After many years of galloping growth rates, India is grinding to a halt, and countries in the region may soon feel the impact.
To ease pressure on the rupee, the government said it had set up a panel to look at paying for imported items in rupees rather than foreign exchange under bilateral currency swap agreements. Photo: Reuters
INDIA is in the news and for all the wrong reasons. With the rupee
collapsing, the current account deficit exploding and corporate debt set
to melt down (trimming its contribution to Forbes billionaires’ list), China’s strategic challenger looks set to drag the rest of Asia-Pacific into a prolonged economic crisis.
After many years of galloping GDP growth rates, India is grinding to a
halt. Growth in 2012 was 6.3% – this year it will be lucky if it can
get above 3%.
For a proud nation with a US$4.684 trillion (RM15.4 trillion)
economy, its own nuclear bomb and a navy equipped with both aircraft
carriers and submarines, this is a massive loss of face and, indeed,
opportunity.
India may well go down in the annals of contemporary economic history
as being the trigger of the 2013 financial crisis – much as the South
Koreans and Thais were the forerunners of the 1998 meltdown.
So what went wrong in India? Wasn’t the subcontinent’s giant supposed
to be a great developmental success story and what are the lessons for
us in Malaysia?
According to a pair of extremely high-profile economists, Jean Dreze and Nobel Prize winner Amartya Sen, whose book An Uncertain Glory: India and its Contradictions was
launched earlier this year, India allowed its public sector, especially
healthcare and education, to wither. This failure of governance and
execution compounded deeply-rooted iniquities at the heart of its
complex – a caste-driven society.
And with a general election slated for next year, there’s little
doubt that a floundering Congress-led administration under Manmohan
Singh will once again fail to tackle one of the world’s most inefficient
and corrupt bureaucracies.
So, with the precipice fast approaching, it would be wise for
Malaysian readers to acknowledge that India will not suddenly rebound
and we will all be tainted by association. Moreover when the fear sweeps
the markets, the contagion often ends up being far worse than anything
crafted by Hollywood’s merchants of doom.
To be fair, India’s track record has been stellar if you’re middle-class and above.
Opportunities have abounded, despite the odd infrastructural glitch
such as the July 2012 power blackout across Northern India (at the
height of the summer heat).
However, for those at the bottom of the social scale, life has been less enthralling.
Take, for instance, the Indian government’s meagre spending on
healthcare – only 1.2% of GDP alongside China’s 2.7% and Latin America’s
3.8%. Converted into absolute expenditure (at PPP terms), India has
been spending US$39 (RM125) per capita whilst China has spent US$203
(RM655) per capita.
To put things into perspective, Malaysia spends 4.8% of its GDP on
healthcare or about US$400 (RM1,292) per capita. Indonesia spends 2.7%
of its GDP and US$100 (RM323) per capita.
Understandably, India has reaped a bitter harvest from this shocking
under-investment, achieving Quality of Life indices that pale in
comparison even with neighbouring Bangla-desh. This is despite
Bangladesh having a GDP per capita of US$747 (RM2,413) compared to
India’s US$3,557 (RM11,490).
But it’s the weaker sections of society that have been the most
imperilled: women, tribal people and the lower castes. Indeed, female
empowerment in Muslim Bangladesh far surpasses anything in India.
However, the story isn’t uniformly bad. India is a vast nation and
there are differences in the various indices between the country’s North
and West (sub-Saharan African bad) and its South (generally good). So,
if one is to subscribe to the Sen/Dreze formulation, India’s failure is
primarily a failure of governance with more public money being spent on
notoriously corrupt fertilizer subsidies rather than healthcare and
education.
We cannot underestimate the cost of this neglect to invest in its
people: not only due to higher crime and squalor, but also in terms of
lost opportunities via better human capital.
As a result of this terrible under-investment in their own people,
India’s “demographic boom” may well be worthless as its burgeoning youth
population of some 430 million won’t be adequately educated, employed
and/or fed.
Of course, the two men’s thesis hasn’t been uniformly accepted.
Free-market thinkers like Columbia University’s Jagdish Bhagwati have
taken issue with their prescriptions, seeing rather the need for less
state intervention and greater private sector participation. The ensuing
debate between the two prominent thinkers has been sharp and
acrimonious, reflecting the underlying sense of unease.
