rapidly enough. The private sector will need to contribute more, but getting both aid commitments and investments requires more reform than Afghan leaders have been able to produce so far.
While the economy actually has grown some tenfold since 2001, with the end of the Taliban government, it now needs to grow at 3 percent annually just to keep pace with population growth, and 7 percent-plus for two decades to get Afghans out of poverty.
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Digital hubs to support Indonesia’s thriving digital economy: business players
Companies are opening up so-called digital hubs to foster innovation and develop new business activities despite limited government support and skill-set gaps.
Property developer Sinarmas Land CEO of technology business Irvan Yasni said the company had invested Rp 7 trillion (US$496.78 million) for the next 10 years to develop a digital hub— a 26-hectare area in BSD City filled with digital infrastructure — as part of the company’s strategic plan in the country’s burgeoning digital economy.
“We provide start-ups with working space and [development] assistance to foster collaboration and build a digital community,” he said during a discussion on the digital hub held by Sinarmas Land in cooperation with The Jakarta Post in Banten on Dec. 3.
The digital hub concept derives from Silicon Valley, home to United States technology behemoths from Apple to Facebook and Tesla.
“We will also build an integrated transportation system in BSD to support the ecosystem,” Irvan said, adding that the transportation system would connect the entire city from clusters to homes to support the digital hub.
The company also plans to work together with several local universities such as Prasetiya Mulya and Atma Jaya, to build a knowledge hub next year in a bid to stoke collaboration among the digital community.
Sinarmas Land currently has two digital hubs: one in BSD City, Banten, which is home to the Apple Developer Academy and Plug and Play’s BSD Innovation Labs, and one in Batam that includes companies from Singapore, said Irvan.
“We expect the digital hub to be a home for the digital community and the creative industry,” he said, adding that the digital hub would only allow start-ups and digital companies to operate in the area as they operated based on digital technology.
Indonesia’s digital economy is well on track to dominate Southeast Asia with its market value expected to triple to $130 billion by 2025 from $40 billion in 2019, according to a study conducted by American tech giant Google, Singaporean holding company Temasek and management consulting firm Bain & Company.
US tech giants from Amazon to Google and Microsoft have set their sights on investing in cloud regions or data centers, as has publicly listed state telecommunications giant PT Telekomunikasi Indonesia.
Pricewaterhouse Coopers (PwC) Indonesia digital transformation adviser Ravi Ivaturi said countries such as Malaysia and Ireland were examples of thriving digital hubs, partly due to the government’s support.
“Malaysia and Ireland have programs [to boost the digital economy] such as tax incentives and visa regulations,” he said, adding that the Indonesian government’s 1,000 start-ups program could help foster the digital ecosystem in the country.
“Another thing that could help [the digital ecosystem] is to have a dedicated space with the necessary tax and incentives other than internet connectivity and talent,” he added.
During the same discussion, Ravi said start-ups would need several support systems, namely the availability of talent, financing, an ecosystem for collaboration and innovation, internet connectivity and sufficient infrastructure.
Irvan added that there were several challenges to foster innovation and collaboration at the digital hub in BSD City.
“We are having difficulties in providing a talent pool and [we need more] government support [because] when we went abroad, investors asked what the government could give in terms of incentives, especially relating to technology.”
According to a study conducted by Deloitte University Press titled How to Innovate the Silicon Valley Way, more than one third of the 141 companies in the Americas, Europe and Asia Pacific that grew to a valuation of greater than $1 billion between 2010 and 2015 were located in the Bay Area.
“Given the Valley’s nearly unique set of assets — the presence of technology giants, world-class universities, abundant venture capital and a hypercompetitive yet collaborative culture,” the report reads.
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China state-owned firms could see more defaults and fewer bailouts from beijing, analysts say
Brace for more defaults by China state-owned businesses, analysts warn.
A huge bond default by a large state-owned business spooked investors last week, prompting experts to question if it’s a sign that Chinese government bailouts may be dwindling.
“We believe bailouts will be increasingly selective, leading to more defaults by SOEs,” said ratings agency S&P Global Ratings in a note, referring to state-owned enterprises in China.
The remarks came after Chinese commodities trader Tewoo Group— owned by the Tianjin government — failed to repay its U.S. dollar-denominated debt last week, in what has become the largest default among SOEs in the country in about 20 years. It was the first state-backed company to default since 1998.
