Forecast Article Looks At The Different Paths The U.S. Economic Recovery Could Take

Each month, Standard & Poor's Ratings Services publishes its economists' best estimate of where the U.S. economy could be heading. However, financial market participants also want to know how we think things could go worse--or better--than what our baseline scenario calls for. As a result, we have been publishing a quarterly feature called "Risks to the Forecast," in which we project two additional scenarios, one worse than the baseline and one better. Standard & Poor's published the latest version of this article, which is titled "U.S. Risks To The Forecast: Half Speed Or Full Speed?," earlier today.


According to the article, our baseline forecast assumes a gradual recovery after a few quarters of bouncing along the bottom, which looks like a stretched-out "U." But the risk of another downward leg on the recession remains real, producing a "W." The optimistic scenario is that we could again be underestimating the American consumer, and a stronger recovery could still turn into a more typical "V"-shaped expansion. However, the Japanese experience of the 1990s suggests that the risk of a fourth scenario, an "L"-shaped recession where years rather than months are spent bouncing along the bottom, should not be ignored.

It should be noted that our baseline scenario is far weaker than would be consistent with historical averages. On average, real GDP rises 5% in the first four quarters of a recovery and tends to rise even more sharply after deep recessions. Our baseline scenario shows a rise of only 2.3%, less than one-half the historical average, while our downside case shows an even weaker recovery of just 1.5%. Even our optimistic scenario implies an increase of only 4.7%. "We believe that the imbalances in the world and U.S. economies will keep the expansion slow," noted Standard & Poor's Senior Economist David Wyss. "The question is how slow."

The report is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.

ESCAP and Russian Federation to Sign Cooperative Development Agreement

Signing ceremony Thursday 11:30, 17 December at ESCAP Building

The Economic and Social Commission in Asia and the Pacific (ESCAP) – the regional arm of the United Nations - and the Russian Federation will sign an agreement this Thursday to strengthen cooperation, with a view to promoting inclusive and sustainable economic and social development in Asia and the Pacific.

Under the agreement, the Russian Federation provides a voluntary

contribution of US$ 1.2 million annually during the period 2009-2010 to support key programme activities of ESCAP.

ESCAP will be hosting a signing ceremony where Mr. Gennady Gatilov of the Russian Federation Ministry of Foreign Affairs and Dr. Noeleen Heyzer, Under-Secretary-General of the United Nations and Executive Secretary of ESCAP will formalize the agreement.

In response to the regional development priorities, the Russian contribution will be used for technical cooperation projects to develop capacities and improve development in key areas such as environment, energy, regional transport connectivity, disaster risk reduction, statistics and migration.

The ceremony will take place Thursday 17 December 2009, 11:30 on the 15th floor of the ESCAP Secretariat building. Media are welcome to cover the ceremony. Please register in advance for building access at unisbkk.unescap@un.org.

Investment-Grade Composite Spread Tightens To 209 Basis Points

Standard & Poor's investment-grade composite spread tightened yesterday to 209 basis points (bps), while its speculative-grade counterpart compressed to 653 bps. By rating, the 'AA' and 'A' spreads tightened one basis point each to 144 bps and 180 bps, respectively, and 'BBB' tightened 3 bps to 264 bps. The 'BB' spread tightened 5 bps to 484 bps, 'B' compressed 6 bps to 654 bps, and 'CCC' tightened 15 bps to 1,040 bps.

By industry, financial institutions, banks, and industrials tightened 4 bps each to 366 bps, 288 bps, and 336 bps, respectively. Utilities and telecommunications followed, tightening 2 bps each to 212 and 318 bps, respectively.

Despite material tightening since their record highs in December 2008, the speculative-grade spread remains range-bound within a default cycle, and the investment-grade spread continues to face pressure from financial institutions and banks. In addition, speculative-grade defaults continue to accelerate, as does the preponderance of credit downgrades. Because of these factors, we expect spreads to remain at their elevated levels for some time as investors, the credit markets, and the economy cautiously tread through the current recessionary period.

TCEB unleashes 3 years strategic plan “Thailand could become one of the best MICE destinations in the world”

Thailand Convention & Exhibition Bureau has laid down six major strategies to develop and expand the market for meetings, incentives, conventions, and exhibitions (MICE) in partnership with private and government networks as well as the growing ASEAN community.


Promoting “Green Meetings,” the act of holding of environmentally friendly events, is key to boosting revenue for Thailand in 2010.

Mr. Akapol Sorasuchart, TCEB president, said Thailand’s MICE sector in 2008-2009 encountered slowing growth from internal factors, such as domestic political unrest, and external factors such as the troubled global economy and the 2009 flu pandemic.

In 2010, the economic situation is expected to trend positive, pushing the MICE sector to reach its growth target of 25 per cent. Next year the TCEB forecasts 785,816 MICE visitors to Thailand, generating income of 56 billion baht from about 400 events and activities.

“The TCEB has drawn up its three-year strategic plan [for 2010-2012] in line with Thailand’s national development plans, including the National Economic and Social Development Plan, the Strategic Formulation Plan [for 2008-2011], and the Tourism Recovery and Promotion Strategic Plan [for 2009-2012],” said Mr. Akapol.

“The TCEB’s strategic plan aims to promote Thailand as a prime destination for the MICE industry and as a stage of Asia for world-class MICE venue,” he added. “The plan is based on the potential network and cultures among ASEAN communities. It’s forecast that in seven years, by 2016, Thailand will be seen as top on the list for the MICE sector in Asia and throughout the world.”

The plan draws on three key concepts: WIN /PROMOTE and DEVELOP Under the plan, six major action plans are included.

1. Accelerate and expand the MICE market. It’s important to establish channels for marketing, public relations, and the capability to draw events with the cooperation of the private and public sectors.

2. Support MICE industry image-building. The importance of the MICE industry and the TCEB’s role and responsibility should be promoted. The “Thailand Creative Event Awards” is a good example for promotion.

3. Support value-added benefits to take the industry to the next level. The concept of the “Creative Economy” should be employed to grow the MICE industry to become more international, with support for new events and large-scale events and activities to Thailand.

4. Expand the capability of the MICE infrastructure. Thailand’s MICE industry must be recognized on the world stage. In 2010, the TCEB will give much effort to promoting highly recognized “Green Meetings,” the practice of holding environmentally friendly meetings, incentives, conventions, and exhibitions, as a selling point to promote Thailand. Some of the MICE companies in Thailand have prepared infrastructure to support these meetings.

5. Build local and international networks. “Thai Team, Team Thailand” will be established as a center for co-operation between the government and private sectors.

6. Boost the role and potential of the TCEB. Management and human resources should be developed in correlation with the direction of the industry.

“The TCEB has a budget of 934 million baht for 2010,” Mr. Akapol said, “divided into 749 million baht for our fiscal budget. Of this amount, 200 million baht for the ‘Pid Thong Lang Pra’ Project, 145 million for WIN, 240 million baht for PROMOTE, 55 million baht for DEVELOP, and 110 million for internal operations.

“In addition, the TCEB has budgeted 185 million baht to attract income to Thailand via the ‘Strong Thailand Project’ and ‘Creative Economy,’” he added. “Activities under the ‘Strong Thailand Project’ include the Thailand MICE Road Show 2010 to boost confidence of our MICE industry in Japan; the TCEB’s participation in World Expo 2010 in Shanghai with the launch of ‘Thai Night’ at the Thailand Pavilion; and the search for an opportunity to draw World Expo 2020 to Thailand.”

The TCEB forecasts 628,653 MICE visitors to Thailand in 2009, compared with 727,723 visitors recorded in 2008. This year it expects to generate 45 billion baht, compared with 52 billion baht in 2008. (Updated figures will be received in March 2010).

In 2009, the TCEB succeeded in attracting 41 events and exhibitions as well as new creations consisting of 27 international conventions, three trade exhibitions, and 11 new shows. In addition, the International Congress & Convention Association (ICCA) ranked Thailand second in the Asian region after South Korea as the country with the highest number of international conventions and the number of participants.

United Mexican States FC And LC Ratings Lowered By One Notch; Outlook Stable

Despite recent tax increases and steps that could bolster growth prospects, we expect that Mexico's fiscal challenges will persist over the coming years.


In addition, the prospects for substantial fiscal reform or other measures to enhance GDP growth in the second half of the Calderón Administration are, in our view, diminishing.

As a result, we have lowered the foreign-currency sovereign credit rating on Mexico to 'BBB/A-3' from 'BBB+/A-2' and the local-currency rating to 'A/A-1' from 'A+/A-1'.

The stable outlook reflects fiscal and external indicators that are consistent with the 'BBB' median, the absence of macroeconomic imbalances in the Mexican economy, and the Mexican government's longstanding commitment to macroeconomic stability.

Standard & Poor's Ratings Services said today that it lowered its foreign-currency sovereign credit rating on the United Mexican States to 'BBB/A-3' from 'BBB+/A-2' and the local-currency credit rating to 'A/A-1' from 'A+/A-1'. Standard & Poor's also said that it lowered the transfer and convertibility assessment on Mexico to 'A' from 'A+'. In addition, Standard & Poor's affirmed the mxAAA/Stable/-- national-scale rating. The outlook is stable.

