The Wall Street Journal - 29.9.2012, Literatura, Gazety, Magazyny
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The Making of TV’s
Hottest Show
WEEKEND JOURNAL
W1
ASIA EDITION
VOL. XXXVII NO. 20
(India facsimile Vol. 4 No. 81)
FRIDAY - SUNDAY, SEPTEMBER 28 - 30, 2012
WSJ.com
SpainUnveils
Austerity
BudgetPlan
Beijing,
Seoul
Criticize
FedEasing
B
Y
A
ARON
B
ACK
A
ND
I
N-
S
OO
N
AM
B
Y
D
AVID
R
OMÁN
A
ND
J
ONATHAN
H
OUSE
straits faced by the euro
zone’s fourth-largest econ-
omy.
Speaking after a cabinet
meeting that approved Spain’s
budget for next year, said the
government will use the funds
to “fulfill a series of treasury
needs.” She didn’t provide any
additional detail.
As of Dec 31, Spain’s so-
cial-security fund had €66.8
billion. The fund, created in
the 1990s, has been filled up
with contributions from Span-
ish workers, and was designed
to ensure pension payments.
In an effort to address in-
vestor concerns over Prime
Minister Mariano Rajoy’s abil-
ity to stabilize one of Europe’s
largest ailing economies, the
government also confirmed
that it will create an agency
to monitor the country’s re-
gional governments and make
sure they comply with
Madrid’s efforts to control
spending.
The government has com-
mitted to slash its budget def-
icit to 4.5% of gross domestic
BEIJING—Chinese and
South Korean central-bank of-
ficials criticized the U.S. Fed-
eral Reserve’s latest easing ef-
forts and advocated reducing
Asia’s dependence on the U.S.
dollar.
The comments Thursday,
at a joint seminar in Beijing
by the two central banks, are
the clearest indication yet of
a rising backlash in Asia
against U.S. monetary policy,
suggesting it could speed up
the search for alternatives to
the dollar as the main global
currency.
“The rise in global liquid-
ity could lead to rapid capital
inflows into emerging mar-
kets including South Korea
and China and push up global
raw-material prices,” said
Bank of Korea Gov. Kim
Choong-soo. “Therefore, Ko-
rea and China need to make
concerted efforts to minimize
the negative spillover effect
arising from the monetary
policies of advanced nations.”
Chen Yulu, an academic
Please turn to page 16
MADRID—The Spanish
government Thursday pre-
sented a new package of eco-
nomic reforms and a stripped-
down budget plan for next
year amid mounting social
tension and renewed worries
about the country’s solvency
in financial markets.
As concerns mounted that
the country will soon seek a
bailout, Finance Minister Cris-
tóbal Montoro said the draft
budget for 2013 would cut
overall spending by €40 bil-
lion ($51 billion). He said cuts
for ministries would average
8.9%.
Deputy Prime Minister
Soraya Saenz de Santamaría
said at a news conference that
Spain also plans to use some
€3.1 billion from the country’s
pension reserve fund to
“cover some treasury needs”
and guarantee pension pay-
ments, a move that seeks to
cover Madrid’s financing
needs and underlines the dire
Economy Minister Luis de Guindos, left, Deputy Prime Minister Soraya Saenz de Santamaría, center,
and Finance Minister Cristóbal Montoro held a news conference after a cabinet meeting Thursday.
product next year as part of
its drive to lower the deficit
below the 3%-of-GDP limit for
EU countries by 2014. The
deficit stood at almost 9% of
GDP in 2011.
The announcements come
at a critical moment for
Spain. The country’s borrow-
ing costs, as measured by the
yield on its 10-year govern-
ment bond, rose again over
6% on Wednesday, a level that
is considered unsustainable in
the long term and which sug-
gests that the so-called Draghi
Effect—the market boost de-
livered by the European Cen-
tral Bank’s promise on Sept. 6
to buy bonds of governments
that submit to an economic-
reform program—is dissipat-
ing. That is raising the pres-
sure on Mr. Rajoy’s to ask for
a second bailout, this one to
help the government finance
itself.
The euro fell against the
dollar after Spain released its
plan. Spain´s leading IBEX-35
stock index fell 0.2% on
Thursday, while the yield on
the country´s 10-year sover-
Please turn to page 16
Greek coalition reaches deal
on cuts............................................. 6
Confidence weakens in euro-
zone core........................................ 8
Inside
Here’s a Sport Where Players Get to Do the Wave
iii
Once a Year, Tide Allows Cricket on Sandbar Off English Coast
Oracle Cloud
Applications, Platform, Infrastructure
B
Y
G
AUTAM
N
AIK
more of a waiting—and wad-
ing—game than a cricket
match.
In late afternoon, 22 crick-
eters in immaculate white
zoomed up in a flotilla of
boats. Nearly 300 spectators
had already gathered at the
scene in dozens of craft, from
canoes and sailboats to mo-
torboats and yachts.
