Wednesday, September 21, 2011

20110921 1013 Local & Global Economic Related News.

The government is aiming for a  domestic direct investment (DDI)-foreign direct  investment (FDI) ratio of 73:27 by 2020. In the first seven months of 2011, the FDI-DDI  ratio in terms of approved investments was 50:50 compared with 60:40 last year, said International Trade and Industry Minister Datuk Seri Mustapa Mohamed.  
• The government would promote domestic investments through various incentives  including tax incentives which were still being studied.  
• He said the manufacturing, tourism, hotel and hospitality sectors were expected to  continue drawing the attention of domestic investors. (Bernama)

The government's revenue from taxes has not been increasing for the past three to four years, Deputy Finance Minister Senator Datuk Donald  Lim Siang Chai said. The amount  was around RM160bn a year even though expenditure was on an increasing trend.  
• He said one third of the government's revenue came from oil and gas, one third from  taxes from companies and individuals while the remaining one third from indirect taxes  such as stamp duties and customs.
• "There is a need to increase the number of skilled labour so that the government would  be able to collect more taxes and increase its revenue," he noted.
• In Malaysia, out of the 12.8m workers, only 29% were skilled labour. Out of the 12.8m  workers, only 1.65m pay taxes, he added. (Bernama)

The  Malaysian Franchise Association (MFA) expects the number of  local franchise  companies establishing their business overseas to grow 10% annually. A main committee  member of the MFA, Abdul Rahman Mohamed said 10% was the minimum target, with 39  companies currently operating in 51 countries. "The food and beverages sector and  education business will have the most potential in  expanding its business overseas," he  said. On the other hand, Indonesia and China host the most Malaysian franchise  companies at 18 and 14, respectively. (BT)  

The lure of delicious food has enticed tourists to spend RM9.7bn on  food and beverage last year.  Tourism Minister Datuk Seri Dr Ng Yen Yen said the figure accounted for  17.2% of overall tourist expenditure for 2010. Tourism sector has grown to become the  second largest foreign exchange earner after manufacturing, she said. Malaysia was the  ninth most visited country in the world, and recorded 24.6m tourist arrivals with RM56.5bn  annually (23.6m tourists and spent RM53.4bn in 2009), she noted. (The Star)  

Malaysia is a leading option among Asean countries for Japanese companies that plan to  relocate to the Asean region following the 11 Mar earthquake and tsunami. Deputy  International Trade and Industry Minister Datuk Mukhriz Mahathir said Malaysia could  expect a surge in investment flows from Japan within the next one to two years. Many  Japanese companies hit by the 11 Mar disaster had expressed strong interest to either  relocate to Malaysia or expand their operations in  Malaysia due to the nation’s political  stability and the fact that it did not suffer major natural disasters, he noted. (Starbiz)

Growth in  Indonesia,  Thailand,  Malaysia,  the Philippines and  Vietnam will climb to  5.6% in 2012 from 5.3% this year, both 0.1% pt lower than its Jun predictions.
• Domestic demand - in particular, robust investment – is expected to offset the slowdown  in export momentum.
• Economic threats may warrant a “wait-and-see approach” for monetary policy  
• Further exchange-rate flexibility remains a key policy priority for  emerging Asia  (Bloomberg)  

U.S. trade officials will announce a major  trade enforcement action against  China on  Tuesday, according to an advisory from the U.S. Trade Representative's office. Possible  actions could target:
• China's export restrictions on rare earths, crucial for electronics, defense and renewable  energy industries
• Solar panel subsidies reportedly driving U.S. producers out of business.
• Anticompetitive currency practices  (Reuters)  

Indonesia's finance ministry said on Tuesday it plans to buy back  bonds maturing in  2012-2016 on 21 Sep. Government bond yields have jumped in the past week on a sell-off  by investors because of increased global risk aversion. (Reuters)  

U.S. homebuilders began work on fewer homes than forecast in Aug, showing the  industry remains flat on its back even as mortgage  rates fall to record lows.  Housing  starts dropped 5% to a three-month low 571,000 annual rate (601,000 in Jul), Commerce  Department figures showed. Economists called for a 590,000 pace. (Bloomberg)  

U.S. building permits  rose 3.2% mom to a 620,000 annual rate in Aug (601,000 in Jul),  the highest this year and a sign construction may stabilize. On a yoy basis, building permits  rose 7.8% higher. Economists expected an annual rate of 588,000 for Aug. (Bloomberg)  

Japan’s  leading composite index, which measures the state of the economy three  months ahead, rose to 104.6 in Jul (102.6 in Jun),  posting the third mom rise in a row.  (MNI) Hong Kong said its  unemployment rate has fallen to its lowest in more than 13 years  thanks largely to a strong local economy, but analysts warned the figure could rise again.  The unemployment rate for the Jun-Aug period fell to 3.2%, from 3.4% in the May-Jul,  which marked Hong Kong's lowest jobless rate since Feb 98, the Census and Statistics  Department said. Economists expected an average reading of 3.5%. (AFP)

Japan: Noda unveils first plan to counter damage from yen
Japanese PM Yoshihiko Noda unveiled his first plan as premier to lessen the pain of a JPY near postwar highs, including a pledge to grant “large” subsidies for domestic construction of factories. “We have to establish a strong economic structure that won‟t be affected by movements in currency markets, whether it‟s a strengthening or a weakening in the JPY,” Motohisa Furukawa, the economy minister, told reporters in Tokyo after the government released its interim report on measures to respond to the JPY‟s appreciation. (Bloomberg)

Italy: Credit rating cut by S&P as crisis contagion spreads
Italy‟s credit rating was cut by Standard & Poor‟s, the country‟s first downgrade in five years, as Greece‟s worsening fiscal crisis fans concern that contagion will engulf countries such as Spain and Italy. S&P lowered its rating last night to A from A+, with a negative outlook, saying weak economic growth, a “fragile” government and rising borrowing costs would make it difficult to reduce Europe‟s second-biggest debt. The yield on Italy‟s 10- year bond rose 9 basis points to 5.674%, 387 basis points more than similar German debt. The cost of insuring Italy against default surged to a record. (Bloomberg)

IMF: Cuts global growth estimate; Europe may worsen outlook
The International Monetary Fund cut its forecast for global growth and predicted “severe” repercussions if Europe fails to contain its debt crisis or US policy makers deadlock over a fiscal plan. The world economy will expand 4% this year and next, the IMF said, compared with June forecasts of 4.3% in 2011 and of 4.5% in 2012. The US growth projection for 2011 was lowered to 1.5% from 2.5% in June. (Bloomberg)

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