"The downgrades reflects our assessment that Mexico's recent steps to raise non-oil revenues and improve efficiencies in the economy will likely be insufficient to compensate for the weakening of its fiscal profile," explained Standard & Poor's credit analyst Lisa Schineller. "This weakening stems from a combination of modest GDP growth prospects and diminished oil production over the coming years." The revenue measures approved in the 2010 budget should address immediate concerns about fiscal vulnerability to volatile oil revenues. However, the inability to widen the tax base substantially, along with a low likelihood of major tax reform in the next several years, suggest that Mexico's debt profile will remain more in line with that of its 'BBB' peers.

Mexico's net general government debt has recently increased and is projected to remain at about 34% of GDP during 2009-2011, which is line with the projected 'BBB' median for this same period. Its GDP growth prospects over the next several years are also projected to remain moderate at 3%-4%, limiting the upside to fiscal dynamics. Notwithstanding the efficiency gains associated with the closure of Luz y Fuerza del Centro (the main supplier of electricity in the central region of Mexico), new management of its assets, and forthcoming telecommunications concessions, we believe that Mexico's strong links with the U.S. economy will limit its growth prospects given our diminished expectations for growth in the U.S.

In the midst of the deepest contraction in real GDP (estimated at 7%) in decades, the Mexican Congress passed a number of tax increases, including raising the controversial VAT. The measures replace lost oil revenue in the short term. However, the government's forecasts are for overall public-sector revenues to at best hold steady at about 22% of GDP; this is consistent with general government revenues of 19% of GDP and is much lower than the 35% for the 'BBB' median. Oil-related revenues have averaged about 35% of total budgetary revenues.

The government's inability to broaden the tax base meaningfully and address the many loopholes and exemptions in the tax regime weakens its capacity to contain fiscal pressures from diminished oil production--even if oil output declines more slowly than in recent years. General government deficits are projected to average 3% of GDP (2009-2011), which is comparable with that of the 'BBB' median. Projected deficits are higher than the deficits Mexico ran during the years of buoyant oil prices, when investment-grade credits with significant budgetary reliance on commodity revenue ran surpluses.

The ratings on Mexico are supported by its track record of and commitment to macroeconomic stability, as its prudent macroeconomic management, which political parties at the national level support, demonstrates. The ratings also reflect conservative management at the Finance Ministry, a formally and operationally independent central bank, and recent steps to improve tax administration at Servicio de Administractión Tributaria, the national tax-collection agency.

In addition, Mexico's external accounts do not, in our view, pose the same risk to its credit profile as they do in some other peer 'BBB' category credits. Mexico's external debt, net of liquid assets, is in line with the 'BBB' median of about 31% of current account receipts. Despite the fall-off in oil revenues, the current account deficit declined to an estimated 0.8% of GDP this year from 1.5% in 2008. Although we expect that the deficit will widen over the forecast horizon toward 1.4% of GDP in 2011, this is below the projected 2%-2.5% for the 'BBB' median for 2009-2011. The absence of imbalances feeds into comparatively strong external financing needs vis-à-vis peer credits. Mexico's gross external financing needs as a percent of current account receipts and usable reserves average 93% in 2009-2011 versus the 'BBB' median of 114%.

"The stable outlook reflects our expectation that cautious macroeconomic policies should contain the rise in Mexico's debt burden in coming years," Ms. Schineller added. The government's commitment to maintaining macroeconomic stability, combined with recent changes in taxation, should contain the slippage in Mexico's fiscal and external indicators and keep them at levels that are consistent with the 'BBB' median.

"The ratings could come under downward pressure if fiscal dynamics were to deteriorate, such as if the recently passed tax measures fail to generate sufficient revenues to offset lower oil revenue," Ms. Schineller notes. "The ratings could benefit from stronger-than-expected GDP growth prospects that facilitate better fiscal dynamics or other measures that enhance fiscal flexibility."
RELATED RESEARCH
"Sovereign Credit Ratings: A Primer," May 2008.

Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.

First Data Reveals Success Factors for Prepaid Cards in Europe

In a new study of consumer attitudes believed to be unique in its scope, First Data, a global technology and payments processing leader, offers insight into the European prepaid market. Study findings are expected to help banks and retailers build more successful business cases for prepaid products. Conducted in June and July of 2009, the First Data survey asked consumers to evaluate five prepaid card types (gift, general spending, travel, youth and remittance) in four countries representing various stages of market maturity: Germany and Austria are considered to be embryonic, the UK is more established and Italy is the most advanced prepaid market in Europe. “The high level of consumer interest in learning more about prepaid products is, in my opinion, one of the key findings of this research,” said Tony Craddock, CEO of Global Prepaid Exchange. “Consumers are increasingly aware of the products and are now evaluating the benefits; a process that should certainly produce improved sales. When you couple increased interest with consumers’ predictions of their own behaviour, the clear implication is that the industry is set for near-term, significant growth across the countries investigated.” Key findings from the study include: · More than half (57 percent) of consumers who expect to buy a prepaid card within the next 12 months describe themselves as creditworthy consumers with incomes above £/€40,000 annually. They consider themselves to be financially savvy and avid savers. It is clear that prepaid market opportunities extend well beyond consumers who are unable or unwilling to open bank accounts.


In every country, the number of consumers expecting to buy a prepaid card in the next 12 months exceeds the number who did so in the previous 12 months. This indicates good potential for prepaid growth in the markets surveyed.

Fifty-five percent of all respondents see benefit in using a prepaid card to help control spending and manage their money. Marketing messages that focus on the benefits of using prepaid cards for budgeting, and also broad card acceptance, are likely to be very well received by consumers when deciding to purchase prepaid products.

Consumers are more willing to accept charges based on one-off actions such as balance top-up or cash withdrawals than monthly fees or fees charged when making a purchase at the point of sale. In all countries, between 50 percent and 70 percent of respondents indicated a preference for offers featuring fee structures that include an initial purchase fee but no monthly charge.

Thirty-eight percent of consumers surveyed said they would be willing to pay additional fees in order to personalise a prepaid gift card with a customised colour scheme, picture or message. This represents a significant potential, incremental revenue stream for banks and retailers looking to introduce prepaid card offerings. In Germany, the level of interest in personalising a Gift card either by selecting the colour scheme, personal picture or customised message was the highest of all four countries surveyed with 41% of consumers expressing interest.

Consumer preference for individual distribution channels varied by market. In the UK, a strong preference (74 percent of consumers) was shown for supermarkets as a distribution channel – for all except a travel card, which 50 percent of consumers were more comfortable buying at the post office. In Germany, banks are the preferred purchase channel for all card types except gift cards, which consumers would prefer to purchase in department stores. In Italy, the majority of consumers surveyed (50 percent – 64 percent, depending on the prepaid card type) would look to purchase prepaid cards at a post office, probably due to the current dominance of the national PostePay products.

Sixty-four percent of consumers stated that they would prefer to receive information about prepaid offerings through online media. In addition, 46 percent of respondents would like to be able to purchase a prepaid gift card online. Levels were similar for other card types. It is clear from the research that there is a significant opportunity to increase prepaid card sales by using the Internet as a supplementary distribution channel to traditional bricks and mortar outlets.

"Our research suggests strongly that retailers and financial institutions could formulate prepaid sales and marketing strategies that are universal or broad in reach, rather than focusing entirely on selling by product, geography or socio-economic groups,” said Lisa Walker, head of Prepaid for First Data’s international business. “Marketing strategies should include online channels as a priority, clearly describe how the product can be used and, importantly, allow consumers to define their own benefits and card usage.”

Pool Assets sends off THRU Thonglor, a 1.8-billion-Baht condominium project set to answer the urban lifestyle of the new generations in Thonglor area.

Pool Assets sends off THRU Thonglor, a 515-unit condominium project with a combined value of 1.8 BN in Thonglor area. Adjacent to Airport Link, BTS and MRT, the project is meant to answer the urban lifestyle of the new generations. At a starting price of 59,000 Baht per SQM or 1.8 MB for one bedroom suite, the project will be officially on sale on this coming October 17, 2009. With Century 21 (Thailand) as project marketing and sale consultant, the company targets 60% presales by the end of this year.


Mr. Sombat Sangratkanjanasin and Mr. Kitimet Kittiakkarapat, Managing Director of Pool Assets Co., Ltd., discloses today that the company is launching THRU Thonglor, a 35-story condominium project on New Petchburi Road adjacent to Thonglor Intersection. With a combined project value of 1.8 BN, the project has a total of 515 residential units and 18 commercial units. Designed to serve the lifestyle of the new generations; it targets at working adults or modern tasteful families yearning for a convenient life in Thonglor area. With its superb location in a high potential downtown area, the project is easily commuted via Airport Link, BTS, and MRT as well as conveniently connected to several main roads,e.g. New Petchburi Road, Ratchadapisek Road, Sukhumvit Road, Rama 9 Road, and Ramkamhaeng Road. All these add up and make all travels, either for business or pleasure, easy and comfortable ones. And as the project is strategically located in a high quality neighborhood, the company is confident that it would receive good response from its targets.