Everyone then waited for
the tide to drop and expose
the Bramble bank.
The tide didn’t drop. The
air pressure was too low and
the wind was too high and not
a bit of seabed could be seen.
Someone decided that the
conditions weren’t going to
get much better. So the teams
half-waded and half-swam to
the submerged bank in the
Solent, a strait of the English
Please turn to page 16
THE SOLENT, England—
Philip Gage emerged from the
cabin of his boat and peered
at the water. “There,” he said,
pointing to an area surging
with gray, unruly waves.
“That’s our cricket pitch.”
Mr. Gage had come to um-
pire an unusual sporting
event: a cricket match played
in the middle of the sea. If or-
dinary cricket is unfathom-
able to many, the marine ver-
sion is bonkers.
For about an hour each
year, the tide usually drops
low enough to expose a small
triangle of sand, known as the
Bramble bank, between Eng-
land’s southern coast and the
nearby Isle of Wight. This
sticky wicket, in the middle of
a hectic shipping lane, is the
Oracle
Cloud
Oracle Managed
Private Cloud
and
Fall Style Issue:
Men oftheWorld
Fall Style Issue:
MenoftheWorld
scene for the annual Brambles
cricket match.
“It’s one of the things we
do that has no rhyme or rea-
son,” said John Hounslow, a
solicitor who captains the Isle
of Wight’s Island Sailing Club,
cricketing nemesis of the
Royal Southern Yacht Club,
which is on the mainland,
about 10 kilometers away.
This year’s clash between
the clubs was held in mid-
September. At first,
The Century’s Finest
Travel Writer
Our Data Center
Your Data Center
Paris’s Secret
Motorcycle Shop
Run some of your applications in the Oracle Cloud
and others in your Private Cloud. You Choose.
Joel Edgerton’s
Breakout Year
WSJ.com/magazine
Copyright©2012,Oracleand/oritsaffiliates.Allrightsreserved.
it was
2
| Friday - Sunday, September 28 - 30, 2012
THE WALL STREET JOURNAL.
PAGE TWO
What’s News—
Inside
iii
Business & Finance
to a planned sale of part of its wa-
ter-purification business to MBK
Partners. The deal would have
been one of South Korea’s biggest
private-equity acquisitions.
23
n
Central Retail plans
to invest
up to $2 billion more in Europe,
the U.S. and elsewhere in Asia.
Last year, the Thai firm bought an
Italian department-store chain.
19
n
New Zealand’s prime minister
apologized to the founder of file-
sharing website Megaupload.com,
after an investigation found the
government intercepted his com-
munications illegally.
19
n
China’s central bank poured
a
record amount of cash into the
banking system this week, cheer-
ing investors looking for signs
that Beijing is addressing slowing
economic growth.
23
n
Sinopec shut
three subsidiaries
temporarily after a state televi-
sion report accused the units of
posing environmental hazards.
20
n
Toshiba forecast
that its share
of the hard-drive market would
nearly double over the next few
years, crediting “hybrid” drives
for laptops.
18
iii
World-Wide
n
Sudan and South Sudan
signed
agreements that will allow a re-
sumption of oil exports from
South Sudan, but they remained
divided over border regions.
n
China’s Baoshan Iron & Steel
suspended production at a plant
making products for the ship-
building and oil sectors.
17
n
LG Display filed
a patent-in-
fringement lawsuit against Sam-
sung over the use of advanced
OLED displays.
18
n
J.K. Rowling’s first novel
for
adults, “The Casual Vacancy,” hit
stores Thursday.
World News:
Rudd
expects more reforms
in China.
6
n
Cerberus will sell some
its
stake in Aozora Bank. The Japa-
nese lender unveiled a stock-buy-
back plan, but shares fell 9%.
17
n
One of China’s top
forensic ex-
perts cast doubt on official find-
ings that British businessman Neil
Heywood died of cyanide poison-
ing, an unusual contradiction of
Beijing’s version of the events that
unleashed a political scandal.
3
n
The EU asked the WTO
for per-
mission to place trade penalties
on U.S. firms, claiming Washing-
ton hadn’t ended subsidies to Boe-
ing that the WTO said last year vi-
olated global trade rules.
22
n
The National Football League
and the officials’ union said they
reached a tentative eight-year
agreement, ending a lockout that
began in June.
n
Woongjin Holdings filed
to go
into receivership, putting an end
Softbank Corp. Chief Executive
Masayoshi Son jumped back into the
news this month after a summer
break. The reason is clear: Apple Inc.
launched its iPhone 5. Mr. Son, head
of one of the two carriers of Apple
products in Japan, returned among the
top three corporate newsmakers in
the country during September, accord-
ing to monthly data compiled by Dow
Jones Insight and edited by The Wall
Street Journal.
