There be dragons

Pretty fascinating stuff, no?

 

Has the internet increased exports for firms from low and middle-income countries?

We know globalisation has always been driven by technology. Better technology, better communications. Whether we are talking about the bronze age to the telegraph to the internet, with each jump in technology, globalisation has improved and extended.

Globalisation can be defined as increased communications, increased trade, increased resource transfers, increased knowledge, etc. on a global basis. And people do complain about globalisation mucking up the poor. Is that true? One way of answering this question is to ask whether the internet has improved exports for lower and middle income countries. This is, of course, assuming that the internet drives globalisation, which I am saying it does.

This paper checks this hypothesis and finds "a strong correlation between exporting and internet access at the enterprise level. Moreover, this correlation remains after controlling factors that might affect both exports and internet connectivity and self-selectivity".

The authors check eastern European and central Asian republics as their sample countries and most importantly, use firm level data rather than country level data (as country level data can be skewed by few very larger firms). The authors found that the firms having internet connectivity export more than firms who did not. But before you get all excited and get everybody hooked up to the internet, the authors also found that non-internet firms which already exported did not show more exports when they did get connected to the net.

But conscious of the fact that correlation does not mean causality, they further generate regression models and determine that even after controlling for various factors, the link between exports and net access is strong thereby giving credence to the fact that if you get net access, your exports will start at worst and improve at best.

So overall, it does seem to be prudent for Governments interested in pushing for better export performance to improve internet access and penetration rates across the country. Also for globalisation opponents, it might be worthwhile for them to consider the plus's of their argument as well.

I was a bit disappointed with the selection of sample countries, I would have preferred if they had added some of the lesser developed countries from Latin America and Africa but I suppose data availability was the challenge.

Technorati Tags: Asia,Europe,Poverty,Internet,Globalisation

 

George R.G. Clarke, Has the internet increased exports for firms from low and middle-income countries, Information Economics and PolicyVolume 20, Issue 1, , March 2008, Pages 16-37.
Many commentators have suggested that the internet is one of the forces driving globalization. This paper assesses one aspect of these claims, looking at whether internet access appears to affect the export performance using data from enterprises in low and middle-income economies in Eastern Europe and Central Asia. The paper finds a strong correlation between exporting and internet access at the enterprise level. Moreover, this correlation remains after controlling factors that might affect both exports and internet connectivity and self-selectivity.
Keywords: Internet; Development; Exports

Has the internet increased exports for firms from low and middle-income countries?

We know globalisation has always been driven by technology. Better technology, better communications. Whether we are talking about the bronze age to the telegraph to the internet, with each jump in technology, globalisation has improved and extended.

Globalisation can be defined as increased communications, increased trade, increased resource transfers, increased knowledge, etc. on a global basis. And people do complain about globalisation mucking up the poor. Is that true? One way of answering this question is to ask whether the internet has improved exports for lower and middle income countries. This is, of course, assuming that the internet drives globalisation, which I am saying it does.

This paper checks this hypothesis and finds "a strong correlation between exporting and internet access at the enterprise level. Moreover, this correlation remains after controlling factors that might affect both exports and internet connectivity and self-selectivity".

The authors check eastern European and central Asian republics as their sample countries and most importantly, use firm level data rather than country level data (as country level data can be skewed by few very larger firms). The authors found that the firms having internet connectivity export more than firms who did not. But before you get all excited and get everybody hooked up to the internet, the authors also found that non-internet firms which already exported did not show more exports when they did get connected to the net.

But conscious of the fact that correlation does not mean causality, they further generate regression models and determine that even after controlling for various factors, the link between exports and net access is strong thereby giving credence to the fact that if you get net access, your exports will start at worst and improve at best.

So overall, it does seem to be prudent for Governments interested in pushing for better export performance to improve internet access and penetration rates across the country. Also for globalisation opponents, it might be worthwhile for them to consider the plus's of their argument as well.

I was a bit disappointed with the selection of sample countries, I would have preferred if they had added some of the lesser developed countries from Latin America and Africa but I suppose data availability was the challenge.

Technorati Tags: Asia,Europe,Poverty,Internet,Globalisation

 

George R.G. Clarke, Has the internet increased exports for firms from low and middle-income countries, Information Economics and PolicyVolume 20, Issue 1, , March 2008, Pages 16-37.
Many commentators have suggested that the internet is one of the forces driving globalization. This paper assesses one aspect of these claims, looking at whether internet access appears to affect the export performance using data from enterprises in low and middle-income economies in Eastern Europe and Central Asia. The paper finds a strong correlation between exporting and internet access at the enterprise level. Moreover, this correlation remains after controlling factors that might affect both exports and internet connectivity and self-selectivity.
Keywords: Internet; Development; Exports

Why most of the world is worried about Democrats?