Given the improving general economic outlook, when Airport Link starts its services in the beginning of December 2009, this will activate extensive activities and travelling along Airport Link line and attracts all kinds of investments to the area. Since it is difficult to find a sizable plot of land at reasonable price in Sukhumvit area, the general outlook of New Petchburi would turn more positive in the future. Old shop houses would then be converted into new office buildings and condominiums, as the rising trend would make it more feasible for investments. As concretely seen today, while many developers have just expressed their interest to build more condominiums in the area, Pool Assets is among the far-sighted pioneers to have announced the launch of this project.

“Our shareholders have more than 20 years of extensive experience in real estate business. We have developed many successful low-rise and high-rise projects, e.g. The Station, which offers two 17-story buildings totaling 675 units in Sathorn-Bangrak area. This project has achieved almost 100% presales to date. And so far 60% have been transferred, while the remaining is expected to be transferred by the end of this year. In each and every project that we operate, we conduct thorough market feasibility study as well as dig deep into our customers’ needs and wants. Therefore, we are highly confident that the project potential and location will naturally make it a success. Now with Mr. Kittisak Champathippong of Century 21 Realty Affiliates (Thailand), as project marketing and sale consultant, it is even more convinced that the project will beautifully succeed. As a test, we have unofficially put the project on sale at Centrual 21 Pavillion in the 21st Home and Condo Expo at the Queen Sirikit National Convention Center last week and received very good response from our targets”.

“As a promotional price to go with the official project launch on this coming October 17, 2009, we will initiate our starting price at only 59,000 Baht per SQM or 1.8 MB for one bedroom suite. Since our first presales at the beginning of September 2009, we have already achieved 25% presales and expect that we would be able to achieve 60% presales by the end of 2009.” Mr. Sombat and Mr. Kitimet concluded.

The THRU Thonglor is a 35-story residential condominium project. With 515 residential units and 18 retail units, the project has a combined value of 1.8 BN. It is conveniently located on New Petchburi Road adjacent to Thonglor Intersection. It is developed by Pool Assets Co., Ltd. on a 2-3-72-rai plot of land. The project offers a variety of suites to choose from, for example, one-bedroom suite with usable area of 31-44 SQM and two-bedroom suite with usable area of 56-65 SQM. Designed to serve true urban lifestyles, all units are crafted out with full functions. With a wide space of 6 meters, every one-bedroom suite is distinctively separated into bedroom, dressing room, toilets, shower room, and kitchen. To make it totally comfortable, all units are equipped with air conditioner, built-in electric stove, and hood. The project offers complete facilities including swimming pool, fitness center, sauna room, stream room, and activity area. It is 100% safe and secured with access control card system, CCTV, five passenger and service lifts, separate elevator on car park levels (2nd – 8th Floor), as well as 24-hour security system. The THRU Thonglor is scheduled to start its construction in March 2010 and is expected to complete by mid 2012.

Capital Market Masterplan

The Economic Cabinet has approved the Capital Market Masterplan as proposed by the Capital Market Development Committee which is chaired by the Minister of Finance.


The capital market is important to a country’s economic and social system. It plays the crucial roles of capital raising for both public and private sectors, promoting balance and stability in the financial system, decreasing dependency on the banking sector, driving the economy forward and creating jobs, as well as being an alternative method for savings. A strong capital market will lessen the impact of economic fluctuations which can be compounded by the fast-flowing nature of capital.

However, there are still many issues besetting the Thai capital market: few institutional investors, small retail investor base, limited financial products, high transaction costs, and lack of efficient regulatory enforcement are some examples. Moreover, Thailand’s capital markets in recent times have grown at a very slow pace. The size of the stock market compared to GDP is only 51% (as of June 2009) which is smaller than other countries in the region such as Hong Kong (845%), Singapore (202%), Malaysia (104%) and South Korea (66%). Should this trend continue, Thailand’s capital market will stagnate and become increasingly marginalized. Various studies have shown that inadequate development of the capital markets will impact its ability to raise, channel and monitor resources efficiently. In the end, this will lead to loss of growth opportunities, standard of living and prosperity.

In recognizing the importance of the capital market, Prime Minister Abhisit Vejjajiva has appointed the Capital Market Development Committee (The Committee) on January 27, 2009. This appointment is a continuation from the last but one government which has appointed the first Committee on March 25, 2008. The Committee is tasked with formulating an overall masterplan for the development of Thai capital market as well as monitoring the implementation of such plan. The Committee comprises of the Minister of Finance as the chairperson and experts from public and private sectors.

In formulating the Capital Market Development Masterplan (The Masterplan), the Committee has solicited inputs and opinions from all stakeholders and has formed the vision and the 5-year development objectives (2009-2013) as follow:

“The Thai capital market is the primary mechanism for aggregating, channeling, and monitoring economic resources. The goal of the capital market is to perform these tasks efficiently to increase overall competitiveness of Thailand”

The Committee has formulated 6 primary missions and objectives to realize this vision:

1. Capital market must be easily accessible by investors seeking investment opportunities and corporations seeking funds
2. Increase quality and variety of products and services

3. Reduce cost of funds to issuers and any intermediary and transaction costs to investors to enable Thai companies to become more competitive

4. Develop efficient infrastructure framework in legal, regulations, accounting, tax, information, technology and enforcement
5. Educate investors and ensure that adequate protection mechanism are in place

6. Promote competition in the Thai capital market and build links with the global market system

The Masterplan consists of 8 important reform measures that will affect the course of development and bring about major changes in the system.

Measure 1: Abolish the Monopoly and Improve Competitiveness of the Stock Exchange of Thailand (SET). Liberalization of capital flows and competitive pressure increase the chances of the SET being marginalized. To make the SET responsive to fast-changing business environments, its business structure must be transformed to increase efficiency and promote competitiveness. First step is to demutualize the SET, convert it into a public company (The Exchange Company), separate the exchange business from capital market development work, and establish a Capital Market Development Fund (CMDF) with the mission of long-term capital market development. The SET’s monopoly on exchange businesses will also end. Therefore, there may be other trading platforms permitted to trade listed stocks. The Exchange Company will be allowed to permit persons other than securities firms incorporated in Thailand to have direct access if it wishes to in order to increase liquidity and expand investment base to promote linkage with global capital market, and decrease limitations which currently obstruct the growth of Thai capital market.

Measure 2: Liberalization of securities business to promote market efficiency. This measure, while in line with recent trends of liberalization in the financial system, also aims to increase competitiveness of Thai capital market and enable it to withstand impact of fast capital flow. Liberalization of licenses will foster the market competition. Securities firms will have to adjust by forming alliances with strategic partners to increase its efficiency by offering new products and services. Deregulation of commissions will reduce transaction cost and increase market activities in the long run.

Measure 3: Reforming Legal Framework. Currently, there are draft laws relating to the capital market, being proposed to the House of Representatives which are: (1) Amendment Act to Royal Enactment on Special Purpose Juristic Persons for Securitisation B.E..... (2) The Draft of Commercial Collateral Act B.E and (3) Amendment Act to the Civil and Commercial Code B.E….. The government should keep pushing for passage of these laws. The Committee also had the resolution to propose further reforms, including (1) Laws to facilitate mergers and acquisitions activities, (2) Adopt civil penalty and (3) Amend the Civil Procedure Code to include class action lawsuits, which would help make enforcement of the Securities and Exchange Act more efficient.

Measure 4: Streamline Tax System. This measure aims to make the tax system more efficient to transactions, improve fairness, and provide tax incentives for transactions that the state would like to promote for the development of capital market. Taxation areas to streamline include those related to mergers and acquisitions, investments in debentures, elimination of double taxation on dividends, equalize tax incentives on direct investment and investment through intermediaries, transfer of investments in provident funds, public savings funds, life insurance premiums, Islamic bonds, securities borrowing and lending of the Bank of Thailand, and venture capital.

Measure 5: Develop Financial Products. Currently, the Thai capital market has few financial products to choose from, which cannot take care of diverse needs of investors thus making the market relatively unattractive. This measure aims to push for development of new products which would help increase the variety of instruments and consequently help develop the market. Example of new products are Infrastructure Fund to promote investments by the private sector, life annuities, interest rate derivatives, inflation-indexed government bonds, Islamic bond, venture capital, and divestiture of ministry of finance’s shares of publicly traded companies.

Measure 6: Establishment of a National Savings Fund. The Ministry of Finance had proposed a National Savings Fund Act, and the cabinet in a meeting on October 20, 2009 has agreed to the first draft. The National Savings Fund will cover workers outside the formal system comprising approximately 70% to total labor force in Thailand. The objective is to institutionalize savings for retirement, create equality of opportunity, and ensure that these informal sector workers are provided with some income after retirement. The National Savings Fund will become a major source of savings and investments in Thailand and will contribute to the development of Thai capital markets. It will help lessen the volatility of capital movements and also indirectly promote new financial products as well.

Measure 7: Developing a Culture of Savings and Investments. This measure aims to provide choices when investing in provident fund and Government Pension Fund, so that investors’ needs are met. It will also encourage investors to be proactive about acquiring new knowledge on financial products, so that investors can truly determine what types of products suit them.

