FT : India 3G Bonanza

Tuesday, May 11, 2010

India’s very easy guide to reducing a budget deficit, chapter one: allow a dozen or so mobile phone operators to compete in your country, block market consolidation and repeatedly postpone the release of third-generation spectrum.  Then as competition descends into a price war, auction off far fewer spectrum chunks than there are potential bidders.  No wonder prices in India’s 3G spectrum auctions have gone stratospheric.  After a month-long process, the price of a nationwide allocation of spectrum has reached $3bn, almost four times the reserve price and a good $1bn more than even the boldest analysts’ predictions.  Whether by accident or design, the Indian government stands to reap at least $10bn from the 3G auctions, with a broadband auction to follow.  Inevitably, the spectacle stirs memories of the irrational exuberance displayed in European 3G auctions a decade ago; the UK government netted more than $35bn from bidders that nearly crippled themselves with debt.

India’s bidders are not in such a precarious position.  The technology that makes 3G spectrum useful is already available (unlike a decade ago) and those expected to be big bidders can absorb some extra borrowing.  It will be an unwelcome expense, though, given that the ongoing price war in India’s mobile market is set to keep a lid on revenue growth and margins for the foreseeable future.  Indeed, Bharti’s profits fell in the first quarter for the first time in three years.  That situation will only change when regulators allow the market to consolidate.  Here the 3G spectrum auctions may have thrown up an unexpected consequence: as BarCap notes, they have placed – or revealed – an extremely high valuation on spectrum.  Small players such as Norwegian company Telenor’s lossmaking venture, which were allocated 2G chunks a few years ago, are sitting on more valuable assets than anyone assumed.  Do not expect them to roll over on the cheap when the M&A party begins.

Reference : http://www.ft.com/cms/s/3/a78edf3e-5c0f-11df-95f9-00144feab49a.html

SMILING and dapper, Fazle Hasan Abed hardly seems like a revolutionary.  A Bangladeshi educated in Britain, an admirer of Shakespeare and Joyce, and a former accountant at Shell, he is the son of a distinguished family: his maternal grandfather was a minister in the colonial government of Bengal; a great-uncle was the first Bengali to serve in the governor of Bengal’s executive council.  This week he received a very traditional distinction of his own: a knighthood.  Yet the organisation he founded, and for which his knighthood is a gong of respect, has probably done more than any single body to upend the traditions of misery and poverty in Bangladesh.  Called BRAC, it is by most measures the largest, fastest-growing non-governmental organisation (NGO) in the world—and one of the most businesslike.

Although Mohammed Yunus won the Nobel peace prize in 2006 for helping the poor, his Grameen Bank was neither the first nor the largest microfinance lender in his native Bangladesh; BRAC was.  Its microfinance operation disburses about $1 billion a year.  But this is only part of what it does: it is also an internet-service provider; it has a university; its primary schools educate 11% of Bangladesh’s children.  It runs feed mills, chicken farms, tea plantations and packaging factories. BRAC has shown that NGOs do not need to be small and that a little-known institution from a poor country can outgun famous Western charities.  In a book on BRAC entitled “Freedom from Want”, Ian Smillie calls it “undoubtedly the largest and most variegated social experiment in the developing world.  The spread of its work dwarfs any other private, government or non-profit enterprise in its impact on development.”  None of this seemed likely in 1970, when Sir Fazle turned Shell’s offices in Chittagong into a refuge for victims of a deadly cyclone.  BRAC—which started as an acronym, Bangladesh Rehabilitation Assistance Committee, and became a motto, “building resources across communities”—surmounted its early troubles by combining two things that rarely go together: running an NGO as a business and taking seriously the social context of poverty.  BRAC earns from its operations about 80% of the money it disburses to the poor (the remainder is aid, mostly from Western donors).  It calls a halt to activities that require endless subsidies.  At one point, it even tried financing itself from the tiny savings of the poor (ie, no aid at all), though this drastic form of self-help proved a step too far: hardly any lenders or borrowers put themselves forward.  From the start, Sir Fazle insisted on brutal honesty about results.  BRAC pays far more attention to research and “continuous learning” than do most NGOs.  David Korten, author of “When Corporations Rule the World”, called it “as near to a pure example of a learning organisation as one is likely to find.”

