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Asian Economy: Overview, Growth & Development

Jordan PM says 2020 budget to focus on growth to ease unemployment

The Jordanian Prime Minister, Omar Al Razzaz, said the country’s draft 2020 budget, approved by Cabinet on Wednesday, aimed to spur stagnant economic growth and create jobs to ease high unemployment.

Mr Al Razzaz told university students that maintaining Jordan’s economic and financial stability, rather than imposing new taxes encouraged by the International Monetary Fund, was the main driving force for the draft budget.

Those taxes triggered protests in 2018 that were the biggest in years.

“Our direction now is not to raise taxes but to attain economic growth that leads to jobs for youths,” Mr Al Razzaz said.

The budget will be sent to Parliament for approval and its details will be unveiled on Thursday.

Economists and analysts say low growth and lack of job creation are the kingdom’s two main problems, although they should not be tackled at the expense of reining in public debt, which has hit a record 94 percent of gross domestic product.

Officials say the 2020 budget deficit is expected to almost double to about 1.3 billion dinars (Dh6.74 billion) with wage rises Mr Al Razzaz has pledged next year for public-sector employees.

Jordan is hoping for direct cash support from major western donors that traditionally cover chronic budget shortfalls.

A staunch ally of the US, Jordan has suffered years of instability at its borders, including wars in Iraq and Syria, and conflict in the Israel-occupied West Bank.

The IMF ended a mission last week that was concerned the kingdom could not meet revenues targets and lower public debt under a three-year extended fund racility agreement that just ended.

Kuwait and Abu Dhabi to invest in Saudi Aramco IPO

Saudi Arabia’s wealthy Gulf neighbours plan to invest in the initial public offering (IPO) of Saudi Aramco, sources familiar with the matter said, helping out Riyadh as it strives to raise $25.6 billion from a domestic listing of the state oil giant.

Aramco has struggled to secure an anchor investor for the listing and found little interest beyond the Gulf, forcing Riyadh to scale back ambitions for the IPO, although it would still be the world’s biggest if it raises more than $25 billion.

Aramco officials have held talks on investing with Kuwait and Abu Dhabi, both oil producing states that have close ties to Saudi Arabia and both with big sovereign funds, after Riyadh scrapped plans for roadshows outside the Gulf.

Abu Dhabi Investment Authority (ADIA) was considering investing at least $1 billion, five sources told Reuters, while one of the sources said a final decision on the amount was still required board approval.

Kuwait Investment Authority (KIA) also planned to invest in the IPO, two of the sources said, although the size of Kuwaiti commitment was not immediately clear.

Saudi Arabia aims to sell a 1.5percent stake in Aramco, valuing the company at $1.6-trillion-$1.7-trillion, a lower valuation than the $2-trillion target initially sought by Crown Prince Mohammed bin Salman, who has made the offering a cornerstone of his economic diversification programme.

Jason Tuvey, senior emerging markets economist at Capital Economics, said that any Gulf state investment in the IPO would be “purely a political decision rather than anything [else]”.

He said commitments by Abu Dhabi and Kuwait, which both sit on huge oil reserves of their own, would be “to show their support to Bin Salman and his plans to diversify the Saudi economy”.

ADIA, estimated to have assets of nearly $700 billion, is chaired by the president of the United Arab Emirates and its deputy chair is Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahyan, a close ally of the Saudi crown prince.

When Aramco’s IPO plans were first flagged in 2016, an international listing was seen as one of the central elements, prompting interest among exchanges from New York to Singapore.

But many foreign institutional investors have said Aramco’s valuation looked expensive and raised concerns about political, governance and environmental issues.

The head of the biggest refiner in Japan, a major Saudi oil importer, said Japanese firms were unlikely to invest because of difficulties in valuing the Saudi firm. Malaysian and Russian oil firms also said they would not invest.

The sale process for listing Aramco on Riyadh’s Tadawul exchange kicked off on November 3. Lead manager Samba Capital said retail subscriptions reached 27.04-billion Saudi riyals ($7.21 billion) on Tuesday, ahead of Thursday’s deadline.

The offering to institutional investors, expected to raise about two thirds of the offering, closes on December 4.

Two sources said ADIA was considering investing at least $1 billion. Two others gave a range of $1.5 billion-$2 billion.

