Horasis:The Global Visions Community Horasis China and business Asian business Asian business globalization systemic risk sustainability management consulting Asian trade globe visions leadership skills scenario-building World Economic Forum Frank-Jürgen Richter Frank-Jurgen Richter Frank-Juergen Richter Frank Richter
      Home Site Map Email
Home
Philosophy
Management
Events
Contact
Opinions
 
2017
Asia Needs more Dialogue
Solutions to urban pollution may prove complex
Spread of ESGs could herald new global movement
Investing in quality education is imperative if India wants to reap demographic dividends
China needs to lead in new multi-stakeholder world
China’s B&R initiative leading a resurgence of Asia
Education is key - but long-term: Can we survive?
New wave of robots will be beneficial to all
China needs to continue with its ‘heavy lifting’
Time is right for Chinese firms to invest in Europe
Robots to the rescue for China?
Asian Multinationals are Going Global, But to Where?
China ratchets forward with energy efforts
China’s calm necessary for globalization push
Bridging managerial gaps involves trust-building
China well-placed to power its future through green technology advances
China's new 'springtime' is here
2016
China’s moves show it’s banking on the future
Mindset for action at the G20 summit will be determined by Chinese presidency
Chinese head-hunting intensifies for rare managers that can steer overseas firms
US talk of isolation jars with growing links in Europe and Asia
Electoral rhetoric on global trade not in sync with reality
Is it time to be prudent and consider austerity policies again?
What will we do if we have no oil?
Unlock talent by finding the right fit for a person
The benefits are real and tangible
Trade along China’s ‘One Belt, One Road’ won’t succeed without the currency of trust
Reasons for optimism about the long term
2015
Can big oil go green and win?
Poorer Nations Could Sway Climate Talks
Combating Idleness and Deprivation
How China can be a model of food sustainability for the developing world
Kyoto II – Is it a Done Deal?
A meeting of the two largest economic powers
Why China will experience a 'soft' landing
Beware of superstitions
The Elephant and Dragon move ahead
G-7 target on fossil fuels raises many questions
Why Battle for Net Neutrality in the US Matters Globally
China’s resurgence – the ‘normal new’
Wanted: A managerial culture that embraces cultural differences
China's early education plan a smart investment in the future
The New Normal for China and India
2014
China's infrastructure push offers a sure track to better growth
US-China climate pact a good start, but not quite enough
Rethink the human’s place in the ‘digital revolution’
China springs a carbon surprise
Infrastructure - the invisible hand in full view
Dialogue vital for survival of Iraqi nation
China must nurture a new generation of beautiful minds
Great expectations in China and India
GM Cereals – The Pros and Corns
Time to be Honest about Our Energy Prospects
Weathering the Storm of Climate Change
Making a Big Decision? Beware of Your Biases
West Deserves Better Logistics Infrastructure
Digital Currencies do Represent the Future
From 'Printed' Houses to Wooden Skyscrapers
It’s time to bail out our schools, not our firms
Solution to India’s housing shortage – print new ones!
And the most promising green technologies of 2014 are ...
Transport infrastructure key to domestic, export growth
Oil stopgaps: Not worth risking
2013
Why the US should grant Edward Snowden amnesty
May we be more optimistic!
China headed for another massive social experiment?
A dialogue that worked
Yes, politicians deserve vacations - because we benefit
NPOs, NGOs invaluable as creators of dialogue
Look closer and ask: Is America reinventing itself?
Boston bombings case underlines need for dialogue
Millennium Development Goals or own goals?
As usual it's about balance - and timing - of course
Chinese strategists make right moves for growth
2012
Preparing for tomorrow
Austerity or growth?
Japan in danger of becoming 'just a place to fly over'
Beware of the business cycle?
An inconvenient truth
Limited offer sale: Buy a country
Where did our money go?
Leading from behind - a year of elections is almost over
Driving towards a green future
Waiting for springtime
Preserve or Perish
Startlingly similar Asia policy for Obama, Romney
Globalisation remains an irresistible trend
Google has the edge in smartphone war
U.S. Braces for China's Rise
Mankind’s General Scourge
The summer holidays are over and nothing has changed!
Put the hidden trillions to work
Making sense of India’s woes and wonders
Storm in a teacup!
Let’s give bad bankers a venue to admit their sins
News is about depth, not puff or velocity
Booming India, but too few toilets
Delayed Court decisions doesn't mean one may continue to play 'Great Game'
We need media to reflect on data and offer public a balanced view
Big polluters can lead in forging common purpose
The weighty issue of choosing a leader
EU-India Relations - Facing similar challenges
Educating with a goal
The Judicial Malaise
We are growing out, but not growing up
EU´s retrenchment enigma
Urbulence in the Eurozone and the effect on SMEs
Skolkovo May Help Russia to Diversify
Make things more effective
Tapping into the Commonwealth connection
Innovative models for public finance
Facebook revolution but Indian style
The feel-good factor
Asian investors - a private equity opportunity
India needs to be taller and stronger
China´s low sales volume...
Nations playing leapfrog
Shafts of sunlight
What webs we weave
As performers go to Davos, the circus steals the show
Can we control the politicians?
 
