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.

Wall Street sinks on job losses data, heads into corporate earnings spell

       Having lost some of its swagger from a powerful six-month rally,Wall Street heads into corporate earnings season with renewed skittishness about prospects for an economic recovery.
       The latest economic data has cast fresh doubt on the notion of a strong recovery from recession, and investors will look to the upcoming quarterly reports for signs of whether Americans are emerging from a long retrenchment.
       In the week ending on Friday, the blue-chip Dow Jones Industrial Average slid 1.84% to 9,487.67, in a second straight weekly loss after the indices hit 11-month highs in September.
       The technology-rich Nasdaq composite sank 2.05% to 2,048.11 and the Standard & Poor's 500 broad-market index slid 1.84% to 1,025.21.
       The losses came on disappointing economic news, highlighted by a shock unemployment report on Friday that showed the labour market reversing course after several months of improvement.
       Official data showed job losses accelerated to 263,000 in September and the unemployment rate rose to 9.8%,pouring cold water on the notion of a quick and strong recovery from the nearly two-year-old recession.
       "The market practitioners who believe the recovery is based on sand are seeing a lot of evidence in this and other recent data," said Cary Leahey, senior economist at Decision Economics.
       The market now looks to corporate earnings, starting with Wednesday's report from aluminum giant Alcoa the first of the blue chips to report results - for clues on the direction of economic activity.
       "The looming question is whether investor expectations are now set at a reasonable level or too high considering the challenges that continue to face the US economy," said Fred Dickson, market strategist at DA Davidson & Co.
       "We feel comfortable forecasting a nice rebound in corporate earnings even in a weak growth economy as most companies have trimmed costs thereby significantly raising productivity of their workforce during the last 18 months."
       The market is still sitting on hefty gains after a solid 15% rise in the JulySeptember quarter for the Dow and S&P 500, and a six-month rally of around 50%.
       Analysts say the market needs to see evidence the economy is on the mend to add to those gains.
       "US equity markets may have racked up their finest third quarter in seven decades, but the low hanging fruit has almost certainly been picked, as the last few days can attest," said Sal Guatieri at BMO Capital Markets."Less-bad news no longer will sustain the rally, as the economy must now prove it can sustain a recovery. But the mish-mash of indicators released this week, showing the economy took two steps forward in the summer and a big step back in early fall,was less than inspiring."
       RBC Wealth Management analyst Bob Dickey said the rally still has legs since the worst of the economic crisis is over.
       "The market is already in a modestly oversold condition, and as such, could bottom and rally again at any time," he said.
       In the coming week, the market will also ponder a purchasing manager survey of the services sector by the Institute of Supply Management and data on the US trade balance.

COMMERCIAL REALTY VALUES TO DROP 42%: GOLDMAN

       US commercial real estate prices may fall as much as 42 per cent from their previous high and vacancy rates may rise further, Goldman Sachs Group said at the weekend.
       Prices may drop another 17 per cent through the fourth quarter of next year, Goldman said. The firm previously predicted a 24-per-cent peak-to-trough decline.
       Scarce credit and the recession are pushing up vacancy rates, allowing rents to declined and putting pressure on holders of commericial mortgages, Goldman said.
       "The downturn in the US commercial real estate sector has been even more dramatic than we antiipated," the researchers said.
       "Given market illiquidity, the risk of forced sales, substantial downward momentum in prices and the tendency for financial assets to overshoot fair values at both the peak and the trought, we believe both appraisal and transaction prices may fall further from here."
       They expect $287 billion *B9.6 trillion) of losses on commercial mortgages, up from a previous estimate of $183 billion. Almost all of the increase is due to the addition of construction loans to the estimate. The overall number is 8.2 per cent of commercial property loans outstanding at the end of last year.
       Vacancy rates have risen 35 per cent across all property types, the report said. or twice what the firm projected in February 2008. The rate could go higher, Goldman said.
       "Demand will be insufficient to soak up space that is coming on stream through 2010," the export says. "This will drive vacancy rates higher and exert additional pressure on rent growth" and reduce revenue relative to loan payments, likely leading to defaults.
       Goldman recommended avoiding investing in regional banks with large commercial real estate portfolios, in favour of" consumerfocused large banks" such aw JPMorgan Chase and Bank of America.
       It also recommended "very selective exposure to real estate investment trusts with strong balance sheets-naming mall REIT Taubman Centres as an example.