Ultimately, the correct policy path for India probably lies midway
between the two positions, but for now, we can be sure that little will
be done to improve the lot of India’s hundreds of millions of poor.
Dreze and Sen have also criticised India’s free market and
much-lauded democracy, arguing that neither has helped address its
fundamental inequalities.
Look across the Himalayas to China, however, whose authoritarian
system has brought it great wealth, but also the same inequalities and
social dislocations and things don’t seem that rosy either.
Where should developing economies go then? Perhaps this is the great
paradox of modern capitalism: that nothing countries do will ever be
right in the long run and that periodic market scares, if not an
outright collapse are only to be expected!
Only then will governments be forced to reassess and change their
policies. So as emerging markets ready themselves for the impending
squalls, we in Malaysia should also be sharpening our policy “tools” and
readying ourselves to address the many failings in our policy
“tool-box”.
Contributed by KARIM RASLAN
> The views expressed are entirely the writer’s own.
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Thursday, September 5, 2013
US-Syria drums of war — a familiar beat
The only solution for the Syrian issue is a political one and a peace conference of all actors may stop further bloodshed.
A HORRENDOUS attack with chemical weapons is alleged to have killed 1,429 people in a Damascus suburb on Aug 21.
Use of such chemical weapons is a flagrant violation of international law and the culprits must be hounded and herded to the International Criminal Court.
However, it is not clear who the real perpetrators are.
The Syrian government alleges that US-supported rebels carried out the attack to turn global sentiment against Syria. Obama pins the blame on Assad and is using this as a justification for a threatened war that circumvents the UN, like Bush before him.
The claims of both sides must be investigated impartially by the UN and there should be no resort to unilateral punishment before all facts are established. It is not in accordance with due process for the accusers to arrogate to themselves the role of adjudicators.
In the meantime, one must note that in March, an Independent Commission of Inquiry of the UN headed by Carla del Ponte had concluded that the nerve agent sarin was used by US-supported rebels and not the Syrian government.
It is also noteworthy that the weapons inspection team of the UN was in Syria at the invitation of Assad who is unlikely to have resorted to such an abomination with the UN watching over his shoulders.
The US and UK have a long, catalogued history of murderous lies to construct the pretext for war.
In August 1945, the US concealed the fact that Japan was actively negotiating surrender and went ahead to incinerate hundreds of thousands of civilians in Hiroshima and Nagasaki in a brutal atomic attack.
The US invasion of Vietnam in August 1964 was founded on the deceitful lie that Vietnamese torpedo boats had attacked US ships in the Gulf of Tonkin. The war took the lives of millions of innocent Asians and 50,000 American combatants.
In 2003, lies and skewed facts about Saddam’s alleged weapons of mass destruction led to the pulverisation and conquest of Iraq.
Similar deceitful warmongering led to the attacks and subjugation of Afghanistan and Libya. The Third World is now quite mindful of Western spin masters and their weapons of mass deception.
Assad is on a winning wicket and Western allies are understandably eager to find any pretext to kill him like the way they did Saddam of Iraq and Gaddafi of Libya.
The US, EU and Israel are fomenting civil war in Syria that has so far killed 100,000 for various geopolitical reasons: to weaken Iran and Hezbollah who are the only remaining regional rivals of Israel; to thwart the proposed Iran-Syria oil pipeline; and to kill the plan to sell Iranian oil in currencies other than the almighty US dollar. The Syrian conflict is a proxy war by the US against Iran.
There is also the desire to consolidate an uncompromising version of corporatism that seeks total economic hegemony over the region. Observers have noted that “defence manufacturer” Lockheed Martin’s stock prices rose sharply since news proliferated of the chemical weapons attack!
Any attack on Syria by a “coalition of the willing” on so-called humanitarian grounds will be a gross violation of the UN Charter.
Except for the narrow exception of unilateral self-defence under Article 51, the Security Council of the UN is the only authority empowered by chapter VII, Articles 39-42 to use force against a nation that is guilty of a threat to the peace, breach of the peace or act of aggression.
