China’s top leaders continue to struggle to get local and provincial governments to implement economic reforms. China’s government appears to be struggling to get local governments to implement its economic reform policies.

Following a meeting of the State Council, China’s cabinet, on Friday, Xinhua News Agency reported over the weekend that the State Council will dispatch eight inspection teams to visit local governments nationwide to investigate whether economic reforms are being properly implemented.

“Responsibility for poor implementation of policy measures will be investigated, accountability will be serious, and there will be verbal admonishments, criticism or even administrative sanctions according to laws and regulations,” the State Council said, according to Reuters.

The inspection teams will travel to various localities from June 25 to July 5. They have been asked to review implementation of 19 different policies the State Council has announced since July of last year. The State Council has ordered local governments to conduct their own internal reviews of implementation before the inspection teams begin arriving later this month.

According to Reuters, at the top of the State Council’s list is streamlining the administrative approval process to reduce the amount of red tape, an issue that Premier Li Keqiang has been particularly forceful in promoting.  The report said the list also includes ecological and environmental improvements, “construction of major water projects, investment policies for non-state companies, employment of college graduates, construction of affordable housing, and efforts to ensure that the financial services industry supports the real economy.”

The State Council’s announcement came after its own meeting on Friday as well as the third meeting of the new Leading Group for Overall Reform. At the latter meeting, the Leading Group announced “a framework for pilot programs of judicial reform, a work program on judicial reform in Shanghai, and a plan to set up special courts on intellectual property rights (IPR).” Judicial reforms in part are aimed at weakening the grip of power of local leaders.

The Leading Group also debated plans for reforming the fiscal and household registration systems, both of which will be particularly important for local governments in China. At the meeting, President Xi Jinping — who presides over the Leading Group for Overall Reform — said, according to China Daily, that the main objectives of the fiscal reforms are “ensuring a clear division of power [between levels of government], reform of the tax system and stabilizing the tax burden, transparent budgeting, and improved efficiency.” Xi was also summarized as saying that he expects “a fiscal system to serve the initiatives of both central and local governments while clarifying the responsibilities of the two.”

On China’s household reforms, Xi was quoted as saying, “Accelerating reform of the household registration system is an important part of urbanization and involves hundreds of millions of rural migrants.”

He also stressed that implementation would be the key to success in all areas of reform. “The success of our blue print [for reform] will be its implementation,” Xi said. He also said that leading departments should be assigned for every area of reform. “Every single issue should have specific personnel to manage, supervise, urge and implement.”

Primer Li, who is a deputy of the Leading Group on Overall Reform and heads the State Council, also emphasized the importance of reform during an economic conference last week. “To achieve the development goals for 2014, we should better mobilize efforts from both the central and local authorities” to implement reform, Li said, according to local media. At the State Council meeting, Li also reportedly said, “My only concern is that our existing policies are really implemented.”

China’s top leaders are seeking to rebalance the economy from the current model which relies heavily on state-led investment to one more dependent on domestic consumption. This has slowed growth considerably, especially in certain provinces in western and central China that are heavily dependent on government investment and certain kinds of manufacturing.

As The Diplomat expected, local officials — who benefit disproportionally from the current model — appear to be the largest barrier to implementing the necessary reforms. The South China Morning Post reports that at a State Council meeting on May 30, Li “pounded the table as he blasted local officials for inertia in carrying out central government directives.” The new inspection teams for implementation are the latest way the central government has tried to force local governments to get in line.

The Diplomat

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A failure to implement fundamental reforms associated with encouraging competitiveness is putting job creation and Europe’s long-term economic strategy at risk, finds The Europe 2020 Competitiveness Report: Building a More Competitive Europe, released today by the World Economic Forum.

Published every two years, the report aims to assess the progress of European economies in achieving the goals set by the EU’s Europe 2020 strategy to become a smart, inclusive and sustainable society. This second edition finds a Europe that has largely successfully dealt with the macroeconomic turbulence of the past half-decade, yet is enjoying mixed success in implementing reforms necessary to return the region to the top of global competitiveness.

“Europe as a whole has made significant strides towards macroeconomic stability. Now it is time for its leaders to address the long-term competitiveness agenda by implementing the right reforms and smart investments to drive productivity growth. There is no room for complacency, even for those countries that are currently performing well,” said Margareta Drzeniek-Hanouz, Lead Economist and Director, World Economic Forum.

In terms of Smart, The report corroborates Europe’s lack of progress in building a more innovation-based, knowledge-driven economy in comparison to other advanced economies. This category, which measures countries in terms of their record in building business-friendly enterprise environments, implementing a digital agenda, encouraging investment in innovation and optimizing skills and training, also represents the widest gap between Europe’s most and least competitive economies.

