Archive for the ‘Business’ category

Judicial independence is the basis of Hong Kong’s economic value

October 2, 2014

This is my translation of the first half of this post by chenglap on a Taiwanese forum. I think it’s a strong rebuttal to the argument (which many people share) that HKers should throw all their effort into making money and not get involved in politics.

You misunderstand. The importance of Hong Kong, when you come down to it, isn’t its substantive “economy”; it’s the liquidity of transactions there. Hong Kong is indeed a major economic city, but not for economic reasons: for political ones. Not even Hong Kongers themselves understand this. Hong Kongers commonly believe their value, and the reason they’re rich, comes from their understanding of economics and how to do business. On the contrary, Hong Kongers don’t really understand economics, and something else is the foundation of Hong Kong’s value: Hong Kong’s independence.

If you keep your eyes open, you’ll discover that all Western systems separate Hong Kong and China and treat them differently. Obviously China cares a lot about this, so it always demands that the word “China” be appended to the name “Hong Kong.” You won’t see them doing that with Shanghai or Shenzhen.

I’m not saying Hong Kong is an independent nation. I’m saying Hong Kong’s value is in its independence in external affairs, toward the world outside the ethnic Chinese community, that is, in the eyes of the world.

To become a financial center, having a big economy is just an entry ticket. Global credibility is the core question. To put it bluntly, it’s a question of how chaotic local governance is. Some places produce oil and diamonds and are very wealthy, but that doesn’t mean they can become economic centers. If you don’t have a government and legal system that meets international standards and is globally recognized, you simply have no way to guarantee the safety of the assets kept in your city.

Hong Kong is trusted because its systems are all independent from the People’s Republic of China. It has an independent currency and independent financial system. It follows the UNCLOS. It has a different judicial system than mainland China, one with the same source as the U.S. and U.K. It basically preserves separation of powers, so the executive cannot control judges’ legal decisions. It has a citizens’ jury system, lawyers, and a legal system that are all recognized by countries following the U.S.-U.K. framework.

Hence, companies are willing to line up and take a number to put their assets in Hong Kong, and extend credit there, -not- because Hong Kong has a “good economy”, but because they believe that Hong Kong will protect these things. The courts are the defender of everything. No matter how good the economy is, if the government can seize your assets at will there, and the courts that are supposed to defend you are on the government’s side as well, then that place is a “paradise of risk” and can never become a financial center. Finance is built on credibility.

Unless East China undergoes major governmental change, Shanghai will never have the conditions of a true financial center, no matter how much it develops. It won’t have its own currency, its own financial network, its own laws, nor credibility, because its credibility is equivalent to the People’s Republic of China’s. Chinese judges are appointed by the Chinese government. They don’t have independence. Foreign businesses that have business disputes in China with Chinese businesses do not believe that the courts there will protect them.

If Shanghai’s legal system cannot regulate the government, and the government can do whatever it wants there, independent credibility cannot be built there.

When Shenzhen was made a Special Economic Zone, the architects considered this point and thought about establishing a “Shenzhen Dollar”, and midway through seemed to want to strengthen the area’s autonomy as well. This is because they realized that the trust placed in Hong Kong stemmed from its autonomy, and from the government not being able to do whatever it wants there. However, Shenzhen was unable to win these rights. Hong Kong has the Internet domain .hk, and Taiwan has .tw, but could Shenzhen have .sz? Sadly, no; that’s Swaziland.

Through investment in industry and cheap labor, these cities can develop better economies than Hong Kong and have higher commodity prices, but how could they build independent credibility or a financial system that isn’t controlled by the government? How would they create an independent judiciary? It’s not that Shanghainese and Shenzhenese aren’t as hardworking or talented as Hong Kongers; they are, actually. But the systems that have already been established there stem from political issues and their issues cannot be resolved simply by making more money.

Outsiders don’t believe in Chinese Hong Kong’s economy; they believe in its credibility. Obviously, many often say that if you have strong fists you don’t need to defend your credibility. Yes, you could then shout at your people that you can do whatever you want and they can’t stop it, but foreigners won’t go for that. The business environment would be like a casino where you could win money easily but couldn’t leave with your winnings.

Hanzawa Naoki

September 1, 2014

半沢直樹

半沢直樹 HANZAWA NAOKI, the most popular live-action Japanese drama in years, is well worth watching, and its roaring success there and elsewhere is indicative of a major problem in the nations’ corporate culture.

Hanzawa is a brilliant, hardworking, charismatic, successful banker with a loving, beautiful, and sacrificially supportive wife and cute kid. He does due diligence and then gives both his support and friendship to the small businesses he deems promising (this alone makes him a kind of unicorn in Japanese banking). No amount of overtime is too much for him. And he’s out for revenge.

