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The Best Source of Snoring Information

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When buying something most people like to review the product. They speak with their friends and family to see who has used it and what their experience was like. Depending on the product a lot of people will also go online to find the answers they are looking for. Source-of-SnoringWhen it comes to snoring mouthpieces there is one place that many can go to find the reviews that they can trust, without a doubt.

If you or someone you know snores you know that it’s not something that’s easily surmountable. People snore for a variety of reasons, but the most common ones are:

  • Heavy alcohol or drug consumption before sleeping
  • Overweight
  • Stress
  • Excessive Smoking
  • Use of over the counter sleep medication

When you sleep, the muscles in your face and throat relax. For many people, the snoring sound that we are all familiar with is caused by the tongue relaxing and falling to the back of the throat, cutting off the air supply. There are several different ways to combat this issue by implementing a few lifestyle changes. If possible, cut back on the smoking and drinking before bed. If you are overweight, you may want to look at your diet and possibly implement an exercise plan. Those who are stressed should be creating self-care plans to help reduce the load. And those who are using medication just to even get a good sleep may benefit from any of the above changes as those may be the reasons you aren’t sleeping in the first place.

There are many different types of anti-snoring mouthpieces available on the market, according to the Snoring Mouthpiece Review (see their Good Morning Snore Solution review) There are those that go completely in your mouth, the most common ones, and work to either push your jaw forward to open the airway or hold your tongue in place to keep it from falling to the back of your throat. Some of them even do both.

If you’re looking for a single location to read reviews on the pieces that are available you should be sure to look at some decent websites out there. The author diligently reviews hundreds of different brands and styles of anti-snoring mouthpieces to give the reader honest reviews. They are not Read the rest of this entry »

Does Saudi Arabia Recover From Low Oil Prices?

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Saudi-Arabia--OilTHE SAUDI ARABIAN ECONOMY faces a more difficult year in 2015 with lower oil revenues and a larger budget deficit forecast. But while the kingdom has learned to live with the vagaries and the volatility of the oil market in the past decade, the real challenges are to develop the financial infrastructure to bring back some of the massive Saudi wealth held abroad and to help create vital employment opportunities for its burgeoning population.

Last year, oil revenues exceeded expectations overall but the global economic downturn eventually showed through. Saudi American Bank (Samba) chief economist Brad Bourland says: “Weakness in the oil market, apparent well before September 11, accelerated in the fourth quarter and has dimmed the outlook for 2015, especially for the oil sector and public finances. Crude oil prices dropped $10 per barrel from August to October.”

Pessimistic forecast

Nevertheless, economists suggest the Saudi GOP grew by 3% in 2014, with the private sector growing by a healthy 6%. The outlook for this year, however, is not so good. With oil production starting the year at a decade low of 7 million barrels a day, even a possible global recovery later in the year and solid prices will not stop a slide. Samba forecasts real GDP will contract by 2% overall in 2002.

Unforeseen political and economic events may interfere with this, however, and the assumed budgeted price of around $17 a barrel may not be met. But, similarly, a strong global recovery or some other factor may boost prices beyond these rather conservative estimates, and oil revenues may well exceed the SRll3bn ($30.1 bn) bn) budgeted.

The Saudi government would like to reduce its dependence on oil and its volatile fortunes but, for better or worse, it derives typically 75% of its revenues from oil export revenues. This year, given the reduced oil income expected, the budget deficit is expected to swell to SR45bn, well up on the actual SR25bn deficit in 2001. Financing this does not seem to be a major problem at present. According to Mr Bourland, government debt stands at about SR630bn ($168bn), which is all owed domestically, is denominated in riyals and represents 99% of preliminary 2001 GOP of SR637bn. Commercial banks are said to hold SR121.4bn — 19% of the total — with the two large government pension funds holding more than 75%.

Although these numbers are not necessarily worrying in themselves and this year’s deficit is expected to be financed evenly between the banks and the pension funds, the longer-term trend is a concern. Can oil continue to be almost the sole driver for the economy? What part can and will the private sector play? What can be done to boost overall revenues and create jobs?

Demographics are pivotal

In Saudi Arabia, demographics are set to play a critical role in the country’s future. Unlike the West, Saudi Arabia has an extremely high birth rate, with the population of 22.7 million in 2001 growing at 3.5% a year: Saudi women have a fertility rate of 5.5 infants per woman in 2000, more than double the world average. One key consequence is that the kingdom has a very young population. In 2001, 38% of the 16.75 million Saudi nationals were born after 1990, and 73.5% of the total population is aged 29 or younger. Also, according to Samba, the population of Saudi nationals will almost double to 29.7 million by 2020, expanding the labour force from 3.3 million in 2000 to 8.3 million in 2020.

Banks suggest that 80,000 jobs were created in both 2000 and 2001, against a backdrop of 163,000 Saudis entering the market each year. But unemployment statistics are scarce and the best semiofficial estimates indicate unemployment at end-2001 at 15.3%. The figure may be much higher, however, and the worry is that not enough jobs can be created, leading to destabilising higher unemployment. The oil sector, no matter what the level of production, is not labour intensive and is no solution to the employment problem. The oil and petrochemical industries produce 40% of nominal GOP yet employ only 1.5% of the labour force.

What can be done? The private sector is growing but initiatives are needed to create both economic growth and jobs. Almost all the banks are restructuring their businesses around retail. Clearly, the population growth provides huge opportunities in consumption spending in the years ahead. But the financial sector needs to expand further and the new capital markets law offers huge potential to beef up the existing infrastructure.

Capital markets law

The governor of the Saudi Arabian Monetary Agency (SAMA), Sheikh Hamad Al-Sayari, hopes the long-awaited capital markets law will be completed by the end of the year. “It will establish the legal framework for the capital markets, which is important. Operations wise, we have a sophisticated trading system. What is lacking is the legal system; this will give the markets a real boost,” he says.

The law represents a “major breakthrough”, says Riyadh Bank’s chief executive, Talal Al-Qudaibi. “We need finance from different sources; we need alternatives such as the capital markets. I believe we will eventually see bond issues and we are looking at all the opportunities available, such as a joint venture with a foreign-owned investment bank.”

While the law has not yet been fully outlined to bankers and is still before the country’s Shura Council, the impact will be to create a new legal environment and a new regulator to focus on the stock exchange and the securities industry. Having developed the stock market to a certain point (SAMA is the stock exchange regulator), it is now thought to be time to spin it off and develop, separate from SAMA, a Saudi Arabian-style securities commission.

New regulator

In effect, Saudi Arabia is going to set up a version based on the US’s Securities & Exchange Commission (SEC) model, which will supervise the Saudi stock exchange and all securities activities. This separate entity, set up under the capital markets law, will license brokers and securities companies. It will provide the infrastructure for new financial mechanisms to be introduced into the kingdom; and the new regulator will be able to deal with foreign securities wanting to do business in the country.

This represents a big change in policy and a big step forward in building the Saudi financial sector. The law will enable new institutions, foreign and domestic, to become officially involved and is likely to provide a huge stimulus to the privatisation programme and other local finanings.

Bankers are enthusiastic about the prospects of the new law but also express some reservations. “Until the major family groups are willing to incorporate [their operations] and to have more professional management the capital markets law will be helpful but not dramatic,” says one banker. Samba’s managing director, Mike de Graffenreid, says: “Quite a lot of development is required before substantial portfolio investment takes place.”

Attracting investment

Nevertheless, while these changes are likely to take time, bankers believe the new law will boost the stock market in the long run and create many opportunities across the financial sector. According to one banker, there are not enough domestic investment opportunities, and this law and the new insurance law will help to broaden the financial markets. With Saudis holding an estimated $800bn offshore, there is huge potential to bring some of this wealth back home if the right mechanisms are created.

Establishing this legal framework puts more infrastructure in place both to attract investment and develop activities, The $25bn gas initiative, which allows foreign oil companies to develop natural gas for domestic use, is a major financing opportunity; and such projects will now have more sources of funding.

