Currently, 15 percent of exports from Asia and the Pacific go to the US market, while 16 percent feed the demand from the European Union.

Asia’s developing countries face a bumpy ride in the year ahead as a slowing United States economy and a weakening of the dollar will hit the flow of exports to that western giant, warn economists from a regional UN body.
Thailand and the Philippines were two countries singled out by the economists for already feeling the cost of this emerging economic scenario. Thailand saw a decline in export growth in August last year and the Philippines saw a 4.6 percent drop in exports in September last year from the previous September.
The sectors most affected in that 2007 slide in Thailand were garments, furniture and rubber, added the economists from the Economic and Social Commission for Asia and the Pacific (ESCAP). The sectors hit in the Philippines ranged from textiles and furniture to agricultural ones, such as banana and pineapple.
Currently, 15 percent of exports from Asia and the Pacific goes to the US market, while 16 percent of exports feed the demand from the European Union. The US economy is expected to slow down from 2.9 percent to 2 percent growth. In addition, a weakening US dollar and strengthening regional currencies have made exports from Asia more expensive to US buyers, Ipsnews.net reported.
The worst affected would be countries that depend on exports built around labour intensive products, a low-technology manufacturing industry and the agriculture sector, says Ravi Ratnayake, chief economist of the Bangkok-based ESCAP.
Consequently, governments in the region should invest in programmes to help the poor and the economically marginalized, since they would be the hardest hit if the economic climate worsens, he said.
According to the International Labour Organisation (ILO), such vulnerable groups are part of the informal working sector, which, in 2007, accounted for 60 percent of the region’s labour force. Over a decade ago, when the financial crisis hit the region in 1997, some 66 percent of the labour force belonged to the informal sector.
The ILO estimates that there are nearly 900 million people across the region who fall into this vulnerable group, earning less than two US dollars a day. But in 1997, the figure was much higher, accounting for about two-thirds of the labour force.
The only Asian country expected to withstand a dip in the global economy is India, says Ratnayake. The South Asian giant will be aided by the investments in its expanding manufacturing and service sector and more domestic demand.
ESCAP’s note of caution, however, was balanced with an upbeat view that the broader outlook for 2008 would be robust, with developing economies projected to grow by 7.8 percent. Yet that figure is lesser than the impressive 8.2 percent growth rate the region achieved last year, revealed the UN body in an annual economic report for the region released this week.
As in previous years, India and China were credited for boosting the region’s economic health, with additional contributions from the energy-exporting countries of Central Asia, in particular the Russian Federation, added the report, ’Key Economic Developments and Prospects in the Asia-Pacific Region 2008’.
According to ESCAP, China’s growth continued to remain in the double figures, 11.5 percent in 2007, while India continued to register 9 percent growth for the third consecutive year. Other countries that showed robust economic signs last year were Turkmenistan, with 10 percent growth, Uzbekistan, 9.1 percent growth, Kazakhstan, 9 percent growth, and Vietnam, 8.3 percent growth.
The Japanese economy, the strongest in the region, has begun to show signs of slowing down, states ESCAP, consequently dampening hopes by the developing economies to turn to it as the US economy weakens.

Iceland is a virtual paradise for global investors.

Iceland is going all out to expand its economy and the global reach of its banks and corporations. With a wealthy consumer base that has the sixth-highest per capita GDP in the OECD, 0.8 percent unemployment, negligible corruption and crime rates, an 18 percent corporate tax rate, ample natural resources and a pro-business government, Iceland is a virtual paradise for global investors.
However, with a total population of just 300,000 nationwide, the country provides Icelandic companies with minimal room for growth. Their appetite for international expansion opportunities is helping to put the Nordic island nation on the global corporate radar, reported Gfmag.com.
Icelandic investors have taken stakes in everything from Russian breweries and Bulgarian pharmaceuticals producers to British investment banks. Local financial institutions that are helping to fund such acquisition sprees, and which were privatized in the 1990s, are themselves pursuing international expansion drives as a way to reduce their dependence on the local economy and increase their potential revenue base.
All three of the country’s largest banks (Glitnir, Landsbanki and Kaupthing) continue to increase their market shares throughout the other Nordic countries and the rest of Europe but have recently begun a foray into fast-growing Asian markets as well.
Landsbanki, formerly the country’s central bank and currently its second-largest financial institution by market capitalization, aims to become Iceland’s first bank to open a full Asian branch when it upgrades its Hong Kong representative office early this year. The Hong Kong branch will focus initially on providing trade financing for small and medium-size businesses but also plans to offer project finance for energy projects throughout Asia.
The Icelandic government itself is keen to increase its international influence. Having joined the European Economic Community in 1994, it will now vie for a non-permanent seat on the United Nations Security Council for 2009-2010, with the election scheduled for this year.
Government plans call for exporting energy to mainland Europe via cable. With more than 70 percent of the country’s primary energy consumption coming from geothermal energy and hydropower, Iceland is becoming a global leader in developing such resources.
Reykjavik Energy Invest, an Icelandic investment fund, announced plans to invest $150 million in geothermal development projects in Africa over the next five years, beginning in Djibouti. ICEIDA, the Icelandic development cooperation agency, has supported Uganda’s efforts to develop its geothermal potential for several years and last year signed a bilateral agreement to develop geothermal resources with the government of Nicaragua.
On the home front, steady economic growth, though slowing its pace since mid-2006, continues to fuel concerns over inflation, prompting Standard & Poor’s and Fitch Ratings to cut their ratings.
Inflation has fallen from a peak of 8.6 percent in August 2006 to an average of 2.6 percent in 2006 but is still above the central bank’s 2.5 percent target and is predicted to rise to 4 percent this year and 3.5 percent in 2009. The government’s plans to maintain an expansionary fiscal stance in 2008-2009 will add further pressure.
The 2007 UN Development Program’s annual Human Development Index cited Iceland as the world’s most desirable country to live in; knocking Norway off the top spot it held for six years.