His top target is the banker who years ago induced his father to commit suicide by denying his small business a loan extension. He wants to overcome this man and reform the bank for which he works. By the end of the first episode, however, Hanzawa is fighting for his career, as corrupt superiors who have cheated the company for personal gain frame him and put him on the chopping block.

A typically meek Japanese worker would take the fall. In the words of one character, in Japanese corporations the superiors take the credit for the subordinates’ successes, and the subordinates take the blame for the superiors’ failures. Hanzawa is different, though. He fights ruthlessly and swears to his enemies that he’ll get a double helping of vengeance for their wrongs (BAIGAESHI DA!). Sakai Masato nails the combination of niceness and scariness required for this starring role.

It’s tense watching. Hearing the theme song again would give me a myocardial infarction. The creators, like the author of the original novels, clearly find catharsis in showing how personal advancement and protection of the organization have long come before doing the right thing at Japan, Inc. and THAT is why the country has fallen. Some of Hanzawa’s bosses are acid. The others are base. Yet the love of Hanzawa’s wife and the loyalty of his friends and subordinates keep him (and you) believing in people enough to carry on.

I’ve had plenty of time to calm down since finishing the series (the ending wasn’t just a cliffhanger, it was like falling off a cliff; a sequel is certain to follow some day) and what most sticks with me is the creators’ passion for reform. I respect Ikeido Jun for becoming so well-versed in business (he worked for a bank for years), yet still preserving his idealism enough to leave his company at 32 to write crusading books like this. He made it to the biggest possible public stage. HANZAWA NAOKI is likely too Eastern to ever come to the U.S. but you can still take some inspiration from its existence.

How Asia Works: Success and Failure in the World’s Most Dynamic Region

August 23, 2014

Amazon Link

I’m extremely fortunate to have stumbled upon this book. It reconstructed my views on developmental economics and doubles as a strong rejoinder to dogmatic laissez-faire.

It explains how Japan, Korea, Taiwan, and China have advanced so much economically–by following the 18th century English and 19th century American and German models of protected development, best described by Friedrich List–and how Southeast Asian nations have struggled despite taking far more of the neoliberal prescriptions of Adam Smith and the World Bank and IMF than their northern counterparts. There’s much to learn about here but we can summarize the three steps to prosperity as follows:

1. Peasant farmers must be given ownership of their land and receive infrastructure and technical support to increase productivity and build wealth. Fair land redistribution spreads wealth so much better than trickle-down economics.
2. During industrialization, infant industries must be protected from foreign multinationals, but there must also be enough domestic firms in each field to allow genuine competition, as monopolies degenerate into rent-seeking. Deals with foreign firms must require technology transfer in exchange for market access to allow the nation to build its knowledge base. Promising companies need sufficient capital to undertake long-term investment. To determine which firms deserve funding, use export performance as a benchmark because it is an objective indicator of competitiveness.
3. Finance must be directed toward productive development, not real estate and stock speculation.

Again, it’s not what race you are that determines how well your country does; it’s how effective its policy is. Learn about what’s been proven to work by reading this.

Top 10 Dream Jobs of Japanese Kindergarten and Elementary School Students, according to Dai-ichi Life Insurance Company survey

July 6, 2013

Top 10 Dream Jobs of Japanese Kindergarten and Elementary School Students, according to Dai-ichi Life Insurance Company survey

Boys
(1) Soccer Player (2) Scholar (2) Police Officer/Detective (4) Baseball Player (5) TV Star, including Anime Voice Actor (6) Astronaut (6) Restaurateur/Chef (6) Train/Bus/Car Driver (9) Doctor (10) Fire Fighter/EMT

Girls
(1) Restaurateur/Chef (2) Nurse (3) Kindergarten/Nursery School Teacher (4) Doctor (5) Florist (5) Teacher (Elementary or above) (7) Animal Husbandry/Pet Store Owner/Animal Training (8) Piano/Keyboard Teacher, Pianist (8) Police Officer/Detective (10) Designer

Dai-ichi Comment: This is the 16th year in a row Restaurateur/Chef was girls’ #1 choice. Since the Great Tohoku Earthquake, children have had much more interest in jobs related to saving lives and protecting others, such as police work and nursing.

Number in parentheses = the rank of that occupation the year before.

Source: http://www.yomiuri.co.jp/atmoney/news/20130705-OYT1T00910.htm?from=main1

Urdangarin’s Ex-Business Partner Implicates the King of Negotiating in Favor of his Son-in-Law

April 22, 2012

Jorge Forteza and Pedro Perelló
Jorge Forteza and Pedro Perelló in 2007. Photo by Tōru Shimada.

