Wednesday, January 9, 2013

A better way for banks to monitor credit


Early-warning tracking of small changes in customers’ financial situations can make a big impact on the bottom line.

https://www.mckinseyquarterly.com/Risk/Banking_Risk/A_better_way_for_banks_to_monitor_credit_3046

Question: Have our financial, monetary and banking sector people learnt by now any lessons?

Wednesday, December 19, 2012

World Bank raises China growth forecast


- BBC
The World Bank has raised its growth forecast for China, saying stimulus measures and approval of infrastructure projects will help boost growth.
It added that the pick-up in factory output and investment "suggested that China's economy was bottoming out".
The bank said it now expects China's economy to grow by 8.4% in 2013, up from its earlier projection of 8.1%.
A slowdown in China's growth in recent months had prompted policymakers to announce various stimulus measures.
These include two interest rate cuts since June, and the approval of infrastructure projects worth more than $150bn (£94bn).
China's central bank, the People's Bank of China, has also lowered the amount of money that banks need to keep in reserve three times in the past few months in an attempt to boost lending.
"The impact of easing credit conditions and public investment in infrastructure is beginning to show," the bank said in its report.
"The impact is expected to continue to be felt into 2013, as the authorities have accelerated the approval of large projects."
'Bright spot'
The bank also raised its forecast for the developing East Asia region, excluding China.
The grouping, which includes Thailand, Philippines, Indonesia and Burma, is now projected to grow 5.7% in 2013, up from the previous forecast of 5.5%.
The bank said that the region was likely to benefit from Thailand's recovery from last year's floods and strong growth in the Philippines.
The Philippines economy has been one of the better performing ones in the region this year.
Its growth has been helped by a strong domestic demand, government spending and increased investment in the country.
The bank raised its projection for the Philippines to 6.2% for 2013 from 5%.
It added that the opening up of Burma and the continuing reforms in the country, which have seen various sanctions against it being lifted, was "another bright spot in the region".

http://www.bbc.co.uk/news/business-20778454

Monday, December 17, 2012

India's economy grows at slowest rate in decade


 @CNNMoney December 17, 2012: 8:22 AM ET

India's economy has been held back by falling exports, high interest rates and slow reforms

LONDON (CNNMoney)

India's economy will grow by about 5.8% this year, representing the slowest rate of growth in a decade, according to revised official forecasts.


The country's finance ministry said Monday it was expecting India's growth rate to accelerate slightly in the second half of its financial year, which ends in March 2013. But gross domestic product will still only expand by 5.7% to 5.9% annually, compared with an earlier forecast of 7.6%. The last year growth was weaker was 2002-03.

India has recently enacted reforms to allow more foreign investment in the retail sector but more will need to be done if the world's second most populous nation is to return to the near double-digit rates of growth seen in previous years.

Growth has slowed in India because of a sharp drop in exports, stalled investments and a fall in business sentiment due to the slow pace of reform and high interest rates.
The revised official forecast is consistent with the most recent growth projections from the IMF, which were lowered in October due to the drags on business sentiment and investment and a weaker external environment.
The Reserve Bank of India (RBI) has been reluctant to cut interest rates but lower inflation could pave the way for an easing in monetary policy in the first half of 2013, economists say.
India is also battling to keep borrowing under control. It is seeking to curb subsidies and sell stakes in a number of state-owned firms in an attempt to cap the budget deficit at 5.3% of GDP in 2012-13. 

Darjeeling Tea


Good Name Is Restored in Terrain Known for Tea

-          The New York Times

DARJEELING, India — Among connoisseurs, few teas surpass a good Darjeeling. The smooth and mellow taste commands a premium price, and the name itself evokes a bygone era when the British first introduced Chinese tea plants here in the Indian foothills of the Himalayas.