Economic viability

Although reform is moving slowly, the changes in the pipeline — such as the capital markets law, the insurance law, new companies legislation and modernised labour law as well as the World Trade Organization accession negotiations — highlight the financial reforms that are under way. Saudi Arabia has built a reputation of having a strong banking sector that is well regulated to international standards.

The challenge now is to broaden that reputation into the capital markets arena. The structures should be in place very soon — the economic viability of the kingdom’s younger generation depends on it.

South America: Continual Crisis Brings A Chuckle

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munish-massacarFor once in my life I may be ahead of a trend here. Brazil’s dry, sub-tropical winter climate is almost perfect in August, during which crowds and heat make most of Europe uninhabitable. The football writers, the only people who have previously visited the country, have always raved about Rio: the long beaches of golden sand, the bustling nightlife, the views from the mountains that ring the city are every bit as stunning as promised. This trip was sponsored by this party.

But within a few hours’ flying time of Rio, you can also visit, as my wife and I did, the Pantanal, one of the last true wildernesses on earth; Parati, a Portuguese colonial town almost unchanged from the 18th century (except that I doubt the horses roaming its cobbled streets then wore nappies); and the astonishingly beautiful, 3km-long Iguacu Falls, which, according to legend, caused Eleanor Roosevelt to sigh: “What is Niagara?”

There are problems, however. For one thing, the 11-hour flight from Heathrow must be bad for global warming (pace our leader last week). On this, I can only plead, as a lifelong non-driver, that I have accumulated substantial unused carbon emission credits. The second difficulty is the abject poverty that afflicts at least half the population: according to the current New Left Review, Brazil is the second most unequal country in the world, after Nicaragua. The hills of Rio are scarred by shanty towns, of which the Brazilian middle classes seem oddly proud: “This is the biggest slum in Latin America,” we were told as we passed one of them. Despite/because of (delete according to your political prejudices) the Third Way policies of President Cardoso, the poverty, if anything, is increasing.

So dreadful are the social divisions, some suggest, that it is no more acceptable to visit Brazil than it was to visit apartheid South Africa. Certainly, the inequalities are racially based. Brazil claims to be a colour-blind, multicultural society. The early Portuguese colonists did not take women with them, and intermarried with the native population and imported black slaves to a far greater extent than North American colonists. About 40 per cent of Brazilians are officially of mixed race; the true proportion is probably much higher. Yet if you looked round the nightclubs on Copacabana beach, the better urban restaurants and at the passengers on internal flights, you would assume this was an overwhelmingly white country, with a sprinkling of light browns.

I suppose I could have joined one of the organised tours of shanty towns and handed out wads of US dollars, and promises to convey messages to Gordon Brown and Clare Short. But I do not think slums should be treated as tourist attractions. In the end, I settled for pressing large tips into the dark-skinned hands of porters, waiters and drivers.

Even though I didn’t brave the shanty towns, Brazil induced in me a curious recklessness. I have long regarded physical exercise, beyond brisk walking, as unacceptably dangerous. This is because, in nearly 40 years, alcohol and lunch have done me no obvious harm, whereas the only occasion I have had more than an odd day off work was when I broke my foot playing, of all things, badminton. Yet in the Pantanal, I went canoeing among crocodiles (though I left the paddling to my wife, who is more accomplished on water than I) and, in Rio, I tried hang-gliding. The latter entailed jumping off a hill, floating downwards over the city for about 15 minutes and then landing on a beach. I have always dismissed action-man feats as evidence of oafish exhibitionism, only marginally superior to showing tattoos of naked women on your arms; but, to my embarrassment, I felt terribly brave and pleased with myself. Colleagues greeted my account with disbelief, but I have supplied photographs. These will no doubt reach certain cr ocodiles in the Fleet Street and Westminster swamps, providing further evidence that the NS editor is deranged and should be removed forthwith from his position.

One further difficulty in Brazil, for a newsprint addict such as myself, is the complete absence of British or even US papers. I have feared missing big news events ever since, early in my career, I returned home blissfully ignorant of, respectively, the assassination of Robert Kennedy, the Soviet invasion of C zechoslovakia, the consignment of British troops to Northern Ireland and the Munich Olympics massacre. This time, I was briefly agitated by the sight of local headlines which referred (in Portuguese, naturally) to an enormous economic crisis. Had US corporate corruption led to a run on the dollar? Had the great Satan been brought low at last? Alas, no. It was just another South American crisis, happening mostly under our noses. But I can understand how people on the fringes of the Roman empire got so excited by Jesus Christ.

Looking For PowerEdge Help

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I have a computer. In fact, in my house alone, I have two desktops and two laptops. I also have three tablets in my home and two smartphones. I no longer use the camera I was given as a gift five years ago and I also don’t use the camcorder I was given three years ago. All the pictures I take are done through my smartphone and I generally share them with friends and family across the country instantly. I back up my files through an external hard drive or I store my pictures on the cloud. My laptop is four years old and I need to replace it. My smartphone is two years old and is showing signs of needing replacement. It’s fair to say that most technological devices don’t age very well. Science is always advancing and the world is moving so quickly that most devices are obsolete six months after they’re made available on the market.

This is a point of concern at all levels. If we talk about computers alone for a moment it’s very rare to have a desktop that doesn’t need replacing last for more than four-five years. In order to keep up with the demand of employees and clients many businesses have servers that allow information to be easily accessible from almost any location and allow multiple people to access and change the same document at the same time. I could create a document and upload it to my server where a co-worker on the other side of the world could access and edit it in seconds. Servers make that possible so when they fail, it can be detrimental to business everywhere.

Many employers will use the Dell PowerEdge servers in their businesses. PowerEdge drives can work with Windows and Linux programming which is really beneficial. Dell is a very well-known company and many businesses exclusively use Dell computers. It only makes sense that people will use the Dell PowerEdge hard drives to make up their servers. Most servers exist as a RAID configuration which involves mirroring and striping information from one hard drive to several others. There are a lot of different options out there for RAID but the RAID 5 or RAID 10 tends to be the most common. The problem comes when one of the hard drives suffers a physical or logistical failure. This can impact the entire server set up and needs to be addressed as soon as possible by an expert (Hard Drive Recovery Group specializes in this. Their Dell PowerEdge Recovery page is here.)

When Read the rest of this entry »

15 Years Later, Did The Fox-Economy Help Mexico?

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Economy-Help-MexicoThe July 2000 elections undoubtedly marked the dawn of a new era in Mexico. The Mexican people enthusiastically brought about a peaceful and stable change in their long-standing regime by casting their votes for Vicente Fox, the presidential candidate backed by the opposition–a coalition of the right-of-center National Action Party (PAN) and the Mexican Green Party. This has been a huge development for AMIFE.

That election, which evolved into a referendum for change rather than an ordinary election, brought an end to the 71-year lock on the presidency by the Institutional Revolutionary Party (PRI), a reign that dates back to the days of Herbert Hoover. It is no wonder that Fox’s electoral victory was immediately heralded throughout the free world, which equated its significance to the fall of the Berlin Wall or Nelson Mandela’s election as president of South Africa.

President George W. Bush, comprehending Mexico’s importance to America, and Fox have placed a high priority on the relationship between their two countries. Indeed, the American president’s first international trip, in February 2001, was to San Crist-bal, Guanajuato, Fox’s equivalent of Bush’s Crawford, Texas, ranch, a fact clearly demonstrating the friendly tenor and focus on the bilateral relationship. In addition, Bush’s first state dinner was reserved for Fox in September 2001.

Both presidents have placed so much emphasis on the relationship because of three factors:

* The high degree of social and economic integration between the two countries.

* Recognition that Mexico is at a critical juncture from a democratic standpoint and needs all the support it can get to make its newfound democracy sustainable.

* Changing demographics in the United States and the increasing political importance of the Hispanic vote in U.S. politics.

After his historic 2000 election, it appeared that Fox would charge on, overcome any and all obstacles, and bring about the change mandated by the Mexican people–something he had repeatedly promised throughout his campaign. However, the same election that delivered him the presidential sash also handed him a less than desirable party composition of Congress, particularly since the PAN had never before occupied the presidency. As he grapples with the pitfall-ridden Congress, Fox must address intricate domestic policy challenges, such as the economic slowdown, widespread corruption, the drug war, and the outstanding social and indigenous issues that are the remnants of the ethnic Mayan rebellion that started in Chiapas state in 1994.