Ahead of the sale, Softbank said it
would offer new capabilities like teth-
ering in a move to better compete
with rival KDDI Corp. Tethering allows
nearby devices like laptops and porta-
ble game consoles to use the iPhone’s
Internet connection via Wi-Fi.
But unlike prior launches, this one
came with problems for Softbank, the
country’s No. 3 mobile carrier by sub-
scriptions. Headaches began before
sales even started: In the wee hours
before doors opened for the launch
last week, some stores were hit by
robbers. At least one of the targeted
stores was a Softbank outlet in Os-
aka, where the burglars got away with
its entire stock of the hot gadget.
—Yoree Koh
Carlos Ghosn
President and CEO,
Nissan Motor Co.
U.S. News:
Romney
tempers tax-cut
expectations.
10
Michael Woodford
Former President,
Olympus Corp.
Masayoshi Son
CEO and Chairman,
Softbank Corp.
Akio Toyoda
President,
Toyota Motor Corp.
Kazuo Inamori
Chairman,
Japan Airlines Co.
In Depth:
P&G’s
stumbles put CEO on
the hot seat.
14-15
Photos: Associated Press; Agence France-Presse/Getty Images, Bloomberg News, European Pressphoto Agency, Getty Images, Reuters, Zuma Press and the companies.
The Wall Street Journal
ONLINE TODAY
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THE WALL STREET JOURNAL.
Friday - Sunday, September 28 - 30, 2012 |
3
WORLD NEWS: ASIA
China Forensic Expert
Joins Gu Trial Skeptics
B
Y
B
RIAN
S
PEGELE
have died nearly instantly. Ms. Gu
didn’t contest the prosecution’s
claim that cyanide was used to kill
Mr. Heywood, according to the
state-run Xinhua news agency.
Xinhua has quoted prosecutors
as saying blood taken from Mr. Hey-
wood’s heart and samples of his
vomit contained cyanide ions.
Ms. Wang is among the highest-
profile figures in China to publicly
doubt the government's official nar-
rative of events surrounding Mr.
Heywood’s death. The criticism,
coming at a particularly sensitive
moment in Chinese politics, is strik-
ing given Ms. Wang’s at times cele-
brated role as the first female foren-
sic expert
prosecutor’s office, according to
state media.
A 2010 profile in the state-run
China Daily newspaper described
her as “respected, elegant, [and]
daring.” The article described her
autopsy work as crucial to tracking
down and punishing criminals.
Friends of Mr. Heywood in inter-
views have also questioned portions
of the prosecution’s account, in par-
ticular a claim that he threatened
the son of Ms. Gu and Mr. Bo.
Revelations of suspicions around
Mr. Heywood’s death contributed to
the ouster of Mr. Bo, once a popular
leader and candidate to ascend to
the all-powerful Politburo Standing
Committee during the leadership
BEIJING—One of China’s top fo-
rensic experts cast doubt on official
findings that British businessman
Neil Heywood died of cyanide poi-
soning, a highly unusual contradic-
tion of Beijing’s carefully scripted
version of the events that unleashed
China’s biggest political scandal in
decades.
Wang Xuemei, a forensic expert
for the Supreme People’s Procura-
torate, the country's top body for
investigation and prosecution, pub-
lished a blog entry on Wednesday
that said insufficient evidence had
been presented proving Mr. Hey-
wood died of cyanide poisoning. The
poisoning is a key part of the offi-
cial narrative of the fall of Bo Xilai,
a star in the Chinese Communist
Party before his wife was accused—
then later convicted—of murdering
the British national.
Growing skepticism by promi-
nent Chinese figures and Mr. Hey-
wood’s friends over inconsistencies,
ambiguities and omissions in the
prosecution's official narrative
could undermine authorities’ credi-
bility in handling the case ahead of
the country’s sensitive once-a-de-
cade leadership transition expected
to begin in the coming weeks, legal
experts and political analysts say.
The comments from Ms. Wang,
previously lauded by state media for
achievements as a female forensic
expert, underscore bubbling unease
in some corners of the country
about the handling of the case
against Gu Kailai, Mr. Bo’s wife.
In an interview on Thursday, Ms.
Wang, who had no role in the case,
said she wasn’t interested in politics
but needed to publish the essay as a
defense of the work of China’s fo-
rensic experts. By Thursday, the
post had been removed, though it
wasn’t clear by whom. Ms. Wang
said she hadn’t removed it herself.
“I just want to leave myself no
regrets. I’m not interested in gov-
ernment issues or politics,” Ms.
Wang said in an interview. “The
only thing I know is I’m a profes-
sional forensic expert.”
Ms. Gu was convicted in August
of killing Mr. Heywood in a hotel
room in November 2011 in the
southwestern city of Chongqing,
where her husband served as the
city’s top Communist Party leader.