US data point to uneven recovery

       US consumer spending rose at its fastest in nearly eight years in August, but a persistently weak labour market and below-forecast expansion in manufacturing in September could hamper a nascent economic recovery, data showed.
       The latest batch of mixed data released on Thursday was yet another indication that while growth probably resumed in the third quarter after a prolonged recession, staying on a steady path could prove to be a challenge.
       "While the economy is emerging from recession, recovery is likely to proceed in fits and starts rather than a continuous upward march. This uneven pattern of growth is what we've been seeing for the last several weeks," said Zach Pandl,an economist of Nomura Securities International in New York.
       The US Commerce Department said personal spending jumped 1.3%in August, the largest gain since October 2001, after a 0.3% rise in July. Spending was up for a fourth straight month and beat expectations for a 1.1% rise.
       Spending was likely boosted by a government-sponsored discount scheme for new motor vehicle purchases, dubbed "cash for clunkers," which ended in August.
       Optimism over the rise in spending,which normally accounts for over twothirds of US economic activity, was clouded by reports showing more people than expected applied for first-time unemployment benefits last week and manufacturing activity in September,although growing, missed expectations.
       A report from the Labour Department showed initial claims for state unemployment insurance rose to 551,000 last week from 534,000 in the previous week,more than analysts' expectations for 530,000. It was the first rise in three weeks.
       Separately, the Institute for Supply Management said its index of national factory activity eased to 52.6 in September from 52.9 in August - below expectations for a reading of 54.
       Despite the disappointing manufacturing and jobless claims reports, other segments of the US economy continue to heal.
       Pending sales of existing homes surged 6.4% in August, notching a seventh consecutive month of gains, the National Association of Realtors said. The rise drove the industry group's sales gauge to its highest since March 2007.
       Housing is at the heart of the United States' worst recession in 70 years. The wealth of most Americans is tied to their homes and a recovery in the battered housing market could encourage them to spend more and help support economic growth.
       Personal income rose 0.2% in August after rising 0.2% in July, the Commerce Department said.

Buffett hammered on Forbes rich list

       The super-rich are getting poorer with the 400 wealthiest Americans losing $300 billion of net worth in the past year, hurt by sagging capital and real estate markets, according to the annual Forbes magazine ranking.The Forbes 400 list of wealthiest Americans, released on Wednesday, said Warren Buffett was the biggest loser, with the famed investor shedding $10 billion in net worth as shares in his firm Berkshire Hathaway tumbled.
       The list of top 10 richest Americans remained virtually unchanged from the 2008 list, with Microsoft Corp founder Bill Gates in the top spot with a fortune of $50 billion, down $7 billion from last year. Buffett was No.2 with $40 billion and Oracle Corp founder Lawrence Ellison was No. 3, with his fortune unchanged at $27 billion. Ellison was the only member of the top 10 who did not suffer significant losses.
       The US stock market, as measured by the Standard & Poor's 500 Index, slid about 43% from September 2008, when the financial crisis erupted, through March - shedding $5 trillion in market value.
       The wealth estimates were made according to asset values on Sept 10. Many at the top saw their net worth rise since March, when Forbes published its list of the world's richest people, coinciding with the bottom of the bear market.
       The top 10 combined lost almost $40 billion, said Matthew Miller, editor of the Forbes list, in what he called a "bloodbath" of wealth destruction for America's rich and not-so-rich alike. The net worth of all 400 combined fell 19%,to $1.27 trillion from $1.57 trillion.
       "No one is going to cry for any of these super-rich guys, because even the ones who dropped from $2 billion last year to $100 million still have a very nice lifestyle," Miller said.
       But he warned about a trickle-down effect since many of these executives wield economic power, including control over thousands of jobs.
       "It really doesn't spell anything good for any of us," he said."If they're getting poorer, we're likely getting poorer."
       Four descendants of Wal-Mart Stores Inc founder Sam Walton returned this year at positions four through seven,with fortunes between $21.5 billion and $19 billion.
       Completing the top 10 were New York City Mayor Michael Bloomberg, with a fortune of $17.5 billion from the news and financial data empire that bears his name, and brothers Charles and David Koch, who run manufacturing and energy company Koch Industries and are valued at $16 billion each.
       This marked the fifth time since 1982 - when the business magazine began chronicling the fortunes of America's richest people - that their collective wealth fell.
       About 314 members of the Forbes 400 saw their fortunes shrink, lowering the price of admission to the list to $950 million, from $1.3 billion a year ago.
       The list includes 19 new members such as Isaac Perlmutter, chief executive of Marvel Entertainment Inc, which recently agreed to be bought by Walt Disney Cos for $4 billion, and Jeffry Picower, a longtime investor with Bernard Madoff who is accused in a civil lawsuit to have profited by at least $5 billion from the Madoff fraud.
       One newcomer, banker Andrew Beal,tripled his net worth to $4.5 billion by buying cheap loans and assets.
       Thirty-two people fell off the list, including former Citigroup Inc chief executive Sanford Weill, accused swindler Allen Stanford, who has been in a Texas jail since June, and brothers Frank and Lorenzo Fertitta, whose Station Casinos Incfiled for bankruptcy during the past year.
       The full Forbes 400 list can be seen at www.forbes.com/400richest.

