1. Subject: BOK Freezes Key Interest Rate at 2.25%
Date: August 12 , 2010
Source: Mail Business Newspaper
The Monetary Policy Committee of the Bank of Korea (BOK) kept its benchmark interest rate unchanged at 2.25% on Thursday, a month after unexpectedly raising it.
Analysts say the BOK’s decision to freeze the key interest rate is attributable to the growing worries over the globally slow recovery and few signs of overheating in the South Korean economy, hinting that two consecutive rate hike isn’t needed.
The only time when the BOK monetary committee raised the interest rate for two months in a row was when the surge in mortgage loans sent housing prices skyrocketing in July and August 2007.
“Stabilizing consumer prices will be a more critical task than driving a steady growth,” BOK Governor Kim Choong-soo said in a press conference shortly after the monetary policy committee, implying further rate hikes in the near future.
With regard to the possibility of another global downturn, Kim noted, “Uncertainties in the global economy do remain, but a double-dip has a low probability. There is no need to make adjustments to the forecasts for the Korean economy since the country’s exports are showing great performances and domestic demand is revitalizing.”
Back in July, the BOK monetary policy committee raised the key interest rate by 0.25%p for the first time in 17 months since last February.
2. Subject: South, East, and South-East Asia recovering most quickly from global investment downturn
Date: August 9, 2010
Source: Mail Business Newspaper
Foreign direct investment (FDI) to South, East, and South-East Asia has been less affected by the global financial and economic crisis and is the first to break out of the downturn, says UNCTAD?s World Investment Report 2010(1). Recovery in FDI in the region has been stronger than that in other parts of the world: it started as early as mid-2009, and gained momentum early this year. Inflows to the region as a whole are likely to rebound in 2010 and continue to grow in 2011, the report says. FDI outflows from the region are also expected to rebound, it notes.
Quarterly data show that FDI inflows have already started rebounding and are expected to pick up speed (table 1). South, East, and South-East Asia remains a priority investment destination: the recovery in inflows has been led by investment into China and India - the two largest emerging economies.
FDI recovery in the region?s four newly industrializing economies (NIEs - Hong Kong (China), Republic of Korea, Singapore, and Taiwan Province of China) is slower and more muted, the report notes.
Compared to FDI inflows to other parts of the world, those to South, East, and South-East Asia were less affected by the crisis: they dropped by a modest 17% to $233 billion in 2009. The region?s relatively strong performance has helped reshape the global FDI landscape: this part of Asia now accounts for one fifth of FDI inflows worldwide. Its top three FDI recipients - China, Hong Kong (China), and India (figure 1) - rank numbers two, four, and nine, respectively, in the world for incoming FDI.
A drop in cross-border mergers and acquisitions (M&As) was largely responsible for the overall decline in FDI inflows to the region in 2009. The value of M&A sales totalled $35 billion in 2009, down 34% from 2008. In the four NIEs, the value of cross-border M&As plummeted by 44%. Although the decline was less pronounced, "greenfield" investment - that is, new, from-the-ground-up ventures begun by transnational corporations (TNCs) in foreign countries - also slowed, as some projects were cancelled or postponed. And some divestments took place, accelerating the decline.
In 2009, outflows from the region dropped by only 8%, to $153 billion. Although total FDI outflows declined, non-financial FDI flows from China continued to expand, driven by a persistent pursuit of natural resources and M&A opportunities generated by global industrial restructuring. Leading sovereign wealth funds, especially the China Investment Corporation (CIC), remain on a buying spree, although they appear to have changed their investment focus from financial services to manufacturing and mineral assets.
Due to weakened investment from developed countries, intraregional FDI gained ground (it now accounts for as much as half of the region?s inward FDI stock). Growing intraregional investment has served as a vehicle for "recycling" comparative advantages, transferring technology, and enhancing competitiveness in South, East, and South-East Asia. It has been instrumental in the sequential upgrading of industries across countries at various stages of development. In recent years, regional integration has accelerated this process, encompassing more production activities and creating development opportunities for a wider range of countries, including such least developed countries as Cambodia, the Lao People's Democratic Republic, and Myanmar.
In 2009, the great majority of investment policy measures in the region aimed at promoting foreign investment, although new restrictions, such as bans from engaging in certain activities or tightened screening processes, were introduced. In countries such as China and India, efforts to attract foreign investment have sometimes focused on new or high value-added industries. A number of countries (for example, Sri Lanka and Thailand) eased conditions for outward FDI through the simplification of foreign-exchange regulations.
3. Subject: Government to tighten new rules on FEZ closures
Date: August 15, 2010
Source: JoongAng Daily
The government announced that it will enforce rules on development plans in six free economic zones (FEZ) as part of an on-going dispute with local governments on shutting down some FEZ areas.