Judicial authorities have said Ms.
Gu killed Mr. Heywood, once a
trusted family confidante, following
a business conflict. A family aide,
Zhang Xiaojun, was also convicted
in connection with the murder. In
her blog post, Ms. Wang said she
didn’t doubt Ms. Gu had killed Mr.
Heywood.
Ms. Wang said she believed there
was insufficient evidence to con-
clude Mr. Heywood died of cyanide
poisoning. She said information pre-
sented at the trial didn’t include a
description of what she said should
have been an immediate health re-
action from Mr. Heywood after be-
ing poisoned by cyanide.
“This fact inevitably makes peo-
ple feel skeptical about the whole
thing,” she wrote. “After the ‘cya-
nide’ was poured into Heywood’s
mouth, he didn’t suffer any corre-
sponding reaction from cyanide poi-
soning.”
Ms. Wang argued that if Mr. Hey-
wood was really killed by cyanide,
as prosecutors say, he would likely
From left, ousted party star Bo Xilai, Neil Heywood and Mr. Bo’s wife, Gu Kailai.
transition. Mr. Bo was stripped of
his party posts in April for sus-
pected “serious discipline viola-
tions.” He is believed to be under
detention of party discipline author-
ities. It remains unclear whether he
will face criminal charges as well.
The Chinese government and ju-
dicial authorities have worked to
present Ms. Gu’s case as strictly in
accordance with legal procedures,
part of a bid to dispel people’s belief
that cases against Mr. Bo and Ms.
Gu were politically motivated.
Cracks in the government’s narra-
tive could undermine authorities’
assertion Ms. Gu received a fair
trial.
At her trial in August, Ms. Gu
didn’t contest charges she poisoned
Mr. Heywood with cyanide after he
had become drunk. According to
Xinhua, Ms. Gu told the court during
her trial that she believed Mr. Hey-
wood threatened the safety of her
son following a dispute over a failed
property deal. Ms. Gu and Mr. Bo
have one son, named Bo Guagua.
—Yoli Zhang
contributed to this article.
to serve the chief
TO BREAK THE RULES,
YOU MUST FIRST MASTER
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FOR 2012. OVER 130 YEARS OF HOROLOGICAL
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4
| Friday - Sunday, September 28 - 30, 2012
THE WALL STREET JOURNAL.
WORLD NEWS: ASIA
Malaysia Public Spending Rises
Ai Weiwei
Refuses
To Pay Fine
B
Y
A
BHRAJIT
G
ANGOPADHYAY
port. Backing from the ethnic Chi-
nese and Indian minorities is split
among the ruling and opposition co-
alitions.
Coming off the fresh announce-
ment of 2.2 billion ringgit in bonuses
to 1.27 million civil servants and an-
other special payout to 657,000 re-
tired employees, Mr. Najib will likely
aim to secure support of the mam-
moth government workforce, crucial
to regain ground lost in the 2008
election when the ruling coalition
lost its two-thirds majority for the
first time. Mr. Najib succeeded Ah-
mad Abdullah Badawi in the wake of
that debacle but has yet to secure his
own mandate to carry out reforms
that he believes are needed to move
the country forward.
These include introduction of a
consumption-based goods and serv-
ices tax, shrinking the budget deficit
every year and trimming subsidies
in a way that only the lower-income
households would benefit
KUALA LUMPUR—Prime Minister
Najib Razak will announce increased
public spending when he unveils
next year’s budget Friday, a key po-
litical event that he hopes will
strengthen his popular support
ahead of elections that must be
called by May.
With Malaysia’s economy grow-
ing steadily, Prime Minister Najib
will be counting on higher tax reve-
nue and more-efficient tax collec-
tion to shrink a fiscal deficit that
has dogged the country since the
Asian financial crisis in the late
1990s. His proposal would reduce
the deficit to 4.3% of gross domestic
product in 2013, down from an esti-
mated 4.7% this year. He will be
building off a budget that totaled
230.8 billion ringgit ($76.7 billion)
for this year.
A senior government official told
reporters that the budget “will be
mildly expansionary but fiscally re-
sponsible,” based on economic
growth of “closer to 5% this year, if
nothing untoward happens,” and
holdingevenat4.5%to5.5%in
2013.
The budget announcement,
which is broadcast live on state tele-
vision, is closely watched every year
as a barometer of the government’s
perceived confidence. The electoral
challenge looms large for Mr. Najib
and the coalition led by his United
Malays National Organization, which
are hoping to roll back gains made
by the opposition front led by the
charismatic Anwar Ibrahim and
which includes a disparate alliance
of Islamic fundamentalists and lib-
erals. The opposition captured a re-
cord 90 of the 222 seats in Parlia-
ment and took control of four of
Malaysia’s 13 states four years ago.
