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http://slidepdf.com/reader/full/spex-41 1/14

-ExaminingtheMiddle-IncomeTrapinMalaysia(Part2)

-TheVietnameseDilemma-UncoveringKeyASEANNeedsVitaltoUSEconomicLegitimacyin

ASEAN(Part2)

TheFortnightInBrief(24 thJuneto7thJuly)

US:Manufacturingreboundsasservicesslide,7.6%unemployment

USPMIforJunebouncedbackfrom49.0inMayto50.9,thefifthtimeinsixmonths,wherethemanufacturingsectorhasseenanexpansion.TheNewOrders,Production,ImportsandExportindicesalsogrewfrompreviousmonths,withthe

exceptionoftheEmploymentIndexregisteringasurprisingcontractionat48.7,

thefirstsinceSep2009.TheISM’snon-manufacturingfigureswerealsosoftasitfellto52.2,thelowestsinceFeb2010.Non-farmpayrollsoutFridayroseby

195,000,beatingexpectationsof165,000astheunemploymentratehoveredat7.6%,afouryearlow.May’sNFPwerealsorevisedupwardsto195,000fromitsprevious175,000,fuellingmoretalkofFedtapering.

AsiaPacific:Japan’s100mark

On25thJune,ThePeople’sBankofChina(PBoC)brokeitssilencetoreassureinvestorsthatithadbeensupportingbankliquidity.ThisannouncementcomesastheChinesestockmarketsswungwildlywhenthecentralbankrefrainedfrominterveningtokeepinterbankratesincheck.InJapan,theYencrossedthe

psychologicallysignificant100markforthesecondtimethisyearasthegreenbackstrengthenedamidsttheFeds’talkoftapering.TheYenhasfallensignificantlyfrom86.72fromthestartoftheyearand79.86fromayearagodue

toJapan’sprimeministers,ShinzoAbe’saggressivelooseningpolicies.

EU:Spain’sbanksdonotrequirefurtherEuropeanaidatpresent

SpanishbanksdonotatpresentrequirefurtherEuropeanaid.Spanishlenders,hithardbyafiveyearon-offrecessionandburstpropertybubble,havereceived

financialaidfromEuropeof41.3billioneuros,todate.Theaidwasusedfortherecapitalizationofstate-aidedbanksandacapitalinjectionintoabankthattookonbadloansanddevaluedpropertyassetsfromthefinancialsystem.However,

thereportmentionedthatensuringbankprofitabilityrepresentsamajorchallengegivenlowinterestratesandrisingbaddebts.ThestabilityoftheSpanishfinancialsectormaystillbeimpairedbyuncertaintyovertheextenttowhichlossescanbepassedontoinvestors.Inaddition,thereisuncertaintyover

arbitrationprocessesbywhichsomeinvestorswillseektoprovetheyweremis-soldcomplexhybridinvestments.

INCOLLABORATION

WITH

PROUDLYSUPPORTEDBY

ISSUE 41

8 JULY 2013

SMU Political-EconomicExchange

ANSMUECONOMICSINTELLIGENCECLUBPRODUCTION

1570

1590

1610

1630

1650

S&P500

274

278

282

286

290

294

STOXXEurope600

480

490

500

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520 MSCIACAsiaEx.Japan

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© Copyright 2012 SMU Economics Intelligence Club 2

ExaminingtheMiddle-IncomeTrapinMalaysia(Part2)

ByTongKahHawandTohWeiZheng,SingaporeManagementUniversity

Inthelastissue,KahHawandWeiZhengdiscussedMalaysia’smiddleincometrap.Thisweek,

theypresentmorestructuralissuesMalaysiafaces.

Figure2:ListofMalaysianStatesbyGDPpercapita(2010)

States / federal territory GDP per capita (2010) in USD

Kuala Lumpur 18,218

Penang 10,893

Sarawak 10,845

Melaka 8041

Pahang 7408

Johor 6809

Perak 5,238Kelantan 2,694

StructuralProblemsinEducationInstitutions

Eversinceprivatehighereducationwasliberalizedin1996inordertotransformMalaysia

intoaneducationhub,morethan50privatedomesticandforeignprovidershavebeen

established.Yet,noMalaysianhighereducationinstitutionhassecuredaplaceamongthetop

400ofTime’sWorldUniversityRankingsin2013.ThebestuniversityistheUniversityof

Malaysia,ranked87thbyTheTimes’AsiaUniversityRankings.Educationstandardsdifferdrasticallyamongstuniversitiesandprogrammesareoftennotattunedtotheneedsofthe

economy,causingamismatchbetweendemandandsupplyoflabour.Manymultinational

companiessuchasIBMhavelamentedaboutthelackofqualifiedgraduateswithtechnical

skills,suchasaccountingandengineering.

