Monthly Archives: October 2012

Australia is second best to do business but more is needed to be done

While Australia is already second best place to do business, more is needed to be done to be competitive. In a globalised world second best may not be enough.

 

Australia second easiest place in world to start-up – but it’s downhill from there

By Michelle Hammond
Thursday, 25 October 2012

Australia is the second easiest place in the world to start a business, according to a new report by the World Bank, but drops back to 10th place when it comes to the ease of doing business.

 

The report, titled Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises, marks the 10th edition of the Doing Business series.

 

This series analyses regulations that apply to an economy’s businesses during their lifecycle including start-up and operations, trading across borders, paying taxes and protecting investors.

 

The aggregate ease of doing business rankings are based on 10 indicators and cover 185 economies.

 

According to the latest report, Australia is the second easiest place in the world to start a business, beaten only by New Zealand.

 

The study found it was possible to set up an operation in Australia in two days and after just two procedures.

 

It also ranked Australia fourth with regard to ease of obtaining credit, behind Malaysia, South Africa and the United Kingdom.

 

While Australia may rank highly when it comes to the ease of starting up, it was ranked 10th with regard to the ease of doing business.

 

Taking the top spot for the seventh straight year was Singapore, followed by Hong Kong, New Zealand, the United States, Denmark, Norway, the United Kingdom, South Korea and Georgia.

 

But Gavan Ord, a business policy adviser at CPA Australia, says the index is, to some extent, flawed and should therefore “be taken with a grain a salt”.

 

Ord says the index focuses solely on laws and regulations and, even then, it does not cover all aspects of regulation.

 

“The index does not take into account factors such as market size or affluence, quality of many infrastructure services, security of property, macroeconomic conditions or the strength of underlying institutions,” he says.

 

“[It also fails to address] the ability of managers, staff and businesses to compete… Therefore, like other global competitiveness surveys, must be taken with a grain of salt.”

 

Nevertheless, Ord says several conclusions can be drawn from the findings.

 

“Australia gets most of the business basics right – for example, rule of law, transparency, accountability,” he says.

 

“While Australian governments have done a tremendous job in making the country a relatively friction-free place to set up a business, once a business is set up, Australia compares poorly in many of the areas essential to operating a business.”

 

“It would appear that Australia has some way to go to match the leading economies in developing a streamlined, effective and inexpensive system that permits businesses to start up at higher rates than elsewhere, to succeed at higher rates than elsewhere and to overcome other disadvantages that might be present in the Australian economy.”

US Solar manufacturer cuts production in the Philippines

I never thought this would never happen but it did. Still, I hope the solar panel business finds a niche in the Philippines both as a market and as a production base.

 

From Eco-Business.com

SunPower Corp to idle Philippines production lines, cut 900 jobs

Posted By Michelle Del Gallego-Ngo On October 16, 2012 

SunPower Corp said it will idle some solar cell production lines in the Philippines and cut about 900 jobs, or 17 per cent of its global workforce, as overcapacity continues to cast a shadow on solar equipment makers.

The solar panel industry has been hit by excess capacity and waning demand with top consumer Europe cutting back subsidies for green power. Prices have tumbled about 30 per cent this year, virtually erasing profits across the industry.

SunPower said on Tuesday that it will temporarily idle half of the 12 lines at its 330 megawatt Fab 2 cell manufacturing plant and 20 per cent of its panel manufacturing in the Philippines.

The company, which is majority-owned by French oil company Total SA, closed a plant in the Philippines earlier this year and streamlined its manufacturing processes at its other two plants in the country.

Sunpower said most of the 900 job cuts would be in the Philippines. It did not specify where the other job cuts would occur.

The company had about 5,220 employees worldwide as of January 1, with 4,130 employees located in the Philippines.

A number of solar companies have begun to cut production, but analysts say more cuts are needed to balance supply and demand.

Suntech Power Holdings Co Ltd, the No.1 solar panel maker, slashed production capacity last month, while First Solar Inc cut output of its thin-film solar panels earlier this year. A number of other players have been operating their plants at reduced rates.

California-based Sunpower expects to record a restructuring charge of $10 million to $17 million, most of which will be in the fourth quarter. More than 90 percent of these charges will be cash.