Banks lack capital to restore credit flows for recovery: IMF

       The International Monetary Fund warned yesterday that banks lack the capital to restore credit flows to levels needed to support a recovery from the global financial crisis.
       "We are on the road to recovery, but this does not mean that risks have disappeared," said Jose Vinals, director of the IMF's monetary and capital markets department.
       "If the question is whether banks have enough capital to supply sufficient credit to support recovery, we believe that the answer is 'no'." Vinals said at a news conference on the release of the fund's semi-annual Global Financial Stability Report.
       Banks have yet to recognise about US$1.5 trillion (Bt50 trillion) in losses for the 2007-2010 period, slightly more than the $1.3 trillion in losses written down so far, the IMF said.
       For banks and non-back financial institutions, the global write-downs amount to about $3.4 trillion for the period, compared with about $4 trillion seen six months ago.
       More than 94 per cent of the writedowns would be taken by US and European banks.
       "Extreme systemic risks have abated, but complacency about banking system repair is still a concern," IMF economists wrote in the report.
       Recently bank balance sheets have benefited from capital-raising efforts and positive earnings, with large US banks in particularly gaining from a stock market rally from March lows.
       But the IMF economists voiced serious concerns that credit deterioration would continue to put pressure on banks' balance sheets.
       Vinals explained that the $1.3 trillion in write-downs had been basically on securities losses, which occurred instantly.
       The potential $1.5 trillion in u ndeclared losses will be found in the weakening of the loan book, which takes longer to ascertain.
       "The big loss recognition will come from loans from the credit book," Vinals said.
       The analysis showed that US banks had recognised slightly more losses than have those in the UK and the euro zone. In Europe, the lag was explained by different accounting standards and a lower frequency of financial reporting.
       The United States has been much more successful in raising capital than European banks in recent months, Vinals added.
       But capital conservation remains crucial at this stage of the recovery, he said, particularly after the Group of 20 nations decided at the Pittsburgh summit last week to set new capital requirements for banks.
       "You need to have some muscle as a bank," Vinals said. "Banks need more capital."
       Vinals criticised "lagging" progress in cleansing impaired assets from balance sheets and urged banks step up their efforts to remove "this uncertainty" to get credit flows moving again.
       Banks also face a "wall of maturities" over the next two to three years of an estimated $1.5 trillion in debt, he said.
       And with recovery from the worst global recession since the Great Depression expected to be long and sluggish, bank earnings are likely to be lower in the post-crisis environment.
       "The tightening of bank regulation under way is expected to reduce net revenues and require more costly self-insurance through higher levels of capital and liquidity," the report said.
       The IMF pointed to "growing confidence" that the global economy had turned the corner, which was underpinning the improvements in financial markets.

