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Strategies & Market Trends : India Coffee House -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (3316)	11/30/1998 11:00:00 AM
From: Mohan Marette	Respond to of 12475

I did by some NAVR for close to $16 will see what happens,I wanted to trade few more but saw them dropping so decided to hold off for right now until things settle down a bit.

To: ratan lal who wrote (3316)	12/5/1998 1:43:00 PM
From: Mohan Marette	Respond to of 12475

Striking at the Roots -------------------------------------------------------------------------------- By Rakesh Mohan -------------------------------------------------------------------------------- (Far Eastern Economic Review) December 10, 1998 A better understanding of the roots of the Asian crisis of 1997 is essential if the broken pieces of the region's economy, and perhaps the world economy, are to be put together again. The conventional wisdom is that the crisis resulted essentially from a financial-sector malfunction within the affected economies and from faults in the international financial architecture. Solutions being pursued obviously correspond to such analyses. The question, however, is whether this understanding constitutes the whole story. Some facets of developments in the world economy in the first half of the 1990s are strikingly curious. The most significant is the remarkable crash of world trade in 1996 after two years of rapid growth. In addition, from April 1995 until the sudden recent correction, the U.S. dollar appreciated continuously and significantly. The dollar-linked Asian currencies appreciated accordingly and this made their exports uncompetitive, leading to large current-account deficits. Thus the U.S.-dollar appreciation in 1995-97 contributed to the 1997 financial crisis, just as increased U.S. interest rates in the late 1970s and 1980s contributed significantly to the Latin American debt crisis. Yet, until the crisis, Asian economies expected continuing expansion and acted accordingly. That these Asian economies were not alone in such rosy expectations is shown by the fact that, until early 1997, the World Bank was predicting sustained growth as high as 6.4% in world-trade volume for the ensuing decade. Can the Asian authorities then be blamed for thinking that they could continue their 1990s pattern of income and export growth indefinitely? In reality, the crisis has its roots in the unsustainable expectations arising from the atypical world-trade expansion of the early 1990s, when the world economy was slowing. Where then does this story lead us? Within the affected Asian countries, the problem lay as much in declining competitiveness in traditional export industries such as textiles as with the financial-sector problems. With international competition being what it is in these industries, the exchange-rate appreciation of 1996 clearly hit them the hardest: The slump in these exports was much more serious than in semiconductors and electronics, even though the hi-tech industries get more attention. Clearly, Asian countries have to move faster up the value chain both within these industries and towards other higher value-added industries. In most of these "traditional" export industries, a good deal of value addition takes place both before and after the item is manufactured. Many of these items are manufactured under licence with foreign designs and brand names and a good deal of the product value accrues to the foreign design and brand-name holders. While turning manufacturers into mass-market producers was a winning strategy in the past, the new strategy will have to be different. Asian companies must innovate and do their own designing, and build their own brand equity and loyalty on an international scale. Much of the foreign added value will then come home, leading to significant gains in competitiveness. Broadly, this new approach requires greater attention to building a whole variety of knowledge-based activities in colleges that add value to core manufacturing. Perhaps this requires much greater freedom of thought and lateral thinking than Asians have been used to. Nevertheless, our educational systems have to adapt themselves towards greater creativity while retaining their proven quality in educational basics. Within the manufacturing sector itself, technology and skill development are the order of the day for enhancing overall competitiveness. The absorption of foreign technology will no longer be enough: Technology adaptation, innovation and creation will now be needed in good measure. Asian companies will have to devote greater resources to these areas, as will governments. In brief, the traditional Asian veneration of learning must now be harnessed towards creative thinking and technology creation. If Asian countries understand this lesson and understand the value of knowledge embedded in the products they sell, their products will become less dependent on price competitiveness and sell more on quality, design and own brand name. Currency movements will then be less threatening. Internationally, the Group of Seven must understand that the restoration of world-trade growth is vital not only to the health of emerging economies but also for the world as a whole--and trade-expansion stimulation is the key. America is doing its bit; now it is the turn of the European Union to eschew protectionist activities and fiscal conservatism. The euro is making its debut on January 1, 1999, so Europe can now loosen the excessively tight Maastricht criteria and stimulate domestic economic activity and world trade. This will reduce its own excessive unemployment and rekindle Asian growth. Financial-sector fixes and the edifices built with the new international financial architecture will not be enough. (The writer is the director-general of the National Council of Applied Economic Research, a New Delhi think-tank.)