Thereisalsoalackofcoordinationbetweenvariousgovernmentagenciessuchasthe

EconomicsPlanningUnitandtheMinistryofHigherEducation.Eachseekstopushtheirown

agendas,andtheresultingconflictofinterestcausesdifficultiesinimplementingviable

educationpolicies;akeyreasonwhyitwillbedifficultforMalaysiatoescapethemiddle-

incometrap.Perhaps,MalaysiacouldlearnfromitsSingaporeancounterpartontheclose

coordinationthatthegovernmentagencieshavewithoneanother.

Inaddition,qualificationsfromindependentChinese-mediumhighschoolsthatmany

academicallyinclinedstudentsattendarenotrecognizedbytheMalaysiangovernmentfor

admissionintopublicuniversities.SuchamovehascausedmanyChinesetopursuetertiary

educationelsewhereinplacessuchasSingaporeandGreaterChinawherethesequalifications

arehighlyregarded,furtherfuelingthebrain-drain1.

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LackofWorkforceParticipationofWomen

TheWorldBankreportedin2012thattheproportionofworking-agewomenwhoarealready

inorjoiningtheworkforceislowerinMalaysia,ascomparedtoothercountrieswithsimilar

incomelevels.ThestudyalsoshowedthatMalaysiacouldexperiencea23%increasein

outputpercapitaifmorewomenholdjobsandbecomeentrepreneurs.

Hence,itiscrucialtoinvolvemorewomenintheworkforceifMalaysiaaimstotransform

itselfintoahigh-incomeeconomy.Asastart,pro-familypoliciessuchasflexi-work

arrangementsandbetterchildcareoptionscanbeintroducedtoencouragemorewomento

enterorremainintheworkforce.However,implementationwillcertainlybedifficultassocial

normsdiscouragewomenfromholdingjobs.

LackofInnovationCulture

InorderforMalaysiatobreakoutofthemiddle-incometrapandtransittoaknowledge

based,innovativeeconomy,acultureofinnovationneedstobefostered.

AsoutlinedintheNewEconomicModel,initiativeshavebeencraftedtoattractforeigndirect

investments(FDIs)2,increasetheeaseofdoingbusinessesinMalaysia,encourage

entrepreneurshipandimproveproductivity.Suchmeasuresarelaudablebuttheir

effectivenessremainstobeseen.

However,certainareashavenotbeenadequatelyaddressedintheframeworkandwarrant

roomsforfurtherimprovements.Enhancedmeasuresinlegalinstitutionsshouldbebolstered

toprotectintellectualpropertyrights,whichisvitalinaknowledge-basedeconomy.Also,

whileprotectionistmeasures3canshelterdomesticindustries,italsoallowsthemtobeless

innovativeandcreativeinthecomfortofgovernmentprotection.Malaysia’snationalcar

manufacturerProtonisagoodexample.Heavyduties,whichareexpectedtoremaintill2016,

areleviedonimportedcarstoensurethesurvivalofProtonandotherMalaysianauto

manufactures.

Inconclusion,althoughavisionhasbeensetforMalaysiatoundergoreformstotransittoa

higherincomeeconomyby2030,inherentstructuralproblemsasseeninitsinstitutionsand

racialpolarisationcanposeseverechallengestosuchatransition.AnotherlearningpointisthatitcanbeeasytomeetthebenchmarktargetssetbytheWorldBank(i.e.aboveGDPper

capitaofUS$12,000)toqualifyasahigh-incomenation,butwhetherMalaysiaeventually

becomesadeveloped,knowledge-basedeconomysupportedbystrongfundamentalssuchas

researchanddevelopmentandaninnovativeworkforceisanotherquestion.Thisisevident

inthegreatdisparityinGDPpercapitaacrossthedifferentMalaysianstates.Nevertheless,

Malaysia’stargettobecomeahighincomenationisanovertlyvisionaryplanthatis

commendable,withthepotentialtoimprovelivingstandardsandtransformMalaysiaintoa

moreequitablenationshoulditbeimplementedsuccessfully.