Mr. Najib, who is also finance
minister in the National Front coali-
tion that has ruled Malaysia since
independence from Britain in 1957,
is looking to cement key constituen-
cies and to prolong a period of eco-
nomic expansion that has seen the
Southeast Asian country launch
B
Y
J
OSH
C
HIN
BEIJING—Artist Ai Weiwei said
he would refuse to pay the remain-
der of a $2.4 million fine for tax
evasion after a Beijing court re-
jected his appeal on Thursday, set-
ting the stage for another possible
showdown between the media-savvy
dissident and Chinese authorities.
Mr. Ai had previously deposited
$1.33 million in a government-con-
trolled account as a precondition to
being allowed to appeal the charges.
The artist said in an interview that
he assumed the government would
automatically take that money, but
that he did not plan to hand over
any more cash.
“We’re not going to pay the fine
because we don’t recognize the
charge,” he said. “And I think they’re
probably too embarrassed to come
and ask for it.”
Mr. Ai, who was detained for 81
days without charge last year amid
a broad crackdown on dissent, sued
the Beijing tax bureau in April, say-
ing the city’s tax authorities had
acted illegally in pursuing claims
that he evaded taxes through his de-
sign company, Beijing Fake Cultural
Development Ltd. Beijing’s Chaoy-
ang District Court rejected the suit
after finding the tax bureau had
acted properly.
Unlike with previous hearings,
which Mr. Ai was prevented from at-
tending, the artist said he was al-
lowed into the courtroom to hear
Thursday’s ruling.
He later posted a photo to his
Twitter feed of a stamped notice
that said the appeal had been re-
jected because it “lacked relevant
facts and legal bases.”
“I told them the whole thing was
a disgrace,” the artist said, referring
to the officials at the Beijing No. 2
Intermediate People’s Court who
handed down ruling.
“No one looked at me. They just
bowed their heads. I think they felt
helpless. They didn’t want to do it.”
Calls to the office inside the
court that was responsible for the
case went unanswered Thursday.
In promising not to pay the fine,
Mr. Ai continues a public battle with
authorities that has won him ac-
claim from fans in China and
abroad, including around 30,000
supporters who donated a total of
$1.37 million earlier this year so
that he pay the bond that allowed
him to press ahead with his legal
challenge.
But the fight has also resulted in
restrictions on Mr. Ai’s freedom.
His home in northern Beijing is
surrounded by more than a dozen
surveillance cameras and he says
the government has yet to give him
back his passport, confiscated when
he was detained at the Beijing air-
port in April 2011.
from
cheaper food and fuel prices.
While tax overhauls will help
boost government revenue, subsidy
rationalization will help plug waste-
ful expenditure, helping the govern-
ment achieve its medium-term goal
of 3% fiscal deficit by 2015, the se-
nior official said.
The latest data show in the Janu-
ary-June period that total govern-
ment-approved investments in the
manufacturing sector fell 10% from
a year earlier, to 25.8 billion ringgit.
This isn’t comforting for what was
once an export-driven economy.
The government is expected to
spend heavily to boost infrastruc-
ture, which won’t take the pressure
off coffers already straddled with a
mammoth subsidy bill that eats up
nearly 18% of annual revenue.
Analysts are wary of the govern-
ment’s ability to stick to a tight fis-
cal discipline in the year ahead.
“While the government is likely
to target a rather optimistic fiscal
deficit figure around 4% of GDP, we
think the actual numbers will come
in significantly higher at just under
5%,” said Credit Suisse economist
Santitarn Santhirathai.
Malaysian Prime Minister Najib Razak will introduce next year’s budget Friday.
many of the biggest initial public of-
ferings in Asia this year. Those in-
clude state-run palm planter
Felda
Global Holdings Ventures
Bhd.’s
$3.3 billion and
IHH Healthcare
Bhd.’s $2.1 billion deals. At the same
time, he must keep spending on a
leash to avoid widening a persistent
deficit that has dogged state fi-
nances since the crash of
Zheng Kit predicted.
Though no sweeping measures
are expected as tight finances leave
little room for largess, the govern-
ment will likely allocate higher
funds toward education, health care
and perhaps repeat one-time cash
handouts to lower-income house-
holds. That would appeal to key vot-
ing blocs for the National Front, es-
pecially among the Malay Muslim
majority that Mr. Najib’s party and
the fundamentalist Pan-Malaysian
Islamic party tussle over for sup-
the
mid-1990s economic boom.
“The budget will walk a tight-
rope between populism and fiscal
prudence,” Citigroup economist Wei
Japan’s Abe Shows His Pragmatist Streak
B
Y
A
LEXANDER
M
ARTIN
“Japan-China relations to be very
important” and stressed that the
two nations’ close trade ties made
them “inseparable.”