After America’s savings-and-loan crisis in the 1980s, in which hundreds of mortgage banks went bust when interest rates moved against them, fortunes were made by those who sifted through the wreckage for bargains.
The same will be true of the current credit crunch. But when is the time to pounce? Bank of America (BofA) dipped a toe in last August, securing 16 percent of troubled Countrywide, the country’s largest mortgage lender, for $2 billion. That proved premature, with Countrywide’s shares tumbling further as gloom over America’s housing market deepened. Now BofA is having another, bolder go.
“Where there are challenges there are also opportunities,“ said Ken Lewis, BofA’s boss, on Friday January 11, after announcing a full, all-share takeover of Countrywide for $4 billion, reported Economist.com.
Countrywide, battered by an over-reliance on fickle wholesale funding and by fast-rising delinquencies had been forced several times to deny that it was about to go bust. Banking is about confidence, and the markets did not believe its claims to have ample liquidity. Wall Street firms were increasingly worried that Countrywide would default on the huge pile of derivatives contracts it had struck with them in an effort to hedge its mortgage exposures.
Regulators, too, were nervous: the liabilities of Countrywide’s bank had ballooned as it offered depositors high rates to keep itself funded. This raised the uncomfortable prospect of big payouts by the Federal Deposit Insurance Corporation, should Countrywide have had to file for bankruptcy.
It carries big risks for BofA. It is buying a mortgage book that continues to deteriorate. Countrywide also faces a welter of lawsuits over its marketing of subprime loans.
Lewis has long said that he likes the mortgage business, in which BofA trails its peers, but he feels that the mortgage companies themselves have been valued too highly. No one knows if that is still true of Countrywide, but there may be no better time to find out. And BofA, which has had teams poring over Countrywide’s books, probably knows its value better than any other outsider.
BofA perhaps felt compelled to intervene to protect its earlier investment. And it is better placed to act than others. It has been far less damaged by the mortgage mess than its arch-rival, Citigroup.
Having trailed for years, BofA is now worth $34 billion more than Citi. If the Countrywide deal pays off, it will be the undisputed leader in mortgages, as well as in credit cards and overall retail banking.
Countrywide’s attractions have been all but forgotten amid the Ÿber-pessimism over housing. It has 9m mortgage customers, to whom BofA will be itching to sell other financial products. Its mortgage platform has unparalleled technology. The key will be to combine its loan-origination clout with BofA’s strength in distribution to investors. In short, Countrywide has plenty of franchise value.

Turkey is seeking a share of the world’s largest sovereign wealth fund, which is being established by Saudi Arabia.Ê
The Saudi Arabian fund will top all other rapidly growing sovereign wealth funds with a commitment exceeding $1 trillion, due to surpass even Abu Dhabi, which will become the runner-up at $900 billion, reported Todayszaman.com.
In the wake of these developments, Turkish Economy Minister Mehmet Simsek traveled to Dubai to encourage the Saudi Arabia Public Investment Fund and other sovereign wealth funds to increase their investments in Turkey.
Government officials had previously said Turkey could attract around $10 billion in investment from the Persian Gulf countries, excluding the new Saudi Arabia Public Investment Fund, to the real estate, tourism and financial sectors as well as to privatizations.
But this new fund will become a formidable rival for other government-owned investment funds in the Middle East and Asia, which are playing an increasingly active role in channeling capital to Western companies, particularly financial institutions hard hit by America’s mortgage meltdown.
Currently 36 countries or regions have sovereign wealth funds, with some $2.5 trillion in assets under their management--more than the sums invested in hedge funds and private equity funds, according to a report by the Standard Chartered Group.
There are seven large sovereign wealth funds, which are named the “Super Seven,“ all of which have assets over $100 billion and make up 80 percent of the revenues of the 36 now in existence.
The super seven are: Abu Dhabi Investment Authority (ADIA, $900 billion), The Government Pension Fund of Norway (GPF, $322 billion); Government of Singapore Investment Corporation (GIC, $330 billion), Kuwait Investment Authority (KIA, $213 billion), China Investment Corporation (CIC, $200 billion), The Stabilization Fund of the Russian Federation (SFRF, $127.5 billion) and Singapore’s Temasek Holdings ($108 billion).