American-style unilateralism and exceptionalism pose significant potential for abuse. This is evidenced by Nato’s destruction of Gaddafi’s regime in 2011 under the guise of a limited humanitarian operation. One must also note that the terror of war necessarily results in thousands of civilian casualties.
Secretary of State John Kerry’s description of the Damascus chemical attack as a “moral obscenity” is very touching but reeks of hypocrisy. It is well known that the US used napalm and agent orange in Vietnam; depleted uranium in Iraq, Kuwait, Afghanistan and Bosnia; and white phosphorus bombs in Fallujah in 2004.
Saddam Hussein’s chemical attacks against Iran were with Washington’s full knowledge and support. In fact the chemical weapons, the feeder stock and equipment were supplied by the US, UK, Germany and Italy.
While the world has been focused on the horror in Damascus, US supported rebels have carried out a campaign of ethnic cleansing against 40,000 Syrian Kurds to force them to flee across the Tigris into Iraq.
There is not a word of Western condemnation of this atrocity.
The threatened missile attacks against Syria would cost thousands of innocent lives. In typical American style of justice, people will be butchered in order to save them from a dictator!
Weapon depots will explode, resulting in horrendous collateral damage. There is no certainty that Bashar Al-Assad will be toppled.
A broader conflict may result if Syria, Lebanon, Iraq and Iran react against Israel and America’s bases in the Middle East.
US military intervention in Syria’s civil war will, therefore, be an enormous mistake. It will not promote US interests. The use of missiles can change the military balance but it cannot resolve the underlying historic, ethnic, religious and tribal issues that are fuelling this conflict.
The only solution for the Syrian issue is a political one. A peace conference of all actors may stop further bloodshed.
President Obama must remember that you can start a war when you will; you can’t end it when you please!
Reflecting On The Law - contributed by Shad Saleem Faruqi
Shad Saleem Faruqi is Professor of Law at UiTM. The views expressed here are entirely his own.
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Wednesday, September 4, 2013
Microsoft buys Nokia’s phone for $7.2 Billion
Ballmer: Nokia Deal Accelerates Share Position
http://www.bloomberg.com/news/2013-09-03/microsoft-to-buy-nokia-s-devices-business-for-5-44-billion-euros.html
Microsoft Corp. (MSFT) is spending 5.44 billion euros ($7.2 billion) to buy Nokia Oyj (NOK1V)’s handset unit so it can gain ground on Apple Inc. and Google (GOOG) Inc. in a smartphone market it let get away -- gaining a possible new chief executive officer in the process.
Nokia’s devices and services unit, which accounted for half of the company’s 2012 revenue, along with 32,000 employees, will transfer to Microsoft, the companies said. Nokia CEO Stephen Elop, 49, will return to Microsoft after a three-year stint running the Finnish manufacturer. The move stoked speculation he may be a successor to CEO Steve Ballmer, who said last month he’d retire within 12 months.
Microsoft is deepening a push into hardware as dwindling computer sales sap demand for the programs that made it the world’s largest software maker. Nokia shares jumped as much as 48 percent in Helsinki as the sale removes a money-losing handset business and lets it focus on higher-margin networking gear. Even combined, the companies have less than 4 percent of the smartphone market, leaving them far behind Apple and Google.
“The question is whether combining two weak companies will get you a strong new competitor -- it’s doubtful,” said Paul Budde, a telecommunications consultant in Sydney. “Both Nokia and Microsoft really missed the boat in terms of smartphones, and it is extremely difficult to claw your way back from that.”
The shares rose 34 percent to 3.97 euros in Helsinki, valuing Nokia at 14.9 billion euros. The shares of Redmond, Washington-based Microsoft fell 4.6 percent to $31.88 at the close in New York, wiping out more than $12.6 billion in market value. The company’s market capitalization is now about $265.6 billion.
As part of the agreement, Microsoft will pay 3.79 billion euros for Nokia’s devices division and 1.65 billion euros for patents, according to a statement from the companies. The all-cash transaction, subject to Nokia investors’ approval, is expected to be completed in the first quarter of 2014. JPMorgan Chase & Co. advised Nokia on the transaction, while Goldman Sachs Group Inc. worked with Microsoft.
“It’s a big transformation, but that’s what you’ve got to do in the tech business to move forward,” Ballmer told Tom Keene on Bloomberg Television’s “The Pulse.”