“Even if our national interests
collide, we need to think strategi-
cally and understand that we both
need each other and must work to
control the situation,” he told a
news conference.
However, Mr. Abe, known for his
conservative, controversial views on
Japan’s wartime actions, has ex-
pressed regret for not visiting the
shrine during his tenure, and has
been calling to beef up security ar-
rangements for the Senkaku islands,
the chain of isles in the East China
Sea also claimed by China, which
calls them the Diaoyu.
At a news conference Wednes-
day, Mr. Abe also expressed his de-
termination to protect the islands at
the heart of the dispute with Bei-
jing.
Masafumi Kaneko, senior re-
search fellow at the PHP Research
Institute in Tokyo and an expert on
foreign policy, said Mr. Abe could
face a tough time dealing with the
current strains in diplomatic ten-
sions if he became premier, risking
losing support if he were to back
down from his security policies.
TOKYO—While former Prime
Minister Shinzo Abe’s return to the
forefront of Japan’s political stage is
likely to inflame tempers in Beijing
and Seoul, the hawkish, nationalist
leader has shown a more pragmatic
side when it comes to diplomacy.
With his Liberal Democratic
Party leading the ruling party in
voter support, the focus is on
whether Mr. Abe, who claimed vic-
tory in a party presidential race
Wednesday, is ready to do another
“Nixon goes to China” in a bid to
mend fences with China and South
Korea should the LDP return to
power.
When he became prime minister
in 2006, Mr. Abe surprised his crit-
ics by making China and South Ko-
rea the destinations for his first
overseas trip, in a bold step to re-
pair ties strained during his prede-
cessor Junichiro Koizumi’s five
years in office.
Mr. Koizumi’s annual visits to the
Yasukuni Shrine in Tokyo, consid-
ered by many Asian nations as a
symbol of Japan’s wartime milita-
rism, drew harsh criticism from
both Beijing and Seoul, and lead to
massive anti-Japanese riots
Shinzo Abe, center, visited the Yasukuni Shrine in Tokyo last year,
China. The shrine honors Japan’s
war dead, including some war crimi-
nals.
Mr. Abe himself, who has been
considered a hawk when he served
under Mr. Koizumi for calling to re-
vise Japan’s pacifist constitution,
also paid visits to the shrine before
he became prime minister.
“While Mr. Abe was already a
known hawk when he took over pre-
miership from Mr. Koizumi, he
worked to mend ties with China and
South Korea, and he himself decided
against visiting the Yasukuni
Shrine,” said Koichi Nakano, politi-
cal-science professor at Sophia Uni-
versity in Tokyo.
Following his election on
Wednesday as the LDP head, Mr.
Abe touched upon his visit to China
six years ago, saying he considered
Reuters
Ai Weiwei in Beijing on Thursday
in
THE WALL STREET JOURNAL.
Friday - Sunday, September 28 - 30, 2012 |
5
WORLD NEWS: ASIA
Impact of Sanction Lift
Will Lag for Myanmar
OECDCasts Doubt
On IndonesiaTarget
B
Y
IM
ADE
S
ENTANA
that Jakarta’s “challenge now is to
boost productivity, reduce energy
subsidies and raise tax collection to
finance key infrastructure, social
and environmental programs.”
The government put a positive
spin on the OECD suggestions.
“I think if we continue to im-
prove [the tax regime, infrastruc-
ture, and bureaucracy] we will stand
a chance to achieve our goal,” said
Finance Minister Agus Martowar-
dojo. “We are still committed in
achieving high, inclusive and just
growth.”
The OECD said the government
will need to raise considerable fi-
nancing to expand social-security
system coverage and develop infra-
structure. Indonesia’s growth has
been driven by its relatively young
population, with over 50% of its 240
million people under 29 years old,
and 60% under 39. “Looking for-
ward, [Indonesia’s] demographic
dividend will fade over the next de-
cade,” the OECD said.
Energy subsidies account for a
quarter of the 2013 budget, Mr. Gur-
ria said. If that is reduced to only
“those who really need them, it can
make a huge difference” and can be
used instead “for social spending—
health, education,
B
Y
S
AM
H
OLMES
A
ND
C
ELINE
F
ERNANDEZ
JAKARTA, Indonesia—Indonesia
may not meet its target of becoming
one of the world’s 10 largest econo-
mies by 2025, the Organization for
Economic Cooperation and Develop-
ment said Thursday, casting doubt
on the government’s ambitious
growth plan.
The OECD expects economic
growth to slow to 6% this year and
next from 6.5% last year. While the
economy remains supported by ro-
bust domestic demand, 6% growth
would be below the 7%-9% sustain-
able improvement the OECD says is
needed to meet the 2025 goal set by
President Susilo Bambang Yud-
hoyono’s government last year.