CHINA AT 60 REMAINS A WORK IN PROGRESS

       With China's increasing role in international affairs, the world expects responsibility and fair play in return For the past three decades, China has progressed with a shinkansen [bullet train] speed in all areas. No wonder the leaders of the Communist Party are commemorating this week, their 60th anniversary, with great pride and much fanfare. Any symbol - succinct or subtle - that shows China's success and ever-growing power will be on full display for all to see. For the time being, it is their call. The whole world is watching, some perhaps with envy. After all, China has survived against all odds and overcome many prejudices. The recent economic downturn has been another illustration that China can weather the storms much better than the majority of developed and developing countries. Beijing has already recovered from the economic quagmire much faster due to its effective and timely stimulus packages. The latest positive figures show that the country continues to enjoy 8 per cent annual growth while the rest of world is struggling. No more belittling of the middle kingdom. Make no mistake, China's economic health is essential for the world's recovery.
       Since the "four modernisations" were put in place in the 1980s, China has transformed continuously. Nobody would have believed that such a transformation could be so rapid. Comparing China then and now, it is two different worlds. But China today is still a work in progress. The Chinese leaders understand the kind of problems their country is facing. When they were young cadres, they were worried about their adherence to Mao Zedong's ideology and to consolidating the party's power, as well as increasing the membership of the rank and file. Now, the Communist Party has a different set of priorities. Modernisation over the past three decades has brought unprecedented development and prosperity to the country and has lifted the standard of living of the Chinese people in general.
       At the same time, this has brought new dilemmas that the current Chinese leaders have to deal with. These issues are not restricted to the economic arena, but to politics and society as well. Due to the growing interdependence between China and the rest of the world, they have become multi-dimensional, involving both domestic and external factors. Indeed, they are so intertwined that solutions to many problems must be holistic and comprehensive.
       But the Chinese leaders have yet to share this perspective. Certainly, they are overwhelmingly mindful of the national interest. But they have to realise that the so-called Chinese interests very much belong to the world too: The common campaigns on climate change and counter-terrorism, to name only two.
       In the coming years, economic progress will not be the barometer of China's greatness and growing influence. It will have to do with its increased international role and responsibility, and the quality of life of the Chinese people. This year China has paid more attention to the United Nations. For decades, Beijing had been recalcitrant in acting and supporting international resolutions that would affect even its own national interests. China is now more open, and is willing to share international burdens and take a longer view on issues such as climate change, renewable energy and global security. A more international-minded and UN-focused China will be a benefit to the world. As one of the five permanent member of the UN Security Council, its power of veto can either help or hinder joint international efforts.
       China's expanding diplomatic role derives from confidence and trust within the region. In the past two decades, relations with countries in Southeast Asia, under the Asean umbrella, have been excellent. China has made an effort to build up relations to showcase its friendships with smaller countries. In economic terms, China has become an indispensable partner. Asean's overall economic condition and development is also dependent on trade and investment relations with China. The Asean-China free trade agreement will help accelerate economic growth.
       As far as the region is concerned, with a stronger, more-engaged China, there will be greater expectations, especially regarding its role in facilitating dialogue and resolving regional issues. Beijing can no longer turn a blind eye to the situation in Burma - which of late has affected the Burmese-China border region as well - nor can it prevaricate or push its weight around on disputed territorial claims in the South China Sea. These issues are linked to regional peace and stability. China's positive contributions in these areas will go a long way to augment its aura of increasing prestige. That will fit in with China's over-arching mantra of creating a "harmonious society" - especially when that society means a global society.