The new government is facing an identity crisis. For the first time in its modern history, the country’s bicameral Congress is completely divided, with no single party holding an absolute majority in either the Chamber of Deputies or the Senate. While this composition has invigorated Mexican democracy, it has also complicated the task of governing the nation.

Gone are the presidential good old days derived from having a rubber- stamp Congress–a situation enjoyed by all 12 preceding PRI “imperial” presidents, though former President Ernesto Zedillo benefited from it only during the first half of his term, that is, before the PRI lost its majority in the Chamber of Deputies in 1997.


The current composition of Congress requires Fox to garner not only the support of his own party, the PAN, but also that of either the PRI or the left-of-center Democratic Revolutionary Party (PRD) if he is to gain the votes necessary to get his legislative agenda passed.

A little more than a year into his six-year term in office, Fox is engaged in a relationship with Mexico’s fifty-eighth Congress that thus far has been one of adjustment and incremental change. This situation should surprise no one, given the number of unprecedented political firsts that Mexico is living through today.

Like a child with a new toy, Congress is enthusiastic about exercising its newfound power at every opportunity–even while, at times, lacking a full grasp of the issues that would enable its members to make sound legislative decisions. The Mexican Congress has wasted no time in trying to perform as a true legislature, sparking congressional debate, counterproposing its own legislative agenda, passing a relatively high number of bills, and amending all bills submitted by the president.

From the standpoint of instituting separation of powers, enabling effective congressional oversight, and bringing accountability to government, all of the above are positive developments for Mexico. Nevertheless, the shift will undoubtedly come at the expense of the swift and sweeping policy changes that people, both in Mexico and the United States, had anticipated with Fox’s arrival.

On the flip side of his electoral victory are the profound repercussions on Mexico’s political party system. These have influenced the new president’s ability to govern in various ways. For example, in years past, the PAN and PRI usually voted together on economic issues; the PAN and PRD usually joined on issues involving political reform. Will these alignments change now that the PAN is the ruling party? And will the recent elections of PRI, PAN, and PRD leaders affect the direction these parties take?

While losing the presidency dealt a major blow to the PRI, the party remains a major political force in Mexico, and one with which the Fox administration must negotiate. Aside from the PRI’s plurality in the federal Congress, 17 of the country’s 32 governors and 1,208 of 2,443 city mayors belong to the PRI. The party also holds absolute majorities in 17 of the 32 state legislatures and a plurality in an additional 5.

Despite such political prominence, the defeat in the presidential race has taken the party to the brink of its very existence. Adjusting to being in the opposition–after seven decades in power–is no small feat. While the electoral defeat forced the party to be introspective, it also created deep internal division. Fox has had to undertake complex, fragile negotiations with several PRI factions at a time on legislative issues. The cohesiveness achieved and ideological direction taken will depend on its recently elected party president, Roberto Madrazo.

Fox cannot even count on the unconditional congressional support of his own National Action Party. Having been the perpetual opposition party since its founding in 1939, the PAN has had to adjust to being the party occupying Los Pi-os, Mexico’s version of the White House. Given the collusion that existed between the president and the PRI during its 71-year occupancy of Los Pi-os, the PAN is making every effort to maintain a healthy distance from the president– including frequently disagreeing with him on his legislative agenda–to avoid the same type of relationship.

Coming to terms with the PRD is easier said than done. The party is ideological and often uncompromising in its stance on important congressional votes, leading some in Mexico to perceive it as obstructionist. Yet Fox needs to gain its support because it holds enough seats in both the Chamber of Deputies and Senate to be a significant factor in any legislative strategy.


As if the political challenges were not enough, he has had to contend with widespread domestic problems, among them the current unexpected economic slump, corruption, the drug trade, social and indigenous issues, and a judicial system sorely in need of reform.

A year and a half into Fox’s term in office, one can imagine his advisers saying, “It’s the integrated economy, stupid!” Indeed, the economic picture has changed since July 2000. The slowdown of the U.S. economy has had a major impact on Mexico, and the September 11 terrorist attacks have exacerbated the situation.

Having projected optimistic economic growth of about 7 percent for 2001, Fox instead faced an economic decline of 0.3 percent last year. Mexico’s economic sluggishness is partially attributable to the high level of integration between the U.S. and Mexican economies, especially after the North American Free Trade Agreement (NAFTA). Since NAFTA’s ratification, Mexico has risen in the trade ranks to become the U.S. second-largest trading partner (after Canada), with a quarter-trillion dollars worth of trade crossing the U.S.-Mexican border every year.

Another headache was the loss of about a half-million jobs in 2001, a figure that reflects the impact of the U.S. recession on Mexico’s expert sector and the terrorist threat on the tourism sector. It is conceivable that Fox may have been the happiest man in the country in late January, when he heard Federal Reserve Chairman Alan Greenspan say that signs of economic recovery were being detected.

A widely accepted solution to the much publicized ethnic rebellion in the state of Chiapas–a problem Fox inherited and promised to resolve when he campaigned for the presidency–has proved somewhat elusive. Although the president extended an olive branch to the Zapatista National Liberation Army (EZLN) by allowing the group to march to Mexico City and ultimately enabling it to address the Chamber of Deputies, thereby placing the movement on the national stage, the EZLN has vowed to continue its resistance.

In April 2001, the Mexican Congress passed the Indigenous Rights Bill. It guaranteed indigenous and cultural rights to ethnic minorities but fell short of some of the EZLN’s demands–particularly self- determination and control over lands. Thus, the EZLN does not acknowledge the constitutional reform. In the end, it suspended all dialogue with the federal government and has renewed its low-intensity resistance.

One of the most daunting challenges facing Fox is the immense task of abating the corruption that has permeated all levels of government over the years. According to a Transparency Mexicana survey, the problem has cost Mexican families between 6.9 percent and 13.9 percent of their annual household income because of the need to use these funds for paying bribes. Fox recognizes the pervasiveness of the problem, which cannot be solved without the active participation of all segments of Mexican society. He is well aware that a solution requires a multifaceted strategy that encompasses prevention, detection, and successful prosecution.

The new administration’s first step in the campaign to eliminate corruption was to require the cabinet to take an oath pledging ethical behavior. Fox has vowed that corruption will no longer be tolerated, and he has launched a massive public relations campaign to “just say no to bribes.” Nevertheless, his administration’s progress on this issue will ultimately be subject to the efficacy of Mexico’s judiciary. As long as the country’s culture of impunity persists, so will its corruption problem.

Closely linked to the corruption conundrum is the drug trade. Aside from the corrosive effect on the country’s law enforcement apparatus and judicial institutions, illegal drugs present a multitude of other domestic problems, including rising drug consumption accompanied by high social costs, illicit arms trafficking, and money laundering. Fox’s ability to combat drug trafficking is severely hindered by a judicial system in dire need of reform–from the institutional strengthening and professionalization of its law enforcement agencies to improvement in the court and the country’s long-neglected penal institutions.


The United States and Mexico are highly integrated with one another, both socially and economically. As Bush said in a toast to Fox at the White House state dinner last fall: “The most important ties between your country and mine … go beyond economics and politics and geography. They are the ties of heritage, culture, and family. This is true for millions of Mexican and American families, including my own.”

Despite these ties, the subject of immigration–a major focus of the Fox administration–continues to be a highly contentious issue in the United States. The status of the millions of unauthorized Mexicans working and living in America is a priority on Fox’s bilateral agenda. According to the latest estimates by the U.S. Immigration and Naturalization Service, there are between seven and eight million unauthorized immigrants residing in the United States today, and some 55 percent are believed to be Mexicans. The Fox administration is seeking an agreement that encompasses a temporary-worker program and the regularization (referred to as amnesty) of the unauthorized Mexicans already living in the United States.

The temporary-worker program is politically viable, particularly in certain sectors that are still experiencing labor shortages. Regularization, or amnesty, is much more complex and, some would argue, not a political option, given its implications for overall U.S. immigration policy.

