PROMOTING SOUTH-SOUTH MUTUAL AID

Erle Frayne D. Argonza

Good day from the Pearl of the Orient!

South-South mutual aid is increasing in scale intensively and extensively. This phenomenon isn’t exactly new, as it commenced when some former 3^rd world economies such as South Korea achieved development maturity despite the shackling policies that Western oligarchs imposed upon the south.

Today the imperialistic shackling by hegemon states and powers is eroding. Emerging markets are rising, thus upping the south-south mutual aid to higher ante. As the emerging markets increase in wealth and influence, the traditional wealthy nations are stagnating and decreasing in their hegemonism.

Below is an instance of two continental development banks closing ranks in advancement of mutual aid and development. This analyst is fully supportive of such efforts.

[Philippines, 03 July 2011]

Source: http://beta.adb.org/news/adb-african-development-bank-cooperate-set-trade-finance-program-africa

ADB, African Development Bank to Cooperate to Set Up Trade Finance Program for Africa

Date

27 Jun 2011

Subjects

Industry and trade

TUNIS, TUNISIA – The Asian Development Bank (ADB) and the African Development Bank (AfDB) have signed an agreement to help AfDB set up a trade finance program to boost African trade and, more broadly, South-South trade.

AfDB is scaling up its trade finance activities to channel critical trade support to companies across the African continent, much as the ADB’s program has done in developing Asia.

Companies in developing countries have difficulties in getting the trade finance they need from banks in order to buy key components from overseas or to sell their goods to other countries. This prevents them from participating fully in global trade which grew 14.5% in 2010, its fastest annual pace on record.

ADB’s Trade Finance Program provides guarantees and loans in support of trade in developing Asia through over 200 partner banks. Under the just-signed Memorandum of Understanding, ADB will share all legal document templates, operation manuals, information technology, and know-how related to its Trade Finance Program with AfDB.

ADB and AfDB expect cooperation to grow in the future, including sharing access to their programs to link banks in both regions. ADB already has such an agreement with the Inter-American Development Bank.

"Partnerships are key to promoting economic growth, and using the Trade Finance Program framework developed by ADB will help AfDB to achieve in Africa the success ADB has achieved in Asia, but much faster and at a fraction of the start-up cost," said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department which oversees the Trade Finance Program. "In time, we would expect the relationships between developing Africa and developing Asia to expand, resulting in much greater South-South trade which could help ease global economic imbalances."

By transferring all tools and knowledge of the Trade Finance Program, the two development banks will reduce duplication of effort and cost and will share best practices, as encouraged under the 2005 Paris Declaration on Aid Effectiveness and the framework to achieve the Millennium Development Goals.

Speaking at a ceremony in Tunis to mark the handover of documents, Tim Turner, Director, AfDB’s Private Sector Department underscored the importance of trade finance in Africa. "By scaling up its trade finance activities, the African Development Bank is supporting an important growth-enabling activity, which has been affected by the recent global financial crisis," he said. "By leveraging the experience of strategic partners, such as ADB, AfDB will not only be reducing the financial commitment necessary to ramp up its activities but also facilitate the expansion of African trade with Asia."

ADB’s Trade Finance Program provided support for $2.8 billion worth of trade in 2010, up from $1.9 billion in 2009. It focuses on countries where trade finance is less readily available. As such, the program does not assume any risk in the People’s Republic of China, India, Republic of Korea, Malaysia or Thailand. The five most active users of the program last year were banks in Bangladesh, Viet Nam, Pakistan, Sri Lanka and Nepal. The program also aims to support smaller firms that typically have more trouble accessing trade finance and to promote trade between developing countries. Around 270 of the 783 deals supported by the program last year involved small and medium-sized enterprises, while half were conducted between two developing Asian economies.

In 2009, AfDB’s Board of Directors approved the Bank’s Trade Finance Initiative (TFI) to provide up to $1 billion of support to African commercial banks and other financial institutions to reinvigorate their trade finance operations. Under the TFI, the Bank initially allocated $500 million for short-term trade finance lines of credit (TF LOC) and $500 million for the Global Trade Liquidity Program (GTLP) in cooperation with the International Finance Corporation (IFC).

The overarching objective of the African Development Bank Group is to spur sustainable economic development and social progress in its regional member countries (RMCs), thus contributing to poverty reduction. The Bank Group achieves this objective by: (i) mobilizing and allocating resources for investment in RMCs; and (ii) providing policy advice and technical assistance to support development efforts. www.afdb.org

WEST MARKETS SHRINK, ASIANS’ RISE AND OVERTAKE WEST SOON

Erle Frayne D. Argonza

Good evening from the Pearl of the Orient!

The International Monetary Fund or IMF has been quite bullish lately about Asian growth. It had forecast East Asia’s average growth at past 7% for this year, and shares an equally positive growth trend for RP at 5.5%-6%. Just what could be the implications of the growth trends on the global economy and the West?