To Anil K. Jha, the superintendent of the Sungma Tea Estate, all this would be extremely good for business, except that much of the tea sold globally as Darjeeling is not actually grown here. Foreign wholesalers often put the name on a blend of the real stuff and lesser teas. And in some cases, growers elsewhere simply slap a Darjeeling label on their tea.
So Mr. Jha and other Darjeeling growers have followed the example of Scottish whisky distillers and French wineries, winning legal protection for the Darjeeling label under laws that limit the use of certain geographic names to products that come from those places.
In a decision this year, the European Union agreed to phase out the use of “Darjeeling” on blended teas. Now, just as a bottle of Cognac must come from the region around the French town of Cognac, a cup of Darjeeling tea will have to be made only from tea grown around Darjeeling.

“That flavor, that uniqueness that comes from here — it is nowhere else,” Mr. Jha said as he stood among manicured tea bushes on a hillside about 5,000 feet above sea level, near the border with Nepal. “People have tried to replicate it, but have failed,” he said.
The uniqueness of Darjeeling as a place certainly seems beyond dispute. On clear days, the white peaks of Kanchenjunga, the world’s third-highest mountain after Everest and K2, floats over the hilltop city like an ethereal fortress. Beyond the clamor of the city, many of the steep surrounding foothills are carpeted with tea estates, some planted more than 160 years ago when a British surgeon found that tea bushes thrived in the region’s alpine setting.
The mountainous terrain also limits production. India produces almost two billion pounds of tea annually, more than any other country, but Darjeeling accounts for only about 1 percent of that output. The Darjeeling district has 87 certified tea gardens, as they are locally known, producing about 20 million pounds of tea every year, and the potential for expansion is almost nil.

That is why local tea growers grew annoyed that as much as 88 million pounds of tea were being sold as Darjeeling on the global market each year.

“Darjeeling tea has always been more expensive,” said Ranen Datta, a longtime adviser to local tea growers, noting that the wholesale price is about five times that of ordinary teas. “And we found that sellers all over the world were selling tea under the name Darjeeling.”
And not only tea: A French company that makes lingerie has fought legal battles with the Tea Board of India to keep using the name.

“This brand name, Darjeeling, was being misused,” Mr. Jha said. “The basic interest of Darjeeling was being killed.”

Local tea growers had already fought to save their product from the vagaries of cold war politics. During the era of British rule, Darjeeling tea was shipped mainly to Europe, which remained the primary market after Indian independence in 1947, when Darjeeling’s tea gardens shifted from British to Indian ownership.

But as India drew politically closer to the Soviet Union, a deal to sell tea to Moscow ushered in a dark period for Darjeeling. The Soviets ordered in bulk and mixed Darjeeling with pedestrian teas from Soviet satellite countries so it could be marketed more widely.
“Russians were not particular about the quality of Darjeeling,” Mr. Datta said. “They took it if it was clear and black.”

Growers saturated their tea gardens with chemicals and pesticides to maximize output, and annual production rose to about 29 million pounds. But when the Soviet Union dissolved in 1991, so did the export deal, leaving Darjeeling with a crop it had trouble selling in Europe, where many customers, especially in Germany, were aghast at the chemical use.
“There were no buyers,” Mr. Jha recalled. “It took a long time to revive the image of Darjeeling.”

The key was to focus once again on quality. Tea growers began discarding chemicals and shifting toward organic farming practices. Total production fell, but prices rose steadily, as growers marketed Darjeeling teas according to the seasons, with the greatest demand during the two harvesting times, known as the first and second flushes, which run between February and July. Growers also developed luxury tea products, particularly “white tips” tea, which is drawn from the white buds of tea leaves.

But as Darjeeling’s reputation was restored, growers discovered that their teas were being repackaged overseas. Europe had become the biggest buyer again, but some wholesalers there were blending Darjeeling with other teas to bulk up their volume, while continuing to label the resulting mixture as Darjeeling tea.

To fight back, the Tea Board designated Darjeeling as a “geographical indication” for tea that is recognized by the World Trade Organization. Over time, Indian tea officials negotiated agreements with various countries to ensure that the status of the Darjeeling name was respected. The European Union resisted for several years, but a deal was finally struck in 2012 to phase out blended Darjeeling in Europe within five years.