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Sources:1. DanielFleming,Hendrik2012.Malaysianskillsdevelopmentandthemiddleincometrap2. 10thMalaysiaPlan2010.PrimeMinisterOffice.3. TimesHigherEducation2013.TimesUniversityRankingsWebsite.4. AaronFlaaen,EjazGhani,SaurabhMishra2009.TheWorldBank.Howtoavoidmiddleincometraps?EvidencefromMalaysia

5. MalaysiaEconomicMonitor2011.BrainDrain6. TheWorldBank.UnlockingWomen’sPotentialKeyFindings7. VikramNehru2013.CanMalaysiabeattheMiddleIncomeTrap?8. NewEconomicModel.EconomicPlanningUnit

1BrainDrainBraindrain(orhumancapitalflight),isthelarge-scaleemigrationofalargegroupofindividualswithtechnicalskillsorknowledge.

2ForeigndirectinvestmentForeigndirectinvestment(FDI)isadirectinvestmentintoproductionorbusinessina

countrybyacompanyinanothercountry,eitherbybuyingacompanyinthetargetcountryorbyexpandingoperationsofanexistingbusinessinthatcountry.

3ProtectionistmeasuresProtectionistmeasuresarepoliciesaimedatrestrainingtradebetweenstatesthroughmethodssuchastariffsonimportedgoods,restrictivequotas,andavarietyofothergovernmentregulationsdesignedtoallow"faircompetition"betweenimportsandgoodsandserviceproduceddomestically.

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TheVietnameseDilemma

ByHangDieuQuang,SingaporeManagementUniversity

Thisarticleseekstoexplorethecurrentrealestatecrisisandsomeconstrainsthatthe

Vietnamesegovernmenthastodealwithtountanglethesituation.Figure1:Vietnaminflationrate2008-present

In2008,whenthefinancialcrisishit,oneofVietnam’schronicproblemsalsocameintofullforce-inflation.Itsinflationrateskyrocketedto23%,morethananyofitsneighboursintheregion.Thegovernmentmovedswiftlyinanunprecedentedcampaigntoreduceprices,usingunusuallyhighinterestrates,restrictedborrowingpolicies,measurestocontrolpricesforessentialitemsamongothers.Theinflationratewastamedtoamoremanageablelevelof11%and9%in2009and2010respectively.

Figure2:VietnamHousing&ConstructionMaterialsCPI2011-present

Justwhenthegovernmentthoughtthattheinflationwasundercontrol,therealestatemarketcameintoacrisis.Suddenly,manycompaniesfoundthattheycouldnotselltheirpropertiestocustomers;manyinvestorsfoundthattheycouldnotrepaytheirbankloansontime.Asaresult,propertypriceshavebeenslidingdownsincethen.

AvailablesolutionstotheGovernment

Thereareafewphysicalandfiscalmeasures1aimedatsolvingthedemandbottleneck.

Althoughtherealestatemarkethasgenerallybeenstabilizedsincetheendof2012when

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thesemeasureswentintofulleffect,manybelievethatthesearejustshort-termsolutionstoavoidacompletemeltdownofthemarket.Theevidenceforthatisthattheincreaseindemandseemstobeweakandwillnotbeabletocleartheinventoryexcessbuiltupthusfar.

Figure3:Hanoiresidentialpropertypriceindexandinventoryratio2009-present

Figure4:HoChiMinhCityresidentialpropertypriceindexandabsorptionrate2009-

present

Thegovernmenthadatthattimetwopossibleroutestodealwiththesituation:i)donothingandletthemarketcorrectitselfwithapossibletotalcollapse;ii)bailout 2thepropertydevelopers.

StatusQuo

Bynotrescuingthemarketandallowingittocorrectitself,thegovernmentwouldnothavetocommitpreciouscapitalthatismuchneededelsewhere.Furthermore,asthecrisisprogressed,itwasnotthecaseofafastandfuriousmeltdownoftheentireindustry.Theweakdeveloperswerebeingweededoutwhilethestrongeronesconsolidated.Thismarketconsolidation3processisbelievedbymanytobewhatisneededforthemarketafterdecades

ofspeculationandbubbles.

