Economy

Malaysia Strong Asian Investment Opportunity

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Malaysia: Major Asia Asset

Just two days ago a $3.7bn investment announcement came from Malaysia, set to “to jumpstart foreign interest in its economy even as other Asian countries try to stem speculative inflows in search of higher-yielding markets.” The country’s Prime Minister (Najib Razak) intends to try and get $444bn worth of investments resulting in Malaysia becoming a “developed country by 2020,” including $165m by Asia Media to create digital media infrastructure as well as the establishment of a state-owned energy development agency to be able to attract $106m worth of investments this year. This is all part of the country’s “Economic Transformation Programme,” a project that is due to be put into practice over the next decade.

Other Asian Countries Less Successful

Malaysia has been doing pretty well recently vis-à-vis investments. Indeed it has already attracted around $5bn in pledges from Exxon Mobil and Royal Dutch Shell Pic as well as other (smaller) projects. For example Indonesia, the Philippines and Thailand are having quite a few issues attracting investments anything near to the success of neighboring Malaysia.

But this hasn’t deterred Najib who is determined to ensure Malaysia stays one step ahead, “transforming [it] into a high-income economy within 10 years by generating new growth areas and restructuring the economy to lure investors.” Yet this goal is not as easy as it may seem. Investment blueprints from the past aren’t showing such great results. As well, in general the economy has been suffering from a less-than-skilled workforce to enable it to develop into the “financial services hub” it wants to. Yet it is past the stage of being a low-end manufacturing center,” as countries such as Vietnam now have that role.

Notorious Najib

Still, given all these efforts made by the country’s premier, the public is remaining loyal to Najib. Although one has only to look at the facts on the ground to see where the country really is, given that the exchange was down more than 5 percent from where it was just four years ago. While there is now more opportunity for competition, in general, investors are expecting the government to “take more aggressive steps to reduce its fiscal deficit and overhaul an affirmative action policy they say hinders competition.”

Malaysia PJ: Malaysia Post Japan’s Trauma

It might not have been a surprise if any parts of Asia – including Malaysia – would have been negatively impacted by Japan’s trauma. But in fact this hasn’t been the case, according to Datuk Donald Lim Siang Chai, the country’s Deputy Finance Minister. He claimed that it will “have little impact on the Malaysian economy in 2011.” Vis-à-vis the country’s exports to Japan he said that actually some areas (like plywood and liquid natural gas) would actually probably “increase during the second quarter of this year as Japan increases its reconstruction work of earthquake-damaged areas.”

As well, Malaysia probably won’t be affected by Mid-East and North African troubles either since trade between those countries is anyway only at around 2 percent.

So all in all things are looking good right now for Malaysia. The country has developed a strong enough economy and excellent relations with regions with which to continue exporting to see it through any troubled times Asia may be encountering.

A Bull in a China-Euro Shop?

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How China Feels About European Investments

It’s nice that China Investment Corp (CIC) is in a good place financially, but it might be best advised to not put all its eggs in one basket. Established a mere four years ago to invest China’s foreign exchange reserves wisely, the multi-billion wealth fund (with estimated assets as of $532 billion as of two years ago) is seeking potential investment opportunities in Europe but is somewhat realistic about the area’s problems. This would make sense since just over 20 percent of its equity investments have been going into Europe.

Nonetheless, since the CIC has already had significant exposure to Europe, one would think it would be a little more cautious as things stand. Apparently not. Even though sentiment remains somewhat less than optimistic, plans may still forge ahead especially in the infrastructure sectors.

Global Economy

The Boao assembly where these issues were discussed is a gathering of government, business and academic leaders to “discuss pressing issues in the region and the rest of the world.” In recent times, China has been purchasing foreign currencies that are put towards its exports as a way of controlling the yuan value. In general they are put into sturdy US Treasury bonds but given the global economic fiasco, the CIC has been making efforts to “be more aggressive to improve returns.”

CIC and Asia Exporters

According to Asia’s largest thermal coal exporter Bumi Resources, talks were being held with CIC about the possible “swap of $600 million debt into equity” but this would obviously require the total support of CIC, according to Kenneth P. Farrell, the company’s director and CEO of Bumi Resources Minerals.

Nonetheless, the main priority of Bumi is to “repay a first tranche of $600 million in debt this October — two years earlier than scheduled — out of a total $1.9 billion it owes to China's sovereign wealth fund.

Global Financial System Reform?