As Asia expands, the West (Europe, USA, Canada, Japan) contracts. The trend will not change much over the next five (5) years, so let’s see where the East and West are headed for in the foreseeable future.

In early 2008 yet, the economists and financial analysts of the West (or North) were of the opinion that the technological cutting edge of the West was already breached by Asia by the end of 2007 yet. Remember that 2007 was the beginning of a new cycle of recession for the West which began in the USA with the implosion of the realty bubble.

Given that the Western economies are flat on their back growth-wise, and their toxic bubble economies have given them only virtual economy results (read: inflated values not based on real production but on speculation), there is ample reason to forecast that they will be mired in problems of saving their ailing banks, financial-monetary systems, and providing sovereign guarantees to their capitalists at the expense of taxpayers and infusing investments in the physical economy. This is now matter of fact, as we can clearly see.

Western economies have suffered from the ill effects of continuous de-industrialization for decades, of being remiss in their own infrastructures (USA seems to be the worst in infrastructure decay), and deteriorating investments in science & technology. From being a producer economy, Western economy generally has become a parasitical ‘eater economy’ that stands on no clear foundation other than financial quicksand.

In contrast, the Eastern economies have steadily built their strategic industries across the decades, reinforced their infrastructure expenditures and projects, and invested in science & technology. The Eastern economy generally has therefore been role-playing as ‘producer economy’ worth the emulation of other developing economies worldwide.

Result: by 2007, at the downspin year of a recessionary West, the East overtook the West in terms of cutting-edge technologies. To qualify, the technologies we refer to are those life-inducing technologies, not those death & destruction technologies that the West has clear edge till these days.

I still remember what my nationalist colleagues in the Sunday Kapihan that we then held every Sunday at the Sulo Hotel in Manila: the West knows nothing but perfect its Armaments. Dr. Emmanuel Yap, an economist who finished his PhD at Harvard University, was the most vocal about that emphasis on the death & destruction focus of Western innovations.

To continue, the added forecast that I’d share at this moment is this: from the years 2007 through 2015, Western markets will contract by at least 30%. That means their own consuming public will spend less and less across a 9-year stretch, until the consumption pattern will settle down by 2016 or so. Real GDP (gross domestic product) will radically decline during the period, shrinking by as much as 30%-40% contrasted to their 2006 levels (the last of the best years of the West).

In contrast, the Eastern markets will expand by at least 100% during the period. The giants China and India will go farther than that, with China expanding by as much as 200% during the same period. That means the middle income earners in the East will continue to rise by the year and consume more products by the year, even travel more overseas year by year.

Result: China will clearly overtake the shrunken economies of EU and USA by end of 2015. India may follow suit, at around the years 2020-2025. The last would be ASEAN, which will overtake the West by 2025-2030 period.

Once a region overtakes others technology-wise, it will just be a matter of time before the same innovator region will overtake the rest wealth-wise. Technologies—physical technologies, biotechnologies, social technologies, medical technologies—are precisely the cutting edge practices that will enable one region to overtake others across the globe.

The bad news for the West is this: if their own states and markets will fail to solve their ailing problems in infrastructures and reverse de-industrialization, they will pathetically go down as 3rd world or ‘developing economies’ past 2020. No less than their own economists warned of this possibility in the early 1990s yet, and sadly no one paid attention to them in their own backyards. City after city in the USA and EU will immerse in urban decay, becoming 3rd world cities in the process.

My mother just retired from New York where she migrated since the 80s yet. She decided to come home back to the Philippines, and visited the Libis & Cubao areas of Quezon City/Manila suburb pronto upon her arrival. She was so deeply enchanted by the esthetic beauty of the architectures and planning in those mixed land use zones, while she complained of the dilapidated buildings and nauseating smells of cinema theatres in downtown Manhattan.

Those observations are signs of the times indeed. In just a year from now, the Pagcor City will rise in Manila, housing the world’s tallest tower. Burj Dubai, Petronas Twin Towers, and Taipei 101 are already similar hallmarks in other Asian cities, signifying the power shift from East to West.

The message is hereby brought to the West’s peoples: shift back from virtual reality to physical reality, from the virtual economy to the real economy. We Asians will help you along the way, as we’ve already been doing through our colossal treasuries investments, direct foreign investments, and quality Asian expatriates in your backyards that have been saving your collapsing economies from rapid decay.


[Philippines, 13 July 2012]

[See: IKONOKLAST: http://erleargonza.blogspot.com,
UNLADTAU: http://unladtau.wordpress.com,
COSMICBUHAY: http://cosmicbuhay.blogspot.com,
BRIGHTWORLD: http://erlefraynebrightworld.wordpress.com, ARTBLOG: http://erleargonza.wordpress.com,
ARGONZAPOEM: http://argonzapoem.blogspot.com]