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Inaddition,themarketwouldtransformitselfintoamorecustomer-orientedindustryratherthanonethatwasonlyinterestedinpushingthepricesofthepropertiesupwards,inordertoearnquickreturns.Whilethemarketdemandclearlyindicatedashortageoflow-endandaffordablepublichousing,formanyyears,privatedeveloperswereonlyinterestedinthehigherends,thehigherthebetter.Thisisevidentinthetransitionmanyarewitnessingwherebythesupplyforlow-endandaffordablehousingisfinallyincreasing.Perhaps,strugglingtogenerateenoughsalestopayofftheirobligations,developersarestartingtorealizethattheycannolongersolelyrelyonthehighendsegment.

Nevertheless,therearefewconsequencestothisapproach.Firstofall,thereisariskthatthemarketwouldgodownfurtherandtransformintoatotalcollapseoftherealestatemarket.Thiswouldhaveanadverseimpactonnumeroussectors,especiallytheconstructionandbankingindustries.Governmentrevenuewouldalsobeadverslyaffected.Withmuchbaddebtcontributedbythisindustry,acollapsewouldspelltroubleforthebanksthatholdontothesedebts.Aconstructionsectorrecessionwouldfurtherdragtheeconomyintoaslowergrowthrecovery.Thus,thegovernmentwouldfinditsrevenue,whichmostlycomesfromlandtax,reducedsignificantlywiththesharpreductioninthenumberoftransactions.

Savethedevelopers

Bybailingoutthedevelopers,thegovernmentneedstocommitnotonlythecapitalbutalsothepoliciestohelpthemsolvetheexcessinventoryaswellasfindingthecustomers.

Theformercanbedoneviathecentralbank.However,therearemanyquestionsremaining.Firstofall,whoshouldthegovernmenthelpandwhy?Therearemanydevelopersthatcurrentlyneedthegovernmenttobailthemout.Howthegovernmentdecideswhichdevelopersareworthbailingoutisatrickyquestion.Usingefficiencyanddebtlevelasaguideshouldbetherightthingtodo.However,mostbigdeveloperswouldnotpassthistest.Ontheotherhand,justsimplyrescuingthebigcompanieswouldgiveawrongsignaltotheeconomy

wherebyitwouldsetaprecedentthatthegovernmentwouldstepintobailoutfailingcompanies.Thesecondquestionwouldbehowmuch.Ifthegovernmentbailsthedevelopersoutexcessively,itmayriskbuildingupanotherbubble.Ontheotherhand,ifthehelpisinadequate,thecrisismayprolongandrequiregreaterefforts.

Therearemanywaysthatthegovernmentcanhelpeasethelevelofunsoldinventoryandencouragespendingonhousing.Infactithasalreadyimplementedsome.Whiletherearemanypolicies:handouts,pricesubsidies,lowerinterestrates,allowingmoreforeignerstobuyproperties,eachofthemcarriesconsequencesthatarefarreachingandmaynotbeseenimmediately.Themostcontroversialoneofallisloweringtheinterestrate.Bydoingthis,thegovernmentriskstriggeringariseininflationagain.Infact,inlate2011,whentheinterestratewasrelaxed,inflationrosetonear2009level.Aslongasthefundamentalproblemscausingtheinflationareleftunresolved,interestrateremainsaverysensitiveinstrumentthatthegovernmentcanuse.Thefactthattheinflationrateiscurrentlystableandlowmaybeduetothefactthattheeconomyhassloweddownsignificantly,coupledwiththeongoingpropertymarketcrisis.Sotheremaybeariskofincreasingtheinflationrateoncetherealestatemarkethasstabilizedandthedevelopersreceivegovernmenthelp.

Figure5:Vietnaminterestrate2011–present

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Therightwayforward

Giventhefactthatthecurrentcrisisisdeep-rootedinthespeculativebehavioursofinvestors,loopholesinregulations,aswellas,looselendingpoliciesbybanks,thegovernmentshouldaimtoprovidealongtermrestructuringoftheentiresystem.Threethingsneedtobedonetoavoidrepeatepisodesofthecurrentcrisis:restructuringofthebankingindustry,newpropertymarketregulationsthatprovidebettermechanismstoreducespeculationandriskyinvestmentsandpoliciestocorrectmarketbehaviours.