Urdangarin’s Ex-Business Partner Implicates the King of Negotiating in Favor of his Son-in-Law
Diego Torres remitted three emails with documents to the court
The Duke says, “He has told Cristina that in principle, there won’t be any problems.”

Duke Iñaki Urdangarin affirmed in three 2007 emails that the king acted as a mediator so his son-in-law could participate in a new yachting team for the 33rd America’s Cup. The documents were remitted by Urdangarin’s ex-business partner, Diego Torres, to the Palma court which is investigating the activities of Instituto Nóos. The Ayre Project, which still has not found prosperity after that fiasco of a sporting event, was managed by Pedro Perelló and Jorge Forteza – regattists, businessmen, and friends of the princes and princesses – with the support of the Duke of Palma.

In one of these communications, dated September 30, 2007, Torres asks the duke about his “experience” in seminars about urban planning in Philadelphia and informs him that Perelló has spent “a good while on the telephone every day” to intensify his contacts with the public administrations of the Valencian Community. The following day, Urdangarin answered him form Washington, “I bring a message on behalf of the king, and it is that he has commented to Cristina, so that she could pass the message on to me, that he will get [Francisco] Camps in touch with Pedro in order to tell him about the theme of the base of the Prada. And that in principle, there will not be any problems, and they will help us get it,” said Urdangarin in allusion to the necessary installations in the port of Valencia to hold Project Ayre’s future boat.

In this same email, Urdangarin informed Torres that “there could be a little something for the foundation” and lamented that the entity’s website was not in English. “It would give a more international touch,” the Duke said, and he added that Agustín Zulueta, leader of the Desafío Español (Spanish Challenge) crew – the team that participated in the 2007 America’s Cup – “had asked Cristina to coffee to talk about something that couldn’t be discussed over the phone.” “It was mysterious, but it seemed serious and important,” he averred.

The messages about the ambitious sailing project which Torres’s lawyer, Manuel González Peeters, handed to the judge, piled up on August 9, 2007. Urdangarin then revealed a supposed encounter between King Juan Carlos and Perelló. “We arranged a meeting between the king and Pedro in order to present the project. It went very well, and apart from seeming very well put together, the king has offered all his help in finding financial assistance,” he said to Torres, to whom he added, “Enjoy the cruise.”

Later, on September 10, the husband of Princess Cristina wrote a message to Perelló which again lead with the supposed actions the king had taken to make sure the project arrived safely in harbor. “The king commented to me that one of his friends had done the negotiating we requested with Miguel Fluxa,” in allusion to the owner and president of the Iberostar group, Miguel Fluxá. “From my end, I’ve given [Fluxá] the ear of BBVA so he can give a push to Paco González,” Urdangarin explained to Perelló.

The messages also reveal certain differences over the (failed) presence of a second Spanish team at the America’s Cup. Zulueta affirmed in an October 2007 conversation that he felt “more peaceful” after speaking with “Cristina” and that he believed Perelló “will not continue sending surprising documents to our sponsors.” The tone, despite it all, is conciliatory, and he informed Urdangarin that “the Desafío Español has nothing against another Spanish team taking part, and if course, it has not acquired any right to be the only team.” This relieved “a worry on our end.”

The message sent by another of those implicated in the Nóos case, Antonio Ballabriga, chief of the corporate affairs of BBVA and friend of the Duke, confirms that Urdangarin went forward with his activity in Nóos and his business with public entities. This, despite his formal renunciation in March 2006 and after the king’s emissary, José Manuel Romero Moreno, advised him that spring to disassociate himself with the business. “As we’ve established, we’ll meet at 10 in Nóos to talk about meetings for the European Games project.”

After the 2009 America’s Cup
J.G. reporting from Barcelona and A.M. reporting from Palma

The Mallorcan regattists Pedro Perelló and Jorge Forteza conceived of a project to give Spain a second representative in the 2009 America’s Cup in Valencia. They wanted a team capable of competing to win, and for that they needed to raise at least 100 million euros. Despite their efforts, and despite the Ayre project being enrolled as a challenger by America’s Cup Management (ACM), the project did not prosper.

In 2007, Perelló won the King’s Cup for sailing with a boat named Siemens in which Prince Elena was a navegator. It was then that the regattist and shipowner tried to put together a great team in order to participate in the America’s Cup. Perelló never hid who the project’s godparents were, and he affirmed that the project counted on the active participation of Urdangarin (who was to take charge of the “social and cultural” area of the project) and the blessing of the king, as well. Duke Urdangarin retired after the project. Three years later, one of his businesses dedicated to “sports patronage” (Promorace, FL) was condemned to pay 34,000 euros for abandoning a sailing ship in the installations of the Royal Nautical Club of Palma. The judge obligated the business to “vacate the installations.”