Measure 8: Development of Domestic Bond Market. This measure aims to develop the government’s cash management methods and study alternatives of amending laws relating to treasury reserves, so that the government can issue treasury bills efficiently. The government should also be able to manage treasury reserves for yield by such means as depositing the reserves with other institutions instead of the Bank of Thailand. This will help decrease the cost of funds that the government faces. Moreover, the Bank of Thailand will take the lead in developing and promoting the private repo and securities borrowing and lending markets, providing the bond market with another tool to manage liquidity efficiently with low risks. Overall, this would lead to further growth in the market.

Aside from the 8 reform measures, the Masterplan consists of 34 further measures that should be implemented. These measures are important in changing the basic framework and developing new infrastructures in the long run, which would lead to the fulfillment of the Masterplan’s main objectives.

After the Masterplan has been approved, the drafting subcommittee will transform into the Implementation and Oversight Committee and charged with overseeing, monitoring, and assessing the implementation of the Masterplan. The new committee will use KPIs to assess progress and efficiency of the implementation.

The Committee believes that success in implementing the Masterplan, aside from directly benefiting the capital market, will have far-ranging benefits to society and economy as a whole. It will improve competitiveness, promote savings and retirement planning, improve linkage between Thai and global capital markets, and benefit all sectors of society. The results will be reflected and noticeable in the capital market structure itself. Thai capital market will grow larger with more liquidity which will strengthen balance and stability of the financial market. It will become a key driver in economic development, which will be observable in the prosperity of Thai people in the long run.

OUR ECONOMIC BACKBONE NEEDS MORE SUPPORT

       Thailand must revamp its agricultural sector to compete with improving productivity in neighbouring countries
       Prime Minister Abhisit Vejjajiva earlier this week vowed to push forward the Farmers Council Bill, which is intended to improve the wellbeing of farmers. During the session to consider the passage of the bill, Abhisit said the issue should be on the national agenda for it involves millions of Thais who form the economic backbone of the country.
       Although Thailand is an agriculture-based country, most of our farmers are heavily indebted. Many don't own the land upon which they work. Past governments have systematically failed to support farmers, and Thailand does not have a comprehensive agricultural development plan to provide sustainable growth in this sector in the future.
       These shortcomings should not be allowed to continue. Thai farmers should be better equipped to compete with their counterparts from neighbouring countries after Asean member countries open up agricultural markets including rice, tapioca and corn from 2010. Thai farmers should be able to effectively improve their yields per rai in order to increase overall productivity. In terms of production, Vietnamese farmers are now catching up with Thai farmers very quickly, due largely to Thailand's failure to improve in this regard.
       Agriculture is a vital sector of the economy that many countries strive to improve in order to ensure their food security. Thailand has exploited its natural advantages, such as its rich soil and climate, for centuries. However, these advantages may not last forever, and we will not always be alone in benefiting from geographical providence.
       The Farmers Council Bill should play a role in empowering farmers by ensuring their rights to receive proper assistance so they can continue with the incentive to work the land. One particular area of importance is that farmers should gain access to proper irrigation systems.
       Investors from some countries are anxious to own farmland in Thailand because they realise the significance of the sector. Unfortunately, some Thais have failed to realise the value of our natural resources. Some have sold land plots to foreigners through proxy ownership.
       The proposed new law should also help ensure legitimise ownership of land, and will give farmers a channel to voice their opinions at the national level.
       The bill should also provide for the formation of institutions to assist farmers, such as a micro-financing system. Otherwise, many farmers will continue to borrow money from unscrupulous lenders who charge extremely high interest rates.
       If there is no shake-up of the system as it is at present, Thai farmers will remain caught in a trap of relying on Mother Nature and crooked politicians who exploit farmers' needs for their own short-term political gain. And they will have no other choice than to come out to block the roads every time they cannot sell their produce at a good price.

World's workshop back in business, data show

       Chinese factory output growth surged to a 19-month high in October, showing the worlds thirdlargest economy has firmly put the worst of the global financial crisis behind it.
       Other figures released yesterday showed a dip in the pace of investment and loan growth as the impact of the initial burst from a bank-financed fourtrillion-yuan ($585-billion) economic stimulus package, announced a year ago,tapered off.
       Exports and imports also undershot market forecasts, falling from year-earlier levels for the 12th month in a row.
       But economists said China was maintaining the momentum of its recent recovery, which has made it a certainty that Beijing will surpass its target of 8%growth for 2009 as a whole.
       Whats more, the large number of investment projects still in the governments pipeline, a sharp rebound in real estate spending and the huge volume of loans issued this year virtually guarantee stronger GDP growth in the coming year.
       Industrial output rose 16.1% in the year to October, the fastest pace since March 2008 before the global downturn brought Chinas export-orientated factories to their knees.
       The figure, up from Septembers reading of 13.9%, easily beat market forecasts of 15.5% growth.
       Factory output is a crucial gauge because industry generates about 43% of Chinese gross domestic product, a larger share than services.
       A battery of energy and commodity data for October confirmed the strength of the sector:
       Power generation in the year to October increased 17.1%, the fastest growth in 19 months.
       Crude steel output was equivalent to an annualised 609 million tonnes,22%higher than 2008.
       Output of refined copper and primary aluminium hit a record for the second straight month.
       The volume of refined crude oil rose 10.4% from a year earlier to a fresh high.
       Trade, by contrast, was weaker than economists had expected.
       Exports in October were down 13.8%from a year earlier, an improvement on Septembers 15.2% fall but short of the median market forecast of a 13.2% drop.
       And imports were down in dollar value by 6.4% from October 2008, compared with forecasts of a 1.0% fall and compared with a 3.5% year-on-year decline in September.
       As a result, the October trade surplus ballooned to $24 billion, a reminder ahead of US President Barack Obamas visit to China next week of the imbalances plaguing the global economy.
       Because global trade fell off a cliff last November after the shock to confidence delivered by the bankruptcy of investment bank Lehman Brothers, economists still think exports will resume positive year-on-year growth by December at the latest.
       This will make it more difficult for Beijing to resist international pressure to let the yuan appreciate and also make it easier for policymakers to justify a stronger currency to domestic audiences, said Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong.
       A stronger currency would help to rebalance the Chinese economy by steering resources away from exports and related investments and towards domestic, consumption-related sectors.
       To that end, policymakers will take comfort from a surprising acceleration in retail sales growth to 16.2% in the 12 months to October from 15.5% in September, handily outstripping market projections of a 15.8% rise.
       By contrast, year-to-date urban investment in fixed assets such as factories and property eased to 33.1% from 33.3%in the first nine months. Economists had forecast 33.5%.
       Looking at trends, consumption is accelerating, while investment is decelerating. The change is pretty modest but it is an interesting trend to see and is positive in the sense of really being what the government wants, said Jun Ma,chief China economist at Deutsche Bank in Hong Kong.
       Deflation eased in October, but not by as much as expected. Consumer prices fell 0.5% in the year to October, with producer prices down 5.8%.
       A sharp drop in new lending, to 253 billion yuan in October from 516.7 billion yuan in September, was partly a seasonal phenomenon but might have reflected regulatory pressure to curb loan growth,said Zhou Xi, an economist with Bohai Securities in Tianjin.

CISCO CHIEF PAINTS ROSY OUTLOOK AS FIRM BEATS FORECAST

       Cisco Systems'John Chanmbers, one of the first technology leaders to herald the recession two years ago, said he now sees a global economic recovery, fuelling a rebound in his company's sales this quarter.
       "The numbers are indicating us being in the early, initial phase of a recovery - with the US leading the way," Chambers said yesterday, following the release of Cisco's fiscal first-quarter results.
       "The numbers for US enterprise orders were dramatic, going from a minus 20 per cent order rate a quarter ago to plus 10 per cent. That's beyond a tipping point."
       Sales will grow 1 per cent to 4 per cent in the second quarter from a year earlier, Cisco said.
       That equates to at least US$9.18 billion (Bt327 billion), toopping the $8.96-billion average estimate of analysts surveyed by Bloomberg.
       The rebound follows four straight quarters of declines.
       After putting off orders during the recession, customers are resuming spending on networking gear to handle growing traffic.
       Cisco, the biggest maker of network equipment, also is benefiting from cost reductions over the past year, including a hiring freeze and travel cutbacks.
       As demand bounces back, Cisco is stepping up investments and acquisitions.
       "Spending on data-networking gear is a tide that will lift all boats," said John Krause, and Appleton, Wisconsin-based analyst for Thrivent Financial for Lutherans, which owned 4.4 million shares as of September 30, according to Bloiomberg data._We're likely to see this improvement continue on into 2010."
       Cisco, based in San Jose, California, rose 64 cents, or 2.8 per cent, to $23.93 on Thursday in Nasdaq Stock Market trading. The shares have gained 47 per cent this year.
       In November 2007, Chambers reported a "drematic" decline in sales to automobile and financial companies. The remarks triggered the biggest technology sell-off in more than four years and foreshadowed the recession.
       Cisco has announced four acquisitions and a joint venture since October 1, living up to a pledge by Chambers last month to get more aggressive in mergers and partnerships.
       One of those deals, the acquisition of Tandberg for about $3 billion, has yet to win shareholder support.
       A group of investors owning more than 24 per cent of Tandberg's shares has pressed Cisco for a higher bid.
       By Norwegian law, 90 per cent of a company's share-holders must approve the transaction.
       "The odds are very high we will find a way to make this work," Chambers, 60,said.
       "It's in our interest and Tandberg's interest to do so. We think we paid a fair price, and we will play out the hand appropriately. If we can't get a fair price, we've walked from several deals already this year."
       Cisco's net income fell 19 per cent to $1.79 billion, or 30 cents a share, in the first quarter, which ended on October 24.
       The US economy grew about 3.5 per cent last quarter, re-emerging from the longest recession since World War II. As demand recovers, companies are stepping up investments in their networks.
       AT&T, the largest US phone company, expects to spend at least$5 billion on capital equipment in the final three months of 2009.
       In September, Goldman Sachs Group predicted that worldwide spending on technology products will decline 8 per cent this year.