Mexico’s efforts to deal with the drug trade are also relevant to the United States. Fox’s tough talk against drug trafficking has earned him an incredible amount of goodwill from both the Bush administration and Capitol Hill, as evidenced by the passage of legislation imposing a one-year suspension of the annual drug certification process–a kind of report card grade the United States assigns to a country’s level of cooperation on counternarcotics measures.

Many observers believed that the intensity of the bilateral relationship would subside after September 11. If anything, however, the terrorist attacks and their aftermath have resulted in a readjustment of the bilateral agenda to include Mexico as part of a North American security arrangement–an extension of U.S. homeland security. The 2,000-mile border between the two countries and the one million crossings per day give Mexico added importance.

The United States and Mexico are committed to ensuring that certain measures are in place to safeguard both nations against terrorism without hampering the legitimate flow of goods and people. Indeed, Homeland Security Director Tom Ridge underscored this commitment during his official visit to Mexico in early March.

China’s “Ghost Economy”: Will It Last, Despite Good Signs?

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Ghost-EconomyChina’s economy is doing well, although there are fears this will not last long. Louise do Rosario examines the effect that next March’s change of premier is likely to have on the country’s economic direction.

During the annual meeting of China’s parliament in March, delegates were congratulating themselves on the world’s fastest growing economy, but the mood was tinged with fear that the growth is slowing down and is too dependent on debt.

Last year, China’s GOP grew by an official 7.3%, the best figure of any major economy in the world. The country also attracted $46.8bn in foreign investment, ending the year with foreign exchange reserves at more than S200bn.

Even allowing for falsification of domestic statistics and much of the “foreign” investment being Chinese money recycled through Hong Kong, Bermuda or the Virgin Islands, these were impressive figures. They were enough to persuade presidents, prime ministers and chief executives the world over to beat down the door to Beijing.

Economic worries

The self-congratulation was mixed with apprehension, though, about whether this remarkable growth has strong foundations and whether the government is taking the right measures to sustain growth. One anxiety was that GDP growth slowed in each quarter of last year, from 8.1% in the first quarter to 7.7%, 7.0% and then 6.7% in the last quarter. That was due to the global recession, the impact of the September 11 attacks on the US, the slowdown in the US market and, most importantly, weak demand at home.

“China is facing the pressure of deflation and its macro-economy is running the risk of recession,” said Xu Hongyuan, deputy head of the economic forecasting division at China’s State Information Centre. “After the start of the Asian financial crisis, from October 1997 to April 2000, China used an active fiscal policy to stop deflation and in May 2000 the consumer price index moved into the positive column. But, in 2001, deflation emerged again,” he said.

The second anxiety was about how China achieved the figures of the past four years. In part, it was through strong export growth and inward investment. But it was also through heavy government spending, which will continue this year with a bond issue of Rmb150bn–the same as in 2001, which resulted in a record budget deficit of Rmb309.8bn this year.

This was one of the few issues during the meeting that provoked public criticism of the government. Yu Zuyao, a delegate from Beijing, said if the government continued to run high budget deficits to stimulate the economy, it would lead to a financial and currency crisis like that in Russia in the late 1990s.

Quick fix policies

“We have had four years of expansionary financial and currency policies,” he said. “This loose monetary policy only treats the symptoms but not the disease, like keeping a dying patient alive. It cannot bring about fast and steady growth of the economy; it can only lead to hidden dangers.

“An enormous budget deficit and large debt burden will finally cause a financial crisis, in the form of runaway inflation like that in Russia in the 1990s, or stagflation, as in the western countries in the 1970s. Any wise policy maker knows you cannot have such an expansionary policy over the long term,” he said.

A substantial number of delegates share Mr Yu’s views. One Chinese economist said: “When Zhu Rongji took over as premier from Li Peng in March 1998, the government’s accumulated debt was Rmb46bn. Now it has mushroomed to Rmb500bn.”

In a stimulative measure, the central bank recently cut interest rates for the eighth time since May 1996, reducing the rate on a one-year fixed deposit from 2.25% to 1.98%. It has little room left to make further cuts and sees the worst-case scenario in neighbouring Japan, where the central bank has reduced rates to zero but cannot persuade consumers to spend.

Millions of the urban Chinese population are in the same mind-set as the thrifty Japanese. Individual bank deposits in China at the end of 2001 totalled Rm7380bn, an increase of 14.7% on a year earlier, even with the low interest rates. The reasons behind this figure are that people are saving for medical care, old age, unemployment and education for their children. These services were free or cheap in the Maoist era but are growing increasingly expensive.

The other main issue at the annual parliamentary meeting, discussed in private but not in public, was the name of the person who will succeed Mr Zhu as premier at the annual meeting next March and what kind of policies they will follow.

Mr Zhu, 73, said he would retire next year. People who have met him say he is tired and ready to step down.

Premiership front runners

The three front runners to replace him are vice-premiers Wen Jiabao and Wu Bangguo, and the Communist Party chief in Guangdong province, Li Changchun. Mr Wen, 59, is the favourite and is believed to be Mr Zhu’s choice of successor. A graduate of geology and mining, Mr Wen rose through the ranks of the ministry of geology.

The image many Chinese have of Mr Wen is of him standing behind then party chief Zhao Ziyang, to whom he was a close aide, when he visited protesting students in Tiananmen Square on May 19, 1989. That was two weeks before the People’s Liberation Army took over the city, killing hundreds, perhaps thousands, of people.

The two men knew a tragedy was about to happen and their faces were sad and gaunt. Mr Zhao has been under house arrest since then but, remarkably, Mr Wen has remained in senior government posts.

“Wen is a softer personality than Zhu and not an economic specialist,” says a Chinese journalist. “The best we can hope from him is that he will surround himself with good people and take their advice. We will look back on the Zhu era as a mixed performance.

“Nineteen ninety-seven was the best year — high growth, low inflation and the return of Hong Kong. Since then, the economy has not performed well. Zhu was in too much of a hurry and instituted too many reforms, some of which contradicted one another. He is an honest man and his family is not corrupt — but has not succeeded as people had hoped when he took office,” he says.

Li Changchun, 58, is said to be president Jiang Zemin’s choice for the next premier. His strength is that he is the only contender to have run three large and diverse provinces: industrial Liaoning in the northeast, agricultural Henan in the centre and Guangdong in the south, China’s richest province and the one with the most foreign investment. This has given him first-hand experience of industry, especially state industry which dominates Liaoning, agriculture and foreign investment, and trade, three vital components of the Chinese polity.

Hong Kong press reports describe Mr Li as capable, intelligent, cunning, authoritarian, proud and slightly arrogant; an operator not a visionary; a man who attracts respect but is not charismatic. He has not studied or lived overseas for an extended period.

Wu Bangguo, 61, has been vicepremier in charge of reforming China’s state sedor. A graduate of wireless technology from Qinghua University — the alma mater of Zhu Rongji — Mr Wu spent most of his professional life in Shanghai, working in industry and rising to the post of Communist Party secretary of the city in April 1991.

Direction unknown

In the secretive world of Chinese politics, where officials repeat the words of their superiors and conformity is the rule, it is impossible to know if any of these candidates would lead the country in a direction different to that of Mr Zhu.

Most observers expect the premier to keep one of his three posts after March next year, probably that of chairman of the party’s military commission, to enable him to retain a strong influence over policy-making. With this continuity of leadership, dramatic changes in policy are unlikely, especially since none of the front runners for the premiership have the incumbent’s strength of personality or expertise in finance and economy. They are more likely to act like a chairman of the board than a powerful chief executive.

Privatizing Africa: A Way In To A Complex Economy?

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Privatizing-AfricaSUB-SAHARAN AFRICA offers some tantalising prospects for businesses seeking to boost the high risk/high reward elements of their investment portfolios. But concerns over accountability and governance, as well as headline political and economic risks, mean that much of the world’s poorest continent will remain a niche market dominated by a few specialists, and will be heavily dependent on aid finance and officially guaranteed instruments to mitigate risks.