Microsoft said it is confident of getting the deal approved by early next year. The transaction will shave 12 cents a share off earnings in the current fiscal year, or 8 cents excluding some items, the company said. In 2015, the cost will be 6 cents based on generally accepted accounting principles. Excluding some costs, the deal will add to profit that year.
Microsoft also expects to get more profit for every device sold -- more than $40 a unit for smartphones, compared with the less than $10 in gross profit it currently gets for Windows Phone sold by Nokia. That doesn’t include the costs of marketing and development, though.
The Microsoft purchase was the second major deal to be announced during the U.S. Labor Day holiday yesterday. Verizon Communications Inc. agreed to pay $130 billion for Vodafone Group Plc’s stake in their U.S. wireless venture in the biggest transaction in more than a decade.
The Microsoft-Nokia deal is the largest for a wireless device maker after Google’s purchase of Motorola’s handset unit in 2012, according to data compiled by Bloomberg. For Microsoft, the deal including the payment to license Nokia’s patents is its second-biggest behind the $8.5 billion purchase of Internet telephone company Skype in 2011.
Google paid about 1.3 times annual operating income for the handset maker, while Nokia’s device and services business reported an operating loss last year, according to the data.
With the latest sale, the original pioneers in the mobile-phone industry -- Motorola, Nokia and Ericsson AB -- have all ceased to be independent handset manufacturers or given up on the business. BlackBerry Ltd. said last month it’s considering putting itself up for sale. Its shares advanced less than 1 percent to $10.21 in today’s trading.
Microsoft, meanwhile, becomes the last major developer of smartphone operating systems to get into manufacturing. Apple makes its own handsets, which use its iOS operating system. Google’s acquisition of Motorola Mobility gave it its own lineup of phones.
To break even on an operating basis, Microsoft will need Nokia to sell about 50 million smartphones a year, it said in a presentation. Nokia has a run-rate of about 30 million units. In the second quarter, Nokia sold 7.4 million smartphones under the Lumia line.
Microsoft acquired the Lumia brand to use with smartphones, while it will license the Nokia brand to use with low-end phones for 10 years, Elop said at a press briefing today. Microsoft will later decide what to call its future smartphones.
Microsoft will face a balancing act owning Nokia and keeping its other hardware partners, including HTC Corp. (2498) and Samsung Electronics Co., committed to its Windows Phone. Aiming to reassure other phone makers that Microsoft will still support them, Ballmer said that the company was “100 percent” committed to helping its manufacturing partners.
Ballmer declined to say whether Elop would become CEO, or had been a candidate to succeed him.
Microsoft and Nokia have had a close relationship through Elop, who had run Microsoft’s Office unit. He left the software maker in September 2010 to take the top job at Nokia.
At the time, Elop likened Nokia’s position to a man standing on a burning oil platform on the verge of being engulfed in flames, facing the option of staying aboard or jumping to the ocean to have a chance to survive.
In February 2011, Elop struck a deal with Ballmer to switch Nokia’s smartphones from its own Symbian operating system to Windows Phone. In exchange, Microsoft ponied up more than $1 billion to pay for Nokia marketing and developing products on Windows.
Still, Nokia remains a top seller of traditional mobile phones -- models that are more popular in developing markets. In total shipments, the company ranks second to Samsung among device manufacturers. Samsung accounted for 26 percent of shipments last quarter, while Nokia had 14 percent. Apple came in third with 7.2 percent.
After the sale to Microsoft, Nokia’s biggest business will be network equipment, which it recently fully took over from Siemens AG (SIE) and renamed Nokia Solutions and Networks. The unit competes with Ericsson, Alcatel-Lucent as well as China’s Huawei Technologies Co. and ZTE Corp. (763)
Ericsson jumped 5 percent to 82.50 kronor in Stockholm. Alcatel-Lucent, which under new CEO Michel Combes is streamlining its business, added 9.2 percent to 2.20 euros in Paris trading.
“Nokia has a highly evolved device design and manufacturing process which will benefit Microsoft greatly,” said Al Hilwa, an analyst at research firm IDC. “This is simply the fastest path in front of Microsoft to achieve something like Apple’s vision on devices.”