Sunpower said it was looking at producing its lowest-cost solar panels for less than 75 cents per watt, on an efficiency adjusted basis, by the end of 2012.

Sunpower shares, which have fallen 47 per cent in the last 12 months, closed at $4.71 on Monday on the Nasdaq.


Article printed from Eco-Business – Asia’s Cleantech & Sustainable Business Community: http://www.eco-business.com

URL to article: http://www.eco-business.com/news/sunpower-corp-to-idle-philippines-production-lines-cut-900-jobs/

Opportunities for PH App developers

Here’s one opportunity for Filipino App developers to offer value for money to local business for their App needs considering the escalating cost of development.

 

From IT Wire.com

Got $1 million? Get an app

Got $1 million? Get an app

The days of the $10,000 app are numbered. High rating, well executed apps now cost hundreds of thousands, even millions of dollars to develop – and the stakes are high, with 45 billion apps expected to be downloaded globally this year.

Melbourne based app developer Outware Mobile, which has developed apps for Foxtel and Seek along with racing and AFL apps for Telstra has a number of seven figure projects on the go. It is also working with one of the big four banks on app development.

Director Danny Gorog explains the motivation for the increasing app spend; “Putting out a quality app for our generation is more important than a TV ad.”

And it’s a costly business. “Building an app is more technically complex than building a website.”

According to technology analyst Gartner 45 billion apps will be downloaded from mobile app stores this year – a figure which will soar to 309 billion by 2016. While the bulk of those will be free apps, for enterprises looking to reach customers or prospects the app market is a hot property with many prepared to invest heavily in order to capture market share.

Mr Gorog said it was a mistake for companies to outsource their app development to a digital agency which then hired a contractor to write the app. Once the app was developed the contractor was often let go – making it hard to keep an app updated and relevant he said.

According to Eytan Lenko another Outware director, apps development is increasingly “a journey rather than a destination” requiring regular updates to keep the app current with rapid hardware upgrades.

Mr Gorog said that there was also evidence that “Apple is cracking down on apps that don’t do enough,” which was forcing organisations to develop richer, more complex apps.

Despite the fast rising costs involved, Melbourne-based Outware has grown rapidly since it was set up by Mr Gorog and his partners Mr Lenko and Gideon Kowadlo in 2009. With a team of around 30 people the company expects to be named on the next Deloitte Tech Fast 50 list.

However the company acknowledges that it can be hard to find exactly the right talent it needs. “We have to go through 40-60 resumes to find a developer we like,” says Mr Gorog who added that Australia was suffering “A real skills shortage in this area.”

He said that the company’s ability to grow was limited by access to talent.

Mr Lenko said that Outware, which worked closely with clients using Agile style methodologies to develop apps, received around 10-15 inquiries a day, many of which it was unable to service. As to the costs he said that for a “Quality app, integrated with the back end and properly tested, it could easily get to $100,000 and it’s not hard to get to $500,000.”

Filipinos are good in Math too

Filipinos are good in math too judging on the recognition given to the following mathematicians.

Australian Mathematics Trust awards Filipino mathematicians 
By Rainier Allan Ronda (The Philippine Star) Updated October 25, 2012

 

MANILA, Philippines – The Australian Mathematics Trust (AMT) awarded more than 130 budding Filipino mathematicians who garnered “high distinction” and other merit awards in the 2012 Australian Math Competition (AMC) administered via correspondence last September.

Dr. Peter Taylor, outgoing executive director of the AMT, and Nick McCaffrey, acting deputy head of mission of the Australian embassy in the Philippines, personally handed out the medals and certificates from the AMT to a total of 73 Filipino awardees during award ceremonies held at the Bayview Park Hotel in Manila last Oct. 17.

Taylor, in honoring the young Filipino awardees, also hailed the Mathematics’ Trainers Guild-Philippines, especially its president, Dr. Simon Chua, for their efforts in helping young Filipino students with a potential in excelling in mathematics, hone their skills to attain world-class competition levels.

Farrell Eldrian Wu, 12, a grade 7 student of MGC New Life Christian Academy in Taguig, was awarded his Peter O’Halloran certificate for getting a perfect score in the 2012 AMC. Wu was one of only two students who got the certificate, with the other being Teo Zhi Yi of Singapore.