The international organization’s
latest Indonesia report comes after
consulting firm McKinsey said last
week that the country’s economy
could become the world’s seventh-
largest by 2030. Last year, Standard
Chartered PLC said Indonesia would
be No. 6 by then. It is currently the
16th largest, trailing only China, Ja-
pan, India and South Korea in Asia.
The country has caught the at-
tention of global investors seeking
returns amid slowdowns in Europe,
the U.S. and China. Foreign inflows
have been good in terms of direct in-
vestment and the Jakarta Stock Ex-
change’s composite index is up 10%
this year, making it one of the
world’s best performers.
The sobering report from the
OECD, a Paris-based organization of
wealthy nations, said the country re-
mains hindered by problems such as
a failure to wean itself from expen-
sive subsidies and problems with de-
centralization.
It said the advent of Indonesia’s
democracy in 1999 and the subse-
quent decentralization of some of
Jakarta’s authority to regional gov-
ernments hasn’t been sufficient to
deliver a competitive market and
trade-friendly regulatory regime. It
added that institution building is a
precondition for meeting Mr. Yud-
hoyono’s growth objective.
“Rapid decentralization results in
much regulatory overlap and incon-
sistencies across the national econ-
omy. Potentially more worryingly,
decentralization may also create
more opportunities for corruption
by increasing the number of decision
makers across the Indonesian archi-
pelago with the power to exploit the
policy-making process for personal
gain,” the report said.
OECD Secretary-General Angel
Gurria said in a separate statement
The U.S. decision to lift a ban on
exports from Myanmar could give
the country its best shot at becom-
ing the world’s next low-cost manu-
facturing hub as well as firm up the
fragile political reforms now taking
place. But business leaders say it
will be a long time before T-shirts
and hoodies made in the Southeast
Asian country are ubiquitous in
shopping malls and years before
meaningful benefits reach the coun-
try’s archaic industrial infrastruc-
ture and low-income households.
With Wednesday's action, Wash-
ington has lifted nearly all of the
economic sanctions imposed against
Myanmar in recognition of its re-
forms over the past 18 months, in-
cluding the release of some political
prisoners and the introduction of
free elections. Secretary of State
Hillary Clinton said that the most
recent move is the next step in nor-
malizing commercial relations be-
tween the two countries. Bans on
investment and financial services
were lifted earlier.
The resource-rich country of 60
million is coming to be seen by
many international investors as hav-
ing potential both as a source of
raw materials and a large consumer
market following a series of wide-
ranging reforms implemented in the
past year after long isolation under
military dictatorship.
However, economic stagnation
following the imposition of a num-
ber of trade and investment sanc-
tions by the U.S. and other countries
since the late 1990s means the
country lacks even some of the most
basic economic infrastructure re-
quired to compete with other fron-
tier, low-cost manufacturing nations
such as Cambodia and Bangladesh.
Maung Maung Lay, vice presi-
dent of the Union of Myanmar Fed-
eration of Chambers of Commerce
and Industry, doesn’t expect to see
any tangible export volumes to the
U.S. until the beginning or the mid-
dle of next year. Even then, he ex-
pects shipments to be just a trickle.
The biggest expected beneficiary
should be the country’s textiles and
garments industry, which had ex-
ports totaling $558 million in 2011,
according to Myanmar’s Garment
Manufacturers Association, repre-
senting 200 factories in Myanmar.
Other industries that could gain in-
clude the timber sector.
Myanmar workers use sewing machines at a Yangon garment factory in April.
Aung Win, vice chairman of the
garment association, said it could
take six months to a year for gar-
ment makers to rebuild capacity,
with local manufacturers needing to
import equipment and machinery
and source the necessary financing
for such operations.
“Now, we only have mostly Japa-
nese orders and Korean orders—
they are not enough to go around
for the industry in Myanmar,” Mr.
Aung Win said. “Most factories are
struggling—we hope this obstacle
will go away when American orders
come in.”
In Washington, senior State De-
partment officials told reporters in
a briefing that the process of imple-
menting sanctions would require
congressional consultations and
waivers from the administration on
different products or sectors, which
still needs to be worked through.
The intent is to help Myanmar's
economy grow beyond extracting
minerals and timber and to be able
to produce job-creating manufactur-
ing jobs, the officials said.
The prospect of an effective low-
cost manufacturing hub has caught
the attention of some manufacturers
and trade groups.
Mr. Aung Win said his garment
association meets potential foreign
buyers on a daily basis.
Fast Retail-
ing
Co., the Japanese operator of
the Uniqlo clothing chain, mean-
while, has flagged Myanmar as a po-
tential manufacturing base along-
side Bangladesh as part of
the Japan External Trade Organiza-
tion this year showed the average
monthly wage of a factory worker in
Yangon came in at 61% of that in
Hanoi and 83% of average wages in
Phnom Penh, Cambodia.