This is an interesting column on why most of the world (at least the Asian bit) is worried about the fact that Democrats might come into power.

An Asian Currency Bloc?

Now this is extremely interesting news indeed. An Asian currency bloc?

I quote:

Asian central banks appear to be adopting similar monetary policies in a way that suggests they could be preparing for an eventual currency union for the region, according to Deutsche Bank.
Twelve Asia-Pacific currencies – including the yen, the Korean won, the Indian rupee and the Australian dollar – have increasingly traded as a bloc since 2005, the bank’s research has found.
There is an increase in the correlation between the value of Asian currencies as central banks try to keep their export-led economies competitive internationally and also reduce foreign exchange volatility within the region.
This trend is a result of the wider use of trade-weighted currency baskets in India, China, Singapore and Malaysia, the bank says, adding that the patterns show similarities to movements in some European Union currencies in the years before the euro was created in 1999.
“Asia is beginning to look a lot like Europe in the 1980s and the start of the 1990s,” said Martin Hohensee, Asian head of fixed income and credit research, who led the analysis.
“Policymakers and politicians are talking seriously about the possibility of Asian currency union, even if there isn’t a single currency,” he told the Financial Times in an interview.

All this to be taken with a grain of piquant salt!!!

Corporate Governance in Asia - still a very long way to go!

Mahatir Mohammad, an ex Malaysia Prime Minister was a very interesting character. He wittered on about how asian values are different from western values so told the western countries to stop moaning about human rights. It was correct, Mahatir Mohammad doesnt treat Asians as humans. In other words, all that wittering on about Asian Values is simply a fig leaf for being a tyrant, discriminatory, autocratic and dictatorial. Esphoks!

But to get to the point, all these asian values lead to is bad corporate governance and a strong feeling that small shareholders are to be ignored. See here for a better report on it. I quote:

ACGA marks down Singapore for limited disclosure of director remuneration, a lack of legal remedies for investors and continuing use of discounted stock options.

However, even top-ranked Hong Kong lags way behind rival markets in the US and Europe in terms of corporate governance. Hong Kong is criticised for allowing reporting deadlines to remain well below international best practice, for inadequate continuous disclosure of price sensitive information and an “artificially designed” and weak definition of independent directors.

Long way to go!

All this to be taken with a grain of piquant salt!!!

More war games planned in Asia showing that the centre of gravity is definitely shifting

After the recent success of the very large SCO war games, it was the turn of the five nation naval war games in the Bay of Bengal, Indian Ocean. Now India has announced that it will be holding multiple war games with other countries, ranging from China, South Africa to Russia. Quite a broad based effort and something which tells me that India is not putting all its eggs into one basket simply for ideological reasons but is much more pragmatic about this all.

I wonder if the good comrades in India would protest against this insult to the sovereignty of India? Clowns, I tell you, clowns indeed.

Also see this blog, very good analysis on counter terrorism, military, history, etc.

All this to be taken with a grain of piquant salt!!!

Asian Labour Markets Report - Some Major challenges coming up

The International Labour Organisation (an arm of the United Nations and completely useless as far as actually doing something about labour is concerned) has released a report talking about the growth in the Asian Labour Markets from 1.8 Billion workers currently to 2 Billion in 2015. The report clearly states that there would not be sufficient jobs for all of them (not surprising, there aren't sufficient jobs for the current workers anyway). The report also mentions that this growth is not socially and environmentally sustainable (more about this later). The report also points to the following aspects

• An ageing labour force that is expected to see between 1 in 10, and in some cases 1 in 4 people in some countries over 65 years of age by 2015;
• The need to improve job quality and ensure equal opportunities between young women and men;
• Increasing migration that will see millions of workers in Asia leaving their homes each year to work abroad;
• Accelerating rural-urban migration that will see the region’s urban population grow by 350 million by 2015, while the rural population will increase by only 15 million;
• The inability of wage growth to keep pace with labour productivity growth in some countries;
• Rising income inequalities between extreme poor and other workers, as well between as rural and urban workers; and,
• Long working hours becoming the norm in many parts of Asia.