While the EU fares well in providing the foundations for sustainable growth, the picture is more mixed for inclusive growth, says the report. Overall, EU countries continue to depict relatively cohesive societies, although many of them are failing to provide gainful employment opportunities for large shares of their populations.

Underlying the gap in competitiveness between Europe and other advanced economies is a deep-rooted competitiveness divide within the region that has proven stubbornly hard to narrow. This is in spite of impressive achievements by many of the more “innovation-poor countries” in adopting reforms necessary to achieve stable macroeconomic environments.

According to the report, there is no one-size-fits-all strategy for lifting competitiveness across all member states as national and regional characteristics all play a part in shaping Europe’s economic landscape. However, one common thread is the need for all nations to build institutional capacity and adopt governance mechanisms that will enable more effective implementation of competitiveness-raising reforms.

An important conclusion of the report is that in the long term, there are no trade-offs between building a competitive economy on the one hand and an inclusive and sustainable society on the other. Competitive economies tend to provide more and better opportunities for their citizens, creating more inclusive societies, and fostering further opportunities for innovation and building environmentally sustainable societies.

“Europe can create more and better jobs, support rising living standards and build economically sustainable societies,” said Nicholas Davis, Director and Head of the Europe Team at the World Forum and co-author of the report. “We hope this report will encourage business, civil society and political leaders at the European and national levels to collaborate to achieve these goals.”

By Eurasia Review

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(China Economic Review)

State-owned enterprises, or SOEs, have made a remarkable contribution to the growth and development of the Chinese economy over the past 30 years. They have provided a stable long-term environment for investment and encouraged the development of the state enterprise sector in line with public as well as private interests.

But SOEs are in retreat. Between 1998 and 2010, the share of SOEs declined from 37% to less than 5% by number of firms, and from 68% to 44% by assets. Calls from inside China are getting louder for further downsizing and corporate governance reforms of the still very substantial SOE sector. Under the new administration of Xi Jinping, policymakers have proposed reforms of government-backed enterprises. The question that remains to be answered is what should take the place of state ownership in the future.

A decade or more ago the answer would have been easy. The investment banks in New York or London would have advised the Chinese government to sell its stakes via secondary offerings to a mixture of banks, financial institutions and private investors, preferably foreign as well as domestic. The objective would have been to use this opportunity of state sales to create an Anglo-American type of capital market characterised by dispersed ownership and high levels of liquidity.

It is far from clear today that this strategy is right for China. A former Minister of the UK government, Paul Myners, has characterized the UK stock market as comprising ‘ownerless corporations.’ The origins of this description can be traced to the highly dispersed nature of ownership in UK stock markets, where institutions such as domestic and foreign mutual funds, pension funds and insurance companies dominate the market. Most of these investors hold too small stakes in companies to be active investors and lack the skills to understand the companies they invest in. The result is that control is vested in the company’s board members who have little ownership and often manage the business at high cost and with poor performance.

Operating as a publicly listed company is also becoming less attractive. Harvard professor Michael Jensen predicted ‘the eclipse of the public corporation’ in 1987, well before the wave of ‘going private’ started around 15 year ago. The Economist in 2012 reported that the number of listed American companies had fallen by about 37% from 1997 to 2012, while in the UK the decline was even more dramatic, at 43%. Many of the companies that have been delisted have been taken private by management and private equity funds tired of the perceived short-termism of the stock market.

It is therefore not obvious that the Chinese government should try to emulate the Anglo-American model of ownership and control. It simply may not be the best one. There is however, another reason not to follow this route and that is, in order to function effectively, the Anglo-American model is dependent on a complex set of institutions, including markets for corporate control and well-developed systems of corporate law and enforcement. China does not have many of these institutions, or rather has different institutions, and grafting Anglo-American stock markets onto the Chinese institutional structure will simply not work.

Japan’s experience of attempting to emulate US capital markets when its institutions were simply not ready for such a task is instructive. When Japan was defeated in the Second World War, the American Occupying Authority sought to dissolve and sell-off Japanese family dominated companies, the ‘zaibatsu,’ which had been implicated in Japanese militarization. Shares in the zaibatsu were sold to employees and investors in local communities. The result was that Japanese share ownership in the mid-1950s was more dispersed than the stock markets of the UK and the US. Laws were passed, including a Glass Steagall Act separating commercial and investment banking, and bankruptcy legislation and security regulation were introduced modelled on the US system.

