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Asian Economy: Overview, Growth & Development

Korea’s economy to normalize in growth, but must watch debt: AMRO

South Korea’s economy is set to return to its normal growth pace of around 3 percent this and next year, but it must watch ballooning debt level, advised ASEAN+3 Macroeconomic Research Office (AMRO), a regional macroeconomic research agency on Thursday.

Asia’s fourth largest economy is expected to stay on a fairly solid recovery path until 2022, according to AMRO’s assessment after its annual consultation visit to Korea. After contracting by 1.0 percent last year, the Korean economy is projected to grow 3.2 percent this year and 3.0 percent next year. The AMRO’s outlook is slightly higher than the Bank of Korea’s forecast of 3 percent for this year.

The AMRO attributed the strong rebound to robust semiconductor exports and expanding investment in ICT infrastructure since the second quarter of last year but was doubtful for other industries, especially service industry, due to slump in local consumption amid prolonged social distancing restrictions.

The regional think tank also stated that the rapidly growing government debt would pose a threat to financial soundness in Korea, suggesting a selective distribution of Covid-19 relief funds targeting businesses or people in need instead of handing them out to everyone. It also warned that the financial position of the corporate sector may also deteriorate due to a surge in debts.

Amcham 2021 reporting on the business environment in China: key takeaways

As China navigates a faster than expected rebound from the initial economic shock due to the pandemic, it becomes important to understand how developments are transpiring on the ground. China’s economy is projected to expand by 7.9 percent in 2021 after showing two percent growth last year, and despite the numbers, the country is an outlier in the world.

China’s policymakers should be credited with the efficient infection control strategies as well as the roll-out of a spate of stabilization and income support measures that made it possible for businesses to restart activity.

Moreover, the pandemic – an event the likes of which comes only every few generations – unleashed far reaching, possibly permanent changes, on how we do business, consumption priorities, and innovations in key sectors.

Digital infrastructure, education and health services, climate resilience and green technologies, are just among the many frontier industries that will see expanding investment, R&D, and market growth due to the experiences spilling over from coping under and combating COVID-19.

Thus, while there will continue to be several challenges on the road to normalization, plenty of opportunities exist for businesses in China, and elsewhere.

Got rails? for Indonesia’s Xendit, infrastructure is baked into the business model

Building a digital payments infrastructure from the ground up in Southeast Asia is every bit as challenging as it sounds. Case in point: When FinTech company Xendit worked with a bank in Jakarta, a bulldozer came through and plowed up one of the city’s main roads severing the lines that connected the bank to Xendit’s data center. Now Xendit builds its data centers inside banks.

Such adaptability has allowed Xendit to thrive in markets that often defeat other entrants looking to capitalize on the region’s explosive growth. And raise money. Xendit recently raised $64.6 million in Series B funding in a round led by Accel. This brings the total raised by Xendit to $88 million since its 2015 founding in Jakarta, Indonesia. It is also the first company in Indonesia to complete Y Combinator’s accelerator program.

Initially launched as a peer-to-peer (P2P) payments platform, Xendit pivoted to the herculean task of building digital payment infrastructures from scratch out of necessity.

Why a ban on cryptocurrency could have dire consequences for India

If India proceeds with a rumored ban on cryptocurrency, it wouldn’t be the country’s first attempt to impose currency controls. This time, however, a ban is even less likely to succeed — and the consequences for India’s economy could be more dire. The country shouldn’t make the same mistake twice.

In the 1970s and 80s, at the height of what was known as the License Raj, Indians could only hold foreign currency for a specific purpose and with a permit from the central bank. If a businessman bought foreign exchange to spend over two days in Paris and one in Frankfurt, and instead spent two days in Germany, the Reserve Bank of India would demand to know why he’d deviated from the currency permit. Violators were routinely threatened with fines and jail time of up to seven years.

Imports required additional permits. Infosys Ltd. founder Narayana Murthy spending about $25,000 (including bribes) to make 50 trips to Delhi over three years, just to get permission to import a $150,000 computer. Plus, since any foreign exchange that the company earned notionally belonged to the government, the RBI would release only half of Infosys’s earnings for the firm to spend on business expenses abroad.