Now you would have noticed the issues with this report. The basic assumption is that informal economy is bad, and only the organised economy is good. Erm, why? In other words, if one has to be living and in receipt of a living income or more, the only way to do so is to have a proper JOB. There is no mention of credit markets, availability of SME financing and markets, microbanking, infrastructure improvements, education for business, banking, innovation, entrepreneurship and a whole host of other issues which can push these additional productive workers to become wealth generators in their own right, take responsibility for their own insurance and pension, etc. Dressing up this issue with the social and environmental claptrap is typical of this organisation and this is the primary reason why it is irrelevant and ineffective. I mean, just why do these topics have to be conjoined? what's the benefit? Most of the issues raised are irrelevant to manage these additional workers.


All this to be taken with a grain of piquant salt!!!

Inequality is a fact of life, but we have to deal with it

Economic inequality is a curious phenomena. The gut feeling when you hear
about economic inequality is that it is wrong and an non-equal society is
not right. So the typical response is to take the money from where it is in
excess and give it to the place where it is less. But when you sit back and
think about it, you then understand that inequality is a fact of life.
There is absolutely no reason why everybody has to be equal, there is no
physical, mental, sociological, economic or financial reason to be so. But
given that we are civilised, we calibrate that law of the jungle. So what
we make sure that some human systems treat everybody equally. Such as our
legal system, such as our election system, such as our hiring system, such
as our money raising system, such as our bank account system, our traffic
system. Everybody has an equal right to participate within that system but
within that system, you have inequality such as having a bigger or more
expensive car than the other. So as long as everybody has a car, nobody
minds that you have a Porsche while I have a 10 year old ford mondeo. But
we are not talking about cars or access to a job when referring to vast
swathes of the world where people live on incomes which are below $1 per
day. That is grinding poverty, at starvation levels, one meal away from
deep delimitating hunger without a safety net or access to clean drinking
water, health care or a roof over your head.

A recent report from the Asian Development Bank talked about one region of
the world, Asia, where we have severe poverty. One measure of inequality is
called as the Gini Coefficient, which measures a ratio of the incomes /
consumption (take your pick) of the top layer versus the bottom layer.
There are gigantic debates behind this simple ratio, whether or not you
measure absolute or relative incomes, top and tail the 1% or 10% or 20%,
whether you go for income or consumption, whether you adjust for the
exchange rate or not, and where do you get the data from. But let us leave
those debates aside for the journals of academia. As long as we are
consistent in measuring the ratio and people accept it by and large, we are
ok. As it so happens, we see that the Gini coefficients are highest for
Nepal and China, India is somewhat in the middle while Pakistan and Kyrgyz
republic are at the bottom. In other words, inequality is highest in Nepal
and China while Pakistan is doing comparatively well.

As the report mentions, this doesnt mean that Pakistan or India is doing
well, the % of severely underweight children is much higher in these
countries but that is a fault of the ratio, that it doesnt consider the
base. What do I mean by the base? A base is what I explained above. A base
level of service, like everybody having access to a car, is what you define
as the minimum level of income/consumption. In other words, you might be a
purist and very hard hearted, but you will never allow anybody to starve in
your country. At the bare minimum, you are happy that everybody has 2
square meals per day, 2 sets of clothing every 6 months and a basic
shelter. Or provide taxes so that the government can provide this bare base
level. Which means, you have immediately raised the bottom layer of
inequality to a common base level.

But overall, as long as the base level is handled right, and this base
level will differ from country to country, time to time, inequality isnt a
problem. At least as far as economics are concerned, but go back to what I
said at the beginning, your gut feeling revolts at the idea of inequality.
And unequal treatment, when taken to the extreme, is very conducive to
rebellion, revolution, terrorism and insurgencies. Study after study has
shown that conflicts are disproportionately skewed towards countries or
regions where there are inequalities or economic problems. For example, you
are more likely to see a revolution or conflict in Pakistan and India
compared to Sweden or Luxembourg.

So if you can manage to have the base level right, remove or control
corruption (which is a huge driver of inequality), have some
re-distributive ability (like sending funds and help to regions where rains
have failed or there is basic issues relating to economic development like
poor schooling, etc.), we are ok. But crucially, the solution is to have
equality in opportunity. As long as you give everybody the same
opportunity, it is good for the country. That means good schooling, good
access to capital, good courts to control and manage violations.


All this to be taken with a grain of piquant salt!!!