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BRIC Leaders Meeting

BRIC nation leaders (Brazil, Russia, India and China) are meeting up in China for a one day conference. BRIC is actually a bit of an inaccurate description now (it should really be changed to BRICS) since South Africa recently joined. As a unit they have both economic and political influence today, and also form part of the G20. The topic to be addressed will be reforming the global financial system since the nations comprising the BRIC make up 40 percent of the world’s population and nearly a fifth of its growth. Given these statistics, the BRICS feels they deserve a “greater say in global affairs.” While BRICS influence has increased since the start of the global financial crisis, there is still much more to be done.

BRICS Status

The BRICS will be discussing rules regarding international trade but there is no guarantee that it will hold much weight. BRICS are in favor of free trade and against protectionism, but in general don’t agree on much. Since all BRIC countries fared well vis-à-vis the 2008 economic crisis, they have already proven themselves. India has a global economic status vis-à-vis being a service provider and engages in the most trade with China although has a large trade deficit with the Chinese.

China Success

China is doing very well in the hi-tech industry, now having the status as a “mass producer of hi-tech products,” such as semi-conductors and solar panels. As well it is doing well in garment and textile industries, maintaining its reputation for being top in low-cost high value markets. At the end of the day China needs to continue to “maintain competitiveness in the global economy [through] low-cost manufacturing.” But if prices start to go up, then what will start happening is that companies will start looking elsewhere like Vietnam.

Indeed, just this last year China started constructing high-speed rail around the world, and is now “home to the world’s fastest train,” and it looks like Brazil is going to use Chinese firms to plan their high-speed rail project. But perhaps some of China’s success will come at the expense of other countries. Brazil and India are “concerned” China will “flood their markets with cheap goods.”

BRIC Cohesion?

Even though the four (now five) countries form the BRIC, it seems that in general, experts feel that the acronym alone is insufficient to give them a unified presence “on the global stage.” It is going to take much more time and a “wait-and-see” approach will have to be taken vis-à-vis G20 and other countries collaboration. While the BRIC are lessening their need to work with developed economies, globally they still have to collaborate with the “major industrialized nations.”

So the BRIC (or BRICS) do definitely have much to offer, but they need to work on compromising so that they can become a more cohesive unit and thus a force to be reckoned with vis-à-vis reforming the global financial system.

Japanese Properties to Quake?

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It was bad enough that the whole of Japan was totally shaken up in more ways than one because of the tsunami disaster, but now it seems like the same is going to happen to what remains of its real estate market. Perhaps not surprisingly, companies are now reported as being “cautious” vis-à-vis the country’s property market although they are trying not to enter into drama-panic mode. As Prudential Real Estate Investors Chief Executive J. Allen Smith put it, “we are taking a wait-and-see approach,” given that so little time has lapsed since the disaster, thus rendering it too early to look at the economy and the markets in a stable light.

Real Estate Troubles Pre-Quake

However, what many are failing to realize, is that even before the terrible disasters struck Japan, the country was reeling from real estate woes. Indeed, over the last two-and a-half years, figures showed a drop in the country’s commercial real estate markets by nearly 20 percent (to the end of the third quarter of 2010). Even at the time this was somewhat of a shock, with Japan ranking as the second biggest “commercial property market by value,” being “one of the few major real estate markets to continue to record capital depreciation.” This clearly reflects its stagnant economic growth.

No Long-Term Lull

So the question being asked then – given all this background information – is what chance does the country now stand of beefing up its real estate market? Well, things don’t have to be all that gloomy, at least not for the long-term. While it is the case that companies like Prudential Real Estate Investors are standing back somewhat from jumping on Japanese properties, they hope this will change in the not-so-distant future. Indeed, the country was described by the company as “an important real estate market,” so with that kind of language, it is unlikely to show itself as a fair-weathered friend.

As well, one of Prudential’s new funds has “earmarked about 50% of capital for Japan,” although it is still “taking a step back” vis-à-vis the country and its real estate. Still, there is funding going on in certain specific parts and markets of Japan, like Tokyo’s retail property assets. Thankfully, according to Smith, “the assets weren’t damaged in the massive quakes.”

Prudential Investing

Despite all of this, it does seem that Prudential remains serious about Japan and its real estate market. Even when things were looking particularly gruesome, the company’s financial chair and CEO John Strangfeld committed the Prudential Foundation to putting $6.1 million to “support disaster relief in Japan,” at the end of last month. Moreover, at around the same time, Prudential Real Estate Investors “co-invested with clients on two Pan-Asia funds totaling about $1.5 billion that have ‘meaningful allocations to Japan.’”