Wanted - a pact that reflects Bangkok's needs

       How best can the needs of a city like Bangkok be reflected in a new climate change treaty? Action and investment are needed without delay.
       Bangkok is one of the great cities of the world, a true international hub with first-class facilities, bustling business centres and, of course,Thailand's legendary hospitality. As such,it is a natural venue for more than 3,000 senior officials and climate change negotiators to come together ahead of Copenhagen to discuss a new climate change agreement to succeed the Kyoto Protocol's provisions, which expire in 2012.
       Bangkok is also a fitting venue as a symbol of some of the great challenges faced by half of the world's population living in Asia and the Pacific. This city of nearly 12 million people has developed in amazing ways over the past two decades. But as anyone reading this newspaper while stuck in traffic can attest, its extraordinary growth has come at a cost: heavy pollution from the massive upsurge in personal motorised transport and an infrastructure stretched to capacity.
       It is stories like this across Asia that have made the burning of fossil fuels for the region's transport the top global source of new greenhouse gas emissions causing global warming. Despite the negative environmental consequences,the city continues to attract new migrants who come to the city in search of opportunity.
       Three new studies funded by the Asian Development Bank (ADB) underscore just how dire is the threat of seriously rising temperatures to the region's food,fuel and people. Without policy measures,the impact to these three will block inclusive and sustainable growth in developing Asia.
       Produced by the International Food Policy Research Institute (IFPRI), USA;The Energy and Resources Institute (TERI), India; and the University of Adelaide in Australia, the reports depict a continent locked in an intensifying, climate change-induced struggle over land,water and energy resources. Viewed individually, each report contains measured warnings about the consequences of rising temperatures for food production, energy security, and migration patterns in the decades to come.
       Taken together, the reports present a deeply troubling confluence of skyrocketing food prices and volatile energy supplies and costs, which will contribute to the ongoing and massive rural to urban migration that has turned cities across Asia like Bangkok into mega cities.
       The agriculture report warns food security is particularly at risk from climate change. Some 2.2 billion Asians rely on agriculture for their livelihoods, which are now threatened by falling crop yields caused by floods, droughts, erratic rainfall and other climate change impacts.
       Current climate models indicate a sharp rise in food prices by 2050-pushing the cost of rice up by 29-37%,maize by 58-97% and wheat by 81-102%.
       The food and energy security of every Asian is threatened by climate change,but the hikes in the price of food will be felt, first and foremost, by the poor and especially poor women in rural areas given their dependence on subsistence crops, their limited access to resources,and their lack of decision- making power.
       The energy report assesses how the fuels that are driving Asia's remarkable development are also driving up the greenhouse gas emissions that,paradoxically, threaten the region's continued growth.
       It finds that Asia's energy vulnerability is rising, with access, affordability and quality all under increasing threat.
       Of the 1.6 billion people in the world who lack access to electricity, about 60%live in the Asia and Pacific region.
       The impacts of climate-change on Asia's agriculture and energy security are helping to drive mass migration,according to the migration report.
       A disproportionate number of "hot spots"- specific areas at relatively high risk from climate change hazards - are in the Asia and Pacific region. The criteria for defining these areas include coastal vulnerability due to sea level rise, water stress, flooding and cyclones.
       Migration is a complex issue driven by a range of economic, social and demographic factors. But migration trends are becoming increasingly clear. Asian people at risk are moving mostly in one direction: toward Asia's cities, within national borders, and to where social networks have been established.
       Which brings us back to Bangkok: A great, ironic tragedy is that most of those migrating to the Thai capital are moving in to, rather than away from, a climatic hot zone, for Bangkok's coastal location and massive population make it particularly vulnerable to climate change.
       And the story of Bangkok is replicated in mega cities across Asia - the region that will likely suffer most if a comprehensive and effective climate change agreement is not reached in Copenhagen in December.
       So what messages can the delegates to the Bangkok climate-change talks draw from Asia to encourage an ambitious outcome in Copenhagen? How best can the needs of a city like Bangkok be reflected in a new climate change treaty?
       Action and investment are needed and needed now - to avert the worst impacts of climate change and protect the food and water security of billions of Asians. Asia needs $3-4 billion in annual investments from 2010 to 2050 for agricultural research, irrigation improvements, and climate-resilient rural roads. It needs all the knowledge, technical expertise and financing levels that the world can provide. Asia is blessed with an array of clean energy resources - including opportunities for expanded hydropower, geothermal, solar, biomass and wind power. Large funding sources will be needed to tap these clean resources and to promote energy efficiency measures, but the savings potential is huge - estimated to be over 45%- for the industry, transportation and building sectors. And Asia needs to factor climate change considerations into spatial planning, with more effective schemes to divert investment and economic activity away from environmentally vulnerable areas of its cities and promote sustainable transport.
       The road to Copenhagen has been long and arduous, but let's hope that this timely and important detour through Bangkok will provide the time and opportunity for delegates to agree upon measures that can ensure the city's and the rest of the planet's future vitality.
       Ursula Schaefer-Preuss is Vice-President of Knowledge Management and Sustainable Development at the Asian Development Bank.