Naturally a black market, with all its unsavory elements, emerged for foreign currency. The government doubled down, subjecting those dealing in illicit foreign exchange to preventative detention, usually reserved for terrorists. Businessmen selling Nike shoes and Sony stereos were arrested as smugglers.

Japan will be urged to restore yen-based concessional loans

Pakistan is all set to request Japan to restore yen-based concessional loans and tariff relief on textile and other products under Japan’s GSP Scheme, well-informed sources told Business Recorder.

Both countries are scheduled to hold the 7th Japan-Pakistan high level Economic Policy Dialogue (EPD) on Friday (Mar 19, 2021) at Islamabad.

Pakistan will assure Japan that it will address Japanese investment related concerns (uniforms/predictable taxation system, regulatory duties in SEZs, turnover tax, tax refunds, difficulty in outward remittances etc); and offer establishment of Japan-specific SEZs as Government of Japan actively considers Pakistan among the destinations for relocation of manufacturing facilities. Japan has incentivised Japanese companies in China who may wish to relocate to other countries.

Exchange of information and intelligence in illicit flow of currency, profiling of passengers through Advanced Passenger Information System (APIS) would also come under discussion.

The sources said during a discussion on development cooperation, Pakistan will seek restoration of yen-based concessional loans, increase in grant assistance and visible flagship projects.

Calls by US for economic transition in Russia from Reagan through Trump

U.S. President Ronald Reagan and his secretary of state, George Shultz, as well as U.S. President George H.W. Bush, are well known to have worked effectively with their Soviet counterparts to advance bilateral arms control. What is less known is that Reagan, Bush and successive presidents also sought to convince the Kremlin to give the market economy a chance, as they believed that a transition by the Soviet Union to a market economy would have been in America’s interest. The 1992 Freedom Support Act submitted by the Bush Administration to Congress, for example, stated that “recent developments in Russia and other independent states of the former Soviet Union present an historic opportunity for a transition of the independent states of the former Soviet Union into the community of democratic nations…the entire international community has a vital interest in the success of this transition.”

Today, Russia’s transition to a market economy is at least partially completed, though estimates point to the state holding between 33 and 46 percent of the economy, with this control concentrated in “strategic” sectors such as energy and banking. Nevertheless, this transition did not succeed in embedding Russia into the Western camp. Nor did a similar effort to encourage China’s transition to a market economy yield the results the West had hoped for, such as democratization of the Middle Kingdom and its alignment with the U.S. and its allies.

Vietnam: successfully navigating the pandemic

Despite COVID-19, Vietnam’s economy has remained resilient, expanding by 2.9 percent in 2020—one of the highest growth rates in the world—and growth is projected to be 6.5 percent in 2021, thanks to strong economic fundamentals, decisive containment measures and well-targeted government support, according to the IMF’s latest annual assessment of the country’s economy.

Protesters playing ‘dangerous game’ with Myanmar’s economy, warn businesses

A civil disobedience movement resisting Myanmar’s military regime has paralysed the economy as workers strike, businesses withhold taxes and the ousted government asks foreign investors to shun the junta. The movement has won mass support from tens of thousands of government and private sector employees opposed to General Min Aung Hlaing’s coup on February 1, in which he ousted Aung San Suu Kyi’s National League for Democracy. Railway workers, bank employees, medical workers and civil servants have joined a general strike, disrupting transport, logistics, banking, commerce and Myanmar’s Covid-19 vaccination drive.

However, the growing chaos has alarmed businesspeople, most of whom support their employees’ right to protest. Privately, though, they warned that the turmoil threatened to wipe out a decade of economic gains.

“The CDM is succeeding in bringing things to a halt,” one chief executive told the Financial Times. “I guess that is its purpose, but it is a bit of a dangerous game.”

The supply chain in garments, a sector that employs 500,000 people, mostly women, is breaking down as foreign companies suspend orders. Goods are piling up at ports because there are not enough customs agents to clear them.

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