The Ministry of Knowledge Economy announced early this month that it might shut as many as 35 districts within the six FEZs due to a lack of foreign investment after conducting an investigation of their feasibility over the next two months. They will begin this week.
The move, however, drew the ire of local governments and the ministry later said it would not force the districts to close without the agreement of local governments.
However, the ministry made it clear that if it decides that a FEZ district is unprofitable or has little potential for development, the local government will need to hand in detailed plans for improvement.
Under yesterday’s announcement, the ministry said it would enforce a stricter approval standard on any development plan changes that would be submitted by the local governments to save the districts from closure.
The new standards are expected to include stiffer environment standards, such as those for carbon reduction, and the feasibility of proposals to attract foreign investment.
The new standards could displease local governments since the ministry will also require that a certain portion of the profits from FEZs should be reinvested.
“This is to lead the FEZs in a proper direction and make it serve its proper purpose, preventing it from becoming just a usual regional development project,” said a ministry official.
- Export boom also leads to record trade deficit with Japan in first half
Date: August 15, 2010
Source: JoongAng Daily
Korea’s terms of trade deteriorated in the second quarter, while the country’s bilateral trade deficit with Japan hit a record high in the first half of the year, the government said yesterday.
According to the Bank of Korea, the country’s net terms of trade index was 85.9 in the period between April and June, down from 89.4 a year earlier.
The index measures how much a country can import with its total export earnings by dividing the export price index with the import price index. With the year 2005 serving as a benchmark at 100, the index showed that while Korea was able to import 100 items in 2005 it can only import 86 items now using the same per-unit price as existed in 2005.
The index posted a decline for the first time since the fourth quarter of 2008 when the index dropped 13 percent, according to the central bank. A BOK official said the decline was due to higher import prices for crude oil and non-ferrous metals.
Korea’s trade deficit with Japan reached an all-time high of $18.07 billion in the first half of this year. Korean exports to Japan amounted to $12.83 billion, while imports were $30.90 billion. Local companies rely heavily on Japan for parts, components and manufacturing equipment. It has been a long-time economic trend that when Korea experiences an export boom, its trade deficit with Japan increases.
“Since 1980, whenever South Korea’s exports rose by 1 percent, imports from Japan went up 0.96 percent,” said a researcher at the Samsung Economic Research Institute.
Another reason for the deteriorating trade balance with Japan is the rise in the value of the Japanese yen, which makes imports more expensive for Korean customers. Meanwhile, ING, the Dutch financial group, lowered its forecast for the Korean economy next year from 7.1 percent to 6.1 percent.
ING said the possibility of a slowdown in the U.S. economy as well as one in China would hurt Korea’s export performance next year. ING is believed to be the first international investment bank to cut Korea’s forecast for 2011. At its Monetary Policy Committee this week the BOK said it did not foresee a double-dip recession for the Korean economy.
BOK Governor Kim Choong-soo said, “A recovery in the U.S. economy has been delayed, but it will not slow down,” while “China’s large growth potential will protect it from economic problems.” Other economists believe that Korea’s outlook remains relatively strong.
“The economic outlook is healthy,” said Capital Economics, a London-based economics consultancy, in a report released this week. “Industry and exports should continue to expand in coming quarters, although the rate of growth will inevitably slow relative to what has come through since the second half of 2009. The won remains competitive in trade-weighted terms, which should also help to offset softer global economic conditions.”
Capital Economics believes that the impact of a slowdown in the U.S. and Europe “should not be severe” on Korean exports.
- A survey by KCCI found that females led the “buy green” movement
Date: August 13, 2010
Source: Chosun Ilbo
More than half of Korean consumers are green-oriented, according to a survey released yesterday by the Korea Chamber of Commerce and Industry.
When the chamber asked 500 consumers about their overall perception on green consumption, 54.8 percent said they enjoyed purchasing environmentally friendly products that help conserve energy and reduce carbon emissions.
In particular, the survey showed that 60.6 percent of female consumers were willing to buy green items, a bigger percentage than male shoppers.
Green products were also popular among consumers who are older, married and have higher incomes.
But 90.2 percent of the respondents believe the price of green products - mainly agricultural goods, cosmetics and children’s items - are too expensive. Consumers said they were willing to pay about 10 percent more for green products but not more.
When asked what defines a green product, 48.6 percent of the consumers said they look for certified labels denoting that it is environmentally friendly.
Only a few said they buy a green product based on the brand image of the manufacturer or the design of the packaging.
In fact, 82.4 percent of the respondents said that excessive packaging is wasteful, particularly for cosmetics and food items.
In order to further promote the consumption of green products, 92.4 percent said retail firms should develop and stock a wide range of high quality green items and market them at reasonable prices.
Educating consumers through green campaigns is also important, as well as establishing green partnership between manufacturers and distributors, said a KCCI official.
Office of Commercial Affairs, Royal Thai Embassy in Korea
Source : http://www.depthai.go.th