Richest village in China a capitalist commune

       Public loudspeakers in the central square blare the village anthem hourly:"If you want to see a miracle, come to Huaxi!" Not that any reminders are needed.
       Down the wide,tree-lined boulevards, rows of nearly identical red-roofed villas sit side by side.Manicured lawns and two-car garages are on every block. Each family has a house and at least one car, awarded by the community.
       Welcome to the richest village in China. Average family assets total $150,000(5.1 million baht) in a nation where annual per capita income hovers around $2,000(67,111 baht). The village's major enterprises in steel, iron and textiles brought in 50 billion yuan in sales in 2008. They belong to the Huaxi Group, the first commune corporation to be listed on a Chinese stock market.
       Yet this corporate enclave of 30,000 people also remains essentially a commune, with land owned jointly and wealth divided among all.
       Huaxi, though an extreme example,is emblematic of China 60 years after the Communist Party came to power on October 1,1949. After decades of denouncing free markets and then embracing them, the country is a distinctive patchwork of capitalism with communist characteristics - all anchored by a strong dose of practicality.
       That combination lies at the heart of Huaxi's success under Wu Renbao,its 82-year-old patriarch and steward.The village is feted by the Communist Party as a model for transforming its poor peasants into wealthy corporate citizens within one generation.
       "What is socialism? What is capitalism? We only wanted the things that are good for our people. We wanted people to get rich," Wu said during an interview in the two-storey house he's lived in since the 1970s, a modest home compared to the larger, lavish ones his villagers prefer.
       He doesn't mention another way Huaxi reflects 21st-century China: the 30,000 migrant workers here who get a much smaller piece of the pie, a reflection of the inequality that has come with free market growth.
       Wu's agnostic approach to economic development - using whatever method works to make his village rich - resonates well in the China of today, where success is measured by wealth.
       It wasn't always so.
       Sixty years ago, China was struggling to survive, a battered nation recovering from a century of foreign invasion, dynastic collapse, famine and a brutal civil war. Under revolutionary leader Mao Zedong, China lurched between industrialisation drives and violent political campaigns that left tens of millions dead before he died in 1976, and his successors began their free market experiments.
       Deng Xiaoping, the leader who launched the reforms, called it "crossing the river by feeling the stones". His pragmatic approach produced the economic power China is today. Life expectancy has risen from 41 years in 1949 to 73 today. Incomes have soared,even as the population has more than doubled from 500 million to 1.3 billion.In 30 years, GDP per capita has grown tenfold from $200 in 1979. China is now the world's largest auto market and has more internet and mobile phone users than anywhere else.
       The hamlet of Huaxi, created on 155 hectares of rocky land in eastern Jiangsu province, was like hundreds of povertystricken villages around the country.Founded in 1961, it was a hard-scrabble farming community made up of a dozen smaller settlements -"work brigades"in communist parlance - that banded together.
       Housing was primitive and paved roads were scarce. Worse, the village emerged in the midst of a disastrous famine brought on by rapid collectivisation of farmland. For 10 years,villagers recall, a meal with meat was a rare luxury. They followed Mao's dicta and were named a model commune.
       Wu, who served as the village Communist Party secretary from the start,realised that residents would never prosper as farmers. He encouraged a return to household farming, away from collectivised work, and wanted to contract out the communally managed bamboo grove. The ideas were dangerous during Mao's call to purge all remnants of capitalism during the 1966 to 1976 Cultural Revolution. Younger villagers paraded Wu in the village square for being a "capitalist roader" and detained him for six months.
       Still, he was determined to try his ideas. He set up a small hardware factory in 1969, hiding its existence from higher government officials when they visited.
       "The factory was a secret. If the leaders came to visit, we called all the workers to go out to the fields. But when they left, we would go back to work," Wu said, chuckling in remembrance."On the outside, we criticised capitalism but on the inside, we were doing it. At the time, it was a fight. They called me the enemy. Why? Because I did capitalism," he said."But I wanted local people to become prosperous so I was not afraid to take risks."
       Known to villagers and his children alike as "Lao Shuji", or Old Secretary,Wu has a genial, grandfatherly demeanour that belies a hard-headed steeliness.He shook off questions about which ideology he followed to accomplish his modern-day rags-to-riches story.
       "Communism has its good points.Capitalism also has good things so we can learn from that. I'm not afraid of capitalism. I'm afraid of only choosing one way," he said.
       By the time China officially warmed up to entrepreneurship and private enterprise in the late 1970s, Huaxi was ahead of the game. It used its factory revenues as capital to expand and set up more companies. From those humble origins, Huaxi's peasant industrialists have exceeded their wildest dreams.
       "When I was young, we never even had three meals a day. I had too many brothers and sisters. My dream was simply to get an office job because I hated farming," said Zhu Zhongliang,48, now a senior manager at the local steel factory.
       He lives with his wife and one grown daughter in a 460m2 two-storey, redbrick home, complete with a big-screen TV and marble floors.
       "We all drive our own car to work every day -my daughter, my wife and I," said Zhu, whose family owns a Honda Accord, a Toyota Corolla and a domestic Dongfeng sedan."Our relatives are kind of jealous of us when we drive to visit them during Spring Festival. They envy us for the fortune brought by Huaxi."
       Blue tin-roofed factories, with belching smokestacks, line an industrial section of the village.
       The prosperity is visibly striking, not only for its lavishness relative to surrounding areas but also for its uniformity. The 400 original households are entitled to a 400 to 600m2"Europeanstyle" villa, along with one car. Residents get a basic salary, but the bulk of their pay comes in annual bonuses, of which they are required to invest 80 percent in company stock.
       In a throwback to Mao's days, all residents receive free health care, education and pensions - something many other Chinese have lost in the transition to capitalism.
       Wu, who has retired as the local Community Party secretary in favour of his youngest son, enthusiastically touts his vision for a "new socialist countryside". Huaxi holds regular training sessions for village officials from across China.
       With 57 percent of the population - about 737 million people - living in the countryside, Wu believes China's leaders need to refocus their attention on rural areas. Most of China's growth has come in the cities.
       Wu, whose home office is plastered with photos of Mao, believes the founder of Communist China would have supported Wu's choices once he saw they worked. He constantly spouts an axiom associated with the reformer Deng:"Seek truth from facts".
       Yet Huaxi's claim to egalitarian fairness masks great disparities between residents and the migrants who increasingly make up the factory workforce in the village, as well as the rest of the country, says Wang Fei-ling, a professor of international affairs at the Georgia Institute of Technology in Atlanta. Huaxi reflects a Chinese society that is fracturing into haves and havenots, he said.
       "If Huaxi is a model, it also suggests something troubling in the ways the Chinese economy is developing," said Wang, who has studied Huaxi's development."It's like when you go to Beijing or Shanghai, you see that locals enjoy the fruits of China's success much more than hard-working outsiders. It's similar to the glamorous Olympic stadiums that were all constructed by migrant workers, who then left town before the Games began."
       Busloads of tourists arrive every day,all curious to catch a glimpse of a village that has attained such visible success.The visitors gawk as they troop through one of 10 distinctive pagoda-shaped high-rises at the centre of the village,taking in the surreal view from the balcony on the top floor. Afterwards, in a giant auditorium modelled after the Great Hall of the People in Beijing,they listen as Wu holds court, sharing jokes and giving a few words of wisdom in a thick local accent that requires a young, red-gowned translator beside him. That's followed by a musical performance, which includes actors portraying visitors from around the world.One, dressed as a tourist from the US,belts out the final verses, ending with:"If this is socialism, we want it too!"