Thegovernmenthasalreadypromisedbankingreformby2015withanewregulationsystemwasdemandedformanyyearsnow.Manyhopethatthiscrisiswillfinallypushthegovernmenttoseriouslyconsidermakingitareality.Whilethepoliciesthatwereimplementedrecentlymayberudimentalandsmallinscope,itisastepintherightdirection.

Hopefully,theyaretobesignalsformoretocome.

TheproblemsthatarefacedbytheVietnameseeconomyareintertwinedanddelicate.Thegovernmentcanriskoneproblembytryingtosolveanother.Itismuchharderforthegovernmenttodeviseasimple,conventionalonestopmeasuretosolvethem.Rather,itrequireseffortsinmanydifferentareasandthecoordinationofmanyfields.Itrequirestimetosolvealloftheissueseffectivelyandtimeissomethingthatisrunningoutveryfast.

Sources:

1. JonesLangLasalle

1FiscalMeasureTheuseofgovernmentrevenuecollection(taxation)andexpenditure(spending)toinfluencetheeconomy.

2BailoutAbailoutisacolloquialpejorativetermforgivingaloantoacompanyorcountrywhichfacesseriousfinancialdifficultyorbankruptcy.

2MarketConsolidationThemergersandacquisitionsofmanysmallermarketplayersintomuchlargerones.

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2. Savills3. TradingEconomics

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UncoveringKeyASEANNeedsVitaltoUSEconomic

LegitimacyinASEAN(Part2)ByTanKwanHong,SingaporeManagementUniversity

Inlastweek’sissue,KwanHongdiscussedtheUS’economiclegitimacyinASEAN.ThisweekheunveilsaninitiativethatwouldhelpinformulatingavibrantUS-ASEANeconomicengagement.TheSecondPivot:ThePivotfromtheTPP1totheE3Initiative2

DespitethenoblegoalsoftheTPPinbeinga“high-level”agreementdeliberatelytargetedatemergingtradeissuesofthe21stcentury,weaknessesthathaveyettobeovercomecontinuetoplaguetheTPP.

First,theTPPisarigidformofarrangementthatrequiresmemberstoeradicatealmostalltariffandnon-tariffbarrierstotrade.Fewexemptionsaregranted,ifany.Japanwillhavetoliberalizeitsricemarket.Countrieswithrelativelyclosedeconomieswillstruggletoadapt.Countrieswithaprotectionistpostureonafewselectedindustries(e.g.duetounionordomesticpressuresorotherreasons)mightalsobediscouraged,eveniftheyarewillingtoliberalizemostotherindustries.

Assuch,thisrigidityleadstothesecondproblem–progressonconcludingtheTPPhasbeenslow,arduousandfraughtwithdifficulties.Despitebeingaconceptmootedin2005,eightyearson,theTPPhasbeennowhereclosetofinalizingitsmembershipbase,letalonebenefitfromaliberalizedtradebetweenmembers.AlthoughJapan,theworld’sthirdlargesteconomy,hasexpressedinteresttoenterthenegotiations,theTPPhasbecomeanissueofcontentioninthecountry’s2012elections,whetheritwillultimatelyenterthefray,remainsatbestaspeculation.Notguaranteeingamajoractor’sentrywillunderminetherelevanceoftheTPP.

Third,theTPPmightbeseenasanotherUSinitiativetocontainChina,especiallywhentheUScurrentlyremainsastheleadingentitydirectingtheoutcomeoftheTPP.ChinesehardlinersmightchoosetoperceivetheTPPasanAmerican-promoted,intrusively‘gold-standard’TPPthatrequiresvaryinglevelsofdomesticreform,soastodiscourageChina’sparticipationintheprogramduetothedifferingnatureofitseconomicarchitecturewiththatofChina’sstate-controlledregime.ThismightundermineUS-ChinarelationsastheTPPisbeingpushedthrough.