The experiment failed and had substantial unintended consequences. Shares held by individuals were sold, and gradually accumulated by banks and other financial institutions resulting in a system of “insider” corporate cross-holdings that has only recently begun to be unwound.

Why did Japan fail to develop its capital markets along Anglo-American lines when seemingly all the ingredients were in place? The answer is that Japanese institutions were simply not developed to support the outsider system of ownership. An example is the emergence of investment funds, which have been important in both UK and US capital markets, and at one point comprised about 10% of the Japanese market. Institutions created these funds in Japan to dispose of unwanted stock and sell them to private investors but insider dealing and breaches of trust in combination with other scandals led to the rapid disintegration of this market and instead the emergence of a market dominated by corporate insiders.

What are the alternatives to Anglo-American systems that China could pursue? There are several. Oversight of SOEs could be extended through state asset management companies managing China’s sovereign wealth and state pension funds. Employee share ownership and employee-owned enterprises could be increased and the rights of workers enhanced through their representation on the boards of companies, as is widely observed in many central European corporations in Austria and Germany. Private and public pension funds similar to those found in Canada, the Netherlands and Sweden could provide the engaged, long-term, sustainable ownership that China seeks.

The main message from the experience of Japan and other countries is that whatever path China chooses, it should be tailored to its particular social and cultural context and the role that is sought of enterprises in Chinese society. While there are important lessons to be learnt from other countries, it should not be presumed that their models can be transferred from elsewhere without significant adaption to the Chinese context.

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In April, the government has said that companies engaged in defence manufacturing will not be allowed to further increase foreign portfolio investment beyond August last year level.

Industry body Assocham today asked the government to review foreign investment policy, particularly related with FIIs, in the defence sector.

In April, the government has said that companies engaged in defence manufacturing will not be allowed to further increase foreign portfolio investment beyond August last year level.

This condition "goes against the principle of a stable policy framework which is needed to attract large investments in this sector", it said.

It also said that the April decision has brought the entire process of issuance of industrial licenses to domestic private sector companies to a standstill and, "therefore, be amended,", it said in a statement.

Several domestic companies have applied to the DIPP for industrial licenses to manufacture a wide range of defence products and shares of most of these companies are listed.

FIIs inflows should be encouraged in order to boost country's foreign exchange reserves, it said.

"FIIs are in no position to exercise any control over management of the affairs of Indian companies. Further there are adequate checks and balances within the existing policy framework to protect our strategic interests," it added.

The chamber said that "there is urgent need to review the existing foreign investment policy applicable to the defence sector" on the issue of FIIs investment so that the matter of industrial licenses to several Indian companies which has come to a grinding halt can be restarted and clearances can be expedited.

Speedy implementation of projects in this critical sector of the national economy will contribute in reducing country's dependence on imports, it added.

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This year’s Mother’s Day is a bittersweet moment for me. I lost my  mother at the start of 2014. To honor her memory and to celebrate all the great mothers in the world, let me enumerate some of the wonderful sayings they have dispensed throughout the years. For what practical purpose? To guide each entrepreneur how to enhance a business.

Check out then these 10 everlasting tips from mothers to aid entrepreneurs:

1. Stand up straight. Any time you meet with possible clients or investors, dealing with suppliers or evaluating prospective employees, you need to present an aura of self-confidence. Good posture, eye contact, and a well-modulated voice (avoid mumbling, as mom used to say) present you as a competent person who can be trusted to safeguard an investment.

2. Clean your room. A disorganized life is costly. If an entrepreneur does not possess an organized computer file system, a method for monitoring tasks, a clear office space and well-managed long-term strategies, he or she might continually be harassed and overstressed. Business owners handle a number of functions, and valuable time lost figuring out where a file is kept is counter-productive.

3. Share. Competition (a state where competitors cooperate and work together) can be significantly helpful for entrepreneurs. It could lead to, based on a certain business sector, savings, enhanced profits or new high-value clients. Setting up a referral system with another company, ordering supplies simultaneously with other firms, office space sharing or even pooling resources and dividing expenses can be done. Look for possible competition pals at networking events.

4. Stop watching the TV and go to sleep. New research on sleep is self-evident: entrepreneurs must be efficient, productive, and healthy. The findings on House of Cards? It is still a fact that watching another episode will enhance profitability. Hence, quit watching TV and get enough rest or you might end up having reduced cognitive performance and alertness – not what you need for managing a 15-hour day.