So while things definitely could be better for Japan, its economy and its real estate market, given the earthquake and tsunami disaster, as well as the problems it was experiencing prior to all of this in its markets, it seems clear that there is still confidence in the world’s second largest commercial property market, third largest economy and global financial player.

Protect Yemen from al-Qaeda

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Yemen is not beyond hope according to “two influential French senators.” It can be saved from “becoming the next base for Al Qaeda” despite the fact that it is currently “faltering,” leading to fear brewing in Egypt, Kuwait and Qatar.
All might not be in agreement with this. It seems that Saudi Arabian officials fear Yemen could be a “more hospitable environment for terrorists than even Afghanistan,” leading to Al Qaeda’s main home. This must be pretty scary for Yemen and its people.

America Understands Threat to Yemen

America is no stranger to Al-Qaeda or its threats and is now revealing “previously secret diplomatic cables,” from 2009-10 (from WikiLeaks) showing a country about to fail even without all the uprisings; President Ali Abdullah Saleh who “exploited the threat of al-Qaeda to extract foreign counter-terrorism help that he sometimes diverted for use against internal foes; and an al-Qaeda franchise remarkably suited to thriving in Yemen’s tribal culture and rugged terrain.” In addition, the cables are showing it was Yemen that became the “launch pad for attacks” such as the 2009 attempted Detroit-bound airliner bombing.

Saleh Needs to Watch Out

Saleh has also been getting a bad rep himself recently, as concern grows over what is happening in Yemen, “disrupting counter-terrorism operations involving U.S. Special Operations forces, aerial surveillance from armed Predator aircraft and clandestine CIA operations.” Ultimately, America is said to have “strongly condemned any illegal disclosure of classified information,” which would anyway deter diplomatic efforts, threaten individual and national security and “undermine [their] efforts to work with countries to solve shared problems.”

Citigroup: Putting Money In; Taking Money Out

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Citigroup Asia Investments

Latest news from Citigroup Inc. is the possibility of a $2bn investment in Asia Pacific banking. This is in line with the bank’s attempt to increase its “service offerings to the expanding middle class in the region.” According to the company’s Asia-Pacific region head of consumer banking Jonathan Larsen, “the opportunity is very significant. I think the broad trend will continue, i.e. the growth of the middle class, the increase in concentration of affluent, the increase in growth of consumption.” The stock price has changed -5.9 percent over the last three months.

New Profit Areas for Citigroup

This move will lead to new areas of profitability for Citigroup since at some point it was banned from adding Indonesian wealth management clients due to a potential fraud issue. Since the bank makes tons of its money through emerging markets, this new area will clearly render it a great deal of extra monies.

Bad Citigroup Publicity

Well sometimes even a reputable institution like Citigroup can fall into bad ways or at least be accused of t his. According to Arief Sulistyanto (National Police Director for Economy and Special Crime) it has been alleged that a local relationship manager stole 16.1 billion rupiah from three clients back in 2009-10 “by using blank forms signed by the customers.”

Clearly Citigroup needs to move away from bad things happening and clear its good name. Thankfully it has a pretty good reputation and with its new moves into potential Asia investments, it needs to work hard to maintain (and improve on) this so that they are known for putting money in (vis-à-vis investments) rather than taking money out (alleged stolen money).

Spotlight on Conduit

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The mobile online and mobile app industry is one of the fastest growing markets in the world today. With Apple’s App Store, Google’s Android Market, and RIM’s Blackberry App World, the industry is in constant competition, making it difficult for other parties to make a name for themselves.

One company that has managed to do so is Conduit. This web and mobile app publisher currently has more than 230 million users, 200 employees and 260,000 web publishers. The original Conduit Network enables global and independent app publishers to develop, distribute and exchange apps across the globe. The network also makes it easy to create business partnerships.

Conduit provides an easy, effortless method of distributing apps anywhere in the world, from toolbars to mobile devices to web browsers. Apps can be deployed directly, or through the Conduit App Marketplace.

Founder and CEO of Conduit Ronen Shilo said: “We know how competitive it is these days to market products, services and content online, which is why we provide an open solution that levels the playing field and creates new business opportunities. With our vast network and App Marketplace, we are enabling Web and mobile publishers of all sizes to freely and easily create and share content with one another, as well as acquire and engage users more effectively. We believe that it’s this same open spirit which attracted people to the internet 15 years ago, that continues to draw publishers to Conduit over and over again.”