       As demand bounces back, Cisco is stepping up investments and acquisitions.

BUFFETT SOUNDS WAKE-UP CALL TO LOWER COSTS

       Berkshire Hathaway managers may deliver more cost cuts to chief executive Warren Buffett after the billionaire replaced Richard Santulli as the head of a money-losing plane-leasing unit.
       Berkshire executives have eliminated jobs and closed plants as the sale of bricks, jewellery and luxury flights suffered in the recession.
       The company, which reports third-quarter results yesterday, may need further reductions, even as the US recovers, said Jeff Matthews, founder of the hedge fund Ram Partners.
       "I don't think Berkshire hit the reset button as hard as other companies" when it came to cutting costs, said Matthews, the author of "Pilgrimage to Warren Buffett's Omaha".
       Naming David Sokol, chairman of Berkshire's energy business, to lead the aviation operation that Santulli founded may have been received as "a wake-up call to other managers".
       Sokol said that Netjets was laying off as many as 495 pilots.
       The CEOs of Berkshire's operating companies oversee more than 200,000 workers selling Fruit of the Loom T-shirts, Geico car insurance and Dairy Queen ice cream, while Buffett vets investments with a staff of fewer than 20 at the firm's Omaha, Nebraska headquarters.
       Berkshire said on Wednesday that it agreed to pay US$26 billion (Bt867 billion) to buy Burlington Northern Santa Fe, adding a railroad with about 40,000 employees.
       Berkshire has gained 5.5 per cent this year through Thursday on the New York Stock Exchange, compared with the 18 per cent gain in the Standard Poor's 500 Index.
       Third-quarter profit may more than double to $2.89 billion, according to Meyer Shields, an analyst with Stifel Nicolaus.
       The best back-to-back quarterly rally in the S&P in 34 year is helping Berkshire recover after its first loss since 2001 in the January-to-March period.
       Berkshire's agreement to purchase the 77.4-oer-cent of Burlington it did not already own may mean Buffett is more confident in the company's finances after he scaled back on insuring catastrophes earlier this year to guard capital. The deal is Buffett's biggest.
       "He's making such a large acquisition at a time when he was so concerned about having enough liquidity," said Gerald martin, a finance professor at American University's Kogod School of Business in Washington. "It might signal that Berkshire is kind of turning the corner."
       Buffett built Berkshire into a $150-billion company over four decades by buying out-of-favour stocks and family businesses. After credit markets froze last year, Buffett added to holdings of bank stocks and agreed to finance Goldman Sachs Group, investments that surged in this year's recovery.
       Buffett purchases operating companies for Berkshire with the promise to their owners never to sell them and says his ideal time horizon to hold a stock is "forever".
       He reversed course on credit-rating company Moody's Corp, reducing Berkshire's stock holding three times since July. In February, he said he made a mistake by buying ConocoPhillips stock, which cost Berkshire $1.9 billion in the first quarter.
       Buffett was a NetJets client before acquiring the firm in 1998 from Santulli, the inventor of fractional jet ownership.
       Santulli added about 648 jobs at Columbus, Ohio-based Netjets in 2008 before presiding over about $350 million in losses in the first half. Sokol announced 300 job cuts in September and the additionaly layoffs on Friday.
       Santulli said in August that he was resigning to spend more time with his family, and Buffett said he accepted the departure "with reluctance".
       "Nothing is forever, even at Berkshire", Matthews said.
       Buffett replaced Marvin Beasley in April as CEO of Helzberg Diamond Shops after saying in an interview that consumers "won't go in our jewellery stores" because of the recession.
       A year earlier, Beasley told the kansas City Business journal that Helzberg was not planning more job cuts after eliminating 21 positions, saying, "we think it's going to be OK".
       Helzberg has 234 US stores, according to its website, compared with the" nearly 270" tally given by the company in April when the transition was announced.
       Marti Greathouse, a spokes-woman for Helzberg, did not return a call seeking comment.
       Berkshire last year cut jobs at businesses including Clayton Homes, which builds manufactured housing, and brick-maker Acme Building Brands.
       Buffett told shareholders at the firm's annual meeting in May that he expected more reductions. Shaw Industries, the world's largest carpet manufacturer, said last October it was closing a spun-yarn plant in Trenton, Georgia, to cut production. About 440 workers were affected.

       Buffett built Berkshire into a $150-billion firm over four decades by buying out-of-favour stocks and family business.

HK TIGHTENS REGULATIONS ON SALES OF DERIVATIVES

       Officials in Hong Kong said yesterday regulations on the sale of complicated investment products have been tightened after thousands of local retail investors were burned by Lehman Brothers-backed derivatives last year.
       But lawmakers said the new measures fall short and urged the government to prosecute banks that misled investors and to ban some risky products outright.
       Under the new regulations, banks must issue risk warnings for complex products and record conversations between their sales staff and clients to prevent deception, KC Chan, Secretary for Financial Services and the Treasury, said at a legislative hearing yesterday. The government is also considering setting up an investor education body and a financial services ombudsman, he said.
       The measures come after 30,000 Hong Kong small investors who bought US$1.8 billion (Bt60.2 billion) in Lehman-linked derivatives were left in limbo after the US investment bank collapsed September last year. They weren't fully aware of the risk their investments carried, many of the complex derivatives were innocuously labelled "mini-bonds", angry investors took to the streets.
       Hong Kong regulators announced a settlement with 16 local banks in July that returned up to 70 per cent of principal to the buyers, or up to $6.3 billion Hong Kong dollars (B27.2 billion).
       Opposition lawmaker Ronny Tong criticised the government for not focusing on legal action. "I think it's strange that there is not a single case of prosecution after investigating for more than a year," Tong said.
       Another lawmaker, Albert Ho, asked Chan why the government didn't consider banning certain risky products altogether, as do a number of other developed markets when it comes to selling to retail investors.
       "Your approach is still disclosure-based. As long as you disclose the risks, if the disclosure is fair and comprehensive, you can cell anything. But shouldn't the government exercise discretion and ban certain products that are very complicated, very risky or whose terms are unfair to investors?" Ho said.
       Chan argued disclosure-based regulation is the international norm, adding that the new measures require bank staff to explan their products in layman's terms and assess their clients' appetite for risk.

LUXURY-BRAND FIRMS HUNT FOR UNTAPPED MARKETS

       With spending on luxury goods down across the developed world in the economic crisis, luxury brands are increasingly looking far beyond the chic avenues of New York, London or Paris for revenue.
       The new names on the lips of luxury professionals are far less familiar - Almaty, Shenzhen, Ulan Bator, respectively, the commercial capital of Kazakhstan, a major Chinese provincial centre and the capital of Mongolia.
       "The desire for luxury is more and more universal so the luxury sector has to reach its clients around the world," Yves Carcelle, chairman of Louis Vuitton, said at the Paris launch of a new luxury products website for China.
       Louis Vuitton earlier this month opened its first store in Mongolia, an Asian country of 2.7 million people with extensive mineral resources and an average per capital annual income of just $1,800 (Bt60,200).
       "It's a country that is taking off economically," said Carcelle, adding: "In just a few days, we already know the store is doing well and we should make as much in Ulan Bator as in a good-sized provincial town in China."
       Antoione Belge, luxury expert at British bank HSBC, explained the strategy.
       "In Mongolio or in Kazakhstan, the big luxury brands are targeting pockets of wealth. In countries which are making revenues from energy, there are small communities of people that have money," he said.
       "When you open a store in a new city in China, the clientele in that city multiplies by a factor of 10. There's the client who is used to buying the brand abroad and nine others who are new."
       A study out this week by US-based consultancy Bain and Company showed luxury sales this year will drop by 16 per cent in North America, by 10 per cent in Japan and by 8 per cent in Europe compared to last year.
       In Asia, however, sales are set to grow by 10 per cent.
       "First we get local elites familiar with our brand, then we open a place where we offer the same quality of service, the same products and therefore the same prices as in other luxury-brand shops," said LVMH, the world's top luxury firm.
       Out of 300 openings of upmarket stores in 2009, Bain said, 15 per cent will be in China, 25 per cent in other Asian countries, 30 per cent in the Middle East, and 15 per cent in Eastern Europe and the Middle East.
       Just 15 per cent would be in Western markets, the study found.
       "Emerging markets with dynamic profiles and appropriate economic potential will offer good growth opportunities," the Gucci luxury group said in a statement.