5. Go out and play. Quite literally, leaving your room for fresh air and exercise can improve creativity and minimize stress, leading to more productivity and efficiency at work. At a different level, viewing beyond the present target audience for clients, thinking outside the box while creating a new marketing plan or leaving one’s comfort zone on a business venture can provide excellent returns.

6. Finish your chores before you go out. Every person has favorite as well as un-favorite tasks. Practice the habit of doing first tasks you do not like. Later in the day when self-control slackens due to flagging attention, less discipline will be needed to concentrate on the remaining tasks.

7. Imitation is the best way to flatter others. Some mothers utilize this as the common retort to oft-repeated complain, “She’s copying me,” and during such instances, it can become irritating. But feel free to imitate any brands admired. Whenever feasible, business owners should reach out to business leaders they want to emulate and find opportunity to learn from them (while mentioning their admiration). Entrepreneurs may be more easily flattered than children when others copy them.

8. Getting bored? By all means, stop being boring. Label this as “hard to get rid of”. Countless mothers have often said, “Only boring people get bored,” and this saying hurts. However, nothing can be closer to the truth. Bored with your marketing or promotional campaigns? Perhaps, your prospects might also be bored. It is difficult to get out of the dumps; but it is vital to grab the bull by the horns and win the admiration of more customers.

9. “No one is quite like you.” Being anxious about the competition can lead business people to forget why they are in business in the first place. Hence, they could find new inspiration from what their moms often told them as kids about being special and unique. And more than ever, they should take heart in realizing and appreciating their uniqueness as a business in order to finally make the way for overtaking the competition and providing clients something really worth having.

10. Always say “Thank you”. This Mother’s Day, adults who take their mothers out for brunch or chat with them online should remember to appreciate and thank her for all the valuable advice she has given them in their growing-up years. Remember, that opportunity might not come again.

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Jakarta. New York and London remain the world’s most global cities, while select emerging-market cities led by Jakarta, Manila and Addis Ababa strengthened their ability to challenge global leaders in the next 10 to 20 years, according to this year’s Global Cities Index issued by management consulting firm A.T. Kearney.

The 2014 edition of the Global Cities Index also includes the Emerging Cities Outlook 2014, a forward-looking measurement of emerging cities with the potential to improve their global standing in the next few decades. Jakarta ranked first among 35 cities most likely to move up the rankings.

John Kurtz, A.T. Kearney’s head of Asia Pacific and president director of A.T. Kearney Indonesia, explained that “the study now confirms what so many Jakarta residents know; the city has its share of challenges but has become truly global in a variety of ways and is now attracting talent from both the Indonesian and global business and cultural communities. Recent leadership by Governor Joko Widodo and Deputy Governor Basuki Tjahaja Purnama has lent further credibility and optimism to the picture and it is very clear that Jakarta is on the rise.”

The Jakarta governor is running for president this year and polls suggest he will emerge victorious, being more popular than other serious contenders like the Great Indonesia Movement Party’s (Gerindra) Prabowo Subianto and the Golkar Party’s Aburizal Bakrie. Joko’s party, the Indonesian Democratic Party of Struggle (PDI-P), appears to have won Wednesday’s legislative election convincingly, although not by as big a margin as some expected.

The Global Cities Index, conducted every two years since 2008, measures global engagement for 84 cities on every continent, examining how globally engaged each city is across 26 metrics in five dimensions — business activity, human capital, information exchange, cultural experience and political engagement. This provides a holistic look at what differentiates cities in generating, attracting and retaining global capital, people and ideas.

Mike Hales, A.T. Kearney partner and study co-leader, said that “corporate executives use the information in the Global Cities Index to help them choose the most suitable locations for regional headquarters, research centers and operation hubs. City mayors and urban economic development planners will find insights to inform their improvement plans and investment decisions to better compete in the global economy and against other global cities.”

The Emerging Cities Outlook measures the likelihood that a city will improve its global standing over the next 10 to 20 years. It focuses on the leading indicators of business activity, human capital and innovation.

According to Andres Mendoza Pena, A.T. Kearney principal and co-author of the report, “as physical distances become less relevant and global competition intensifies, cities in low- and middle-income countries will increasingly jockey for position with one another and with cities in higher-income countries.”

Jakarta’s strong showing on the ECO signals that select cities in numerous countries throughout eastern Asia are laying solid groundwork to become global cities and eventually raise their ranking in the Global Cities Index.

Kurtz said that Jakarta was the most likely city worldwide to advance its global position, driven by significant increases across the leading indicators. In 2014, Jakarta showed the greatest improvement in information exchange. The city is an increasingly conducive setting for doing business, anchored by a high GDP growth rate. Human capital, especially in the health care evolution metric, presents a major opportunity for Jakarta to exploit, he said.