The AMT said that there were about half a million students from 30 countries who joined the the AMC correspondence math tests this year.

Chua, president of the Mathematics Trainers Guild-Philippines (MTG), said the Philippines performed impressively in the AMC, with 73 among the 3,617 Filipino students who joined this year’s AMC getting awards.

Aside from Wu, Filipino students who won AMC Medals and Prize Awards for belonging to the top 99+ percentile were Andrew Brandon Ong, Chiang Kai Shek College; John Thomas Chuatak, St. Stephen’s High School; and Justin Yturzaeta, Jubilee Christian Academy; Bryce Ainsley Sanchez, Grace Christian College; Eion Chua, MGC New Life Christian Academy; Dion Stephan Ong, Ateneo de Manila Grade School; Matthew Eric Tan, St. Stephen’s High School; Patrick Nino Policarpio, Greenpark Montessori Learning Center; Christian Philip Gelera, UP Integrated School; Shaquille Wyan Que, Grace Christian College; and Deany Hendrick Cheng, Grace Christian College.

Winning an AMC High Distinction Certificate Awards were Immanuel Josiah Balete, St. Stephen’s High School; Sted Micah Cheng, Hope Christian High School; Hiraya Marcos, Philippine Cultural College-Main; Kaizen Naquita, SPED Integrated School de Iloilo; Rene-John Ongchua, Solomon Integrated School de Iloilo; Trisha Danielle Sia, Chiang Kai Shek College; Dan Alden Baterisna, Colegio San Agustin Makati; Adolph Monji Chen, Xavier School; Drew Skyler Co, Jubilee Christian Academy; Maxinee Louise Co, Ateneo de Iloilo-SMCS; Miguel Bradford Lao, Philippine Cultural College-Main; Jacob Peralta, PAREF Southridge School; Steven Reyes, St. Jude Catholic School; Trisha Denise Siy, MGC New Life Christian Academy; Philmon Wee, Xavier School; Juan Pablo Abola, PAREF Southridge School; Alodia Carey Baisas, Colegio San Agustin-Binan; Szel Leeven Embay, La Salle Academy; John Henry Marquez, UP Integrated School; Raymund Carlo Masbano, St. John’s Institute; Zeidrich Monares, UP Integrated School; Stefan Marcus Ong, St. Jude Catholic School; Lance Christian Ting, St. Stephen’s High School; Bon Leif Amalla, Colegio San Agustin-Binan; Luke Matthews Bernardo, Philadelphia High School; Vicente Raphael Chan, Zamboanga Chong Hua High School; Jinger Chong, St. Jude Catholic School; Jan Joshua Cruz, Pasig Catholic School; Shamira Liao, St. Stephen’s High School; Jose Ignacio Locsin, St. John’s Institute; Eason Wong, Philippine Cultural College-Caloocan; Clyde Wesley Ang, Chiang Kai Shek College; Kyle Patrick Dulay, Philippine Science High School-Main; Xavier Jefferson Go, ZamboangaChong Hua High School; Grant Aaron King, Grace Christian College; Angelika Joie Tagupa, Colegio San Agustin-Binan; Raphael Villaluz, Philippine Science High School-Main; Raymond Joseph Fadri, Makati Science High School; Kelsey Lim Tiong Soon, Grace Christian College; Albert Jason Olaya, Philippine Science High School-Main; Ezekiel Christian Ong, UNO High School; Gerald Pascua, Philippine Science High School-Main; Vince Benedict Say, St. Jude Catholic School; Adrian Reginald Sy, St. Jude Catholic School; James Vincent Tan, Bayanihan Institute; Jonn Angel Aranas, Makati Science High School; Nathanael Joshua Balete, St. Stephen’s High School; Austin Edrich Chua, St. Jude Catholic School; Francis Concepcion, Philippine Cultural College-Main; Ma. Czarina Angela Lao, St. Jude Catholic School; Reine Reynoso, Philippine Science High School-Main; Matthew-Ryan Tan, St. Jude Catholic School; Kaye Janelle Yao, Grace Christian College; Karli Ang, Philippine Institute of Quezon City; Jervis Chua, Philippine Cultural College Main; Aaron Jevon Dy, Xavier School; Martin Lewis Koa, St. Jude Catholic School; Himig Marcos, Philippine Cultural College Main; Ron Gabriel Navarro, Philippine Science High School; Lorenzo Gabriel Quiogue, Ateneo de Manila High School; and Jason Allan Tan, Jubilee Christian Academy.

