Tag Archive | "Chindonesia"

Chindonesia Getting Prepared For G-20 Summit


Shanghai, one of China's signs of boom

The global downturn failed to prevent China overtaking Germany as the world’s third-largest economy. In fact, China’s economy has shown signs of improvement recently, with the annual growth rates of both industrial output and retail sales rising in July.

But the downturn has had serious consequences for the country, both internally and externally. Chinese exports have been hit hard by falling world demand, with millions of rural migrants returning to their villages after the factories that employed them closed down. China’s waning appetite for raw materials has had a knock-on effect on other countries’ exports, crushing hopes that key emerging markets could compensate for the developed world’s slowdown.

Its banks have not felt the impact seen elsewhere, but ordinary people have – with migrant workers especially hard hit. While China’s growth remains relatively strong compared with other countries, it has launched a $587bn stimulus package and has underlined that it now has the largest deficit in 20 years.

And China has recently been talking about the possibility of a new world currency to replace the dollar, though it stopped short of calling for this when it met with Brazil, Russia and India at the first BRIC summit in June.


Mumbai, India's booming pride

Indian government under Prime Minister Manmohan Singh is well placed to embark on economic changes, having won a new term with a strong margin in May. In July’s budget, Finance Minister Pranab Mukherjee said the government’s “first challenge” would be to return to a growth rate of 9% a year “at the earliest”.

The Indian economy grew 6.7% in the year to the end of March 2009, but had grown by an average of 8.8% in the previous five years. Agriculture, which makes up about a fifth of the economy, was one of the sectors to see growth fall, while industrial firms such as Tata have been severely affected by the freeze in world credit markets and a general fall in global spending. In the budget, the government also increased spending on urban poor schemes and the jobs-for-work scheme to help the poor.

Although India’s economy has undoubtedly been affected by the global recession, Prime Minister Singh has said he has no intention of going to the IMF for help – an institution he partly blamed for the economic downturn, saying it had conducted “too little surveillance of the affairs of the developed countries”.

Mr Singh has also shared France and Germany’s concern for greater regulation of financial markets. He has said he is happy that his country has been admitted to two key standard-setting bodies. “India has now been made a fully-fledged member of the Financial Stability Forum [and] also the Basel Banking Committee. This from India’s point of view is a plus factor,” he said.


City of Tomorrow, Surabaya, Indonesia's 2nd largest city. Indonesia's confidence of growth

Globalisation has been a significant economic benefit for Indonesia in recent years. Thanks in no small part to a big growth in manufacturing facilities for major multinationals, its economy grew 6.1% in 2008. However, with Western firms cutting back production towards the end of the year, Indonesia’s exports dropped sharply in the final three months of the year. To help lift the economy, the government of President Susilo Bambang Yudhoyono has passed a $6bn (£4.3bn) fiscal stimulus.

Quoted from BBC.com

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Another Story From CHINDONESIA

Jim O’Neill will long be known for coining BRICs. Ten years from now, Nicholas Cashmore may enjoy similar notoriety for another addition to the investor lexicon.

The money phrase put forth in 2001 by O’Neill, London-based chief economist at Goldman Sachs Group, refers to Brazil, Russia, India and China. BRICs is now a ubiquitous term for a new wave of emerging growth stars transforming markets.

Cashmore takes two of O’Neill’s BRICs — China and India — and adds Indonesia to form what the Jakarta-based CLSA Asia- Pacific Markets economist calls “Chindonesia.”

Asked if it will become as common as BRICs, Cashmore jokes: “Obviously, I’d like to think so. Adding an ‘I’ to BRIC doesn’t roll off the tongue as easily.”

There’s a compelling logic to expanding the “Chindia” concept to another member. China, India and Indonesia already generate economic activity equal to 44 percent of the US economy. Within five years, Cashmore says, the group’s gross domestic product will surpass $10 trillion, even amid modest growth rates. Talk about a no-brainer for investors.

Not that there aren’t risks to consider, including social instability in China, high poverty rates in India, corruption in Indonesia and myriad speed bumps. A deeper global recession won’t help anyone, no matter how insulated from the forces of foreign capital or trade.

Yet Chindonesia has just about everything value-oriented investors seek right now. Even its weakest link from a growth-rate standpoint, Indonesia, has an economy expanding at the third-fastest rate in Asia and faces brightening prospects.

Indonesia shows how, as much as these three economies may compete, they will complement each other. It’s a significant supplier of resources and can leverage the growth of Asia’s two nascent superpowers. Commodity-rich Indonesia will benefit from ultra-low interest rates in developed nations. As their easy-money policies boost inflation, Indonesia will count the profits.