Perelló paired up with a person who could provide more economic muscle for the project, businessman Jorge Forteza, duke of the real estate company Nova. Forteza was tthe “fourth player” that participated in the table tennis game in the palace of Marivent Urdangarin, along with regattist and ex-Director General of Sports Pepote Ballester and ex-President of the Balearic Islands Jaume Matas, who were also imputed in the Nóos case. There, Urdangarin confirmed his patronage of the Illes Balears cycling team. Nóos bought to apartments in Novaen Palma. In addition, Forteza was an intermediary for buying and selling terrain for Mallorca’s territorial program, which was investigated by the attorney general. The BMW Oracle team took the plan for the 33rd America’s Cup to court, where the project was paralyzed more than a year and a half before it was finally cleared.

Saudi Businessman Paid for Spanish King’s Hunting Trip in Botswana

April 21, 2012

King Juan Carlos Hunting
The King. Date undetermined. Photo by Rann Safaris.

Saudi Businessman Paid for Spanish King’s Hunting Trip in Botswana
Mohamed Eyad Kayali resides in Spain, where he represents the Royal House of Saud
El País: Un empresario saudí pagó la cacería del Rey en Botsuana
Mábel Galaz reporting from Madrid April 18, 2012

The King went on his controversial hunting trip to Botswana on invitation from Saudi businessman Mohamed Eyad Kayali, who has lived in Spain for years, as reported by El Mundo and confirmed by sources with knowledge of the expedition. Kayali, who has properties in Madrid and Marbella, usually acts as a representative of the Royal House of Saud in Spain, defending and driving their business. This lobbyist of Syrian origin was one of the people who accompanied the king on his safari.

In other news, whether it is coincidence or not, Queen Sofía decided to spend two anda half hours in the Hospital USP San José yesterday, where Don Juan Carlos is recuperating from a hip operation which began at dawn Saturday. This long visit was ten times longer than her first, on Monday, which was reduced to 15 minutes.

The royal family knows that its place in the public square is important and should be untainted by personal problems, which are private business. So the king and his children have decided to close ranks. All have gathered around Don Juan Carlos, the visible head of the Crown, who has never been in the eye of such a hurricane.

Doña Sofía arrived at the hospital at 1:30 PM. The Royal Family reported that the two had decided to have lunch together. They even gave details abot the menu. They both had greens for their first course. After that, the king requested a sirloin steak and the queen a hake; she no longer eats meat. Their private date was different from the visit on the first day, when they were surrounded for those few minutes by doctors and retainers.

The queen left the lunch smiling and relaxed and approached the press to inform them her spouse is “phenomenal”, “has an appetite”, and “is doing very well”. She only added, “I’ll say nothing more because there is nothing more to say.” As Doña Sofía approached her automobile, she heard a voice asking, “What’s your opinion of the trip to Botswana?” She did not respond. No one really expected her to.

The stage of closing the family ranks was completed yesterday with the visit of the Prince of Asturias, who has continued representing his father at public functions, yesterday in Valencia and today in Murcia. And with the presence of Doña Elena, who left her convalescing son for a while in order to be with her father, with whom she is especially close. She said about criticism of the king, “I haven’t heard anything; I’ve been working.”

Everything indicates that the king will be able to leave today. The director of USP San José, Javier de Joz, read the new medical report at noon on Tuesday and assured that the king is “showing great progress”. He explained that they had practiced new remedies and had intensified his rehabilitation, with several sessions per day.

Kirchner Extends Nationalization Threat to Other Groups like “Telecommunications Companies and Banks”

April 19, 2012

Kirchner Extends Nationalization Threat to Other Groups like “Telecommunications Companies and Banks”
Spanish firms are engaged in a wide array of enterprises in Argentina
El País: Kirchner extiende su amenaza a otros grupos como “telefónicas o bancos”
David Fernández reporting from Madrid April 16, 2012

The expropriation of YPF could be only the beginning of a nightmare for Spanish businesses. During her announcement of the nationalization, Argentinean President Cristina Fernández de Kirchner threw down the gauntlet before other foreign business interests in the country, like “telecommunications companies and banks”, about the “necessity” of reinvesting their earnings in Argentina.