While a handful of multination-
als such as
Coca-Cola
Co.,
PepsiCo
Inc. and
General Electric
Co. have
made earnest moves into Myan-
mar's domestic market, caution and
a degree of skepticism prevails
among many users of inputs from
emerging markets about Myanmar.
A spokeswoman for
Hennes &
Mauritz
AB said the Swedish fash-
ion retail giant is watching develop-
ments there closely but hasn’t made
any decision about using goods from
there until the situation becomes
more clear. H&M and other foreign
manufacturers have been bound by
the U.S. rules against exporting
goods with Myanmar-originated ma-
terials to the U.S.
Adam Sitkoff, the Hanoi-based
executive director of the Asia Pacific
Council of American Chambers of
Commerce, said many U.S. busi-
nesses are looking to see how Myan-
mar can fit into their future supply
chain plans.
“In the near term, however,
American consumers probably won’t
see many ‘Made in Myanmar’ labels
in their favorite stores as the coun-
try lacks key infrastructure, legal
certainty, and skilled labor,” he said.
A protracted debate in the coun-
try’s legislature about how to allow
foreign investment also clouds the
investment outlook.
—Jens Hansegard
contributed to this article.
infrastructure,
housing, water, etc.”
The OECD medicine may prove
hard to swallow. With parliament
and presidential elections due in
2014, support for Mr. Yudhoyono’s
Democratic Party has been weaken-
ing. While the economy has ex-
panded more than 5% in seven of his
eight years in office, his party’s ap-
proval ratings have fallen as voters
tire of corruption cases involving
members of the ruling party.
Indonesia's GDP
Annual percentage growth
Indonesian government
FORECASTS:
OECD
8
%
6
4
2
0
its
2007
'08
'09
'10 '11
'12 '13
capacity expansion.
Myanmar should have a competi-
tive edge in labor costs. A report by
Source: OECD
The Wall Street Journal
Inflation Fears Hang Over Rebound in Vietnam
B
Y
V
U
T
RONG
K
HANH
steps this year to boost growth,
such as lowering banks’ lending
rates and reducing income tax for
some businesses.
However, prices in Vietnam have
begun rising again, a setback after a
series of rate increases had suc-
ceeded in curbing runaway inflation.
A report earlier this week showed
the consumer-price index rose 2.2%
in September from August, the fast-
est pace in 16 months.
The banking system recently has
been beset with bad loans and scan-
dals, but economist Le Tham Duong
of Ho Chi Minh City Banking Univer-
sity said lending has been rising, a
sign that companies are expanding
operations and production. He said
bank loans need to be funneled to
projects that add value to the econ-
omy, or the expansion in credit will
merely fan inflation.
The government said Thursday
that the inflation issue is “compli-
cated” and will be difficult to tame.
It said all ministries and localities
must continue pursuing the goal of
controlling inflation and stabilizing
the economy for the rest of the year.
“I think the central bank will
keep its policy rates stable until the
end of the year, as keeping inflation
under control is still one of the gov-
ernment’s key tasks for the year,”
Mr. Duong said.
In contrast, ANZ said in a report
Thursday that it expects the State
Bank of Vietnam to cut policy rates
by another percentage point in the
fourth quarter. The central bank has
cut its policy rates by five percent-
age points this year. Its refinance
rate, the rate at which it lends to
other banks, stands at 10%.
“The latest economic data makes
monetary policy decisions more dif-
ficult in the months ahead. Spurring
bank lending can rejuvenate growth,
but this may aggravate an already
shifting inflation path,” ANZ said.
The government is targeting GDP
growth of 6% to 6.5% for this year,
but Prime Minister Nguyen Tan
Dung earlier this month said he ex-
pects growth of 5.5%. The country’s
GDP growth averaged 7.2% over the
past 10 years, and was 5.9% in 2011.
The statistics office said Thurs-
day that GDP grew 4.7% in the Janu-
ary-September period compared
with a year earlier. Vietnam often
issues economic data before the end
of the reporting period.
Other data Thursday showed in-
dustrial production rose 9.7% in
September from a year earlier, up
from August’s 4.4% rise and its most
robust gain since February. Retail
sales of goods and services in the
first nine months of the year rose
17% from a year earlier. The country
posted a trade surplus of $34 mil-
lion in the January-September pe-
riod, compared with a deficit of
nearly $8.16 billion a year earlier.
HANOI—Vietnam’s economic
growth continued to rebound in the
third quarter, as government efforts
to revive the economy bear fruit.
But authorities will face a delicate
task in coming months to maintain
robust growth without letting infla-
tion get out of hand.
Vietnam’s gross domestic prod-
uct rose 5.4% in the third quarter,
up from 4.7% growth in the second
quarter and 4% in the first quarter,
the General Statistics Office said
Thursday.
After spending much of 2011 bat-
tling high inflation and trade imbal-
ances, the government has taken
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