What makes BRAC unique is its combination of business methods with a particular view of poverty.  Poverty is often regarded primarily as an economic problem which can be alleviated by sending money.  Influenced by three “liberation thinkers” fashionable in the 1960s—Frantz Fanon, Paulo Freire and Ivan Illich—Sir Fazle recognised that poverty in Bangladeshi villages is also a result of rigid social stratification.  In these circumstances, “community development” will help the rich more than the poor; to change the poverty, you have to change the society.  That view might have pointed Sir Fazle towards left-wing politics.  Instead, the revolutionary impetus was channelled through BRAC into development.  Women became the institution’s focus because they are bottom of the heap and most in need of help: 70% of the children in BRAC schools are girls.  Microfinance encourages the poor to save but, unlike the Grameen Bank, BRAC also lends a lot to small companies.  Tiny loans may improve the lot of an individual or family but are usually invested in traditional village enterprises, like owning a cow.  Sir Fazle’s aim of social change requires not growth (in the sense of more of the same) but development (meaning new and different activities).  Only businesses create jobs and new forms of productive enterprise. 

After 30 years in Bangladesh, BRAC has more or less perfected its way of doing things and is spreading its wings round the developing world.  It is already the biggest NGO in Afghanistan, Tanzania and Uganda, overtaking British charities which have been in the latter countries for decades.  Coming from a poor country—and a Muslim one, to boot—means it is less likely to be resented or called condescending. Its costs are lower, too: it does not buy large white SUVs or employ large white men.  Its expansion overseas may, however, present BRAC with a new problem.  Robert Kaplan, an American writer, says that NGOs fill the void between thousands of villages and a remote, often broken, government.  BRAC does this triumphantly in Bangladesh—but it is a Bangladeshi organisation.  Whether it can do the same elsewhere remains to be seen.

Reference : http://www.economist.com/businessfinance/displaystory.cfm?story_id=15546464

FROM being a rounding error a decade ago, the financial clout of China now trails only that of America.  By market capitalisation, it has three of the four largest banks, the two largest insurance companies, the second-largest stockmarket and a lengthening list of investment funds.  Yet who makes the decisions in China is barely understood.  The government and the Communist Party are intimately entwined with the managers of China’s financial institutions.  Working out who is really in charge is almost impossible.  Even attempting to do so takes you into sensitive territory.  Disclosing information about how the Chinese government works risks violating nebulous secrecy laws or sacrificing business opportunities.  Many China-watchers will only speak face to face, concerned about using e-mails or phone calls to discuss what, in the West, would be standard chatter about the status of bankers and their supervisors.

Almost all of the credit for Chinese companies is raised through its commercial banks.  The country’s bank chiefs are powerful men whose careers have been meticulously managed.  But none has the freedom of their peers in the West, not even those managing state-infested firms like Citigroup and RBS.  Perhaps the only Western equivalents of a Chinese bank are the two American housing agencies, Fannie Mae and Freddie Mac—vast institutions with political mandates to expand credit, and protection from the consequences of their role in fostering bad debt.  Big credit decisions in China are not advanced by any one bank, nor any one banker.  Credit is infused and withdrawn by central diktat.  That process has extraordinary appeal to state planners but is horribly inefficient for individual institutions.  In recent weeks, for example, as the screws on lending have tightened, favoured industrial companies have been getting urgent calls from their bankers demanding that they immediately scoop up their credit needs for months to come, or be subject to a freeze of uncertain duration.  Firms that manage to load up on credit still suffer because they bear interest costs long before the money is actually needed.  “The Chinese banks are pure utilities,” says one banker.  “The State Council [the government’s chief administrative arm] tells them to lend, and they lend.”  Overt controls increase in line with the amount of credit.  Loans above $500m are said to be directly vetted by the State Council.  Something like four-fifths of the assets in the banking system are controlled by 17 institutions.  In many ways, China Development Bank is easiest for an outsider to understand.  It is vast, run by a powerful government official, Chen Yuan (son of Chen Yun, one of the “eight immortals” who created modern China), and supports projects that the government favours.  Most of the other big banks are not explicitly run by the government, but regulators attend board meetings and senior management often includes a person with the title “head of discipline”, who represents the Communist Party.  Executives are rotated between institutions by government decree.  HSBC was stunned in 2006 when Zhang Jianguo, the president of Bank of Communications, in which it had taken a 20% stake, turned up as president of a key competitor, China Construction Bank, the country’s second-largest financial institution.  There was no consultation, nor even notification of the move.  China Construction Bank’s chairman, Guo Shuqing, is rumoured to be in the running for a top political position: the move could have been succession planning.  Shifts of this kind have gone into high gear since the start of the year…..