The Abu Dhabi and Kuwaiti sovereign funds manage a combined total of about $1.3-trillion in assets, according to the Sovereign Wealth Fund Institute, making them among the biggest sovereign funds in the world.

China wants to speed up business reforms

China will speed up reforms to help build a market-based, globalized business environment and break investment barriers for all kinds of companies, Premier Li Keqiang was quoted as saying during a Cabinet meeting on Wednesday.

Economic growth slowed to 6percent year on year in the third quarter of 2019, the weakest pace in more than 25 years, with the economy hit by a punishing trade war with the United States.

China has already drawn up new measures to start on Jan. 1 to “optimize” the business environment aimed at improving productivity and competitiveness.

Li was also quoted as saying in a summary of the Cabinet meeting published on China’s official government website that taxes would continue to be cut as part of efforts to stimulate the slowing economy.

China aims to reduce administrative barriers, lower industry entry thresholds, eliminate discriminatory practices and decentralize investment decisions, the summary said.

 

Building a business and building resilience in Indonesia

Surianti Makamban is an entrepreneur in a rural mountain village in South Sulawesi, Indonesia. In the past, Surianti and her family relied on produce from small rice and cocoa fields to support themselves. But their harvests were never enough to meet their basic needs.

Ibu Sari, a community leader, noticed how Surianti’s family was struggling and invited her to join the CWS DREAM initiative. DREAM, or Disaster Risk Reduction through Enhanced Adaptive Measures, helps families strengthen their resilience against natural disasters and climate change. One way that families can become more resilient is by diversifying their income. To this end, DREAM supports women in creating savings and loan groups where women support each other in building small businesses.

In January 2019, only three months after she joined a DREAM group, Surianti took out her first loan. “I had been talking to my husband about starting a noodle stand, but he never encouraged me by saying that we didn’t have money for such a business investment,” Surianti said. But with the Riwang women’s savings and loan group, she was finally able to buy what she needed with a small, affordable loan to start her business.

With a 1,000,000 Ruphia ($70) loan, Surianti bought noodles, spices, bowls, utensils and other supplies to open her noodle stand in the local market. By the third month, she was making more than $40 each month: “I was easily able to repay my loan, and put savings into the group,” she said. In addition to being able to save a little bit more money, Surianti is so proud that she can now buy her children’s school textbooks.

Recently Surianti borrowed an additional 2,000,000 Ruphia to expand her menu to sell meatballs with her noodles, and to buy a larger stove and pots. She also plans to move her stand to the middle school during the week. “By moving to the school, I can sell noodles every day for sure, and not just occasionally at the market,” Surianti said.

Korea and Brunei agree to boost cooperation in ICT

Promising future partnerships on smart cities and ICT-related businesses the leaders of South Korea and Brunei have renewed their countries’ ties ahead of the ASEAN-KOREA Commemorative Summit scheduled to begin on Monday.

President Moon Jae-in shook hands with Sultan Hassanal Bolkiah, who will also attend the ASEAN summits in Busan.

The leaders promised substantive cooperation for the development of the bilateral ties.

“In ICT, smart cities and electronic government, the potential of our two countries’ bilateral cooperation is infinite. If Brunei’s Vision 2035 and our administration’s New Southern Policy move forward together, our two countries will be able to broaden the scope of our cooperation and achieve co-prosperity.”

The president was referring to Brunei’s long-term development plan Vision 2035 aimed at revamping the country’s resource-dependent economic structure and making Brunei an industrial economy.

For that, the leaders agreed to look into “specific cooperation projects” so that Korean IT firms can share their experience in Brunei’s smart city projects including the Kampong Ayer water village.

The leaders also exchanged views on mutually beneficial relations in defense and arms development as well as active cooperation on security conditions on the Korean Peninsula.

Japan beer exports to South Korea hit zero amid trade spat

Japanese beer exports to South Korea hit zero last month amid boycotts sparked by a simmering trade row between the Asian neighbours.

Official figures on Thursday showed Japan food exports were down 58.1percent in October, according to broadcaster NHK.

Sake shipments tumbled more than 90percent and instant noodles also flat-lined, it said.

What began as a diplomatic feud over wartime labour compensation has evolved into a trade row between the countries.

The dispute has hit various industries, from Japanese car makers to Korean electronics suppliers.

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