AUGUST SEES FIRST DROP IN INDUSTRIAL SENTIMENT IN FIVE MONTHS

       The Thai Industries Sentiment Index (TISI) fell for the first time in five months in August, due mainly to lower orders, higher production costs and a shortage of labour.
       This was the finding of a new survey from the Federation of Thai Industries (FTI) that also showed automotive production increased in August, thanks to the global economic rebound and greater demand at home and abroad.
       The TISI dropped from 89.9 points in July to 88 in August.
       The survey also showed the Industrial Confidence Index (ICI) for the fourth quarter grew last month to 102.1 points, thanks to manufacturers seeing positive signs of economic recovery and more purchasing orders.
       It was the first time in 20 months for future confidence to break the 100-point barrier.
       The FTI surveyed 1,128 respondents from various industries nationwide. A score of less than 100 points means manufacturers expressed weak confidence, while above 100 points indicates a positive outlook.
       However, chairman Santi Vilassakdanont said the Manufacturer Confidence Index had dropped slightly last month, due to lower purchasing orders for some industries and a rise in the oil price during the month.
       The rubber and plastics industries are facing higher production costs, due to more expensive raw materials.
       To ensure better sentiment for the industrial sector, the government should regulate the oil price, promote alternative energy, stabilise the exchange rate and develop skilled labour, said Santi.
       He said the construction industry would grow significantly in the fourth quarter, mainly from the government's Thai Khemkhaeng stimulus package for mega-project and irrigation development.
       Other industries expressing improved confidence were medicine, wood, herbs, petrochemicals, automobiles, sugar and biotechnology.
       Vice chairman Payungsak Chartsutipol said manufacturers would use more than 60 per cent of their production capacity in the fourth quarter, thanks to the global economic recovery increasing demand for goods.
       He added that the government must refund corporate tax to exporters, in order to increase financial liquidity for traders. It must also seek tariff privileges for supporting industrial growth.
       Surapong Paisitpatnapong, spokesman for the FTI's Automotive Club, said vehicle production was expected to show an increase to 303,600 units for the last four months of the year. Although that would be down year on year, it would beat June-August production of 233,870 units.
       In August alone, automobile production grew 12.25 per cent month on month to 84,170 units, the highest volume this year. However, auto production was down 41.98 per cent to 548,238 units in the first eight months.