“In the case of Darjeeling tea, it was accepted that there was specificity that is unique — and geographically based,” said João Cravinho, the European Union’s ambassador to India. “Tea produced anywhere else will have different characteristics.”

Mr. Cravinho noted that Europe was pushing its own geographic indication cases in India as part of negotiations for a free trade agreement. For example, while India recognizes Cognac as a geographic indication, it does not do the same for Champagne, so sparkling wines from other places can be sold legally in India as “champagne,” a practice that the European Union wants ended.

Up on the slopes of the Sungma Tea Estate, Mr. Jha said he believes that the trade protections will not only increase profits for the local industry but also, ultimately, save Darjeeling tea. The estate is certified as organic by India, Japan and the United States, and it is pursuing a globally recognized environmental certification.

Reaching down to pluck a leaf from a tea bush planted more than a century earlier, Mr. Jha gestured toward the surrounding foothills.

“Here, we are not doing anything,” he said. “It is all God-gifted.”


Wednesday, October 10, 2012

What Will South Asia Look Like in 2025?


The Optimistic Outlook

The optimistic outlook is based on favorable trends, including improved governance, the demographic dividend, the rise of the middle class, and the new faces of globalization. 

All countries in the region have an elected government for the first time since independence leading to governance that is more focused on development. Improved governance will enhance the politics of democratic accountability; diminishing the importance of identity politics; and the rates of incumbency – the likelihood of a sitting politician being re-elected – are down.....

The Pessimistic Outlook

The pessimistic outlook is backed by equally strong arguments. There have been no more than a dozen countries that have managed to sustain an average growth rate of 7% a year for 25 years. Many have reached middle- income status, but very few have moved into high-income status.

Growth could be derailed by spatial transformations, poor infrastructure, lack of entrepreneurship, deep pockets of poverty, large informal sectors, huge social and gender disparities or high levels of conflict in the region...............


http://blogs.worldbank.org/endpovertyinsouthasia/what-will-south-asia-look-2025

Monday, October 1, 2012

FDI in retail – the Indian farmers' perspective


A potent solution for several deficiencies of Indian agriculture
- Motilal Oswal

The Government of India's recent decision to permit FDI in the retail sector has raised a high level of debate and a major political fallout. For a perspective from one of the key constituents – farmers – we organized a concall with Mr P Chengal Reddy, Secretary General, Consortium of Indian Farmers Association. We present the key takeaways.

·             Indian agriculture is plagued with lack of storage, investment and technology, low price realization, appropriation by middlemen, and huge wastage to the extent of 30-40%. Indian retailers have lacked the scale, technology, management vision and focus to change this.

·              FDI in retail would expand the outreach of Indian produce to the world market (e.g. access to 350 Wal-Mart stores in China in one go). It could lead to multiple other benefits: (1) uniformity in farming practices and scaling-up to suit global requirement, (2) enhanced branding and visibility, (3) superior back-end infrastructure, (4) significantly lower wastage, and perhaps most important, (5) integration of agricultural policies and implementation at various levels of government.

·             The political differences in this regard are largely on the surface; more and more states are expected to put in enabling provisions (like amending APMC Act) to introduce FDI in retail. While contract farming would increase, fears of job loss are unfounded as FDI is justifiably allowed only in bigger cities, and further, it would gain  currency only among the upper class. n While the role of middlemen is likely to stay because of their superior reach, efficiency is likely to be enhanced and exploitation reduced.

·             Finally, sugar sector liberalization is in the offing. This would provide major opportunity to (1) increase yields and revenue, and (2) diversify sources of income.



 Read Full Report


Thursday, August 30, 2012

Bangladesh: The next hot spot in apparel..... (2)


Chinese factories turn to Bangladesh  as labour costs rise
By Ethirajan Anbarasan, BBC News, Dhaka
29 August 2012 Last updated at 22:04 GMT

There is a spring in the step of Syed Faizul Ahsan as he walks through the floor of his garments factory outside the Bangladeshi capital, Dhaka.