Some have even predicted that China may increasingly withhold bailouts to its state-owned enterprises, and instead, allow distressed companies to rely on markets-based solutions.
Assessing the recent defaults in China, Nathan Sheets, chief economist at PGIM Fixed Income told CNBC on Wednesday:
“I interpret this from the perspective of President Xi (Jinping)’s ongoing de-risking campaign, trying to increase the financial discipline in the system.”
He said it was significant that Chinese leaders now “feel comfortable enough about the outlook that they’re willing to let some firms fail.”
“It’s discipline, that’s the way it’s supposed to work,” said Sheets, who was Under Secretary of the Treasury for International Affairs under the Obama administration from 2014 to 2017.
Chinese corporate debt has been under the spotlight recently, as analysts warned of record levels of defaults.
Moody’s Analytics told CNBC on Tuesday that Chinese corporate debt is the “biggest threat” to the global economy. In addition, Fitch Ratings said last week that a record high of 4.9percent of China’s private issuers defaulted on onshore bond payments — or yuan-denominated bonds — in the first 11 months of 2019. That’s a jump from 0.6percent in 2014, Fitch said.
Investors“will start realizing that state intervention isn’t always happening,” Tuuli McCully, head of Asia-Pacific economics at Scotiabank, told CNBC on Wednesday.
While the increasing level of defaults is concerning, there is also “a certain need for this,” McCully said. “I think the pricing of risk in the Chinese economy has not been adequate … Investors will start realizing state intervention is not always happening.”
So far, defaults by state-owned entities (SOEs) have been relatively rare in China’s bond market. Just six government-owned companies have defaulted this year, compared to 42 private companies, according to source.
In its debt restructuring effort, Tewoo offered its investors a repayment that made them take huge discounts that were as deep as 63percent.
Among its investors, 57percent accepted that offer, while 22.6percent opted for the second route: to exchange their debt for new bonds issued by a state asset manager— also a Tianjin-based state enterprise — which offered much lower coupons.
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AS Japan’s labor crunch bites, companies look to robots to plug the gaps
In the not-so-distant future, more robots may be interacting with customers at shopping complexes, serving food at restaurants or cleaning floors at offices in Japan amid a serious labor crunch.
A hint of what is to come is visible at the International Robot Exhibition 2019, a major biennial robot trade show that kicked off on Wednesday at Tokyo Big Sight. The event runs until Saturday.
Featuring a record 637 firms and organizations, some participants said demand for robotics as helping hands in service sectors is rising to compensate for a shortage of workers.
Tokyo-based Omron Social Solutions Co. unveiled a robot capable of performing three tasks: cleaning, security and guiding.
“We hear that it’s becoming harder to hire security guards and cleaners due to labor shortages,” said Masayuki Atsumi, a spokesman for the company, a subsidiary of Omron Corp., which produces control equipment and sensors.
The 87-centimeter-tall robot, which comes equipped with a 21.5-inch display, can walk along preprogrammed routes and avoid collisions with obstacles. It can also be operated by remote control.
Some cleaning robots produced by other firms are already on the market, but their function tends to be limited to just cleaning. Omron’s robot, which is scheduled to debut in May next year, has a competitive edge because a single unit can perform multiple tasks, Atsumi said.
For instance, if a shopping mall opts to “hire” the robot, it can clean floors in the morning, wander around with advertisements on its display and interact with shoppers during the daytime, and act as a security guard at night.
Omron said demand for robotics technologies in the service sector is likely to increase, so the firm is looking to beef up its efforts.
Other participating companies are also displaying their robots for security or guiding purposes at the trade show.
Restaurants are considering turning to robots amid the labor shortage, according to Pangolin Robot Japan Co., a unit of a China-based firm.
Eateries are increasingly looking to counter a lack of manpower, said Koichi Wakabayashi, a sales official at the firm.
The Chinese firm makes robotic servers for restaurants that can deliver food and pick up dishes. Wakabayashi said Pangolin, which was founded in 2006, has shipped about 2,000 such robots in China.
The firm entered the Japanese market in 2017, and its serving robots have been introduced at some restaurants, said Wakabayashi.
Pangolin’s serving robot is more reasonably priced than those made by Japanese firms, since its function is simpler, Wakabayashi said. The average daily cost is about ¥1,000 if an eatery uses a robot for five years, he said.
Other than robots for the service sector, the International Robot Exhibition showcases robots and smart technologies for agriculture. Many companies are also exhibiting robotics technologies for factory automation and industrial uses.