India and Indonesia, it’s worth pointing out, boast large and growing domestic economies that helped both sidestep the global crisis.

The case for Chindonesia is really about the financial world we’re moving toward. The go-go global growth seen before 2007 is unlikely to return anytime soon. The international balance of power is beginning to move away from New York, London and Hong Kong toward the developing world.

Cities that thrive off the trading of complex financial instruments are at a disadvantage as regulators turn to the task of reining in speculation. That will put a spotlight on high- growth nations with great potential and governments committed to reform. Chindonesia’s relative contribution to world gross domestic product will increase as America’s declines.

Take India, which is on a high following Prime Minister Manmohan Singh’s recent re-election. The former central-bank governor masterminded the 1990s market changes propelling rapid growth. He now has a bigger mandate for change, free of the small-party bosses that have stymied it. The hope is that Singh will get control over India’s massive public debt, even as he improves infrastructure and education, and attacks corruption.

China’s outlook may be more complicated. Ethnic violence in Xinjiang province raises the specter of social instability. China twice last week failed to attract enough bidders in a government debt sale on speculation record bank lending will spark inflation. Talk about a bizarre challenge as the rest of the world fights deflation.

Indonesia’s challenges are equally daunting. A population roughly the size of Canada’s still lives on less than 70 cents a day per capita. Rampant corruption squanders economic growth and the risk of terrorism can’t be dismissed.

The good new is that President Susilo Bambang Yudhoyono looks to have won a second term in last week’s election. The economy can expand “significantly” more than 7 percent if Yudhoyono fulfills his pledge to fix the nation’s congested roads, neglected ports and aging power plants, says Joachim von Amsberg, the World Bank’s representative in Jakarta.

Demographic trends are worth considering. As populations in the euro zone, Japan and Russia stagnate, Cashmore says China, India and Indonesia will add more than 170 million people to their work forces over the next decade. “This is Asia’s new growth triangle,” Cashmore says.

That’s a double-edge sword. Swelling populations become a nightmare when you don’t create enough good-paying jobs.

It’s a big “if,” of course. And much could go wrong, be it a worsening the global crisis, health pandemics or the need to address the forces of climate change.

When you look at demographics, the outlook for consumer demand and public balance sheets in developed nations, though, Chindonesia’s challenges sometimes seem manageable.

William Pesek is a commentator on international economics and

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Indonesia’s economy may double in the next six years as the world’s biggest exporter of power- station coal and largest producer of palm oil taps surging demand from India and China.  China, India and Indonesia will generate $10 trillion of wealth for investors by 2015. Nicholas Cashmore, head of Indonesia research at CLSA Asia-Pacific Markets, said this in a note titled “Chindonesia: Enter the Komodo,” a reference to the reptile found only in eastern Indonesia, that the three economies are Asia’s “next growth triangle,”

Together, China and India are increasingly becoming the biggest marketplace for almost everything sold on the planet, where Indonesia plays a symbiotic role in the emergence of China and India and “as this role becomes more pronounced in years to come, it will boost growth, investment and consumption.” India’s industrial production increased at the fastest pace in eight months in May. The South Asian nation, the biggest buyer of Indonesia’s palm oil and cashew, may overtake China next year as the world’s fastest growing major economy, according to the World Bank.

BRIC Membership

China’s economy will expand 7.2 percent in 2009 from a year earlier. Indonesia’s exports to China grew 16 percent last year, compared with a 10.7 percent expansion in demand from the U.S., the second-largest buyer of Indonesian products.

Indonesia’s economic acceleration provides a case for its inclusion among the BRIC economies, as released by Morgan Stanley in a report to clients last month.

Indonesia’s economy can expand “significantly” more than 7 percent once the new president spends huge money to build new roads, ports and power plants, according to World Bank’s representative in Jakarta.

Yudhoyono is set to win a second term after presidential elections this week, providing the 59-year-old former general with a mandate to double spending on roads and power to $140 billion by 2014.

In 2007, Tata Power Co., which is building a 4,000-megawatt plant in western India, bought a 30 percent stake in two coal mining units owned by Indonesia’s PT Bumi Resources. The $4.14 billion plant will run on coal from the Indonesian mines.

India’s coal imports will more than double to 100 million tons by 2012 from 40 million tons, which supplies coal in India and Pakistan. That’s about 40 percent of Indonesia’s estimated coal production for this year.

As a leading supplier of commodities, Indonesia is leveraged to the growth of China and India, Indonesia is ready to rise in the world economic hierarchy and take its place alongside China and India.

Source : The financial Times

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