A BOOST FOR THE THAIECONOMY?

       In the near future, businesses in Thailand may be endowed with a new tool that could help enhance their access to financial resources - arguably one of the most important resources to survive and thrive in today's highly competitive environment. This tool is "commercial collateral", a new form of security/security interest not previously available under Thai laws.
       The draft Commercial Collateral Act proposed by the Fiscal Policy Office,Ministry of Finance, was approved by the cabinet on July 92009. The draft Commercial Collateral Act, when adopted, will effectively expand the types of security available and can be used to secure debts/financial obligations in Thailand.
       The draft Commercial Collateral Act brings about a new form of security/security interest resembling the concept of floating charges not previously provided for under the Thai Civil and Commercial Code (CCC), which recognises only limited forms of collateral such as mortgage and pledge.
       To support the draft Commercial Collateral Act, amendments to the CCC were also proposed and approved by the cabinet. The cabinet-approved draft Commercial Collateral Act and draft amendment to the CCC are now under the consideration of the Office of the Council of State.
       Similar to mortgagees and pledgees,creditors secured by commercial collateral shall have preferential rights and be entitled to receive performance of the obligation due to them from the commercial collateral granted in preference to other creditors. When one and the same property is used/given as security to/in favour of several creditors,the preferential rights created rank according to the respective dates and hours of registration/notification, and the earlier one shall be satisfied before the later one.
       To create valid commercial collateral,it must be made in writing and registered with or notified to the Department of Business Development (DBD), the Ministry of Commerce, without requiring physical delivery of the property granted as collateral to the creditor. The Office of the Council of State is considering whether to adopt a registration regime (whereby the officers will be required to verify all details and particulars relating to the commercial collateral) or a notification regime (whereby verification would not be required) for the administration of the commercial collateral.
       Properties/assets that may be used as commercial collateral can be classified into two broad categories:(a) businesses;and (b) other properties/assets, which include claims, movable property used in business operation, immovable property in the case where the business operator engages in real estate business,and other property as to be prescribed by the ministerial regulations.
       The concept of using the business as collateral is indeed a novel legal concept in Thailand. Under the draft law, when a business is used as collateral, it does mean the entire business. That is, if the collateral provider is in default, the creditor will be entitled to enforce the collateral, including through sale/disposal of the entire or part of the business of the collateral provider,according to the provisions of the Commercial Collateral Act.
       The use of claims as commercial collateral differs from the transfer or assignment of claims under the CCC in that it would create a real right and valid security interest recognised under Thai law over the property. This differs from the CCC, under which it would be the transfer or assignment of claims/rights creating contractual obligations binding and enforceable only upon the contracting parties and the debtor of such claims.
       In addition, unlike the pledge under the CCC, the right to possess and utilise the commercial collateral will remain with the collateral provider, provided that creditors are permitted to examine the assets. This is a big plus as the possession of the property does not have to be transferred to the creditor, which effectively removes the limitation on the usage of the property.
       To enforce commercial collateral,creditors may, with the consent of the collateral provider, sell or claim foreclosure of the collateral property;otherwise they have to take court action.In the cases where a business is used as collateral, the enforcement must be executed by an expert/executor licensed by the DBD.
       However, the current draft of the proposed law does not clearly address the issue of whether the licences, permits,and approvals required for engaging in the relevant business or concessions granted by government authorities will also be transferred to the buyer of the business in the event of enforcement where the collateral is the business. This could create practical problems, unless properly resolved/addressed in the Commercial Collateral Act.
       If the draft Commercial Collateral Act and draft amendment to the CCC are adopted, they will provide more options for both creditors and debtors. This could help businesses to seek bank lending to finance capital requirements and, if implemented in a timely manner, could also facilitate recovery during the current depressed economic environment where access to funds is vital.

Tepid sales recovery in 2010 seen

       The global economic crisis has generated a new phenomenon: luxury shame, or the shunning of ostentatious purchases of expensive jewellery, watches and fashion, which is largely blamed for the projected 8% drop in the luxury market this year.
       But a Bain & Co study released on Monday indicates the phenomenon isn't durable, predicting a slight 1% increase in the luxury market next year, with full recovery not expected until 2011-2012.
       The global luxury market is expected to be worth 153 billion ($228.25 billion)in 2009, compared with 167 billion in 2008. The 2009 forecast is a slight improvement over the 10% decline in sales Bain predicted for the year in April.
       For the first time since it began tracking the sector, Bain said exchange rates had a positive impact, dulling what would have been an 11% drop in the worldwide luxury market.
       The trend against ostentatious spending hit such luxury items as jewellery and watches especially hard."Watch sales are screeching to a halt, forecast to drop 20% to 20 billion this year," Bain said,"while jewellery sales are expected to drop 12% to 6.8 billion."Conversely, online sales are projected to rise 20%, to 3.6 billion worldwide in 2009.
       "It is much more private," Bain partner and luxury goods expert Claudia D'Arpizio said."You just click. There isn't all the ceremony of paying for the item and making the sale at the cash register."
       Women this year opted to "shop their closets" and accessorise to update their wardrobes rather than buy new clothes,precipitating an expected drop of 12.5%to 20 billion in womenswear sales this year. Leather goods sales are expected to drop just 4% to 18 billion with shoes dipping just half a% to 7.8 billion.When they did buy new clothes,women tended not to snap up fancy pieces that could only be worn on certain occasions, but rather evergreens,D'Arpizio said
       Cosmetics and fragrances - areas that D'Arpizio expected to be durable - actually hit hard times, dropping 5%and 3% respectively (to 19.8 billion and 16.9 billion) as women went down market, going for supermarket brands rather than the 300 creams - the so-called "Nivea effect."
       "Frugality is fashionable," D'Arpizio said, even for the wealthiest consumers.
       Geographically, luxury sales in America are taking the biggest hit, with Bain estimating a contraction of 16% to
       44 billion in sales in 2009, while Europe is expected to be down 8%. Asia Pacific,excluding Japan, is forecast to grow by 10%, boosted by China, which is expected to grow 12% to 6.6 billion.The Japanese market continues to slump, with a forecast drop of 10%.

Beauty, luxury products shine amid gloom

       Department stores in Asia that have managed to capitalise on trendconscious consumers willing to spend on elegance and beauty are ringing in the sales as the region's economy recovers.
       In contrast, the ones not using luxury to tempt shoppers look much more vulnerable to cheaper alternatives.
       The post-crisis strategy for department store operators like South Korea's Lotte Shopping, Hong Kong-listed Parkson Retail and Japan's Isetan Mitsukoshi, is how to fend off cost-competitive rivals from discount stores to Internet shopping in the battle for consumer wallets that have been fattened up by government measures to stimulate the economy.
       Despite the downturn, Asia's department store shares still outrank lowerend retailers in valuation, a sign investors see stronger earnings recovery as regional economies turn around.
       Asia-Pacific department stores trade at average 39 times of their forecast earnings, compared with 20 for supermarket and convenience store chains,according to Thomson Reuters data.
       In China, Taiwan and South Korea,where expensive tastes accompany a rising middle class and asset prices, department stores are associated with brand-name cosmetics and luxury.
       "Although the economy is bad, people still want to look good. They'll rather spend money on their face and body to look young, and wear cheaper clothes,"says Shauna Lee, a marketing executive at Taipei's Shinkong Mitsukoshi department store, where throngs of shoppers enjoy the annual sale promotion with shopping vouchers from the government.
       In South Korea, August department store sales from top players Lotte Shopping, Shinsegae and Hyundai Department Store rose at the fastest clip in seven months, with consumer sentiment at a seven-year high. Cosmetics, luxury items and premium health foods are consistent leaders. Shares in Hyundai,more focused on upscale shoppers than its peers, have jumped 85% this year.
       China's retail sales posted 15% growth in the first three days of the Oct 1-8 "golden week" holidays. The downturn has done little to dent demand for designer handbags and watches, a survey from market research firm Pao Principle shows.
       As China's urbanisation and growing wealthy consumer class fuel demand,brand recognition is helping high-end retailers. Department store chain Golden Eagle shares have more than doubled this year.
       "The right strategy for department stores is to go even more upscale," said Hyundai Securities analyst S.K. Lee."Those with money keep spending on beauty products and luxury goods."
       Shinsegae constantly renews its luxury items offering to compete with special-ised stores around Seoul.
       "We were able to post fairly strong earnings thanks to the robust sale of luxury items and cosmetics ... And wealthy consumers' royalty to our groceries section is extremely high," said Shinsegae spokesman Kang Sang-min.
       Top Thai shopping centre operator Central Pattana plans to add eight locations a year for six years from 2011.
       "There is a sign of an industry pickup and we're not stopping ourselves from expanding," chief financial officer Naris Cheyklin said.
       For some Asian department stores,expansion means potential mergers and acquisitions - Lotte Shopping is debating whether to buy Chinese supermarket operator Times Ltd as it seeks a strong brand in a fast-growing market.
       In Japan, however, a prolonged retail slump is weighing on upscale retailers,hit by the impact of deflation and job losses.
       "Specialty stores like Uniqlo and Nitori are attracting customers. Department stores have failed to respond to changing consumer trends," said Naozumi Nishimura, analyst at a research firm TIW in Tokyo.
       Sales at Japanese department store chains, including Isetan Mitsukoshi,J.Front Retailing and Takashimaya,marked the 18th straight month of yearon-year decline in August.
       "As for consumer spending, tough times are likely to continue for a little while," said Takashimaya president Koji Suzuki.
       "We have been working on structural reform and stepping up marketing efforts,but we cannot make up for falls in sales in this tough economic condition."
       Asian retailers in general have still fared better than Western peers as their economies avoided the worst of the fallout from the financial crisis. High-end retailers in the United States and Europe,including Saks, Nordstrom and PPR, have been hit hard by weak sales and consumer focus on value.
       The question now is whether Asia's high-end retailers can sustain the upturn once stimulus measures are removed.Monetary tightening has already begun in Australia, South Korea is expected to hike rates early next year, while many other governments are cautiously discussing exit strategies.
       In Taiwan, shopping vouchers equivalent to 0.7% of the island's GDP were offered and almost all of them used.
       Government cash handouts have also helped Australia's department store chains David Jones and Myer post resilient sales.
       An upcoming initial public offering by Myer, Australia's biggest department store chain, could test investors' confidence in retailers.
       Although growth in consumer spending across Asia is expected to dip this year, it is forecast to continue its upward trend in the next two years, underpinning the region's department stores.
       "I know there is a crisis, but things seem much better now," said Chen Yi,a Beijing housewife shopping with her son at upscale shopping mall "The Place".