Contributed by Bloomberg
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http://www.bloomberg.com/news/2013-09-03/microsoft-to-buy-nokia-s-devices-business-for-5-44-billion-euros.html
Microsoft Corp. (MSFT) is spending 5.44 billion euros ($7.2 billion) to buy Nokia Oyj (NOK1V)’s handset unit so it can gain ground on Apple Inc. and Google (GOOG) Inc. in a smartphone market it let get away -- gaining a possible new chief executive officer in the process.
Nokia’s devices and services unit, which accounted for half of the company’s 2012 revenue, along with 32,000 employees, will transfer to Microsoft, the companies said. Nokia CEO Stephen Elop, 49, will return to Microsoft after a three-year stint running the Finnish manufacturer. The move stoked speculation he may be a successor to CEO Steve Ballmer, who said last month he’d retire within 12 months.
Microsoft is deepening a push into hardware as dwindling computer sales sap demand for the programs that made it the world’s largest software maker. Nokia shares jumped as much as 48 percent in Helsinki as the sale removes a money-losing handset business and lets it focus on higher-margin networking gear. Even combined, the companies have less than 4 percent of the smartphone market, leaving them far behind Apple and Google.
“The question is whether combining two weak companies will get you a strong new competitor -- it’s doubtful,” said Paul Budde, a telecommunications consultant in Sydney. “Both Nokia and Microsoft really missed the boat in terms of smartphones, and it is extremely difficult to claw your way back from that.”
Market-Share Decline
Nokia, based in Espoo, Finland, racked up losses of more than 5 billion euros over nine quarters as Elop’s comeback efforts failed to eat into the dominance of Apple (AAPL) and Google’s Android platform in the smartphone market. The stock has lost more than 80 percent in the five years through yesterday.The shares rose 34 percent to 3.97 euros in Helsinki, valuing Nokia at 14.9 billion euros. The shares of Redmond, Washington-based Microsoft fell 4.6 percent to $31.88 at the close in New York, wiping out more than $12.6 billion in market value. The company’s market capitalization is now about $265.6 billion.
As part of the agreement, Microsoft will pay 3.79 billion euros for Nokia’s devices division and 1.65 billion euros for patents, according to a statement from the companies. The all-cash transaction, subject to Nokia investors’ approval, is expected to be completed in the first quarter of 2014. JPMorgan Chase & Co. advised Nokia on the transaction, while Goldman Sachs Group Inc. worked with Microsoft.
‘Big Transformation’
Nokia said it will book a gain of 3.2 billion euros, with the sale “significantly” accretive to earnings. It also said it aims to return its debt, which is ranked junk by all three major rating companies, to an investment grade. Chairman Risto Siilasmaa, who will become Nokia’s interim CEO, said the company may return excess capital to shareholders.“It’s a big transformation, but that’s what you’ve got to do in the tech business to move forward,” Ballmer told Tom Keene on Bloomberg Television’s “The Pulse.”
Microsoft said it is confident of getting the deal approved by early next year. The transaction will shave 12 cents a share off earnings in the current fiscal year, or 8 cents excluding some items, the company said. In 2015, the cost will be 6 cents based on generally accepted accounting principles. Excluding some costs, the deal will add to profit that year.
Microsoft also expects to get more profit for every device sold -- more than $40 a unit for smartphones, compared with the less than $10 in gross profit it currently gets for Windows Phone sold by Nokia. That doesn’t include the costs of marketing and development, though.
Cost Savings
Based on generally accepted accounting principles, the transaction will add to earnings in fiscal 2016, Microsoft said. The company expects to have annual cost savings of $600 million 18 months after the deal closes.The Microsoft purchase was the second major deal to be announced during the U.S. Labor Day holiday yesterday. Verizon Communications Inc. agreed to pay $130 billion for Vodafone Group Plc’s stake in their U.S. wireless venture in the biggest transaction in more than a decade.
The Microsoft-Nokia deal is the largest for a wireless device maker after Google’s purchase of Motorola’s handset unit in 2012, according to data compiled by Bloomberg. For Microsoft, the deal including the payment to license Nokia’s patents is its second-biggest behind the $8.5 billion purchase of Internet telephone company Skype in 2011.