Some of the better known Conduit users include MLB (Major League Baseball), Time Warner Cable, Univision, Chelsea Football Club, Fox News, iVillage, Groupon, Travelocity and TechCrunch.

Kuwaiti Investments

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Kuwait Working with Morocco

North Africa Holding Company (NorAH), a Kuwaiti investment firm has just “acquired a minority stake in a Morocco real estate developer,” with its investment and place on the board in Dar Saada Company (DSC). It looks like there will be significant opportunities for NorAh in the North African housing market that is currently on an up.

NorAH’s Investment Goals

Given NorAH’s strong, solid, stable base, it is the perfect company to make an investment. It works well with various economies in the North African region, having the capacity (with its KD 50 million capital base) to “contribute to the sustainable development” there. It is also “one of the largest pan-regional investment companies.” When it joins up with other companies, it can help them become “premier regional and global players.” Since it recognized that the housing market had huge potential, it made sense for it to move in that direction. Since there hasn’t been such a commitment by the government to respond to the lack of Moroccan affordable housing, the company’s CEO, Emad Anwar Al-Saleh said the sector is likely to undergo “major growth in the next few years.”

NorAH Gets Assistance

NorAH has been receiving significant assistance in raising the necessary $137m for the stake. Companies providing capital include: Wafa Assurances; Aabar Investments (Abu Dhabi), RMA Wataniya and Idraj Capital Development Fund. In addition, NorAH plans to “target investment opportunities arising in North African economies.”

Happy Days for UAE

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Well, anyone living and investing in the UAE should be pretty happy. Things are going well which is why it shouldn’t be such a great surprise that the population has more than doubled in the last few years. In fact, figures show that there has been an increase of a staggering 65 percent inhabitants in the region from 2006 to 2010. This could be to do with the economy since most of these newbies to the area are comprised of overseas investors and workers with a mere 11 percent of those living there being UAE nationals at the end of June 2010. It is Abu Dhabi that has had the large influx of investors.

GDP Rise

The region’s non-oil GDP was said to have increased by 3.3 percent over the course of the year, according to figures released by the International Monetary Fund, as opposed to the 2.1 percent figure of last year. Additional development is anticipated due to the UAE’s “low interest rates, strong crude prices and better prospects promote expansion. ” People living in the area are thrilled with the news and “optimistic” that such trends are set to continue.

More Pocket Money?

But, at the end of the day, it remains unclear as to whether all this good news will mean more money in the pocket of the average UAE citizen. Apparently it may not. It looks like salaries are going to either stay the same or just increase a minimal amount. This is despite the fact that it seems to be an employee’s market right now as companies are on the lookout for a not-endless supply of skilled workers. So it seems a bit strange that salaries remain under lock and key. Nonetheless it’s all relative. Despite the lack of rising salaries, according to a study these salaries are still at the top of the entire Middle East market.

Pakistan Investments Increase

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Pakistan Packs It In

Despite the crazy floods to strike the country just a year ago, impacting a staggering 18 million people, it looks like Pakistan’s economy is actually growing today. Indeed, it looks like the country will be joining forces with Malaysia and economists expect economic cohesion between the two countries to expand “by at least 10 percent this year.”

According to Datuk Mukhriz Mahathir, Malaysia’s Deputy International Trade and Industry Minister, there could be joint work between the following sectors: chemicals, palm oil downstream products, petrochemicals, and telecommunications. Because both countries have their own strengths, Mahatir told a “Business and Investment Opportunities in Pakistan” conference that he believes the two should take advantage of each other for mutual benefit.

Indeed, this has already been happening. The figure recorded for Pakistani investments in Malaysian manufacturing area reached a total of RM1.099 billion spanning 26 projects. As well, last year trade between the two countries was recorded at RM7.991 billion.

Booming Bahrain

Economic and financial advancement in Malaysia is going beyond the scope of its host country. Indeed its trading with Bahrain shot up to $192.2 million. As well, last year Malaysian exports to Bahrain reached $71.57 million and $120.6 million the other direction.

According to CEO of My Events International, Shahul Hameed, this “increased trade not only reflects a healthy business relationship with emerging countries in the South East Asian region but also shows its eagerness to explore key investment and financial opportunities inside and outside of the Middle East region.”

For sure whenever political issues get ironed out it, the way will be paved for economic and financial development as well.