CHIANG MAI BANKING ON LOY KRATHONG

       The Loy Krathong festival in Chiang Mai should draw at least 30,000 tourists a day and Bt500 million in money circulating over its five-day stretch starting on October 31.
       Chalermsak Suranant, director of the Tourism Authority of Thailand's Chiang Mai office, said the economic recovery and the northern province's cultural attractions should whet the appetite of locals and foreigners to travel.
       Four and five-star hotels have already reported festival bookings of 70 per cent of available rooms, which is better than last year at the same time, and two more weeks are still left for the festival,he said.
       Boonlert Buranupakorn, president of the provincial administrative organisation, said all corners of the city would be decorated with flowers and on November 2 the city wil float three giant lanterns representing the three pandas living in Chiang mai Zoo.
       On the next day, visitors will enjoy a special fireworks show.
       Last quarter, the tourism in the province slowed, but the situation should recover this quarter, he said.
       "Tourism revenue should be close to last yea's level, with a slight upside or downside gain," he said.
       Last year, the province generated Bt38 billion in tourism incom, welcoming 5 million tourists, of whom 70 per cent were Thais.

Integration will make Asean an economic powerhouse

       WITH A COMBINED economy bigger than India or South Korea and a total population of more than half a billion people, Asean has the potential to become an economic force that could rival China, India, Brazil and Russia. The absence of Asean from investors' radar screens as a unified economic unit is due to the lack of integration of the bloc's economies and financial markets. Both local and international investors still widely view the Southeast Asian region as 10 separate economies due to differences in regulations, business environment, institutional capacity and culture. Thus, further integration of Asean is necessary in order to maximise intra-regional synergies and keep the region relevant to the international economy and investors.
       History is on Asean's side. The global economic and financial crisis has seen a redistribution of economic power from the developed economies to the emerging markets. The September summit of G-20 leaders in Pittsburgh was a landmark event in this shift, with the expansion of the forum from seven industrialised nations to the 20 countries with the greatest global economic influence.
       Although Indonesia became the only Southeast Asian member of the G-20, Asean as a group was invited to participate in the G-20 summits in London in April 2009 and in Pittsburgh as a result of its growing influence on the global economy. The US is set to hold its first-ever summit with Asean in November, when President Barack Obama visits Singapore for the Apec meetings. These events have provided opportunities for Asean to emerge from the shadows of China and India and transform itself into an economic force in its own right.
       Asean has earned its way to the high table. Its member countries have weathered the financial storm well. Economic activity did contract in some open economies, such as Singapore, Thailand and Malaysia, but the worst is over, and their economies and financial systems have suffered no collateral damage. Meanwhile, Indonesia and Vietnam are emerging as Asia's two out-performers. We estimate that Asean's purchasing power could double by 2023, creating significant opportunities in consumer products and services.
       All of this reflects the fact that Asean economies have built up their resilience through years of reform and restructuring since the Asian financial crisis of 1997. The accumulation of foreign-exchange reserves has helped to maintain investor confidence and limit undue volatility, while a well-capitalised banking sector has been crucial for ensuring the smooth running of the region's economy.
       Last but not least, disciplined fiscal policy has provided governments with the capacity to pump-prime, often in innovative ways, when needed.
       Indeed, the Asean region has all the ingredients to become a global economic force. In 2008, its 10 members had a combined GDP of US$1.5 trillion (Bt50.34 trillion), 580 million people and total trade of $1.7 trillion (26 per cent of it intra-regional). If Asean were a single country, it would be the world's 10th-largest economy and the third-most populous country. Counting only extra-regional trade, Asean is the world's fifth-largest trading power, after the US, Germany, China and Japan. In recent years, Asean's free-trade agreements with China, India, Japan and South Korea have deepened the region's economic links with the rest of Asia.
       Also, Asean as a combined economy would rank among the world's top 10 in terms of foreign direct investment inflows. Fears of China taking every FDI dollar from Asean have not been matched by reality. Asean still managed to attract $60 billion of FDI in 2008, with intra-regional investment accounting for a sizeable portion as foreign investors, especially from within Asia, see countries such as Indonesia and Vietnam as alternative manufacturing bases as the cost of doing business in China rises. In fact, relative to the sizes of their economies, Asean attracted more FDI than China, which absorbed $108 billion of FDI in 2008, while its GDP was three times the size of Asean's.
       That said, further enhancements are badly needed to increase foreign investor interest in Asean. The region's economic integration is still at an early stage and much more work is required to remove barriers to the trade of goods and the free flow of capital, information, and talent. These measures are relevant to businesses as they enhance access to the whole Asean consumer market from any one member country.
       Amid the rise of China and India, there are ongoing concerns that some Southeast Asian nations may be marginalised. This is primarily a result of the economic and political diversity of Asean members. For example, the World Bank's "Doing Business Survey 2010" ranks Singapore as the easiest place in the world to do business, while it ranks Laos 167th out of 181 countries. Politically, Asean's members range from Indonesia, the world's third-largest democracy (after the US and India), to Burma at the other end of the spectrum. Brunei's economy is heavily dependent on oil and gas. Thailand, Vietnam, Indonesia and Malaysia have considerable agricultural production bases. By contrast, Singapore has few, if any, natural resources and relies on imports for local consumption, and manufacturing, financial services and trading drive its economy. Singapore, Asean's richest member, has a per-capita GDP 150 times higher than its poorest, Burma, and 15 times the Asean average. While Singapore, Malaysia and Thailand boast the region's best ports, airports and transportation networks, other Asean countries are disadvantaged due to poor logistics and infrastructure.
       Clearly, Asean's smaller members need a common platform to represent their interests, and Asean could become that key channel through which these members can make their voices heard.
       The challenge for Asean leaders converging in Thailand this month for the 15th Asean Summit is to convince the business sector and investors that Asean is a workable concept. The Asean Charter, adopted by all 10 members in 2008, is an important step towards integration. The plan to establish an Asean Economic Community by 2015, while ambitious, is necessary to push the region's integration forward and help establish Asean as a global economic powerhouse.