 

 

NBN to promote higher Teleworking take-up

One opportunity that will be available to local with the NBN (National Broadband Network) is wider teleworking opportunities with workers able to access faster broadband speeds for their work needs.

Two weeks in the car to get to work

Two weeks in the car to get to work

National Telework Week is urging Australian businesses to consider adopting more flexible working arrangements, with a new survey showing workers in major cities are losing up to 12.5 days annually travelling to and from work.

In fact Sydneysiders, who suffer the longest average travel times of 70 minutes daily, now have comparable commute times to workers in New York (74 minutes), Paris (72 minutes), Los Angeles (67 minutes) and Tokyo (76 minutes).

Around the country, NSW workers recorded the longest national daily commute – with the typical employee travelling for an average 64 minutes. However workers in all states recorded lengthy figures with Victorian workers commuting for 55 minutes daily and Queensland employees driving for 50 minutes.

Even Tasmanians, who recorded the lowest travel time of 40 minutes daily, spent over a week commuting to and from work annually. Rizvi says that on top of being unproductive, international research is beginning to show a direct link between long commuting times and a range of health factors including increased stress, exhaustion and employee absenteeism.

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“Research from around the world shows the adverse affects that elongated commutes can have on employees. In fact new research from Sweden shows that workers who travel between 30-60 minutes daily have significantly higher levels of sleep deprivation and exhaustion. While for many workers the daily commute is a way of life, there are avenues that businesses can take to reduce this burden,” says Rizvi.

Rizvi says National Telework Week, an upcoming initiative to help increase the number of Australians engaged in telework from 6% to 12% by 2020, has been developed to help businesses and workers realise the benefits which can result from blending flexible working practices into workplace policies.

“The rollout of the National Broadband Network will enable more people to telework, providing reliable high speed data transfer and more opportunities for collaboration,” says Rizvi. “Telework is becoming a much more economically viable and productive option for both employers and employees.”

PH Globe Telecom bringing LTE Roaming to Australia

Here’s a first. A Philippine telco sharing its new technology and bringing it to Australia.

From IT Wire

Globe LTE roaming “headed to Australia”

The PhilippinesGlobe Telecom has signed a deal to offer LTE roaming in Hong Kong and Korea. It intends to expand the service to Australia and other countries.

Globe has partnered with China Mobile in Hong Kong for the LTE data roaming service and will soon launch the same service with SK Telecom in Korea. President and CEO Ernest Cu says the company plans to offer the service in Australia as soon as possible.

“These two operators are the first of many in the pipeline,” said Cu. “We are also working with IPX providers Sybase, Aicent, Syniverse, Citic, Tata, and BICs to allow us to scale up our LTE roaming partnerships with operators from Australia, Singapore, the USA, Japan, Canada, and the Middle East. We look forward to reaching these countries in the coming months.”

Cu says Globe is the first telco to offer LTE data roaming. “With this service, Globe subscribers roaming with partner operators abroad may now enjoy the same high-speed LTE data usage as they can in LTE-covered areas within the Philippines.”

Globe was first to introduce 4G technology in the Philippines in 2009, with the deployment of its Worldwide Interoperability for Microwave Access (WiMax) network. Last September, Globe launched its 4G LTE network covering 45 sites in Makati City. To date, Globe has over 2,700 4G sites, which it says will increase to over 4,000 sites by the end of the year.

Globe is a leading Filipino telco, often confused in this country with the Australian company of the same name. The two companies have no relationship. Globe is 47% owned by SingTel and 32% by Ayala Corporation, a Filipino conglomerate. The remaining 21% of stock is publicly traded on the Philippine Stock Exchange. It has annual revenues of around US$2 billion, and 7500 employees.