Hundreds of workers, most of them women from rural areas, are busy making sweaters for an overseas client.

The setting may well be similar to any one of the thousands of such factories in Bangladesh, but one thing makes Mr Ahsan's unit stand out.

The sweaters made in his unit are not heading to the US or eurozone, the two biggest markets for Bangladesh's garment exports, but to China.

Growing orders from mainland China mean that Mr Ahsan can breathe easy despite the slowdown in demand from the US and eurozone.

"A few years ago only 5% of my factory output was for the Chinese market. Now it has gone up to 20%," he says. He expects that number to increase further in the coming years.

Labour cost

It may sound strange that Chinese firms are turning to Bangladesh to make clothes, not least because China is the global leader in clothing manufacturing and exports.
But the shift is happening for very obvious reasons.

Rosa Dada of Four Seasons Fashion Limited, a Chinese garments manufacturer, says factories in China are not competitive anymore because of increasing wages of labourers and a sharp hike in overall production costs.

Ms Dada has been running a garments factory in the Chinese port city of Ningbo for nearly two decades.

"In my factory in China, the salary of workers has been increasing steadily over the last few years," she told me during her recent visit to Bangladesh to look for opportunities here.
"It has reached around $400 to $500 (£250 - £315) a month per worker. If I continue to produce there, our business will disappear.

"In Bangladesh the average monthly salary for garments workers is only around $70 to $100. If I produce here, price is much more competitive."

She has already opened an office in Dhaka and is not only looking to order clothes for her own firm but is also involved in getting other Chinese online retailers to source from Bangladesh.

Chinese manufacturers say if they source clothes from Bangladesh, prices can come down by 10% to 15% depending on the category.

'A new beginning'

Bangladesh garment exporters say the other advantage they enjoy is that more than 90% per cent of their products, such as T-shirts, jeans, sweaters and casual trousers enjoy duty free access to the Chinese market.

The combination of lower labour costs and duty free access means that orders from China are likely to receive a boost in the coming years.

Bangladeshi clothing exports to China jumped to more than $100m last year, from $19m a few years ago.

It is a modest beginning but Bangladeshi factory owners expect the shipments of ready-made clothes to China to go up to $500m in the next five years.

According to Chinese media reports, Vancl, China's largest online clothing retailer, has already shifted a portion of its shirts and casual trousers orders to Bangladeshi factories.
Meanwhile, western fashion brands such as Ocean and H&M are also making clothes for Chinese customers in Bangladeshi factories.

"I think it marks a new beginning for our exports," Siddiqur Rahman, vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), tells the BBC.

"At a time when western economies are going through recession, Asian countries like China, Japan and India are opening up for us."

Potential pitfalls

While there is tremendous opportunity for growth, there are fears that this potential may remain unfulfilled.

Bangladesh's creaky infrastructure and political instability have been a major concern for the clothing manufacturers.

In addition, there have been violent labour protests in recent months with workers demanding better wages and conditions.

Labour activists say Bangladeshi clothes manufacturing workers are among the lowest paid in the world for this type of work.

The killing of a prominent labour activist, Aminul Islam, earlier this year has only added to the insecurity among the factory workers.

Following an outcry by western campaign groups over wages, major global retailers like Walmart and GAP have urged the country's factories to increase salaries.

But Bangladeshi business leaders are defiant saying they have recently hiked up wages in the sector and warn that any further increase may damage its competitiveness.

"Our prices are low. That's why big western fashion brands are coming here. If they increase their buying price, we will also increase our salary to the workers," Mr Rahman says.

But as the country attempts to gain ground as a lower-cost alternative to China, local workers' conditions will come under increasing scrutiny.

Industry players will have to find the right balance between maintaining competitiveness, meeting labour demands and keeping their buyers satisfied.

That may prove to be the toughest test for the sector yet.