In order to capitalize on this potential, according to Kurtz, Jakarta must provide greater transparency in doing business, revamp the regulations in setting up businesses, and be more open to the new global business environment.

Tangible examples that would favorably impact Jakarta could include acceleration of MRT development, better public transportation to support workers to commute between Jakarta and satellite cities, development of the new port to increase throughput of export and import, as well as integration of the infrastructure with central business districts and industrial parks.

Jakarta would also need to improve the presence of international education, an aspect where it still lags behind other cities.

Consistent with previous editions of the Global Cities Index, New York, London, Paris and Tokyo lead the ranking. Among the top 20 cities, seven are in the Asia-Pacific region (Tokyo, Hong Kong, Beijing, Singapore, Seoul, Sydney and Shanghai), seven are in Europe (London, Paris, Brussels, Madrid, Vienna, Moscow and Berlin), and six are in the Americas (New York, Los Angeles, Chicago, Washington D.C., Toronto and Buenos Aires).

The above article is a repost from Jakarta Globe.

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Osaka, Japan’s third-biggest metropolis, plans to sell the city’s 81-year-old subway operator in an initial public offering to lure private investment after ceding ground to Tokyo.

Osaka plans to privatize the operations, which could be valued at more than 600 billion yen ($5.9 billion), in the next few years as part of efforts to become a global metropolis, prefectural Governor Ichiro Matsui said in an April 8 interview. It may also weigh a sale to private investors, he said.

Local governments in Osaka prefecture, near the ancient capital of Kyoto and home to electronics makers Panasonic Corp. and Sharp Corp., are stepping up sales of public assets to cut debt. Osaka is privatizing state-run companies and talking to potential investors including Caesars Entertainment Corp. on a planned $4.9 billion casino resort as it seeks to overcome a declining population.

“I am ready for the subway sale any time,” said Matsui, 50, who also is secretary-general of the Japan Restoration Party. “Osaka city assembly members should all have a sense of urgency to move this economic stimulus forward, as Osaka needs to bring in economic revival.”

A proposal to privatize the metro, which carries 2.24 million passengers daily, was submitted to the city assembly in February 2013, according to documents posted on the Osaka government’s website. The proposal, which is under discussion, would have Osaka transfer the subway operations to a separate government-owned entity and then fully privatize them, the documents show. It didn’t elaborate on the sale method or valuation.

Shrinking Population

The Osaka subway, which started operations in 1933, has nine lines running in the city and totaling 138 kilometers (86 miles). The privatization proposal will need endorsement by two-thirds of the assembly to be passed.

Osaka prefecture’s economic output dropped 6.2 percent to 36.6 trillion yen in the year through March 2012 from a decade earlier, according to the latest data compiled by the Cabinet Office. That compares with a 0.4 percent decline in Tokyo’s output, to 92.4 trillion yen.

The population of Osaka prefecture fell to 8.85 million as of March 1, down 0.1 percent from a year earlier. It’s forecast to shrink another 5 percent by 2025, according to a report compiled last year by the National Institute of Population & Social Security Research. Tokyo’s population, which rose 0.5 percent to 13.3 million in the year to March 1, is projected to decrease to 13.2 million by 2025.

“Osaka’s economic revival is vital to helping Japan avert a default or economic crisis, as Tokyo’s growth alone won’t be enough to bring momentum to the country’s overall economy,” said Matsui. “Other prefectures should follow suit.”

Selling Assets

Osaka joins the nation’s capital in seeking to sell transportation infrastructure. The Tokyo metropolitan government has been studying a sale of its 46.6 stake in the city’s subway operator, Governor Yoichi Masuzoe said March 19.

Matsui said in January his government has been holding talks with global casino operators including Caesars Entertainment, Genting Singapore Plc and MGM Resorts International on a plan to build a resort complex in the Osaka Bay area that would cost at least 500 billion yen.

In February, Matsui said the prefectural government plans to sell Osaka Prefectural Urban Development Co., a commuter rail operator, to Nankai Electric Railway Co. for 75 billion yen. State-owned New Kansai International Airport Co. is working with Sumitomo Mitsui Financial Group Inc. to sell rights to operate two of Japan’s biggest airports, people familiar with the situation said last month.

“By turning to a small government from a big one, Osaka is shifting to companies those things that can be left to the private sector,” Matsui said. “The casino-resort project, airport privatization and subway sale have great potential to lure private money into Osaka and its surrounding areas.”

The above article is a repost from Bloomberg

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