New Filipino Cardinal named by Pope Benedict XVI

The Philippines gained a new Cardinal in the person of Bishop Tagle. Let’s hope he may give the needed spiritual guidance for the many Filipino Catholics in this challenging globalised world.

 

Pope Benedict names 6 new cardinals in surprise announcement

CWN – October 24, 2012

Pope Benedict XVI has announced that he will create six new cardinals in a consistory that will be held on November 24.

The Pope’s announcement, issued at his regular general audience on October 24, caught reporters by surprise. The Pontiff elevated 22 new members to the College of Cardinals at a consistory in February; it is unprecedented to name two sets of cardinals in a single calendar year.

At the time of the February 2012 consistory, many reporters commented that the Pope’s selection of new cardinals had increased the influence of European prelates–and more particularly Italian cardinals–at a future consistory. But none of the Pope’s 6 latest choices is European, and only one, an American, is currently working in Rome.

The six new cardinals will be:

The addition of six cardinals will increase the membership of the College of Cardinals to 212 and the number of cardinal-electors to 120. There are currently 116 cardinal-electors, but two of them, Cardinals Francis Arinze and Renato Martino, will turn 80 before November 24 and thus become ineligible to participate in a papal conclave.

Most of the newly designated cardinals are currently in Rome to participate in the Synod of Bishops. Archbishop Tagle, speaking to Vatican Radio after his appointment was announced, said that he saw the honor as the Pope’s expression of support for the Church in the Philippines. The cardinal-designate said that the Church should listen to the people, “to be first in solidarity with them, not to pretend we have all the solutions.” As a minority in Asia, he said, the Church has learned to approach the public with quiet humility, not as “a triumphalistic, know-it-all institution.”

Archbishop Onaiyekan—who has been proposed as a candidate for the Nobel Peace Prize because of his work for inter-religious harmony in Nigeria—remarked that becoming a cardinal would mean that he shared in the “universal responsibility” of the Roman Pontiff. Speaking to Vatican Radio about the situation in Nigeria, Archbishop Onaiyekan said that Christians in the African nation “do not see themselves as being under any massive persecution by Muslims.” The tensions between the two faiths, which he conceded are serious, are “caused the reckless utterances and activities of extremist fringe groups on both sides of the divide,” he said. The cardinal-elect said: “We have to work together to make sure that the fanatics do not dictate the agenda of our mutual relations, pushing us to be enemies of one another.”

Allow me to be your Servant

I am posting this Homily made by Fr Arnel in his Sunday mass which also happens to be the day when Pope Benedict canonized the second Filipino Saint Pedro Calungsod. At the end of the day, we are all servants of the Lord.

 

