Economics, Politics and Public Policy in East Asia and the Pacific
Author: Byung Min, Griffith University
Following the 1997 financial crisis, corporate governance reforms and government-initiated corporate restructuring were implemented in Korea.
In the past, the internally appointed board members tended to act as rubber stamps and failed to monitor the actions of the controlling shareholders. Read more…
Author: Peter Drysdale, EAF, ANU
China’s economic growth brings with it fundamental change to the global economic and political system.
The surge in Chinese direct investment abroad is the latest element, beyond trade, in China’s integration into the global economic and political system. Read more…
Author: Yoichi Funabashi
I was in Washington, DC recently while congressional hearings were held into the massive recalls announced by Toyota Motor Corp. I sensed that public sentiment in the United States was rapidly becoming critical of the auto giant, which is now a synonym with lemons.
An article published in the New York Times on February 21 under the headline, ‘Doubts raised on book’s tale of atom bomb’, drove home the point to me. The newspaper noted that the author of ‘The Last Train From Hiroshima,’ Charles Pelegrino, used quotes from an individual who falsely claimed he was a last-minute substitute on an observation plane that accompanied the Enola Gay on its mission to destroy Hiroshima by atomic bombing. An expert is quoted in the article as saying, ‘This book is a Toyota. The publisher should recall it, issue an apology and fix the parts that endanger the historical record.’ Read more…
Last week Japan Airlines went into receivership. JAL is the stately matron of Asian flag carriers so while its struggles with high costs and overheads were familiar news to the heavily business-class patrons of the old dear, it came as a shock to most of us who had loyally racked up JAL Mileage Bank points over the years – even if they did evaporate if you did not use them rather quickly!
JAL may be a leader of sorts – a prototypical example of what’s wrong with the major established international airlines today – but what’s wrong with JAL is not untypical with the challenges facing a bunch of the majors all over the world. British Airways is in trouble and other European majors have already succumbed. As Christopher Findlay explains in this week’s lead, the international system of air transport regulation might have tried to suppress the highly competitive forces that have been shaping huge adjustments in the business, but that was a loser’s game. Read more…
Author: Christopher Findlay, Adelaide University
Readers who are members of the JAL Mileage Bank (JMB) are probably wondering now what will happen with their bank of points. The reconstruction of JAL certainly raises this question but also highlights some even bigger challenges in air transport today.
The international system of the regulation of air transport has tried to suppress a set of highly competitive processes. Market access rights are negotiated bilaterally, and routes limited mostly to carriers identified with the countries involved. Read more…
Author: Raghbendra Jha
Satyam Computer Services, India’s fourth largest IT firm and a leading outsourcing company that counts General Electric, General Motors, Nestle, the US Government, Qantas and National Australia Bank amongst its clients, suddenly collapsed on 7th January 2009. The script for this debacle appeared to come straight from Enron. Like Enron, Satyam cooked the books and showed highly inflated assets. In his letter to the Satyam Board, CEO Ramalinga Raju admitted that of the 53.6 billion rupees in cash and bank deposits which Satyam listed as assets at the end of the second quarter of 2008-09, 50.4 billion rupees or US1.03 billion did not exist.
However, the similarity with Enron ends there. Whereas Enron was a loss-making enterprise that kept hiding its losses until they could be hidden no longer, Satyam is still a profitable company. In the past year, Satyam’s profit was not Rs. 6.49 billion as it claimed but Rs. 0.61 billion. Once Satyam’s true balance sheet is taken into account its margin last year was only 3 %, much lower than that of other IT majors.
Guest Author: Dr. Fang-Fang Tang, China Centre for Economic Research (CCER), Peking University
The attraction of China is far more important for its consumption potential to multinational companies than for its low labor costs which are anyway now on an increasing trend. Particularly for the protection of international brand image for consumption goods, it is totally unwise to be legally safe but economically stupid.
There is still no clear law about recalling problematic products in China. In December 2004 the Chinese National Bureau of Quality Monitoring approved and issued a series of ‘requirements’ in respect of food safety and food production management, but the standards are still ‘recommended industry standards’ without any legal obligation. Enterprises can follow them voluntarily, or ignore them completely.
Author: Luke Nottage
With Non-Performing Loans finally under control and economic recovery underway since 2002, Japan has also experienced a revival in FDI outflows. Many commentators focus on the large stocks built up in China, but there has also been steady interest in investing in Australia. Rather than tourism and property developments, Japanese firms have been quietly investing in infrastructure projects, and Nomura is reported recently as a possible buyer of the Australian investment banking arm of ABN AMRO.
A more remarkable development is the expansion of inbound FDI, particularly under the former Koizumi government. Fueled by a broader boom in M&A world-wide, Japan’s inflow rebounded to US$22 billion in 2007, and foreign investment stocks doubled over the last five years. But flows and stocks are still low by OECD standards relative to GDP, especially compared to the US, the UK and now Australia.
The Fukuda government has also sent more mixed messages recently. The Transport Ministry tried to include a blanket one-third cap on foreign shareholdings in Japanese airports. But others including the Financial Services Agency objected that this would choke off other inbound FDI, so this provision was dropped in March. The government is now considering the introduction of measures that more directly regulate the understandable security concerns arising from operating airports. Macquarie Airports Management Ltd, which already owns 19.9 percent of Haneda Airport, will be following this ongoing debate especially carefully.