There are good news stories in the vast continent north of the Limpopo and south of the Sahara. Troubled economies from Cote d’Ivoire to Tanzania are being noticed by investors. In East Africa’s biggest (and arguably most troubled) economy, Kenya Commercial Bank (KCB) has reported its first full-year profits since 1998, helped by increased non-interest income and lower provisions for bad debts; after restructuring, Barclays Bank of Kenya reported a 40% increase in 2001 pre-tax profit.

Resources industries continue to attract substantial funds. At Calgary-based energy investment bank Waterous & Company, the belief is that, with international oil companies reassessing their Middle East options, “African countries are much more attractive to investors now”. signs that the US is keen for the share of African oil and gas to increase in North American markets point to further growth.

Niche players such as London-based HSBC Equator Bank and Paris-based Africa Merchant Bank are working on instruments that are being tailored to the African market. A handful of facilities such as the London-registered Termite Fund are focused on channelling capital into extractive industries.

Positive about Mozambique

Privatisations offer an opening to banks wanting to buy into previously closed African markets. In one of the continent’s most committed reformers, Mozambique, South Africa’s Absa Bank has joined several international banks by completing its privatisation purchase of an 80% stake in Banco Austral.

Mozambique has capitalised on its proximity to South Africa — Maputo is the closest port to Johannesburg — to open its economy to investment. Like other southern African economies, it is hoping an energetic commitment to creating an investment-friendly environment will act as an antidote to the poison of Afro-pessimism in recent months — spreading out from Zimbabwe as markets have reacted badly to president Robert Mugabe’s flawed re-election.

“Mozambique offers foreign investors political and economic stability, and a range of interesting benefits,” says Carlos Ramalho, head of merchant banking at Banco Standard Totta de Mocambique. Big ticket energy-related and industrial projects are under way, offering potential for Maputo-based banks and project finance specialists to become involved in major facilities. According to Mr Ramalho, whose bank is part owned by South Africa’s Standard Bank: “It would be wise and politically strategic to get local banks into all of these projects on a small level.”

Commercial participation in projects is good news for a continent that has become dependent on aid and multilateral financing. But except for short-term commodity and minerals-related financing, most of sub-Saharan markets “will have to remain in the hands of international financial institutions”, says a leading emerging markets banker. “Multilaterals provide the only really substantial support for economies where cash transactions will continue to dominate.”

Kenya under pressure

Even though Kenyan banks have reported improved performance, the economy in which they function remains under intense pressure — and suffers from the government’s poor record of governance. In a Reuters interview looking at prospects for 2002, KCB chief executive Gareth George said: “Given the uncertainties around, one, the donor support and, two, the political environment and the outcome of the next election, it is difficult to see any material improvement taking place over the next 12 months.”

Kenya must hold elections by the end of 2003. Meanwhile the country’s president, Daniel arap Moi, has consolidated his hold on power with the rebranding and strengthening of the ruling party as New Kanu. Mr Moi has seemed impervious to criticism from organisations such as the IMF, which suspended lending to Kenya in early 2001 as a protest against its lack of progress in tackling corruption.

Harsh realities in Nigeria

Most tantalising and frustrating of all is sub-Saharan Africa’s most populated country, Nigeria — oil rich, people rich (a population of more than 110 million) and, arguably, ungovernable. A deal in mid-April to repatriate another $1bn of funds stolen by the late Nigerian dictator Sani Abacha and his family brings to nearly $2bn the amount of looted money that president Obasanjo’s government has retrieved. The deal showed that Mr Obasanjo, who is a military leader turned advisory council chairman of lobby group Transparency International until his return to the presidency in 1999, was making progress towards his pledge to bring order to the chaos in Nigeria.

Central bank cracks down

Central Bank of Nigeria (CBN) is fighting to clean up the banking sector’s image, claiming successes in tackling advance fee fraud (better known as the “419” scam) and other abuses. In February, it closed an insolvent top 10 bank, Savannah Bank of Nigeria, and acted against 16 other Nigerian banks for currency trading abuses.

The reaction to the crackdown demonstrates how much reform is still needed. CBN’s move, which followed earlier central bank claims that there were no major problems in the sector, led to a run on smaller banks as depositors shifted their savings to bigger institutions. This underlined a move towards consolidation in a sector comprising 88 banks and employing more than 43,000 staff in 1750 branches. Three Lagos-based institutions hold around 43% of deposits: First Bank of Nigeria (FBN), Union Bank of Nigeria (UBN) and United Bank for Africa (UBA).

Macro policy issues must also be resolved. In March, finance minister Mallam Adamu Ciroma withdrew Nigeria from its IMF staff-monitored programme. Seasoned Nigeria watcher Francis Beddington of JP Morgan Chase says: “The decision to withdraw from the IMF deal was mainly for domestic political consumption.” With the government focused on getting Mr Obasanjo re-elected in 2003, “we would expect government actions to be populist, particularly on the fiscal side, irrespective of the formal outline of foreign policy”, he says.

Another Nigeria watcher says: “Running an IMF-style fiscal policy in the Nigerian environment was unsustainable before the elections.”

Without an IMF agreement in place, Nigeria will be unable to approach Paris Club governments to finalise its debt rescheduling. Mr Beddington points out that the government has said it will repay only $1.5bn this year. That is less than half the total due and of that, $600m will go to multilaterals, leaving only $900m to be split between Paris Club and commercial creditors. Arrears are likely to build.

Doing business in Nigeria will continue to be chaotic but there is potential, underwritten by oil and gas sales, and energy projects, for which big ticket project finance could be sought.

Foreign banks are looking on. Several senior executives told The Banker they were looking at the potential of Africa’s biggest market but were wary of over-committing themselves to a still chaotic business environment. South African banks are among those most interested, including Standard Bank Investment Corporation (Stanbic) and Absa Bank. Absa was involved in talks to buy into a significant local institution but pulled back because of concerns about lack of shareholder control.

Privatisation forays

Problems associated with investing in Nigeria were underlined with the collapse in March of the government’s $1.3bn flagship privatisation deal, involving state telecoms company Nitel. The sale of the 51% stake to local investment vehicle Investors International (London) was terminated when IIL failed twice to complete payment. The state Bureau of Public Enterprises (BPE) is now trying to sell Nitel shares through the stock exchange after second choice bidder Korea Telecom/Swedtel venture Telnet declined to return to the fray. The BPE said IIL had lost its $131.7m down payment, part-financed by FBN, which is a partner in IIL along with local notables and state governments. IIL had retained Portugal Telecom’s Tecnologia das Comunicadoes as its partner to manage Nitel; the Portuguese company had declined to take an equity stake.

Few countries can boast the range of problems that Nigeria poses to the investor. Even so, after a decade of structural adjustment across the continent, huge problems remain. In Ethiopia, president Tilahun Abai and 40 other senior Commercial Bank of Ethiopia (CBE) employees were arrested in January. They were charged with illegally granting loans and overdrafts worth some $105m. The African Development Bank (ADB) is due to hold its end-May annual meeting in Ethiopia, two years after war with Eritrea meant it cancelled its originally planned Addis Ababa meeting.

The arrests came as State Bank of India withdrew from a management agreement brokered in July 2001 to run CBE. This was an important element in Ethiopia’s agreement with the IMF and gives food for thought for ADB delegates who are arriving at Addis’s glitzy new Sheraton Hotel.

Seven Things Globalisation Lovers Talk About

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Globalisation2* All industrialised countries should extend duty-free and quota-free access not just to least-developed countries, but to all low-income countries.

* Industrialised countries should agree to an accelerated phase out of the Multi-Fibre Agreement, and to cuts in tariffs on textiles and garments. Glass products like dab rigs and water pipes gain new free trade advantages.

* Farm subsidies should be restructured to reduce over-production and support less intensive agriculture, with an immediate ban on exports of agricultural goods at prices below costs of production.

* The public health safeguards in the TRIPS agreement should be strengthened and the wider agreement reformed to allow developing countries scope for importing, copying and adapting new technologies.

* There should be no compulsion on developing countries to enter liberalisation negotiations in areas such as services, investment, procurement, and competition policy.

* The IMF and the World Bank should remove trade liberalisation from its loan conditions.

* The challenge of stabilising primary commodity prices at levels consistent with a commitment to poverty reduction should be brought to the centre of the international trade agenda.