Other parts of the financial system are no more transparent.  Take the China Investment Corporation (CIC), China’s sovereign-wealth fund, which was founded in 2007.  For fund managers and companies in search of money, CIC’s chief investment officer, Gao Xiqing, has become highly sought-after.  But just how much autonomy Mr Gao has is uncertain.  CIC’s chief executive, Lou Jiwei, told a conference in Hong Kong on January 20th that two things would improve his organisation: more freedom from foreign authorities to make investments, which would doubtless be fostered by his second wish, more freedom to manage itself.  For many firms, ties to government are considered their greatest asset.  The seed capital for China International Capital Corporation (CICC), which dominates domestic underwriting activity, was provided by Morgan Stanley back in 1995.  But Morgan has since been squeezed out of a hands-on role.  CICC is now run by Levin Zhu, son of Zhu Rongji, a former prime minister.  Two CICC alumni, Wu Shangzhi and Fang Fenglei, run what are described as the most important private-equity firms in China—CDH Investments and Hopu Investment Management, respectively.  In this kind of system, big decisions are funnelled upwards to a very small group of people.  Technically, the banks fall under the auspices of Liu Mingkang, chairman of the China Banking Regulatory Commission.  Interest-rate and exchange-rate decisions come under Zhou Xiaochuan, head of the People’s Bank of China, and a former director of the State Administration of Foreign Exchange, now run by Yi Gang.  But their official titles both overrate and underrate their authority.  Mr Liu and Mr Zhou are likely to be involved in innumerable decisions that would be considered private matters outside China.  It is unlikely that lending rates or credit policies could be shifted without their input.  Both provide an intellectual foundation, through papers and speeches, for China’s actions. 

Even so, in the shifting currents of power, many believe the critical hand is played by Wang Qishan, the vice-premier responsible for the financial sector, a former mayor of Beijing and former head of China Construction Bank.  Unlike Mr Zhou and Mr Liu, Mr Wang rarely comments publicly.  But he is a critical conduit for bankers inside and outside China, directly oversees the People’s Bank and is a member of the Politburo, the government’s chief political arm.  He also serves on three big regulatory commissions covering insurance, banking and securities.  When the government is pondering a new policy—expanding China’s financial ties to Africa, say, or the creation of a futures market—Mr Wang is the one who calls in foreign bankers for consultations.  They do not say no. During the depths of the financial crisis, when money was being sought for Morgan Stanley from CIC, Hank Paulson, then America’s treasury secretary, called Mr Wang for his blessing (and got a lukewarm reception).  Technically, only Wen Jiabao, the prime minister, sits above Mr Wang in economic matters.  But when it comes to financial decisions that China perceives to be particularly sensitive, such as exchange-rate movements, stimulus spending or even large financial transactions, the standing committee of the Politburo—the nine most senior leaders of China, including President Hu Jintao—can take up the matter.  At some point the sheer complexity of China’s economy will preclude China’s top leaders from serving, in effect, as an elevated credit committee. But that time has yet to come.

Reference : http://www.economist.com/businessfinance/displaystory.cfm?story_id=15453014

BBC Business Daily : India & Privatization

Thursday, January 14, 2010

(click for audio which runs 4m)