HOMILY FOR THE 29th SUNDAY IN ORDINARY TIME (B)  By Fr. Arnel Aquino SJ
On my last year in Boston, a friend of mine, Fr Joe Bagetta, invited me to give a Lenten talk to parishioners of Boston Cathedral. Back in the day, people refered to Boston as “Catholic Boston” because all through the 19th century, Catholics made up the largest religious community in the city. Fr. Joe welcomed me into the sitting room of the cardinal’s residence while we waited for the parishioners to fill in the church downstairs. I was just a few doors down from Cardinal Sean O’Malley’s office. It was an old sitting room; wooden panels, heavy red velvet curtains, a matching wine-red rug, and the smell of old mansions. On the walls of the room hung larger-than-life oil portraits of cardinals past, shepherds of the Boston flock, the kind that you see in haunted mansions in the movies.
          The portraits were very beautiful up close, especially how their eyes were painted, and how the brush captured the grain of their priestly vestments. I guess portraits like these were supposed to coax out of you, a breath of awe. It certainly did out of me. You wouldn’t miss the regality about them: gold-threaded vestments, dainty lace around the cuffs, the velour of the miter, the shine of lacquer on the throne-like chair, the rings of gold accentuating hands that never seem to have done laundry or chopped wood. The cardinals were now mute, Yet every portrait whispered of the power and affluence that came with the position of shepherd of the Church; really fit for royalty, fit for a king in a king-dom.
          In fact, I was thinking that afternoon, if the apostles were with me in that sitting room, they’d probably have asked, “Where are we?” “It’s the Cardinal’s sitting room,” I would answer. Maybe they’d ask, “What’s a cardinal?” And I’d be hard put at explaining that to them, especially to try to connect cardinals with the apostolic line (?) which is their line? Maybe I can start: “Well, cardinals are descended from you, guys.” And it would probably blow their minds. Some of them might even say, “Wait, it has all come to this, what we started?” And I’d know what they mean. Because Jesus taught them about the kingdom of God, but not this kind, I suppose. They’d probably be mystified that what before was a kingdom of fishermen, tax collectors, the blind, the lame, the hungry, the widows…had now become very similar to the kingdom of…well…Caesar and Roman centurions and thrones, goblets, jeweled rings, velvet capes, subjects. In other words, we would think that the apostles would be nonplussed at all this royalty, wouldn’t we? They’d never have ambitioned for this kind of a kingdom, would they?
          But today’s gospel says that at least two apostles did have the wrong notion of the kingdom: James and John, the sons of Zebedee. “Teacher, we want you to do for us whatever we ask of you. Grant that in your glory, we sit one at your right and at your left.” And that’s getting the Kingdom all wrong. For it bears no difference from the kingdoms of the world—kingdoms with a throne on which a potentate sits, and on two sides of him, trusted advisers whose whispers carry sway. The worst thing about it? It was Jesus’ apostles themselves who did not get the point of the Kingdom of God, which meant that they still did not get Jesus, what he was all about.
          We are all prone to that, are we not? Self-entitlement. Self-entitlement is a very gradual slope. In self-entitlement, we steadily go from being thankful for blessings freely given us, to being demanding of blessings we now believe are due us. We go from grateful undeserving recipients of gifts, to begrudging strikers for our rights to them. We go from saying, “Who am I (to deserve this grace)?” to saying, “Do you know who I am (and my right to this grace)?” Whereas before God was giver; now, God is ower. In self-entitlement, mas pinapansin na natin kung anong ipinagkakait, imbis na mas ipagpasalamat natin kung ano ang ipinagkakaloob.
          Yet, look at the servant of God as the first reading characterizes him. God says, “My servant gives his life as an offering for sin,” not demand it as though owed him. “Through his suffering, my servant shall justify many, their guilt he shall bear.” The servant of God walks off as a scapegoat of sinners, not a chancellor of kings. In the second reading, Paul says that the great high priest “is able to sympathize with our weaknesses because he has been similarly tested in every way,” instead of demanding to be exempt. In other words, if there’s anyone truly entitled to the share of glory and honor in God’s kingdom, it should be Jesus himself. Yet he privileged himself nothing. Everything that he enjoyed, even his power, he saw as the Father’s gift. When the ungrateful crushed him under the weight of a cross, his last breath was still never a claim, but a surrender.
“You know that the rulers over the Gentiles lord it over them, and their great ones make their authority over them felt. It shall not be so among you. Whoever wishes to be great among you will be your servant; whoever wishes to be first…will be the slave of all.” Jesus paints a portrait of true greatness, doesn’t he? Notice: there is no royal velvet in that portrait, no shimmer of gold, no throne, no royal estate. Yet, that is what kingship is all about in the kingdom of God: faded white tunic, sweaty brow, rough hands, folded knees that draw the body down to towards the earth where the feet of friends might be washed, and a beautiful, warm smile in his  eyes that look up at you and say, “Allow me. Entitle me to be your servant.”
Ad majorem + Dei gloriam!

 

Sources of Philippine economic growth

Former NEDA secretary Cielito Habito believes the Philippine economy is largely powered by local stimulus spending by the government. I wonder how about the remittances of the OFWs and the investments made by BPOs?

 

What is driving the economy?

By 

Monday, October 22nd, 2012

It is remarkable that the Philippine economy has been showing dynamism this year so far, even with a sluggish world economy. This implies that the energy driving our economic growth lately is coming from within. Indeed it is internal demand—that is, we Filipinos ourselves purchasing our goods and services—that has provided the current impetus for heightened economic activity, thereby providing increased jobs and incomes for Filipinos. I will explain some of the evidence on this below.