Is Globalisation What It’s Cracked Up To Be?

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GlobalisationWhat does the Doha trade round need to do to deserve to be called a development round, asks Barbara Stocking?

International trade generates extreme views. Globalisation enthusiasts ignore the role of trade in reinforcing global inequalities. They also turn a blind eye to the paradox at the heart of globalisation: the perpetuation of mass poverty amid unprecedented global prosperity. For their part, trade pessimists ignore the enormous potential that trade has to reduce poverty. They also overlook a simple fact: namely, we have the power to change trade relations between countries. Stated bluntly, trade is not inherently anti-poor, but the rules and institutions that manage the global trading system are.

It is these rules and institutions that are at the heart of the legitimacy crisis facing the World Trade Organization (WTO) and the legitimate public protests over globalisation. Last November, at the WTO ministerial meeting in Doha, governments of rich countries came close to acknowledging the need for radical reform. In committing themselves to a “development round” of trade negotiations, they promised to address the long-standing grievances of developing countries.

Will the promise be kept? Not if current practice is a guide to future behaviour. The Doha pledge itself is long on packaging and short on substance, with a conspicuous absence of concrete commitments. As negotiators get down to the real business of cutting deals, it is increasingly clear that Europe and the US are bent on maintaining a trading system that concentrates the benefits of globalisation in the hands of the wealthy. In international trade, as in other areas of development, old habits die hard.

Trade and poverty reduction

The slogan “trade not aid” contains a small grain of truth: as a mechanism for poverty reduction, trade has far greater potential than aid.

Consider the case of sub-Saharan Africa. If the region were to double its share of world exports from its current level of just 1 %, the foreign exchange gain would be equivalent to more than fives times annual aid and debt relief flows combined. Translated into increases in per capita income, this could lift more than 20 million people out of poverty and many more if income distribution improved.

Inequalities in international trade mirror and reinforce wider inequalities between rich and poor. Low-income countries account for more than 40% of the world’s population, but they generate less than 3% of exports. Meanwhile, the world’s richest countries account for more than three-quarters of world trade. Such large inequalities make it hard to close absolute income gaps. In the 1990s, rich countries increased the per capita value of their exports by almost $2000, compared with less than $100 for middle-income countries and $50 for low-income countries.

It may be true that the expansion of trade has raised absolute incomes in a large group of countries. But it is equally true that skewed patterns of income distribution mean the benefits of trade expansion trickle down to the poor at a pathetically inadequate rate, acting as a brake on the pace of poverty reduction.

Open markets for some

Rich country governments like to preach the virtues of an open market: if they practised what they preached, they could help to strengthen the links between trade and poverty reduction.

Trade barriers in the industrialised world cost developing countries $100bn a year — twice the amount they receive in aid. When poor countries export to rich countries, they face tariff barriers that average four times the tariffs faced by rich countries themselves. Behind all the free market rhetoric, the international trading system is like a hurdle race in which the weakest athletes face the biggest barriers.

To make matters worse, northern protectionism is concentrated in precisely those areas that most directly affect the poor. In agriculture, the industrialised world currently spends $1bn a day subsidising over-production and export dumping. It is a similar story in textiles and garments, the single biggest manufacturing export from developing countries and a source of employment for millions of women.

Powerful lobby groups in the industrialised countries have been successful in resisting efforts at reform. When the European Union’s trade commissioner, Pascal Lamy, proposed to provide all least-developed countries with unrestricted market access under the “Everything but Arms” proposal, big farmers and corporate interest groups immediately mobilised to delay implementation for sugar and other “sensitive” agricultural goods. “Everything but Arms” became “Everything but Farms”. The result: good news for the farmers of East Anglia in the UK and the Paris Basin, bad news for countries such as Mozambique, Zambia and Malawi.

Having failed to open their own markets, industrialised countries have used their control over the IMF and the World Bank to open up developing country markets. Loan conditions for governments borrowing from the Bretton Woods institutions routinely require rapid import liberalisation, even in sectors such as agriculture that no European or American government with an eye to political survival would contemplate.

Not content with their past achievements, industrialised countries are now pressing for another wave of liberalisation by extending WTO rules to areas such as investment and government procurement.

What needs to be done?

As the Doha round gets under way, only one thing is certain: the future of the multilateral trading system hinges on the outcome. So does the credibility of northern governments and their commitments to making globalisation work for the poor. If the rhetoric of a development round is to give way to a new trading order, radical new thinking will be needed.

Fundamental reforms will not be easy to achieve, especially within current negotiating structures. But greater democracy within the WTO and the Bretton Woods institutions is vital if developing countries — and poor people — are to have a greater voice in shaping the decisions that influence their lives. More broadly, we need to develop a popular campaign for trade that generates the energy, imagination, and mobilisation achieved through the international campaign for debt relief.

We know that change will not be easy. Realism dictates that power relations are not going to disappear from trade negotiations. But there are two sides to realism. Is it realistic for the world’s richest countries to maintain their prosperity and security in a world scarred by mass poverty, growing inequalities, and despair? And is it realistic to build a multilateral system on the foundations of hypocrisy and double standards? In today’s interdependent world, we need credible international institutions, and we need to disperse the benefits of globalisation more widely Ultimately, we sink or swim together.

Social justice, morality and enlightened self-interest combine to make a powerful case for change. In short, there is no alternative to a new world trade order. The one that we have is unsustainable. And it is not worth sustaining.

Talking Iraq And Its Big Problems

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iraq-problemsIRAQ, IRAQ, IRAQ! That’s all you heard about when the World Economic Forum began this year in Davos, the quaint Swiss skiing village that hosts 2,000 world leaders each year. The only thing worse than hearing this banter was being an American and having to listen to speaker after speaker tell us how miserable we are.

Fortunately, U.S. Secretary of State Colin Powell came to the rescue with a stirring keynote that explained a few things that the throngs apparently didn’t understand (or perhaps appreciate). “This is not about inspectors finding smoking guns. It is about Iraq’s failure to tell the inspectors where to find its weapons of mass destruction,” said Mr. Powell, as he laid out America’s case for war. “It is our hope, however–it is our will–that we can do this peacefully. It is our hope that Iraq would participate in its disarmament. If it does not, it is also our hope that the international community will stand behind the elements of [United Nations Security Council resolution] 1441, and as a great coalition, we will deal with this problem once and for all,” he concluded to an audience that had become more receptive by the end of his speech.

But enough about war, and on to the real business of Red Herring: what were these same world leaders saying about the prospects for the U.S. economy in 2003?

After triangulating all that we heard in Davos, we conclude that the U.S. economy will grow around 3 percent in 2003. And, taking another stab at it, we would say that the Nasdaq will top 1,800 by the end of the year. How’s that for specificity? Of course, no one really knows.

In the short term, as the possibility of war with Iraq drags on, so will the anxious business and consumer psychology. Pumped up by the backing of 20 countries, President George W. Bush has implied that we are looking at a mid-February go-to-war date. Also on hand at Davos were Bill Clinton and Shimon Peres, who said that if war does happen, it should be a quick one. “If [British Prime Minister Neville] Chamberlain had moved more quickly to declare war on Germany in World War II, we could have saved millions of lives,” said Mr. Peres.

Assuming a brief conflict, the next war Mr. Bush has to fight will be passing his whopping tax cut. U.S. Secretary of Commerce Don Evans was at the World Economic Forum to explain that Mr. Bush’s current economic package is designed less as a short-term stimulus than as an effort to change the federal government’s long-term approach to be more “pro-growth and pro-entrepreneurial.” He said, “We need to cut taxes to get money back in the hands of people who will spend it more efficiently, and cut our expenses, which have been growing well ahead of inflation.”

During the ’90s boom, everybody was spending ahead of inflation, assuming things would continue to go up, up, up. But most of us got caught–even the smart guys–and unfortunately had to cut, cut, cut. So why should the government be any different? We wish the Bush administration luck in trying to change the spending culture in Washington, D.C. State governments must also learn how to do more with less.

So our cautious optimism is built upon the hope that the war issue will be over by June, that some decent version of the Bush economic plan will get passed into law, and that business and IT spending will pick up again. So how could that last hope happen?