FT : Japan’s Unique Mobile Apps

Tuesday, December 22, 2009

There must be few places in the world where mobile phone usage has become so integral a part of everyday life as in Japan.  Japanese use mobile phones for so much more than speaking and emailing – which replaces SMS in Japan – and it sets them apart from other markets across the globe.  For example, about 45% of mobile phone usage in Japan is for data, which compares with about 20% in the US, according to Nathan Ramler, an analyst at Macquarie Securities.  On top of this, Mr Ramler points out that only 2% of that data usage is for e-mail, while the time used for speaking on the phone is just 140 minutes per month for DoCoMo, Japan’s largest telecommunications company with about 50% market share.  That is about four and a half minutes of talking time a day.  Internet access makes up a big part of the usage.  More people use their mobile phones to access the internet than their personal computers.  The younger generation in particular use mobile phones as their primary access, Mr Ramler says.  The importance Japanese people place on data usage is all too evident on the Tokyo trains, where it seems that most commuters in their 40s and younger sit or stand engrossed in their mobile phone, whether playing games, watching television, listening to music, reading keitai (mobile) novels and comics, or e-mailing.  But what is perhaps more interesting than the common mobile technology such as cameras, videos, TV, radio, music and GPS, are the numerous obscure functions that the Japanese have developed for their handheld devices.

  1. Fe-ku chakushin: the fake incoming call.  This is the perfect bad-date escape.  By surreptitiously pressing a couple of buttons on your phone under the table at dinner, the function causes the phone to ring a few seconds later, enabling the owner to pick up, pretend to speak with someone, exclaim horror at the “situation”, excuse him or herself from the date and head for the exit.
  2. Secret History: A recent survey by Macromill, an online researcher, showed that 61% of respondents – in this case Japanese mothers with young children – secretly check the contents of their husband’s mobile phone.  Of that figure, 35% are checking to see if their husbands are having an affair, while 28% are checking to see if their other half is hiding something from them.  For those husbands (or wives) who do have something, or someone, to hide, some handsets offer a function that can prevent certain phone numbers or emails being recorded in the incoming and outgoing call/mail history.
  3. Eco-oto: Eco sound.  Many women in Japan are self-conscious about using public toilets or lavatories in restaurants and bars, with fear of being heard by next door’s occupant.  It has led to many flushing the toilet throughout their time in the lavatory.  But digital contents developer Polygon Magic has come up with an application to stop the water waste and end the embarrassment.  It recreates the flushing noise, which can be set at either 30, 60, 90 or 120 seconds and with adjustable sound levels. 
  4. Golf Lessons: Japanese “salarymen” are infamous for their love of golf and it is common to see them practising their swings as they wait for the train.  Fujitsu’s new handset for NTT DoCoMo has a function that uses 3D motion-sensor technology to monitor golf-swing movements.  It uses the data collected to provide a diagnosis of the owner’s swing and offers advice for improvement.

The list of such functions grows daily.  Companies such as NTT DoCoMo for example, are currently working on services that target the older population – an area of business that is set to grow with the country’s greying population.  Even Japanese who do not think they use their mobile phones much still seem to use them for a wide range of purposes.  As well as email and conversation, Shiyo Takahashi, the manager of a high-end store in Tokyo, uses his phone for betting on currency markets, checking rates, the weather, banking, train and concert ticket purchases and sometimes GPS.  Among the younger generation, mobile novels and manga (comics) have become extremely popular.  Some novels have even been written on a mobile phone.  A brief read of a keitai comic on a mobile phone highlights an added dimension: at a dramatic point in the story as you electronically turn the page, the phone vibrates.  Shopping is also a popular activity.  For example, Macromill’s survey of mothers showed that of the respondents who used their mobile phone for shopping, 65% did so at least once a month, with nearly 30% doing so at least once a week.  “The way Japanese consumers use their phones is unique,” says Macquarie’s Mr Ramler.  “Other markets may catch up with certain aspects of web browsing and mobile content consumption, but some mobile phone use will always reflect local cultures.  “While security features and convenient services have universal appeal, how each market or country specifically addresses them is likely to reflect the local culture and local patterns of consumption.”

Reference : Financial Times, Dec 10 2009

PSA Container Handling Way Down

Monday, November 30, 2009

PSA Singapore handles about one-fifth of the world’s total container transhipment throughput.  In 2008, PSA Singapore Terminals handled 29.0 million twenty-foot equivalent units of containers…..