In basic economics, we are taught that the products and services produced in the economy are bought by four major sectors: private consumers for their consumption needs; businesses and firms for their real investment requirements such as structures, equipment and materials; government for public infrastructure and services, and for its own consumption requirements like office supplies and equipment; and foreigners who buy our products and services as we export them abroad, or buy them here as tourists.  Growth in spending by any or all of these would propel growth in the economy as a whole, as increased demand for goods and services would certainly draw a response of greater production on the part of the economy’s producers.

What’s more, any rise in spending by any of these four sectors of the economy provokes a multiplier effect that leads to even more growth in economic activity. This is because any new spending leads to a chain reaction of new incomes and consequent new spending. If a company spends P100 million on a new factory, this turns into P100 million in total incomes received by contractors, engineers, construction workers, suppliers of equipment and construction materials and others. But that’s not the end of it. Those various people now have more money to spend or save as they choose. If people save P20 out of every additional P100 income they receive on the average, then the original P100 million of investment spending turns into a new round of P80 million in spending on various things such as food, clothing, appliances, etc. that those construction people normally spend their incomes on. And since anyone’s spending turns into someone else’s income, that second-round P80 million in incomes turns into a third round of spending amounting to P64 million. This becomes yet another round of incomes spurring yet another round of spending, and so on down the line.

Ultimately, the P100 million originally spent by the investing firm will actually create five times as much (P500 million) total production and incomes. The mathematically inclined can figure out that if the saving rate is 20 percent or 0.2, the multiplier works out to be one divided by that, or five. So if people tend to save less, say 10 percent, every spending gets multiplied by even more (that is, 10) and generates 10 times more production and incomes in the economy. And even more so if those savings are kept within the country, so that the banks receiving them could further put that money to work within our domestic economy, say by lending the savings to a company that would invest it in a new factory—thereby repeating the same story above.

Official data suggest that there is indeed more domestic spending by consumers, investors and government lately, even as foreign purchases of our products (especially in Europe) had slowed down due to their own homegrown difficulties. In particular, government spending for both its consumption requirements and for public construction has dramatically swung around from a negative performance last year. In the first half of the year, government consumption spending grew 12.3 percent, a dramatic turnaround against the 4.6-percent drop in the same period last year. Government construction spending jumped 55.4 percent after falling 51.1 percent last year. The government, stung by criticisms that it directly dragged down the economy last year with reduced spending as it worked to plug corruption loopholes, has now come back with a vengeance. And this time, having done what it did last year, it has greater confidence that the money it spends goes (mostly?) to the intended purposes, rather than be siphoned off to bank accounts abroad and killing the usual multiplier effect. (Remember the question on why a neighboring country that appears to have as much corruption as we do manages to have its economy grow faster than ours? The explanation offered has been that their corrupt officials keep the money at home, while ours stash the money abroad.)

The data show that firms’ investment spending on durable equipment, breeding stock and orchard development and on intellectual property products have likewise sped up significantly from last year’s pace. Private consumption growth is similarly brisk at 5.7 percent. Interestingly, among the strongest sources of growth in people’s spending are communication (with our continuing fascination for ever more sophisticated smart phones), restaurants and hotels, and recreation and culture. These suggest to me that domestic tourism has been a particularly important driver of our growth. One only needs to experience the now common flight delays and overcrowded airports to be convinced that Filipinos are traveling a lot more—and perking up the economy in the process.

The good news is that spending by foreigners on our products—i.e., our exports—has lately resumed growth after contracting last year. Even then, the latest figures suggest that the export turnaround may be tentative. But I wouldn’t lose sleep over this one. After all, our economy is now speeding along on its own steam, through the Filipinos’ own spending, multiplier effect and all.

E-mail: cielito.habito@gmail.com

 

AUS is 2nd, 12th or 18th globally

Depending on what measure is used Australia is going great guns economically right now. But like what the article said its more important to use a variety of other measures to accurately describe the performance of the country.  For me the greater need is to ensure that the fruits of the country’s economic success is shared with the rest of society in an eligatarian way as what Australians best describe their country.

Sizing up the economy: Are we as good as we think?

18 October 2012 Tom Conley

Treasurer Wayne Swan recently noted that Australia now has the world’s 12th-largest economy. This suggests it has moved up three places during Labor’s period of office, and regained the three places it had lost during the Howard government’s tenure.