POLITICS HOLDING BACK THAI RECOVERY

       Corporate giants yesterday warned the government that continued political unrest was acting as a major drag on the country's economic growth while the rest of Asia powers ahead in the world arena.
       The global economy is entering into a show of economic rebound but the recovery will take two years to be seen, they said.
       However, there are some good signs for the local economy.
       Interest rates will not be raised until late next year, oil prices will not fluctuate like in the past few years, and the government's second stimulus package will disburse Bt190 billion-Bt200 billion of the total Bt1.43 trillion next year to enhance domestic consumption.
       In particular, the emergence of new economic powers, including China and India, has prompted developed countries, including the US and those in the European Union, to move trade and investment to Asia. They believe Asia will be the first region to overcome the global financial paralysis.
       Panellists at a seminar in Bangkok on the "Global Trading Outlook 2010" pointed out that international trade is driving the country's economy.
       The government should prepare measures to create networks to take advantage of the seamless trade through free-trade agreements, they said.
       Charumporn Chotikasatien, a vice president at Siam Commercial Bank, said the five major growth engines next year would be agriculture, manufacturing and manufacturing-related services, hotels and restaurants, transportation and other services.
       No factors have come into view on the horizon to force the government to raise interest rates.
       "Consumers will enjoy low interest rates until the end of next year," he said.
       However, the stronger baht against the greenback will hurt all exports. It is the result of capital inflows from the West to Asia, the world's main manufacturing belt. This shift will pull up Asia from the crisis before other regions.
       As businessmen venture to new potential markets abroad, particularly the Middle East, the bank plans follow them to serve their new operations.
       "Exploring new export markets calls for risk insurance. The government should take care of the transactions and commercial banks will facilitate the export letters of credit," he said.
       Surong Bulakul, senior executive vice president for international trading at PTT, said the worldwide slump had dampened both oil consumption and price speculation.
       The Organisation of Petroleum Exporting Countries is also afraid that the serious concerns over global warming will make the international community more aware of alternative energy, electric cars and hydrogen power.
       "Opec is worried about the security of oil demand, which cautions them not to do anything to pull up the price and to stabilise production," he said.
       The oil price is also closely related to the geopolitical situation, but now there are no negative factors to push up prices.
       PTT predicts that the crude-oil price will average US$75 (Bt2,500) per barrel this year.
       Kalin Sarasin, managing director of SCT, said traders had to keep a close eye on major factors, particularly the political situation, government spending, international cooperation through free-trade agreements and the G-20, and diverse global market opportunities.
       China and India will be spotlighted in global trading next year. China's economy is predicted to grow by 8 per cent and investments in property and corporations are rising as exports take up the slack from weakening government investment.
       India's government spending will increase by 36 per cent next year, focusing on infrastructure, job creation and improving the livelihood of the poor.
       The business risk factors include fluctuating commodity prices, unstable exchange rates, political unrest, credit risk and the high risk of entering into new markets, he said.
       Sumate Tanthuwanit, president of leading logistics operator Ngow Hock Agency, said the top 10 shippers had faced a combined loss of about $3 billion since the collapse of Lehman Brothers in September last year. They will not reduce service fees but will increase them to survive.
       Container demand has dropped by 9.14 per cent from a year ago. Demand is expected to increase by 2.25 per cent but the supply of ships will shoot up by 15 per cent next year, he added.