(click for full image)

References :

In recent years, the rise of China and India has become a salient feature of the global economic landscape. Conferences and books have proliferated with titles such as “China and India Rising” and “Dancing with Giants”.  Although individual contributions have often delineated carefully the differing paths taken by these two populous Asian nations, there has been a general tendency to lump the two countries together in discussions of global economic issues ranging from international trade to climate change.  At one level, this is quite natural.  China and India are the only two countries with more than a billion people. Both are in Asia.  Both have opened up to international trade and capital flows in the past three decades.  Both have demonstrated sustained and enviable economic growth since 1980.  It is true that if current growth rates are maintained, both countries could join the US in the trio of the world’s largest economies by around 2025, measured in purchasing power parity (PPP) prices.  Yet for all its apparent sense, the pervasive bracketing of China and India too often masks critical differences between them and impedes a better understanding of the challenges posed to the world economic order by their economic expansion.

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First, China and India today are at different stages of development. The two countries may have had similar average incomes in the late 1970s.  But their subsequent growth trajectories have changed the situation materially.  India’s 4% average annual growth in per capita gross domestic product since 1980 is commendable and has brought enormous benefits to her population.  However, it pales in comparison with China’s spectacular growth in per capita income of over 8% a year, which has transformed the living standards of her people and made the country a major economic power.  By 2007 average incomes in China were about two and a half times higher than in India, at official exchange rates, and about twice as high in internationally comparable PPP prices.  More importantly, the World Bank estimates that the proportion of people in extreme poverty – defined as those living on $1.25 a day – had fallen to 16% in China by 2005, while it still remained above 40% in India.  With a higher poverty line of $2 a day, the Bank reports three-quarters of India’s population to be poor as compared with 36% in China…..The second major difference between the two nations is the far greater impact of China on the global economy, especially in the present decade.  This is due mainly to two reasons: first, China’s much more aggressive strategy of export-and-foreign-investment-led industrialisation; and second, the extraordinary pace of China’s growth.  Thus, between 2000 and 2007, China’s merchandise exports almost quintupled in value to account for nearly 9% of world exports, while India’s export share increased sedately from 0.7 to 1%.  The increase in the value of China’s exports over the seven years was nearly seven times India’s total exports in 2007.  Despite the rapid growth of India’s information technology-based service exports since 1995, in 2007 China’s total service exports exceeded India’s by 40%.  By 2007 China’s $1,500bn of foreign exchange reserves were about six times India’s and her current account surplus of $370bn was of a different order from India’s modest deficits.  In most years of this decade foreign direct investment inflows into China have been eight to 12 times higher than to India, though the multiple dropped after 2005.  Similarly, China’s primary energy consumption of commercial fuels has doubled since 2000 to about 1.9bn tonnes of oil equivalent.  The increase over the seven years is more than double India’s total primary energy consumption of 410m tonnes of oil equivalent in 2007.  Unsurprisingly, China’s carbon dioxide emissions had soared to 5.6bn tonnes by 2006, compared with 1.3bn tonnes from India.  In per capita terms China’s emissions were almost four times higher than India’s.  With China’s economy three times as large as India’s today and given her disproportionately larger footprint in international trade, capital flows, energy consumption and carbon emissions, China’s potential role in helping solve the major global economic issues of the day is correspondingly greater…..Similarly, on the enduring issue of global imbalances, India, with her modest current account deficits and high share of private consumption, can do little to ameliorate this problem.  China, in contrast, can play a much bigger part by stimulating greater consumption and undertaking significant currency appreciation to contain and reduce her massive current account surpluses…..

What of the future?  Many believe that on current trends India will achieve China’s present economic scale in about 15 years.  Perhaps.  But by then, it is not unreasonable to expect that the Chinese economy may also have expanded threefold.  The main point is that China’s explosive growth has not only dominated the global economic scene over the past decade; there is a strong likelihood that it will do so for the decade ahead as well.  Put differently, there is really only one new economic giant in town.  The other potential giant, India, is still a relative stripling.  Thus far her growth in trade, capital flows, energy consumption and emissions has been at a steady, moderate pace.  Ten or 15 years on, the story may be different.  In an important sense, the sequential rise of China and India has made things easier for the global economic community.  The strains of accommodating one giant at a time have have been substantial but broadly manageable.  Had both these populous Asian countries embarked on growth of 8-10 per cent a year at roughly the same time, it could have been far more challenging for the international economic order – and perhaps more dangerous.

Reference : http://www.ft.com/cms/s/0/381e3a1e-7bd7-11de-9772-00144feabdc0.html