Fourth,giventherapidgrowthoftheASEANeconomicforceasmentionedabove,nootherequally-massivesub-regionintheAsia-PacificcommunitycanrivalthecollectivegrowthoftheASEANentity.TheabilitytorideontheASEANwavewillbebeneficialtotheUS.Unfortunately,byengagingintheTPPalonewherebyonlyfourASEANcountriesareinvolved(notethatIndonesia,thelargestASEANeconomy,isn’tinvolvedtoo),theUSmightbemissingoutonlong-¬termgrowth.

Therefore,thepivotfromtheTPPtotheE3mightprovebeneficialasahedgingtooltotheweaknessesoftheTPP,andtobetteraligntheUStotapofthegrowthofASEANforlongtermgains.TheauthorrecommendsthattheUSheightenthedevelopmentoftheE3undertheObamaAdministration,whilemaintainingcontinuedengagementswiththeTPP.

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MaintainingcontinuedengagementswiththeTPPisnecessaryfortworeasons:(1)TosendasignalofcontinuedAmericaninterestintheregionand(2)TopreventtheTPPfromplausiblyfallingapartorbereducedinmembershiptothefouroriginalsignatoriesduetoaleadershipvacuum,foradiminishedTPPmightencouragealternativeformsofmultilateraltradeagreements(suchastheEAFTAandCEPEA3)totakecenterstageamongUSmajortradepartnersintheregion,ofwhichtheinterworking,normsandprinciplesunderlyingsuchagreementsmightnotbefavorabletowardstheUS.

However,theUSmightsensiblyviewtheE3asamoreconstructivevehicleinachievingAmericantradeandeconomicobjectives,atleastintermsofimplementationspeed.

Also,asabackupplanintheeventtheTPPdoesnotmaterializefull-scaleintheshorttomid-term,theauthorrecommendsthepursuitofacomprehensiveE3withASEAN,supplementedwithenhancingbilateraltradeagreementswithmajorpartnerssuchasAustraliaandNewZealand,asaviableandquickeralternativetoextendingthebreadthanddepthofUStradeengagementswiththeregion.

FurtherRecommendationstoaConstructiveUS-ASEANEconomicAlliance

DespiteASEAN’sgrowth,potentialandrobustnessasaneconomicregion,ASEANisstillfarfromreachingitsfulleconomicpotential.USlegitimacyandrelevancehingesonitsabilityandwillingnesstounderstandthefundamentaleconomicneedsandprioritiesofASEAN.

TheauthorproposestheI-4initiative:Infrastructure,Institutionalization,IncentivizationandIntegration.EachrecommendationismutuallysupportiveinformulatingavibrantUS-ASEANeconomicengagement.

Infrastructure

DevelopingbasicASEANinfrastructureremainsparamounttoASEAN’seconomicgrowth,andoneofwhichisenergy.

Despitethecrucialimportanceenergyineconomicdevelopment,stunninginsightsemergefromcurrentsupplyanddemandbalanceintheASEANenergyarchitecture.ElectrificationratesinASEANremainedstunninglylow.ASEAN,withapopulationof567millionpeople,comprisesofastartlingproportionof160.3millionpeoplewhodonothaveaccesstoelectricity,usingtwigsandleavestocooktheirfood.

Figure4:ASEAN,worldandadvancedeconomiesprojectedGDPgrowthratesuntil

2016

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Source:IMF,WorldEconomicOutlookDatabase

ElectrificationratesvarywidelythroughouttheASEANregion,rangingfrom0.1inMyanmarto1inSingapore.WithaprojectedGDPgrowthratethatisexpectedtosupersedethatoftheworldandofadvancedeconomiestill2016(Figure4),thelowelectrificationrateswillfurtherexacerbatetheincomedisparitybetweenruralandurbanregionswithinacountry.Incomeanddevelopmentdisparitymightinturnhavepoliticalandsocialimplicationswithinthecountry.

Theregionalsofacesasteepsurgeofdemandforenergyinthenexttwodecades,somuchsothatdespitehavingaconsiderableamountofcoalandgasintheregion,morewillstillneedtobeimported.Theusageofoilandcoalwillremainasthedominantsourceofenergytill2030,andwillcontinuetocontributetoenvironmentaldamages.

Finally,enhancingenergyefficiencyisanoften-¬overlookedfactorinASEANenergypolicydevelopments.SeveralASEANcountriesfacehightransmissionanddistributionlossesofelectricity.Thisaddsontowastedresources,andtothecostofenergyproduction.

