Enzio's Clock

--Have you got any comments on Toyota, either the company or the stock? (we are asking all our guests this week if they can make comment on Toyota).

·        I see this worrisome incident against the backdrop of increasing politicization of multinationals’ activities

·        On top of which we have the mid-terms coming up in the USA, so beating up on Toyota costs nothing to the domestic US politician

·        In any instance, this domestic political tirade by US politicians will cost US firms in Japan, so expect more of what I call in my most recent book “host country protectionism”

--The Hong Kong budget will be handed down in a couple of hours.  Could you  please provide some thoughts on this?  Also the Singapore budget handed down on Monday?

·        HONG KONG

·        As anywhere in surplus countries, budgets are for hand outs. So we will see some “goodies” handed-out here

·        Crucially, however, the government won’t show any leadership whatsoever in investing in three sorely-needed areas:  pollution, English and hospitals

·        Of concern is that with increased “democratization” our politicians seem only to call for increased spending; I see no policy  initiatives from them whatsoever on pollution, English or health issues, for instance.

·        SINGAPORE

·        Prudence reigns, as always in this Republic

·         It will spend S$5.5 billion over the next 5 years to boost long-term growth. 

·        In particular, the Government will

1.    spur productivity (via tax benefits, tax grants and subsidies), and

·        it wants to do this in order to ensure growth of 3%- 5% annually so it reckons that with productivity rising by 2-3% per year, the labor force will growth by 1-2% per year

·        it will re-structure the economy to higher value-added activities and exit from the less efficient ones

·        currently, the gov’t says that productivity in manufacturing and services is about 55% that of America’s and Japan’s

·        this productivity increase should increase real incomes by about 33% over a decade

2.    reduce dependence on foreign workers

·        waning productivity is blamed on the large influx of foreign workers coming in

·        one in three workers in Singapore is a foreigner

             3.   The annual budget deficit will be about S$3 billion

--Are you able to give us any preview of what you expect from the India  budget?

·        The key plank will be the downgrading of subsidies on fuel, food and fertilizer

·        This is so that the government can recover from its worst fiscal deficit in 20 years: subsidies account for over 10% of national expenditure

·        Within this, the key emphasis will be on reducing energy subsidies; if they are not cut, energy prices will keep going lower

·        But despite reducing subsidies, they will increase support for the rural economy by supplementing the National Rural Employment Guarantee Act

·        Some of the stimulus measures of last year will be stopped

·        They also will move along the introduction of a goods and services tax

·        They probably will not introduce measures for financial liberalisation

--Any other points you would like to raise?

·        The trickiest policy area is going to be the formulation of smart exit policies concerning particularly MONETARY (as opposed to fiscal) policy

1.    Bernanke has to testify to Congress

2.    His – and the government’s- past actions on bailing out the banks has the unfortunate consequence of politicizing the monetary independence of the Fed: now Congress is starting to ask how the Fed will conduct its monetary policy