Industry and Competitive Analysis

A. Tony Prasetiantono Week 2

Emerging Asia
Flying Geese Phenomenon The Gang of Four Asian Tigers: South Korea, Taiwan, Singapore, Hong Kong NICs = Newly Industrialized Countries Export oriented industry Strong government support Hard-working people and entrepreneurship

Emerging Asia
Next tigers: Thailand and Malaysia Strong inbound investment Stable political environment Reasonable infrastructure (particularly in Malaysia)

Emerging Asia: China

1979: The government has established economic zones, including Guangdong and Fujian, to attract foreign investment. Transformation from planned economy into market-oriented economy. Many overseas Chinese joined the first wave of investors. Hong Kong and Taiwan: rising costs. 1990: per capita GDP was < US$400.

The Growth Engine for the Worlds Economy

In the late 1980s, Japans bubble economy started to decline. Bad debt and business failures in 1990. Deng Xiaoping: market reform policy, after the Tiananmen Square crackdown. Zhu Rongji: modern fiscal, upgrading the basic infrastructure, negotiating to the WTO. In 2002: leading recipient of FDI. In 2003: US$53 billion of FDI. 1990-2004: US$500 billion, mostly in manufacturing 2003: Export at US$851 billion 2004: Export at > US$1 trillion (top 3 in the world).

India: the Most Robust Economic Growth Periods

Market-oriented policies, deregulations, allowing more foreign investment. Declining interest rate: good for either consumers and producers/investors. Information technology Compare to China: inferior infrastructure

Asian Financial Crisis 1997

Bad debt (NPLs), overinvestment. Overvaluation of currency (baht, rupiah, won). International banks announced default on 26 Thai financial institutions. Lack of foreign exchange reserves to fulfill foreign debt obligations. Indonesia and the Philippines: too quiet to gradually restoring the confidence.

Current Development
China recently climbed to 6th place in global GDP rankings. India is also approaching the top 10. Goldman Sachs: the total GDP of BRIC (Brazil, Russia, India, China) would surpass the US and the UK combined as the dominant economic centers within 30-50 years.

Basic Indicators: Population

China India Indonesia Bangladesh Japan Vietnam 1.24 billion 1.05 billion 212 million 135 million 127 million 80 million

Poverty in Asia
The majority of the population in the Asia Pacific region still live in poverty and have no substantial purchasing power. There are at least 700 million people living in underdeveloped rural areas or on completely undeveloped farm land in China. About 30% of these people have < US$200 per capita. India also has a large portion of its population constantly struggling to feed themselves.

GDP and (GDP Per Capita)

Japan $3,978 billion ($31,293) China $1,237 billion ($966) India $515 billion ($491) South Korea $476 billion ($10,006) Australia $410 billion ($20,969) Taiwan $281 billion ($12,500) Indonesia $173 billion ($817) Thailand $126 billion ($2,052) Malaysia $95 billion ($3,915) Singapore $87 billion ($20,886) The Philippines $77 billion ($964) New Zealand $58 billion ($15,035) Bangladesh $47 billion ($349) Vietnam $35 billion

Purchasing Power Parity

PPP is the true measure of how much people can afford to spend in day-to-day purchasing activities under a local market environment.

Purchasing Power Parity

Japan $3,559 billion ($28,000) China $6,008 billion ($4,690) India $2,967 billion ($2,830) South Korea $837 billion ($17,580) Australia $559 billion ($24,500) Taiwan $551 billion ($24,500) Indonesia $739 billion Thailand $426 billion ($6,920) Malaysia $161 billion ($6,640) Singapore $113 billion ($27,030) The Philippines $317 billion ($3,970) New Zealand $86 billion ($22,170) Bangladesh [not available data] Vietnam $191 billion

Comparison (1)
Japan $3,978 billion ($31,293) China $1,237 billion ($966) India $515 billion ($491) South Korea $476 billion ($10,006) Australia $410 billion ($20,969) Taiwan $281 billion ($12,500) Indonesia $173 billion ($817) Japan $3,559 billion ($28,000) China $6,008 billion ($4,690) India $2,967 billion ($2,830) South Korea $837 billion ($17,580) Australia $559 billion ($24,500) Taiwan $551 billion ($24,500) Indonesia $739 billion ($3,490)

Comparison (2)
Thailand $126 billion ($2,052) Malaysia $95 billion ($3,915) Singapore $87 billion ($20,886) The Philippines $77 billion ($964) New Zealand $58 billion ($15,035) Bangladesh $47 billion ($349) Vietnam $35 billion ($436) Thailand $426 billion ($6,920) Malaysia $161 billion ($6,640) Singapore $113 billion ($27,030) The Philippines $317 billion ($3,970) New Zealand $86 billion ($22,170) Bangladesh [not available data] Vietnam $191 billion ($2,380)

Big Mac Index

McDonalds is the symbol of globalization McDonalds exists in all over the world Purchasing power parity could be represented by comparing the Big Mac product all over the world

Current Account Balance

Singapore $20.3 Malaysia $11.9 Taiwan $24.8 Thailand $7.6 Philippines $4.2 Indonesia $6.6 Japan 125.7 China $35.4 South Korea $11.4 India $2.6 Vietnam $0.2 New Zealand $2.0 Australia $25.9

Human Development Index

Australia Japan New Zealand Singapore South Korea Brunei Malaysia Thailand The Philippines China Indonesia Vietnam India Cambodia Myanmar Lao Bangladesh

Competitiveness Index
Economic performance (domestic economy, international trade, foreign investment, employment, prices) Government efficiency (public finance, fiscal policy, institutional framework) Business efficiency (productivity, labor market, finance, management practices) Infrastructure (basic, technological, health, environment, education)

Competitiveness, by Country
Singapore (2) Australia (4) Taiwan (12) Malaysia (16) New Zealand (18) Japan (23) China (24) Thailand (29) India (34) South Korea (35) The Philippines (52) Indonesia (58)

Political Risk
The only obvious political risk is related to the existence of terrorism and terrorist group in Indonesia, the southern Philippines and small parts of Malaysia. The negative image associated with terrorism not only hurts the country in receiving foreign investment but also directly affects the overall economic activities.

Financial Sector Problems

China has a massive non-performing loan problem in the order of US$500 billion or 20-25% of total outstanding loans. Negative equity, bank recapitalizations.