Swan boasted that:

“In the past five years, Australia’s economy has surpassed the economies of South Korea, Mexico and Spain. Our economy has grown around 11% since the end of 2007, while the US has grown only around 1.75%. Many European countries are still substantially smaller due to the massive recessions they have suffered. Inhabiting a place among the top dozen largest economies on the planet is particularly impressive when you consider that we rank 51st in terms of population.”

Swan is right: this is a remarkable outcome. But it must be noted that one of the reasons we’ve improved our ranking is because of the appreciation of the Australian dollar against the US dollar. In 2007 the Australian dollar averaged 83.9 US cents, compared to a 2012 average of 103.4 cents.

If economies are measured by converting the domestic currency value of GDP to US dollars, when a country’s currency appreciates against the USD, the economy “increases” in size as well, and vice versa. When the Australian dollar fell to around 50 cents in the early 2000s, the Australian economy was relatively much “smaller” in size.

If the Australian dollar were to fall substantially over coming years, other factors remaining equal, the “size” of our economy would also decrease. This US dollar exchange measurement, therefore, is an unsatisfactory way to measure the real size of economies, let alone wealth or development.

An alternative way of measuring the size of economies is by using a concept calledpurchasing power parity (PPP). A PPP index provides a way to convert national accounts to a common currency – called Geary-Khamis or international dollars – adjusting GDP to reflect different costs of living and production.

As most travellers and international investors know, the costs of goods, services and production vary considerably across countries. The most widely known use of PPP is The Economist’s Big Mac Index, as well as the lesser-known iPod Index. Both, however, are oversimplifications of PPP.

If we consider the top 20 countries on PPP and USD terms, we get vastly different results. Using IMF data, I have ranked countries on their 2012 “results”.

In 2012, China is half the size of the United States on a USD basis, compared to more than three-quarters measured by PPP. On the latter measure, the IMF estimates China to overtake the United States by 2017, but on USD terms it would still only be two-thirds the size.

India has passed Japan in 2012 to become the world’s third largest economy on PPP terms, although if Indian GDP is converted to US dollars it carries less than half the weight of Japan’s GDP and is only 10th overall, just two places above Australia.

Australia is only 18th on PPP terms, just behind Iran and six places worse than if judged by Swan’s preferred choice of measure.

Recently, Secretary to the Treasury Martin Parkinson argued that Australia now has a smaller economy than Indonesia, but this is only true if measured via PPP. It still has a smaller economy than Australia’s on a USD exchange (2.2% of the total compared to Indonesia’s 1.3%).

Based on current projections, Indonesia will have a slightly larger economy than Australia’s in 2017. These measurements and projections will change as the Australian dollar and the Indonesian rupiah appreciate or depreciate against the US dollar in coming years.

As economies develop, the costs of living and production increase, making even PPP comparisons problematic at best and inaccurate at worst. The World Bank recalculates PPP indexes via the International Comparison Program.

It suits Wayne Swan to use the USD exchange measurement – 12th sounds much better than 18th – and it suits Parkinson to use PPP to make his points that emerging economies are now a much more important part of the global economy, and that Indonesia might leave us behind if we don’t improve our productivity and tax system.

What this all means is that we should take measures of economic weight as indicative rather than absolute, and that future projections should carry the same warning as investment products; “past performance is no guarantee of future results”.

Economic “progress” is another thing entirely, and we need to consider measures such as GDP per capita, human development, and environmental sustainability to get a more accurate picture of what is going on.

For GDP per capita, the distinction between the two methodologies is significant, with Australia ranking 6th on a USD exchange basis and 15th on a PPP basis in 2011.

On the Human Development Index, which includes a range of variables including life expectancy, literacy, education and GDP per capita, Australia ranks second behind Norway, while China came 101st, Indonesia 124th and India 134th.

Improvements in productivity – the efficiency of labour and capital – and an egalitarian distribution of the fruits of that productivity are what matters in the long-term. Getting our policy-makers and the wider population to realise that the two are not contradictory is the short-term challenge.

Tom Conley is a senior lecturer, School of Government and International Relations, at Griffith University.

This article first appeared at The Conversation.

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