Archive

Tag Archives: economics

Image

Galle Face (and a shameless plug for my Instagram)

Washed out streets and a clean Colombo welcome the start of SAES2013. A literary metaphor for a fresh beginning? Perhaps. But also an ominous symbol of one the themes of the conference. The weather in Colombo hasn’t been normal for years now. When I was a kid, the monsoon was like clockwork, April was always hot, August was rainy, and December offered slight relief from the repressive humidity.

Over the last year mostly, and the year before that somewhat, Colombo has felt more like a mildly warmer version of the Central Hills. Not that I’m complaining. I hate the humidity, and now I just need some mosquito repellent to grab a good night’s sleep on most nights. The reprieve gave way to a month or two of absolute scorchers, but that is a price I’m willing to pay. I like the new Colombo weather.

However, this post is not about weather, at least not in the conventional, hi-how-are-you-doing-its-very-hot-no? kind of way. Climate change, the likely culprit of Colombo’s newfound coolness (a very relative term still), is a major problem for the region. And a topic that the South Asian Economic Summit (SAES 2013) where I’m sitting at right now, is quite concerned about.

The unpredictability of monsoons, while mildly inconveniencing the city’s cubicle warriors with cumbersome umbrellas, plays havoc in the region’s agricultural sector, the rise in sea level threatens low lying islands, the melting of ice caps in the Himalayas threatens norms of water flow and while Colombo may have been benefitted with a welcome bout of cooler weather other parts of the region have feced extended spells of debilitating heat. Besides, of the sea level rises that stroll along Galle Face could soon turn into a wade. All these changes affect millions of lives and threaten the already struggling development processes of the region.

The carbon neutral conference happening in Colombo right now is talking about how to address this and many other problems. It’s easy to be cynical in adventurous discussions like the ones taking place today, especially being in a region bogged down by political corruption and policy blindness. Economists and policy wonks can talk and talk but you and I know that when it comes to implementation it always boils down to what the politicians stand to gain on the ground.

But ideas are important. Ideas, if powerful, can eventually trickle through the political processes, even those as mired as the ones in S. Asia, and create some change down the line. People here are talking about regional integration, investment promotion, collective agricultural initiatives, regional transportation and energy management etc. All very adventurous stuff for countries with long histories that are used to justify enmity just as much as to justify friendship.

The conference live streams here. Join the discussion on Twitter on #saes2013.

Advertisements

The Krrish project has been making waves, if only for its absurd proportions. The complex’s tallest tower is going to be the third tallest residential tower, are you ready for this? In_the_world. I hear three quick bangs on a bell; the crowd goes wild as the fighter in the right corner shrugs off his glittering robe. All hail the Krrish project, destroyer of third world woes.

But seriously. I snooped around a bit (and by now this is relatively common knowledge) and found that Krrish doesn’t really have any completed real estate projects anywhere in the world. Closest thing they have is a few projects underway in Guragon, India. As a company laying claim to such a massive venture, Krrish has virtually no media mentions in India, and its only ties to solid listed corporate are a claim to own a stake in Cobra Beer. And in fact Krrish is better known for its brewery business than anything else.

It’s projected to bring about $560mn into the country. But that number exists only on paper. In reality these projects bring a fraction of that amount, usually 10%, and try to source the rest locally. Krrish, which hasn’t started building yet, is rumored to only have brought in $5mn, as a 10% down payment for the value of the land. The completed project will have some 750 apartments plus equal amount of office spaces, each of the apartments are priced at roughly a million dollars.

The plan is to pre-sell them to raise money to build.  But as you can see from the chart below, demand for apartments hasn’t exactly been booming. If demand does not meet supply, the project will have to be abandoned. Far worse though, is the prospect of the project being bankrolled by a country eager for any kind of investment (especially something with a result so grandiose) ending up with the local banking system owning roughly $500mn of bad loans. And this will probably at the very least result in a major banking/debt crisis for the country. Just putting some thoughts out there. What does everyone else think?

krrishh

take it easy and you’ll do fine: Upali

Upali is what industry insiders call a ‘professional tuk tuk driver’. He bought his first tuk tuk 27 years ago. Currently driving a four stroke TVS,  he claims that it is better than its Bajaj equivalent. The TVS is the latest of 8 three wheelers he has owned throughout his career. He gets a new one every three or four years.

Though he makes a successful living (he has built two houses), the idea of sitting back and having others drive his tuk tuks for him never appealed much. His past experiments have all failed. At one time he owned 3 tuk tuks simultaneously. But the problem with having others drive your tuk tuks is that well… others drive your tuk tuks. Accidents are a norm. He has lost count of the visits he paid to the courts. Drivers don’t pay you on time, if ever. So no thank you but i’ll drive my own, he says. Even if it means less money, the peace of mind is worth more.

His lease costs him Rs.10,500 a month. Petrol about Rs 500-600 a day. Servicing costs about 7500 every 3 months. But spare parts are a problem. Tyres cost in excess of Rs 2000 and other parts don’t come cheap. This is why its important to use your vehicle very carefully, he thinks. He needs to earn about Rs 2000 to be happy; a decent figure.

Upali recently switched to a meter. He says he gets more hires this way but the fares are less, so in the end it probably amounts up to the same. Asked why he refuses to join a taxi company and get even more hires that way, he balks. Taxi companies don’t give you time to relax. They’re always calling you with hires.