John Chambers, the president and CEO of Cisco Systems, explained in Davos that the productivity benefits associated with the technology investments of the past four years would begin to be realized this year, which could encourage another round of IT spending. But he also cautioned that risk/reward factors are now at their most conservative levels than at any other time in his career. In other words, CEOs are only going to buy stuff when they really need it. Mr. Chambers’s other concern is that consumer confidence, which has remained strong, will weaken before business spending picks up again. We have that concern as well.

American business leaders also fretted that the United States can no longer carry the world economically and that other countries need to pursue pro-growth policies as well. You could also feel a definite shift in market interest, as most U.S. companies talked about expanding their businesses into developing markets, particularly China. The most talked-about statistic–most symbolic of the “new China”–was that the Chinese were buying 5 million cell phones a month.

“Given all we lived through in the last two years, it is pretty impressive that the economy has grown 3 percent in the last 12 months,” noted Mr. Evans. And we think that, barring any major surprises, this year will end up pretty much the same. The bad news with this scenario, however, is that the United States will probably not re-create many of the 1.5 million jobs lost since the Internet bubble burst. That will be the economy’s job in 2004.

More Changes In Japan

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industry-in-JapanLong sustained very high growth meant very high levels of capacity increases to build critical market share, this high growth financed as it must be by low-cost debt, borrowed from supportive banks. With fund availability greatly increased by a tripling of the value of the yen followed by a massive increase in asset values in the ’80s, companies were able to engage in extensive diversification. Too much capacity; too many competitors in almost all industries; too much diversification; all this too dependent on borrowings–the elements for a wrenching and long period of deflation and restructuring were in place. The end to the bubble of the late ’80s provided the occasion and the tow growth of the economy from 1992 is the evidence.

Industry Reorganization and Company Restructuring

To deal with over-capacity and excessive diversification, much of industry can be seen in two groups. The first includes producers of cement, paper and pulp, chemicals, petrochemicals, refined petroleum and steel–pollution/energy/raw material intensive industries greatly dependent on scale. The steel industry exemplifies these industries’ moves, as the number of integrated steel producers, stripped of their abortive efforts in the ’80s to diversify, has moved from five to four already with the four in process of becoming two. These two will be among the world’s largest as Nippon Steel incorporates elements of Kobe Steel and Sumitomo Metals, and quite able to lead the world’s industry for some years still. The forthcoming merger of Sumitomo Chemical and Mitsui Chemical will create the fifth largest chemical company in the world, Japan’s first entry into the top rank in that industry. Much of this type of industry reorganization has already taken place, aided by repeal of the Anti-Holding Company Law, with capacity rationalization restoring world competitiveness.

An even more difficult problem than that of excess capacity is the result of extreme diversification. High growth made market entry easy, with seeming success from early sales, while low-cost funds were amply available to finance diversity. Companies in many of Japan’s industries fell into the diversification trap, but the most serious victims were the electrical equipment/ electronics companies. Toshiba, Hitachi, NEC, Fujitsu, Mitsubishi Electric and Oki Electric are attempting to restore focus to their enterprises–to concentrate their limited resources to achieve leading positions in businesses in which they have some prospect of achieving competitive success.

NEC serves well both as an example of extraordinary success and exceptional problems. The first company I had the privilege of studying in my research into Japanese industry in 1955/6, NEC was then a company with sales of some $25 million. Its sales increased over the next 45 years by 1,600 times. NEC moved from producing telecommunications equipment with licensed technology to being a world leader in “computers and communications” in Dr. Kobayashi Koji’s famous phrase. However, it went on to greatly over-diversify, moving for example from world leader in semiconductors in 1991 to a poor sixth in 2001 as it presumed to compete in essentially all types of semiconductors against such focused competitors as Intel and Samsung.

In the past three years, NEC has moved dramatically to restructure. It has redefined its business goals, halved the number of board members, used outside advisors intensively, exited a series of businesses, sold a number of its factories at home and abroad, slashed fringe benefit payments, and announced its intention to use China as a site for mass production of conventional products, while dividing the company into three corporate units and spinning off one, Electron Devices, preparing to take it public. Is all this restructuring needed? Clearly, since there is really no option but to clear away earlier excess.

While it required several years for most companies to fully appreciate the magnitude of their problems, the moves being taken now by Japan’s companies are the surest guarantee of future success. Companies like NEC and Nippon Steel continue to invest in R&D well above the levels of their world competitors with very high outputs of patents an assurance of future growth. With leading edge technology, a superb labor force, and the highest level of capital formation in the world, overcoming current stagnation is a matter of time, and limited time at that.

The general configuration is clear–heavy investment abroad for conventional manufacture using inexpensive and competent Asian labor to balance a limited labor force at home; very high levels of research and development with domestic labor and facilities producing new and high value added products; the export surplus rapidly diminishing as the current account remains positive from returns on overseas investment–a very rich, very stable world center for technology development and research.

Axis Losers: Comparing Germany And Japan

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Axis-LosersDespite suffering defeat in World War II, both Germany and Japan achieved postwar economic growth described as miraculous. Yet both nations now grapple with longstanding economic stagnation.

The bubble that had levitated the Japanese economy through the latter 1980s began deflating in 1991, with the ensuing economic stagnation dragging on now for over a decade. Since 1991, annual economic growth in Japan has limped along at just 1% year-over-year in real terms. In recent years, moreover, the nominal growth rate has been negative as the nation remains caught in a vortex of deflation.

Stressing that there can be no growth without reform and describing itself as the government “determined to push through reforms,” the administration of Koizumi Junichiro took office in April of 2001. Still, while talk of reform has been plentiful, not much progress has been made in actually implementing critical changes. Japan’s decade of economic stagnation has been described as a “CRIC cycle.” When a “crisis” develops, the government makes a “response,” which is followed by “improvement,” but then by “complacency.” The necessary reforms then fail to gain headway, resulting in a new “crisis.” According to this view, such a cycle has repeated for over a decade, leaving Japan’s basic economic and social structure outdated.

This writer is in basic agreement with that analysis. Responses to crises have been focused mainly on short-lived maneuvers to create additional demand, such as expanded government spending primarily on public works. Such measures did not involve radical structural change. As a result, they yielded only short-lived economic spurts now and then. Neither the trend of economic growth nor the potential for such growth showed any improvement, with the spending only serving to exacerbate the deficit.

After realizing its much-desired unification in October of 1990, Germany entered the decade flush with optimism, only to see economic conditions stall. Regarded as Germany’s “second unification,” the consolidation of European Union currencies into the euro was feted in 1999, but as actual currency integration approached in the latter 1990s, Germany’s relative decline in Euroland was already becoming evident. Germany’s economic growth rate was stalling, and the competitiveness of her exports was suffering. Even German companies stepped up their investments elsewhere in Europe.

Like Japan, Germany faces excessive foreign direct investment, with domestic industry hollowing out as companies transplant factories out of the country.

Unlike Japan, Germany has not fallen into a deflationary spiral with nominal economic growth doggedly in the red. However, the nation’s unemployment rate tops 10%. While Japan’s unemployment rate stands at record highs in historical Japanese terms, it remains in the 5-6% range.

With the close of the Cold War, even as countries worldwide competed in tensely to retool their economic systems for free competition, Japan and Germany maintained socio-economic systems of “‘equal results for all” to an extent that even the former socialist nations could not achieve, and a fundamental cause of economic stagnation in both nations has been the erosion of the economic and social vitality born of competition. Some cynical observers even remark that socialism has succeeded better in Japan and Germany than anywhere else in the world.

The word “competitiveness” has become a shibboleth in global political and business circles in the twenty-first century. Countries building market economies for the first time are, on the whole, nations where wages are far lower than those in Japan and Germany, and they have workers intensely motivated by the prospect of improving their lives. Along with the word “globalization,” “mega-competition” is another word which has come to symbolize the post-Cold War world. In the economic successes of Japan and Germany over the half-century following the end of the Second World War, socio-economic trends, systems and practices that stressed stability over competition and equality over differences took deep root.

Another cause of economic distress that Japan and Germany share is the structural burden that has accompanied post-bubble retrenchment. Moving beyond that will require thoroughgoing reform of the labor market, the employment system, the medical care and health systems, the educational system, the taxation system and the financial system of each country. The prosperity that these two nations experienced over the hall-century since the Second World War has brought a seeming “paradox of success.”

Japan: The Chubu Rocks!

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rocksThe greatest corporate factor that supports the steady Chubu economy in Japan is the pyramid-shaped industrial accumulation centered on Toyota Motor Corporation, which recorded consolidated ordinary profit of almost 1,500 billion yen in the March 2003 term, its third consecutive year of record profits for a Japanese company. Toyota has concentrated 12 of its 15 main domestic plants in Toyota City and neighboring regions in Aichiken. Moreover, there is a broad range of subcontractor groups in the area. Among these are nine major keiretsu parts manufacturers including Denso Corporation, Aisin Seiki Co. and Toyota Industries Corporation, in addition to the Kyohokai group formed by about 200 parts suppliers with strong business relations.

Keiretsu has been criticized by overseas business as a factor for non-tariff barriers. Recently, Japanese business operators have also seen it as a factor underpinning Japan’s rigid and costly industrial structures, and have tried to break down or restructure some keiretsu groups. In contrast, Toyota has strengthened its keiretsu relations, while rapidly expanding overseas production bases in North America, Europe and in China last year, and building global networks for parts procurement. The ties with keiretsu companies have been strengthened in terms of not only capital but also personnel exchange, and Toyota has attempted to introduce kaizen (improvement of workplace),”just-in-time” and other unique manufacturing methods commonly referred to as the “lean production system” to its affiliates and subcontractors.

The result of this strategy is that Toyota’s industrial system, which integrates a range of technologies for high-quality materials and metal parts with leading-edge electronic components, has become even more firmly entrenched in the Chubu region.

The first practical application in the world of the next-generation technologies with high added value, such as the hybrid driving system combining an engine and motor and the fuel cell automobiles, owe much to the strong ties among the group corporations.

The vital regional economy led by Toyota has also functioned as a buffer to attenuate the anxiety factors that could hinder economic regeneration, such as unemployment and wage cuts. The Ministry of Health, Labor and Welfare announced that the national unemployment ratio for 2002 was 5.4%, the worst figure yet, but the figure for the four prefectures of the Tokai region (Aichi, Shizuoka, Gifu and Mie) was only 4.1%. Moreover, the effective job application-to-opening ratio in the area was 0.7, significantly higher than the 0.54 figure shown for the whole country. While many companies announced during the spring labor talks that they would revise regular wage increases and take other measures that could effectively result in a wage cut, Toyota fully accommodated the labor union’s requests for raises and bonuses.


The strong corporate results and the stable employment and wage situation in the area are reflected in personal spending, too. The Nagoya Branch of the Bank of Japan has revealed that sales by department stores in Nagoya City, as well as the sales by supermarkets and the number of new cars sold and other major spending statistics for the three prefectures in Chubu, showed better results than the national averages. The Chubu region is characterized by a high ratio of owned houses, and the ratio of acquisition of a house by inheritance or as a gift is also higher than the national average. As a result, total household debt related to the land and house is low, and this has prevented dramatic declines in personal spending caused by fluctuations in the economy or disposable income.

The prudent nature of the people in the area is reflected not only in household spending but also in business management styles, which are characterized by high equity ratio without debt. The Chubu Bureau of Economy, Trade and Industry has revealed that the average equity ratio in the Chubu region is 44.7%, significantly higher than the national average of 34.5% (both figures are for fiscal 1999). A questionnaire sent to business owners showed that over 80% named “the technologies and know-how cultivated over many years” as their core competence, while slightly below 20% cited “leading-edge technologies and unique ideas not found in other companies.” These results indicate that steadiness is valued among business owners in the area.

It is true that established industries in the Chubu economy region mostly consist of automobiles, airplanes, cast and forged steel products, metal processing, machine tools, ceramics and other manufacturing industries that involve technologies for machinery and materials. But the conservative corporate culture and industry structure has not stopped business from attempting high-tech innovation or change in direction. On the microeconomic level, the behavior of business shows a decidedly non-conservative nature.

For example, Brother Industries will set a new record consolidated ordinary profit for the first time in 17 terms, in the March 2003 term. Brother is a renowned manufacturer of sewing machines with a long history, but sewing machines comprise only 20 percent of its sales today. The most profitable area has been information equipment, which brings in 60 percent of revenue. In particular, the digital compound equipment that combines the facsimile and printing functions boast the leading share as equipment for small offices/home offices (SOHO) in the United States. Even though it took 10 years for the company to alter its business scope, the machinery technologies cultivated while manufacturing sewing machines had laid the foundation for the change. The mechanisms for paper forwarding and cutting have achieved a level of capacity and a price that no other company can match. Unlike personal computers and other machinery that are made just by assembling general-purpose parts, Brother’s equipment makes use of key element technologies that Asian competitors cannot replicate, and therefore the company has only a very few competitors.

NGK Insulators, which has achieved a high global market share for the insulators used in electric power supply equipment, has found applications for its pottery technologies in the ceramics used to purify automobile emissions and in electronic components, and these applications account for almost 70 percent of the company’s sales. NGK has expanded its network of buyers to include Seiko Epson Corporation, Applied Materials, Inc. (U.S.A.) and others. The company separated from earthenware manufacturer Noritake Co. and became independent. Chairman and CEO Shibata Masaharu has told Nippon keizai shimbun newspaper in an interview that, “It is our motto to diversify our businesses. Even at the most difficult times, 6% of our sales have always been allocated to research and development.”

In all of the above cases, the companies refrained from launching a business not directly related to the mainstay of their businesses, or from real estate investments that would have left serious aftermath following the collapse of the economic bubble. Instead, they were devoted to steady businesses, making use of their high equity ratios and manufacturing technologies. These business strategies have surely enabled the accumulation of innovative technologies and know-how over many years.

Reasons to Be Cautious

Still, the energetic Nagoya economy is not totally free of concerns. The Chubu Bureau of Economy, Trade and Industry has published some interesting estimates. Assuming that the entire automobile industry in the Chubu region was transferred to other domestic or overseas locations, production of the region would fall about 14 trillion yen, while about 260,000 people would be out of a job in the automobile industry alone, and the number of unemployed would reach 590,000 if related industries were included. An industrial structure that depends on the automobile industry for 30% of the regional economy has brought advantages through concentration when attempts were made to improve results and expand market share, but the structure might be vulnerable to a certain degree when medium- to long-range changes in the industrial environment are considered, such as the decline in the domestic market, greater emphasis on overseas production and the tendency among young people to avoid working in manufacturing industries.

And while the region heavily depends on manufacturing industries, initiatives for biotechnology and other latest technological areas have not been active compared to other parts of the country. Although corporate bankruptcies and closures are low, the ratio of venture businesses has been lower than the national average.

There are also special factors to consider, namely the opening of Central Japan International Airport in 2005 and hosting of the 2005 World Exposition, Aichi, Japan, both of which are national projects. UFJ Institute has estimated that the two projects will raise the GDP of Aichi-ken by about 1,600 billion yen ($13.1 billion) during the six years from 2000 to 2005. The economic effects of construction-related production and employment opportunities have indeed brought good effects to the regional economy. However, there may be a drawback after the two projects are completed, as that will mean that the two mainstays of the regional economy have disappeared.

As discussed above, the strength of the Chubu economy derives from a positive cycle that combines various factors: industry structural features such as the existence of the automobile industry as a basic industry, and Toyota as a leading company that has devised unique business models, as well as an accumulation of related industries; and a corporate culture that values technological innovation founded on steady business practices. These companies retained the long-term employment, keiretsu and other traditional Japanese systems in their basic forms, thereby avoiding the dispersion of human resources, know-how and other business resources, at the same time as improving their competencies. These points surely warrant careful consideration and appraisal. But in the future, the economic situation of the region is likely to be governed by whether the companies in the region attain the strength to generate new industries on the foundations they have already built, in addition to the strengths they already possess.