AMID THE CRISIS, THE MYTH OF RISING TRADE PROTECTIONISM

       THERE WAS a dog that didn't bark during the financial crisis: Protectionism. Despite much hue and cry about it, governments have in fact imposed few trade barriers on imports. Indeed, the world economy remains as open as it was before the crisis.
       Protectionism normally thrives in times of economic peril. Confronted by decline and rising unemployment, governments are more likely to pay attention to domestic pressure groups than to upholding international obligations. As John Maynard Keynes recognised, trade restrictions can protect or generate employment during recessions. But what may be desirable under extreme conditions for a single country can be highly detrimental to the world economy. When eveyone raises trade barriers, the volume of trade collapses. No one wins. That is why the disastrous free-for-all in trade policy during the 1930s greatly aggravated the Depression.
       Many complain that something similar, if less grand in scope, is taking place today. An outfit called the Global Trade Alert (GTA) has been raising alarm bells about what it calls "a protectionist juggernaut". The GTA's latest report identifies 192 protectionist actions since November 2008, with China the most common target. This number has been widely quoted in the press. Taken at face value, it seems to suggest that governments have all but abandoned their commitments to the World Trade Organisation and the multilateral trade regime.
       But look more closely and you will find less cause for alarm. Few of those 192 measures are in fact more than a nuisance. The most common among them are the indirect (often unintended) consequences of the bailouts that governments mounted as a consequence of the crisis. The most frequently affected sector is the financial industry.
       Moreover, we do not even know whether these numbers are unusually high when compared to pre-crisis trends. The GTA report tells us how many measures have been imposed since November 2008, but says nothing about the analogous numbers prior to that date. In the absence of a benchmark for comparative assessment, we do not really know whether 192 "protectionist" measures is a big or small number.
       What about the recent tariffs imposed by the US on Chinese tyres? President Obama's decision to introduce steep duties (set at 35 per cent in the first year) in response to a US International Trade Commission ruling (sought by US unions) has been widely criticised as stoking protectionist fires.
       But it is easy to overstate the significance of this case, too. The tariff is consistent with a special arrangement negotiated at the time of China's accession to the WTO, which allows the US to impose temporary protection when its markets are "disrupted" by Chinese exports. The tariffs that Obama imposed were considerably below what the USITC recommended. And, in any case, the measure affects less than 0.3 per cent of china's exports to the US.
       The reality is that the international trade regime has passed its greatest test since the Depression with flying colours. Economists who complain about minor instances of protectionism sound like a child whining about a damaged toy after an earthquake that killed thousands.
       Three things explain this resilience: Ideas, politics and institutions.
       Economists have been successful in conveying their message to policy-makers-even if ordinary people still regard imports with considerable suspicion. Nothing reflects this better than how "protection" and "protectionists" have become terms of derision. After all, governments are generally expected to provide protection to citizens. But if you say that you favour protection from imports, you are painted into a corner with Reed Smoot and Willis C Hawley, authors of the infamous 1930 US tariff bill.
       But economists' ideas would not have gone far without significant changes in the configuration of political interests in favour of open trade. For every worker and firm affected by import competition, there is one or more worker and firm expecting to reap the benefits of access to markets abroad. The latter have become increasingly vocal and powerful, often represented by multinational corporations. In his latest book, Paul Blustein recounts how a former Indian trade minister once asked his American counterpart to bring him a picture of an American farmer: "I have never actually seen one," the minister quipped. "I have only seen US conglomerates masquerading as farmers."
       But the relative docility of rank-and-file workers on trade issues must ultimately be attributed to something else altogether: The safety nets erected by the welfare state. Modern societies now have a wide array of social protections - unemployment compensation, adjustment assistance, and other labour-market tools, as well as health insurance and family support - that mitigate demand for cruder forms of protection.
       The welfare state is the flip side of the open economy. If the world has not fallen off the protectionist precipice during the crisis, as it did during the 1930s, much of the credit must go the social programmes that conservatives and market fundamentalists would like to see scrapped.
       The battle against protection has been won - so far. But, before we relax, let's remember that we still have not addressed the central challenge the world economy will face as the crisis eases: The inevitable clash between China's need to produce an evergrowing quantity of manufactured goods and America's need to maintain a smaller current-account deficit. Unfortunately, there is little to suggest that policy-makers are ready to confront this genuine threat.

Recession claims another fashion victim in Yohji Yamamoto

       The recession claimed another fashion victim last week as Yohji Yamamoto, the cult Japanese house, announced it was filing for bankruptcy.With debts of about ฃ42 million (2.2 trillion baht), the company blamed slow sales and a decrease in demand during a time of general economic slowdown.
       "I concentrated too hard on making clothes and left too much responsibility on higher management," the crestfallen designer told a press conference in Tokyo on Friday, only a week after he had presented his spring/summer 2010 collection to fashion press and buyers in Paris.
       "But my biggest obligation is to keep making world-beating products. I'll continue to do that until the business is wound up."
       The label, founded in 1972, will continue trading internationally for the time being. But Yamamoto is the latest company to suffer in a string of bankruptcy claims in Japan, where high-end fashion retail is being squeezed by a boom in budget clothing.
       Last week, Versace announced it was liquidating its operations in the country,30 years after opening its first shop there.And last year, Louis Vuitton scrapped plans for a 12-floor megastore in Ginza,Tokyo's busiest and most exclusive shopping district.
       While the homegrown budget brand Uniqlo chalked up a record year, Yama-moto has seen its market shrink.
       "The company has also suffered because of the fall in consumption and excess levels of debt," a statement released said. The company also blamed the strength of the Yen for its plight.
       Yamamoto, who turned 66 last week,first arrived on the international fashion circuit in 1981. Along with Rei Kawakubo at Comme des Garcons, he spearheaded the avant garde movement then emerging from Japan.
       His label is known for its unstructured and deconstructed tailoring, inspired by traditional Japanese men's workwear,and for its plain collections solely in black, which earned the moniker "Hiroshima chic" within the fashion industry.
       Such was the enormity of Yamamoto's and Kawakubo's colour choice, when other brands were firmly focussed on bright shades and conspicuous status,that the women who bought and wore their pieces were known as "the crows"in Japan. Often described as "intelligent clothes", Yamamoto attracts intellectual customers who appreciate the hidden complexities of his work. Such complexities and studied simplicity do not come cheap, of course, and the label's higher prices may have contributed to its insolvency.
       Pieces are masculine in shape, often intended to conceal the feminine form in vast swathes of gabardine or loose weave cotton and muslin.
       The look is tricky to pull off for most,and one that is jarring and consciously so - in comparison with the current trend for a slim-line, body-conscious silhouette. Yamamoto said that he was "scared" of women in high heels and red lipstick; his clothes are a more understated take on female power dressing, favoured by the likes of Tilda Swinton and the architect Zaha Hadid.
       The company's decline could be attributed to the vogue for "it" pieces,recognisable status buys that were big business before the economy plunged.Although fashion now favours a more inconspicuous look, Yamamoto's clothes are almost too quiet; and his trademark "peasant shoes" don't have a matching price-tag.
       The announcement comes after the French couture house Christian Lacroix went into administration in May. Yohji faces a similar problem- while he has diversified by taking on a number of collaborations, including a range for Adidas (which will continue), a lack of diversification into lucrative cosmetics and fragrance has contributed to his decline.Lacroix and Yamamoto embodied their brands and ploughed their creative visions into them, but did little to expand commercially. Sheikh Hassan Ben Ali al-Naimi, from the United Arab Emirates,offered to take a majority share in Lacroix last week, which would push the designer into a minority shareholding; whether Yamamoto will seek a similar solution remains to be seen.
       His focus on clothing may be artistically noble, and his fans as dedicated as any collectors, but fashion is a strange discipline and even the most avant garde of its number still need to make big money.

Commerce Ministry reshuffle "not based on individual merit"

       Any reshuffle of the Commerce Ministry will be based on politicians' favourites and coalition parties' political bargaining power rather than individual performance, sources say.
       The ministry next Tuesday will submit for Cabinet approval a list of senior officials to be reshuffled. Some departments have not yet finalised names of new appointees, particularly new directors-general for each department, as they are awaiting the outcome of politicians' discussions within the coalition parties.
       However, some directors-general have packed up their belongings in anticipation of new assignments.
       A senior ministry source said Commerce Minister Porntiva Nakasai had not yet finalised her director-general appointees for the Export Promotion and Trade Negotiations departments.
       "The minister must discuss her choices with Deputy Minister Alongkorn Ponlaboot and certain politicians before finalising them," said the source.
       It was reported that two present directors-general - Rachane Potjanasuntorn at the Department of Export Promotion (DEP) and Chutima Bunyapraphasara at the Foreign Trade Department - would both become deputy permanent secretaries. Business Development Department director-general Kanissorn Navanugraha will reportedly be named as an inspector-general.
       Commercial adviser Vichak Visetnoi will reportedly replace Chutima, while inspector-general Banyong Limprayoonwong will be named as the new director-general of the Internal Trade Department.
       The source said both Vichak and Banyong had strong backing from politicians for their move.
       In other reported switches, ministry inspector-general and spokesman Krisda Piampongsant will be named as the new director-general of the Business Development Department. Intellectual Property Department deputy director-general Pajchima Tanasanti will be promoted to director-general. And Trade Negotiations Department director-general Nuntawan Sakuntanaga may move to the DEP, while deputy permanent secretary Srirat Rastapana would replace Nuntawan.

NORWAY TOPS UN HUMAN DEVELOPMENT INDEX

       Norway takes the No 1 spot in the annual United Nations human development index but China has made the biggest strides in improving the well-being of its citizens.
       The index compiled by the UN Development Programme (UNDP) ranks 182 countries based on such criteria as life expectancy, literacy, school enrolment and gross domestic product (GDP) per capita.
       Norway, Australia and Iceland took the first three spots while Niger ranks at the very bottom, just below Afghanistan. China moved up seven places on the list to rank as the 92nd most developed country due to improvements in education as well as income levels and life expectancy.
       Colombia and Peru rose five spaces to rank 77th and 78th while France - which was not part of the top 10 last year - returns to the upper echelons by moving up three places to number 8.
       The UNDP said the index high-lights the grave disparities between rich and poor countries.
       A child born in Niger can expect to live to just over 50, which is 30 years less than a child born in Norway. For every dollar a person earns in Niger, 85 dollars are earned in Norway.
       This year's index was based on data from 2007 and odes not take into account the impact of the global economic crisis.
       "Many countries have experienced setbacks over recent decades, in the face of economic downturns, conflict-related crises and the HIV and Aids epidemic," said the UN development report's author Jeni Klugman.
       "And this was even before the impact of the current global financial crisis was felt." The top 10 countries listed on the idex are: Norway, Australia, Iceland, Canada, Ireland, the Netherlands, Sweden, France, Switzerland and Japan.