2011
Europe’s reminiscence
China firms should go for win-win in overseas ventures
Of procrastination...
Making sense of profiteering
Truth about financial mess must be laid bare
Small is also beautiful
China can help Europe with debt crisis
Excising the cancer of global corruption
Education, a critical asset
Arab uprisings set in motion forces of creative destruction
A new era of change
We must ensure better education for all
Beijing wary of bankrolling a lost cause
Asean's re-emergence as a local and global leader
Why India's Role in the Global Economy is Still Work in Progress
Its the leadership, stupid!
Reverse globalisation: The new buzzword
Is it time to be prudent and consider austerity policies again?
By Frank-Jürgen Richter
Business Times, March 31, 2016
 

George Osborne, Chancellor of the UK Exchequer, has introduced more cuts for the UK in his 2016 Budget. As the UK is the world’s fifth largest economy, might it be time for South-east Asian nations to consider introducing measures of austerity?

I am against “austerity measures” though I am not against evaluating core and peripheral business processes to remove redundancy and waste. We abhor lots of apps in our smartphones, calling them “bloat-ware”, so why not slim down redundant departments and processes?

In fact, this was the purpose of Business Process Re-Engineering – a consultancy portfolio action plan to be undertaken before large-scale back-office automation. It is a necessary evaluation of core processes before Artificial Intelligence applications are applied to the complex systems that comprise modern businesses.

Over years, managers have looked for ways to increase their mini-empires and have created paperwork redundancies that are perpetuated even when they retire as few wish to disturb the status quo or make paper-pushing staff redundant. But these empires absorb cash that would be better spent on modern automation and machine tools. Hence overstaffed firms gradually lose competitiveness and some actually acquire state support over fears of “too big to lose” if, say, the national unemployment figure is high on the list of government targets. All in all, while “austerity” may be a grim prospect, the rationale is reasonable: to free up corporate capital and apply it to productive purposes.

Mr Osborne states his fear that there are many global forces antithetic to the blossoming of the UK economy. Its GDP continued to grow through the last quarter to a 2 per cent annual pace – somewhat more than the EU as a whole. But when we review the situation in Asia via its Purchasing Managers’ Index (PMI), always a leading indicator, business activity has slowed remarkably over the last year.

Every nation, except India, has felt the slowdown – none more so than China. Here, they have seen a relentless fall in PMI from 52.2 in January 2013 to 48 of late. Singapore too had a high of nearly 52 in mid-2013, then again in late 2015, but it has now fallen to 48.5. In parallel, business confidence has fallen to minus 22. Just to recap, 50 in these indices is taken as the boundary between growth and recession. Most Asian nations have seen under-50 performances through the last year, so it is inevitable that business and economic confidence across the region is low, and in turn global confidence has slid. And global trade is hovering at half its long-term average of 4 per cent per annum.

A further facet follows from the 2008 global financial crisis. All banks have been instructed to shore up their capital reserves. In the first instance, this resulted in their lowering of loan rates, following which many businesses did not reinvest in their processes but sat on their money.

TURNAROUND
Later, several central banks lowered their base rates to stimulate their economies, which did not work beyond the short term – so they again lowered rates, in some cases below zero. Again no real effect, though the recent European Central Bank (ECB) move may have shocked European businesses into renewed action. However, very low interest rates make it more difficult for banks in the euro zone (everywhere, actually) to sustain profitability and return on equity remains well below pre-crisis levels. This is reflected in a 2016 eurozone growth forecast, which sees the bloc's real GDP expanding only 1.5 per cent for the second consecutive year.

But “austerity” can work effectively and quickly to achieve a turnaround.

Cyprus is the new example: after 42 years, it may again become one country. The people are nearly celebrating, but there are some tricky negotiations to settle, one of which is property restitution. Following a Cypriot coup d’état in 1974, the Turkish army invaded to protect its Turkish-Cypriots. This resulted in a rapid flux of Turkish and Greek Cypriots from one part of the country to another, leaving their homes and belongings behind before the border closed. Presently, there is considerable impetus to rejoin the divided, but increasingly rich, nation.

This small economy had turned around its economy up to 2009 but then the Greek banking crisis struck. Greek banks were given their first loans in May 2010 by the EU, the ECB and the International Monetary Fund (the trio later came to be known as the Troika). They were not alone: Ireland followed Greece, getting a bailout in November 2010; Portugal was next in May 2011, with Spain and Cyprus requiring official assistance in June 2012 and March 2013respectively. Cyprus benefited from this easing but needed only 7.5 billion euros (S$11.5 billion) of its 10 billion euro loan. Of course, the Troika imposed heavy structural reforms, including austerity measures – which investors did not like. But with hard work, and the willingness of its citizens, Cyprus has turned around its ills and is likely to repay its loan early. However, continued prudence is needed.

I am in no way suggesting the Asian nations (much larger than Cyprus) need go right to the brink. But they might consider emulating George Osborne to address systemic inefficiencies and carefully guide their nations’ progress. In all business systems, curious and inefficient systems grow through empire building; they don’t contribute to the business or the economy, and they consume scarce resources. It might thus be prudent to enforce new policies to promote studies on better ways to manage. This may well free up government money for vital infrastructure investments in education, telecommunications, health and safety. All will benefit.

 

The writer is founder of Horasis, a global visions community. Its inaugural Horasis Global Meeting will be held in Liverpool on June 13-14 as part of Britain’s International Festival for Business.

 


Horasis is a global visions community committed to enact visions for a sustainable future. (http://www.horasis.org)

For more information, please contact:
 
Communications and Public Affairs
Horasis. The Global Visions Community
phone: +41 79 305 3110
fax: +41 44 214 6502
e-mail: visions@horasis.org
 
 
Copyright © 2005 Horasis Web by Toronto Web Design