Therefore,amongalltheinfrastructuralissues,energyisanoften-¬forgottenissuethattheUScangetinvolvedeconomically.TheUScanfacilitateanenergy-relatedbusinessforumoreconomicsociety,whosemembersincludeenergyandenvironmentalcompaniesfrombothASEANandtheUS.ThiswillfostercollaborationsbetweenASEANandUScompaniesinenergyprojectsthatfulfillthelargedemandofenergyinASEAN.Projectsonenergymassproduction,energyefficiency,energytradingandenvironmentalconservationwillgenerate

jobs.

AresearchinstitutededicatedtoresearchonUS-¬ASEANprivateandpublicsectorenergycooperation,R&Ddevelopment,andprojectimplementationcanbeinstituted.Governmentoversightandfundingcanbeimplementedconcurrentlyonprojectsinitiatedthroughtheforum,leadingtopublic-¬privatepartnershiparrangementsthatwillgeneratemeritandpublicgoodsforthemasses.

ForacontinuationofKwanHong’ssuggestedI-4initiative,pleaserefertonextweek’s

publication.

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Sources:

1. UBS2. UnitedNations

3. WorldBank4. Haver5. IMF6. WorldEconomicOutlookDatabase

1TPPTheTrans-PacificPartnership(TPP)isaproposedfreetradeagreementundernegotiationbyAustralia,Brunei,Chile,Canada,Malaysia,Mexico,NewZealand,Peru,Singapore,theUnitedStates,andVietnam.

2E3Initiative

Ayear-longinitiativeofenergy-relatedcompaniesthatpromotedtherelationshipbetweenenergypolicyandnationalsecurity.

3CEPEATheComprehensiveEconomicPartnershipforEastASIA(CEPEA)isaJapaneseledproposalfortradeco-operation,freetradeagreement,amongthe16presentmembercountriesoftheEastAsiaSummit.

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TheS&P500isafree-floatcapitalization-weightedindexpublishedsince1957ofthepricesof500large-capcommonstocksactivelytradedin

theUnitedStates.IthasbeenwidelyregardedasagaugeforthelargecapUSequitiesmarket

TheMSCI Asiaex Japan Index is a freefloat-adjustedmarket capitalization indexconsisting of10developedand emergingmarketcountry

indices:China,HongKong,India,Indonesia,Korea,Malaysia,Philippines,Singapore,Taiwan,andThailand.

The STOXXEurope 600 Index is regardedasa benchmark for European equity markets. It represents large, mid and small capitalization

companiesacross18 countriesof theEuropean region:Austria,Belgium,Denmark,Finland, France,Germany,Greece, Iceland,Ireland,Italy,

Luxembourg,theNetherlands,Norway,Portugal,Spain,Sweden,SwitzerlandandtheUnitedKingdom.

Correspondents:

VeraSoh(VicePresident,Publication)vera.soh.2011@economics.smu.edu.sgSingaporeManagementUniversitySingapore

NgJiaWei(VicePresident,Operations) [email protected] SingaporeManagementUniversitySingapore

SamuelOng(PublicationsDirector/Editor)samuel.ong.2010@business.smu.edu.sgSingaporeManagementUniversitySingapore

YingyuZeng(LiaisonOfficer)yingyu.zeng.2010@economics.smu.edu.sgSingaporeManagementUniversitySingapore

NgYongxiang(MarketingDirector)

yx.ng.2011@accountancy.smu.edu.sgSingaporeManagementUniversitySingapore

DarrenGohXianYong(Editor)

darren.goh.2010@business.smu.edu.sgSingaporeManagementUniversitySingapore

TanKwanHong(Writer)UndergraduateSchoolofEconomicsSingaporeManagementUniversitykwanhongtan.2009@economics.smu.edu.sg

TongKahHaw(Writer)UndergraduateLeeKongChianSchoolofBusinessSingaporeManagementUniversitykahhaw.tong.2009@business.smu.edu.sg

TohWeiZheng(Writer)UndergraduateSchoolofEconomicsSingaporeManagementUniversity

[email protected]

HangDieuQuangUndergraduateSchoolofEconomicsSingaporeManagementUniversity

[email protected]

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