Instead Upali has nurtured a strong network of contacts. He regularly transports light cargo for a firm in Piliyandala. This morning by nine he had already earned about Rs 600 through other hires who called him personally. He’s relaxed and at peace with his job. His years of experience have served him well and i’m sure he can teach a thing or two to budding professionals in the field. Like for instance; so long as you don’t do crazy stuff like running whores and other dodgy things, you’ll make a good living.

News

The S&P 500 rose 0.7% on positive comments from the Chairman of the Federal Reserve while Stoxx Europe 600 Index (SXXP) dropped 1.8% as Greece’s prime minister asked for a two-year reprieve from cutting government spending. MSCI Asia Pacific Index (MXAP) slid 0.4% on signs of slow growth in the two largest economies in the world and concern over the Euro zone. Brent crude fell 12 cents after reports that IEA is likely to tap strategic oil reserves as soon as September.

Views

What is the risk of escalating tensions in the Middle East contributing to higher oil prices especially given Sri Lanka’s dependence on Iranian oil?

In a context where Sri Lanka is actively discouraging consumer durables imports, India has done just the opposite despite having a teetering exchange rate and BOP issues.

Vietnam is experiencing doubtful growth prospects with an emerging slump in its urban real estate sector.

Africa’s fast-growing middle class has money to spend

An Interesting article from India on reforming its private sector education , and the social conflicts arising therein.

Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission. The Indian economy is drawing quite a few uncanny parallels with Sri Lanka’s and global markets primarily reacted to goings on in China.   

The Week in Global Markets

Markets in Asia fell as economic slowdown in China, Korea and Australia sparked fears of lower corporate profits. Meanwhile US markets rose on hopes of policy easing in China, as the latter saw its slowest economic expansion in three years. Euro markets also advanced on similar hopes while Italy’s falling borrowing costs also contributed to optimism. Oil rose on speculation of Chinese stimulus and on the back of tightening US sanctions on Iran.

The Week in Economic Views

India’s emerging fiscal and BOP problems are uncannily similar to Sri Lanka as the latter battles an expansion of its Current Account and doubts as to whether it can keep its budget deficit under control.

The US presidential race draws near and ‘outsourcing’ is increasingly becoming a dirty word as candidates seek to distance themselves from it, something regional outsourcing firms should keep an eye on.

An interesting article in this week’s summary discusses the Indian people and their tolerance of government censorship; a topic currently under hot discussion in Sri Lanka.

In Mid 2013, Sri Lanka will have an announcement on how much oil it possesses; a possible game changer for the country. It is worth keeping an eye on new oil rich nations such as Kenya to get an understanding how the impact of oil discovery will flow through to the rest of the economy.

With the emergence of South East Asia as a growth hotspot, global powers are falling over each other to woo the region’s governments and to secure a portion of the pie. South East Asia’s rise poses emerging threats as well as opportunities for Sri Lanka.

In China, while official headline Macro data continues to be reasonable, other news and data has turned much worse; perhaps indicating a need to find alternate data on the Economy for Sri Lanka that could provide similar tracking to assess the latter’s performance as well?

India and Sri Lanka have both suffered large depreciations of their currencies in recent times. Non resident Indians are however inadvertently rallying to their currency’s cause, by investing their dollars in the India to take advantage of the cheaper rupee.

Sri Lanka’s GDP increased by 7.9% in the first quarter of 2012. But what does this mean exactly? I made the following infographic to explain. Click to see a larger and clearer image. I used data from The Department of Census and Statistics, The World Bank and Trading Economics. (*Image updated to correct a mistake in Sri Lanka’s annual GDP, which was showing the 2010 figure – 50bn).

UPDATE – Small error on the 4th tier where it says ‘Rupees Million’, Read that as ‘Rupees Billion’. Until I get around to editing it (Corrected – Jul 19).

Frontier Research does this nifty summary as a part of its overall range of news products, usually for private clients. They scour through the myriad goings on in the global economy so you don’t have to, and bring out what’s relevant from a Sri Lankan non-expert’s perspective. Pretty useful if you’re generally into economics, or just want to get a feel of current hot topics. Here I’ve syndicated their Weekly News Summary with permission. The “markets” section gives a lowdown of global stock and crude oil markets, but for the more interesting analysis and discussions check out the “views” section.

The Week in Global Markets

Anticipation of monetary policy easing in Europe and Asia stimulated markets in those regions, while lingering optimism from last week’s Euro summit also propped up European markets. But pessimism about the same in the US, along with weakening job data, caused markets there to fall. WTI and Brent crude moved in opposite directions. WTI fell on account of weak US job data, while Brent rose on account of an oil workers’ strike in Norway.

The Week in Economic Views

Given current global events, the question is being asked if India is prepared for a real European crisis; a salient point for Sri Lanka to ponder as well because of its dependence on European markets.

On that topic, a very pessimistic, but comprehensive analysis of the current global economic situation comes from Swaminomics.

Military polarization has been advancing quietly in the Asian region. Increasingly, the so called ‘middle-nations’ between the West and China are finding a need to strike a balance in military relations with the two global giants; especially in the context of Burma’s recent troubles.

Meanwhile, a media outcry has made the Pakistan authorities enforce adherence to standards of physical fitness in its police force, which has obtained an image of being fat and corrupt.

South East Asian countries are set to become an IPO hotbed in months to come as several firms prepare to go public in an investment environment where IPOs are facing bleak prospects globally, including Sri Lanka.

India’s biggest Tea company is seeing very high profit growth due to Tea prices rising on a global production shortfall; a useful and positive perspective for Sri Lankan Plantations.

%d bloggers like this: