The export boom reflects an ongoing geographical dispersion of production, with assembly operations migrating to lower-wage economies, while more developed Asian economies specialize in production of high value-added components and capital goods.

As almost any shopper in the industrialized countries knows, Asian exports are booming, with growth built increasingly around rapid growth in intra-regional trade that has China playing a central role.
Despite the current slowdown in the world economy, the International Monetary Fund (IMF) projects Asian growth to moderate only slightly, with developing Asia growing by a projected 8.6 percent in 2008. China’s growth is forecast to slow to 10 percent from an estimated 11.4 percent in 2007.
The export boom reflects a still-ongoing geographical dispersion of production, with assembly operations migrating to lower-wage economies, while more developed Asian economies specialize in production of high-value-added components and capital goods.
The resulting increase in vertical intra-industry trade, fostered by foreign direct investment, has created a sophisticated production network in emerging Asia, facilitating the “catch-up“ process of developing Asian countries through technology transfer. India also is making its mark, albeit in services trade, which is outside of the production networks of East Asia.

World Trade Share
The export-oriented growth strategies of emerging Asian economies have been reflected in a steady increase of their share in world trade. The share of emerging Asia in world trade flows reached 34Êpercent in 2006, up sharply from 21 percent in 1990. Moreover, the rise in emerging Asia trade accounted for roughly 40 percent of the total increase in world trade over the period.
The importance of exports to the region has reached an unprecedented level. While the share of exports in GDP was already high for emerging Asia in 1990, it increased further over the past decade, reaching almost 50Êpercent in 2006. This is attributed in part to the small open newly industrializing economies (NIEs), especially Hong Kong SAR and Singapore, for which the exports-to-GDP ratios are 109 and 184 percent, respectively. However, high and rising exposures of other economies in emerging Asia, including China, suggest that this trend is key to understanding economic developments in the region.

Export Hub
Asia’s growing share of world trade has resulted largely from increased regional trade integration. While trade flows in the rest of the world roughly tripled between 1990 and 2006, inter-regional trade involving emerging Asia rose by 5Êtimes, and intra-regional trade within emerging Asia increased by 8Ú times. As a result, trade between the economies in emerging Asia has risen steadily from about 30 percent of total exports by the region in 1990 to more than 40Êpercent in 2006 .
China has become Asia’s export hub, dramatically raising its position as a destination for intra-regional exports and the source of exports from Asia to the rest of the world.

Vertical Specialization
Intra-industry trade is also booming. This trend in emerging Asia tracks developments in the more advanced economies, but the motivation in Asia is quite different.
Intra-industry trade in emerging Asia is primarily a reflection of greater vertical specialization that exploits differences in comparative advantage to build a production network targeting foreign markets. In contrast, intra-industry trade in the developed economy groups (the North American Free Trade Agreement and the European Union) appears to stem primarily from demand for product variety in the context of their large domestic markets. This difference can be seen clearly in the increasing intermediate goods trade in Asia.
The share of intermediate goods in trade flows into emerging Asia has increased to 65Êpercent, while the share in trade flows among more developed economies is about 40Êpercent. On the other hand, the share of intermediate goods flowing from emerging Asia to the more developed economies is low, at around 30Êpercent, as exports to the rest of the world tend to be final goods.

By 2011 drugs worth some $60 billion will come off patent.

Women with brittle bones are in for a bit of a windfall. That’s when Merck’s (MRK) Fosamax, America’s market-leading osteoporosis drug, comes off patent and patients can start buying generic versions.
If history holds, prices for the generic medication, called alendronate, should run 60 percent less than the $90 a month Fosamax tends to cost.
According to AP, those deep discounts on generics are creating unease within the pharmaceutical industry, however. This year alone more than 10 major drugs will lose patent protection, and there are no potential blockbusters emerging from the development pipeline to take their place.
In 2010 the blockbuster, cholesterol-lowering medication Lipitor loses patent protection; the world’s biggest-selling drug pulled in $13 billion for Pfizer (PFE) last year, and the company has yet to come up with a comparable replacement.
Pharmaceutical consultancy IMS Health says that, in all, by 2011 drugs worth some $60 billion will come off patent. Makers of generic drugs, which already hold 60 percent of the US prescription market, have nowhere to go but up.
“Within the first six months to a year of a brand going off patent, it loses 80 percent of its revenues to generic competitors,“ says Amanda Zuniga, a senior analyst with the market research firm Cutting Edge Information.
Big Pharma, however, is trying to stem that rush to generic makers by creating a relatively new category, branded generics.
Essentially, the original manufacturer licenses exact copies of its branded drug to a generic manufacturer, allowing it to hang onto some of the generic revenues. This approach also appeals to those patients who feel most comfortable with a name they know.
Merck, for example, signed a deal on January 11 to supply Fosamax to Watson Pharmaceuticals (WPI).
“It’s become a huge tactic for the pharmaceutical companies,“ says Zuniga. “It’s their last chance to remain competitive.“
Medical specialists advise patients to treat branded generics just like any other drug in a category, however.
“There is no advantage to a branded generic over any other generic,“ says Catherine Tom-Revzon, a pediatric clinical pharmacist at Montefiore Medical Center in New York. “There is no reason to remain on the brand name if a generic is available.“

Chrysler has to get rid of some of its look-a-like models sold by different brands and put more marketing muscle behind the remaining nameplates.

When private equity firm Cerberus Capital Management put Robert Nardelli in charge at Chrysler LLC, the promise was that business as usual would be a thing of the past.
Nardelli’s right-hand man, former Toyota Motor (TM) executive James Press, is making that happen, mainly by trying to emulate the efficiencies of his former employer. At meetings with Chrysler’s dealers this week, Press revealed the beginnings of a plan to overhaul the troubled automaker’s lineup, trimming its 28 existing models to something in the neighborhood of 16 and adding new ones to fill existing gaps, reported Businessweek.com.
Press also told dealers he also wants to accelerate consolidation of the company’s bloated dealer body, resulting in a smaller retail network that sells Chrysler, Dodge, and Jeep brands under the same roof. The moves come on the heels of two major restructuring moves announced by Chrysler in the last 12 months that cut more than 700,000 cars worth of production at several plants and took out about 23,000 jobs.
“We’ll get the company sized right for the market we’ll be in,“ Press told reporters after the dealer meetings on February 8. “We’ll be the best damn little car company there is.“
Press’ emerging retail strategy is what Chrysler needs, but putting it into practice will be a big challenge. The company has to get rid of some of its look-a-like models sold by different brands and put more marketing muscle behind the remaining nameplates. But the plan also risks sacrificing market share and buyers as the company trims its offerings. Plus, getting dealers to buy one another could take years as the company will need to play matchmaker with buying and selling entrepreneurs.
“They will lose sales,“ says John Wolkonowicz of Global Insight’s North American Auto Forecasting Group. “When they get rid of one model, they may only get back 20 percent of those buyers with their remaining cars.“
Press told dealers he wants to eliminate models sold by one Chrysler brand that are basically clones of a car sold by a sister division. His logic is that, with fewer models, Chrysler can put its marketing dollars behind one car in every market segment and create more noise with its advertising.
“Press said they need fewer products so we can really get behind every one of them,“ says one dealer who attended the meeting.
Press did not tell dealers which models are on the block. But it’s easy to see which cars might be killed. Instead of the Dodge Caliber and Jeep Compass, only one compact car might survive. Ditto for the Dodge Avenger and Chrysler Sebring midsize cars. Chrysler also may get rid of either the Chrysler Town & Country or Dodge Caravan minivan and sell just one. The company wouldn’t need two large sport-utility vehicles either.
In all, Press told dealers in San Antonio on Feb. 6 that he envisions that the three brands could sell something like five passenger cars, three SUVs, two crossover SUVs, one minivan, one full-size van, and a family of pickup trucks.
But Press stressed during a speech at a dealer convention in San Francisco on February 8 that he doesn’t have a specific number of models in mind yet and that the company will look for new models to build.
“We don’t know how many models we’re going to have,“ Press said, according to Chrysler’s media web site. “Nobody knows that.“

On January 30th the Indian government approved a slew of long-delayed changes to FDI rules. Although the cabinet took two years to sign off on the changes and postponed them six times, the new rules are not particularly groundbreaking. Restrictions will be relaxed in sectors as diverse as civil aviation, construction development, industrial parks, petroleum and natural gas, commodity exchanges, credit-information services and mining. But this still leaves an unfinished agenda of permitting greater foreign investment in politically sensitive areas such as insurance and retailing.
According to Indiaoutlook.com, India’s foreign investment policy is fairly liberal, allowing up to 100 percent foreign investment in most sectors. However, some sectors have caps on FDI. The government also imposes caps on portfolio investments, within the FDI caps or separately, to cap total foreign equity in certain sectors. These caps apply mainly in areas considered strategic or sensitive, as well as to any investments considered to have national-security implications.
In most sectors, investment up to the caps is permitted on the “automatic route“, meaning that companies need only file papers with the central bank after investing. In areas that the government wants to monitor more closely, prior approval is necessary from the Foreign Investment Promotion Board.
In recent years the Indian government has relaxed or removed the caps in many sectors and shifted most investments to the automatic route. Aimed at encouraging foreign investment, these liberalizations have had considerable success. FDI inflows into India reached a record $19.5 billion in fiscal year 2006/07 (April-March), according to the government’s Secretariat for Industrial Assistance. This was more than double the total of $7.8 billion in the previous fiscal year. Between April and September 2007, FDI inflows were $8.2 billion.
After the latest changes, the cap on FDI in cargo airlines, non-scheduled airlines and chartered airlines will rise from 49 percent to 74 percent, using the automatic route. Non-resident Indians (NRIs) can invest up to 100 percent in the sector. More significantly, the government has allowed foreign airlines to invest in cargo airlines.