After speaking about Argentina Airlines and its disappearance, the president moved on to comment on other sectors in which Spain has investments in Argentina. “We’ve made it clear that the businesses that are here, even if their stockholders are abroad, are Argentinean businesses,” she began. She referred to “telecommunications companies, some of which are Spanish and which have recently submitted us to blackouts. I hope that the Ministry will promptly respond to this,” she charged, clearly referring to Movistar. “And the foreign banks, as well…in sum, we don’t have a problem with profitability, but these profits must be reinvested in the country in order to help the country grow,” Fernández resolved.

The internationalization of Spanish businesses began in Latin America, and Buenos Aires was one of the first ports of call for these then-incipient multinational corporations. In recent years, the importance of Argentina on the bottom lines of these sought-after businesses has decreased in favor of other economies in the region (principally Brazil, Mexico, and Chile), but the Argentinean market continues to be a net contributor. This is the exposure that the principal Spanish companies have to Argentina, according to fiscal 2011 data.

Repsol: YPF provided 17.42% of operating revenues (~€11,105,000,000) and 25.61% of gross profit (~€1,231,000,000). Last year, Argentina received more of Repsol’s investment money than any other country (€2,182,000,000, 33% of the total). There are 15,119 Argentineans on Repsol’s payroll, 32% of the total, making them the second most numerous nationality on their staff after Spaniards.

Telefónica: Kirchner, without referring explicitly to the Spanish operator, has sent a message to Telefónica in reminding them of the “blackout” that some enterprises “have submitted us to recently”. This April 2, a breakdown in Telefónica’s Argentinean affiliate’s mobile phone service affected 16 million users and a smaller number of landline users. After the blackout, the Argentinean government signaled that it would study how to impose the “maximum” fine possible on Movistar, which indicated its intention to compensate its clients in the country for the blackout.

Telefónica of Argentina has licenses which permit it to provide landline, cellular, and Internet telephone services. These licenses will not expire, but as the operator recognizes in its annual report, “they can be cancelled by SECOM (the Secretary of Communications) for failure to complete the terms of the license”.

Telefónica has 21.9 million clients in Argentina, principally for its mobile phones (15.9 million users); it enjoys a 29.8% market share in the cellular market. The net total of the bills for this division in that country last year was ~€3,174,000,000, while its Operating Income Before Depreciation And Amortization (OIBDA) reached ~€1,085,000,000. Telefónica’s Capital Expenditure (CAPEX) in Argentina in 2011 was €449 million.

Banco Santander: Santander Río is the country’s principal private bank, with 358 offices, 2.5 million individual clients, and 6,777 employees. In 2011, the affiliate had gross earnings of €926 million, net earnings of €472 million, and €287 million in profits. Argentina contributes 3% of the Santander Group’s profits.

BBVA: The entity controls 76% of the capital of BBVA Banco Francés. In 2011, the Argentinean division earned a net profit of €315 million and an attributed profit of €157 million, a quantity which represents 5.2% of the group’s total profits. BBVA has 4,844 employees in Argentina, 4.4% of its total employees.

Endesa: The services of the generation and transportation of electricity provided by Endesa’s Argentinean affiliate netted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of €118 million in 2011. In addition, since the beginning of April last year, two interconnecting lines between Brazil and Argentina have begun to receive regulated remuneration, producing an EBIDTA of €127 million. The distribution business, for its part, had operating losses of €23 million, as greater fixed costs as a consequence of inflationary recovery in the country could not be recuperated by the bills charged to clients.

Gas Natural: The distribution of gas in Latin America earned the company an EBITDA of €621 million in 2011. Brazil, Colombia, and Mexico are Gas Natural’s principal markets; Argentina only contributed €27 million of its EBITDA.

Mapfre: Argentina is the insurer’s fourth most important market in Latin America. In 2011, it contributed €457 million in premiums (2.33% of the insurer’s total) and €18 million to Mapfre’s bottom line.

DIA: The distributor sold a total of €11,123,000,000 in products last year. Its principal markets are Spain, Portugal, and Brazil. Argentina is fourth, although it was the fastest-growing market in 2011, contributing 7.8% of the chain’s sales (€868 million). DIA opened 47 new stores last year for a total of 495 there.

Prosegur: The security company grossed some €500 million in the Argentinean Area, which also includes Paraguay and Uruguay, in 2011.

Codere: Codere Argentina is the principal operator of bingo sales in the province of Buenos Aires, with a total of 14 functioning rooms and more than 5000 recreational machines installed. This South American country contributes more to the group’s revenue and EBITDA than any other, €553 million and €165 million respectively.

NH Hoteles: On December 31, the group had 13 hotels open in Argentina (11 owned and 2 others under management) with a total of 2049 rooms.