Motorola Comparison
Microsoft agreed to pay about 0.35 times annual revenue, compared with the median of about 1.4 times for 60 wireless equipment-maker deals tracked by Bloomberg. That also compares with the 0.77 times revenue Google paid for Motorola Mobility, the data show.Google paid about 1.3 times annual operating income for the handset maker, while Nokia’s device and services business reported an operating loss last year, according to the data.
With the latest sale, the original pioneers in the mobile-phone industry -- Motorola, Nokia and Ericsson AB -- have all ceased to be independent handset manufacturers or given up on the business. BlackBerry Ltd. said last month it’s considering putting itself up for sale. Its shares advanced less than 1 percent to $10.21 in today’s trading.
Microsoft, meanwhile, becomes the last major developer of smartphone operating systems to get into manufacturing. Apple makes its own handsets, which use its iOS operating system. Google’s acquisition of Motorola Mobility gave it its own lineup of phones.
Surface Tablet
Microsoft’s other recent significant move into hardware -- the Surface tablet -- has trailed expectations and the company wrote down inventory last quarter.To break even on an operating basis, Microsoft will need Nokia to sell about 50 million smartphones a year, it said in a presentation. Nokia has a run-rate of about 30 million units. In the second quarter, Nokia sold 7.4 million smartphones under the Lumia line.
Microsoft acquired the Lumia brand to use with smartphones, while it will license the Nokia brand to use with low-end phones for 10 years, Elop said at a press briefing today. Microsoft will later decide what to call its future smartphones.
Microsoft will face a balancing act owning Nokia and keeping its other hardware partners, including HTC Corp. (2498) and Samsung Electronics Co., committed to its Windows Phone. Aiming to reassure other phone makers that Microsoft will still support them, Ballmer said that the company was “100 percent” committed to helping its manufacturing partners.
Ballmer declined to say whether Elop would become CEO, or had been a candidate to succeed him.
Microsoft Tie-Up
Ballmer called Nokia’s Siilasmaa shortly after the new year to initiate discussions on an acquisition and the two met in February at the Mobile World Congress in Barcelona, according to Microsoft. Talks heated up in recent months and a deal was lined up before Ballmer announced his retirement last month, the company said.Microsoft and Nokia have had a close relationship through Elop, who had run Microsoft’s Office unit. He left the software maker in September 2010 to take the top job at Nokia.
At the time, Elop likened Nokia’s position to a man standing on a burning oil platform on the verge of being engulfed in flames, facing the option of staying aboard or jumping to the ocean to have a chance to survive.
In February 2011, Elop struck a deal with Ballmer to switch Nokia’s smartphones from its own Symbian operating system to Windows Phone. In exchange, Microsoft ponied up more than $1 billion to pay for Nokia marketing and developing products on Windows.
Losing Share
Nokia had the largest share of the mobile phone handset market until it was overtaken by Samsung (005930) in 2012, according to data compiled by Bloomberg.Still, Nokia remains a top seller of traditional mobile phones -- models that are more popular in developing markets. In total shipments, the company ranks second to Samsung among device manufacturers. Samsung accounted for 26 percent of shipments last quarter, while Nokia had 14 percent. Apple came in third with 7.2 percent.
After the sale to Microsoft, Nokia’s biggest business will be network equipment, which it recently fully took over from Siemens AG (SIE) and renamed Nokia Solutions and Networks. The unit competes with Ericsson, Alcatel-Lucent as well as China’s Huawei Technologies Co. and ZTE Corp. (763)
Ericsson jumped 5 percent to 82.50 kronor in Stockholm. Alcatel-Lucent, which under new CEO Michel Combes is streamlining its business, added 9.2 percent to 2.20 euros in Paris trading.
Mapping Unit
Nokia said it will also keep its mapping and location services unit, called Here, and its technology development and licensing division.“Nokia has a highly evolved device design and manufacturing process which will benefit Microsoft greatly,” said Al Hilwa, an analyst at research firm IDC. “This is simply the fastest path in front of Microsoft to achieve something like Apple’s vision on devices.”
Contributed by Bloomberg
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Chinese smartphone innovators shrug off Android dominance
Tuesday, September 3, 2013
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