South Korea’s debt
SIR – Your article about “emerging-market contagion” ranked countries according to their vulnerability to the global credit-crunch (Economics focus, February 28th). But you did not reflect the actual situation of the Korean economy. The article portrayed South Korea as the joint third-riskiest among the countries surveyed, citing “large short-term foreign debts and highly leveraged banks”. This is simply not the case.

Let me provide you with accurate figures. South Korea’s short-term external debt is 75% of its foreign-exchange reserves and it continues to decline. The South Korean banks’ average loan-to-deposit ratio stood at 118% as of the end of 2008 and has been on the decrease since last June.

Thus, the overall risk assessment for the Korean economy, as described in your article, relies upon incorrect information and estimates.

Cheol-kyu Park
Spokesperson
Korean Ministry of Strategy and Finance
Seoul

Editor’s note: Our figure for short-term debt as a percentage of foreign-exchange reserves included all debt due within the next 12 months, the definition favoured by the IMF. At the end of December this was 96%. The figure of 75% includes only liabilities with an original maturity of up to one year; it excludes maturing long-term debt. Our loan-to-deposit ratio covered all commercial and specialised banks and excluded certificates of deposits, the same definition used for all the countries we surveyed. The Bank of Korea’s latest figures show this to be 136% at the end of December.

이걸 보고 나라망신이라고 한다. 박철규씨 같은 사람이 재정경제부에 있으니 외국인이 환투기를 하는 거다. 이코노미스트가 예전에 발표한 자료를 보고 당신들이 제신한 수치는 잘 못되었다고 했으나 이코노미스트는 공신력있는 기관인 IMF기준에 따랐으며 일부자료는 한국은행에서 발표한 것을 인용했다고 밝혔다. 또한 이코노미스트가 사용한 기준은 모든 국가에 동일하게 적용했다고 답변했다. 재경부에서 지면에 대놓고 무식함을 드러내기 전에 이코노미스트의 자료를 다시 한번 분석했다면 저런 망신은 당하지 않았을 것이다.

Hitachi to spin off units amid reshuffle
By Robin Harding in Tokyo

Published: March 16 2009 07:57 | Last updated: March 16 2009 19:13

Hitachi, the Japanese industrial group, on Monday announced a sweeping restructuring of its operations and top-level management changes as it sought to tackle expected losses of Y700bn ($7.1bn) in the year to March.

Two of Hitachi’s largest operating divisions – the consumer business that makes electronic goods such as televisions and its automotive components business – will become independent, but 100 per cent-owned, subsidiaries. The goal is to speed decision-making and contribute to Y500bn in cost cuts during Hitachi’s next financial year.

Hitachi’s chairman and president will both stand down, to be replaced by Takashi Kawamura, who will come out of semi-retirement to take on both top jobs. He is currently chairman of two Hitachi subsidiaries that make batteries and industrial machinery.

The changes reflect concern within Hitachi about the scale of this year’s expected losses – equivalent to almost a third of shareholders’ equity as of March 2008 – but analysts were sceptical that the move would lead to radical change at the sprawling group.

Hitachi is Japan’s largest electrical group, with Y11,227bn in sales last year and 880 consolidated subsidiaries that make everything from nuclear power stations to hard disk drives.

The business was struggling for profitability even before the global downturn and this year will mark the company’s third consecutive net loss.

The group has been hit especially hard by the collapse in car sales and losses at Renesas Technology, its 55 per cent-owned semiconductor business.

After January’s announcement that Hitachi expected a Y700bn net loss in the year to March, Moody’s cut its credit rating by one notch to A2 and placed Hitachi on review for a further downgrade.

In response, Hitachi promised on Monday to cut costs by Y500bn, equivalent to 4.6 per cent of last year’s operating expenses. Of that, Y200bn will be cuts to fixed costs and Y300bn will come from a lower procurement bill, which is falling anyway because of raw material price declines.

Hitachi said much of the Y200bn in fixed-cost cuts would come from the automotive and consumer businesses, and named two Japanese car component plants that will close.

Etsuhiko Shoyama, outgoing chairman and former president, will remain on the board and is likely to wield influence, as will outgoing president Kazuo Furukawa, who will also stay on the board as deputy chairman.
Copyright The Financial Times Limited 2009

3분기 연속적자를 내고 있는 히타치가 사장교체와 사업부문을 분리하겠다고 발표했다. 신용등급이 한단계 떨어진 뒤 내놓은 방안이다. 사장을 교체해도 대표이사는 그대로 남아있다고 한다. 실질적인 의사결정권자는 그대로이다. 의사결정속도를 빠르게 하기위해 사업부문을 자회사형태로 분사 사업부문을 분리한 것도 재무재표를 깔끔하게 하기 위한 조치는 아닌지 의심된다. 한국기업들과 구조가 유사한 일본기업들도 체제를 변화하는데는 너무 느리다.

Short View: Cheaper currency

Short View: Cheaper currency
By John Authers, Investment Editor

Published: March 12 2009 18:05 | Last updated: March 12 2009 18:05

If the world is really following the script of the 1930s, then we are due for competitive devaluations, as nations attempt to make themselves more competitive at the expense of everyone else.

So the Swiss National Bank’s announcement that it is intervening to push down the Swiss franc sounds alarming. The speed with which the franc responded, dropping 3 per cent against the euro in a matter of minutes, also shows that if a central bank wants its currency to fall, it can deliver.

The problem is that not everyone can devalue at once – someone has to be left with an overvalued currency.

The SNB’s action does not necessarily herald such an outcome. The Swiss franc, like the Japanese yen, has been a “safe haven” currency, and thus had a perverse gain last year.

With inflation virtually zero already, an overvalued franc created a severe risk of outright deflation – something the SNB reasonably wants to avert. As it also cut rates and said it would buy bonds, this move has more to do with attacking deflation than with boosting Swiss trade.

Indeed, a cheaper franc is good news for eastern Europe. Their consumers had indulged in the Swiss franc carry trade, taking out mortgages denominated in Swiss francs. Since last July, the franc gained more than 50 per cent against the Hungarian forint, making those mortgages unbearable.

Thus, if anyone can pull off a deliberate devaluation without sparking ugly consequences elsewhere it may be the Swiss.

But the precedent of a central bank attacking its own currency is disquieting. The falls in industrial production and world trade suggest that everyone on the planet would like a cheaper currency.

This even includes China, which has allowed its currency to gain 26 per cent on a trade-weighted basis over the past four years, and seen its exports suddenly tumble.

john.authers@ft.com

(뉴욕=연합인포맥스) 김홍규특파원 = 금가격은 스위스중앙은행의 외환시장 개입으로 상승했다.

12일 뉴욕상업거래소에서 4월물 금가격은 전날보다 온스당 13.30달러(1.5%) 높아진 924.00달러에 마감됐다.

이날 스위스중앙은행인 스위스내셔널뱅크(SNB)는 스위스프랑화의 추가 평가절상을 막기 위해 스위스프랑을 매도하고 유로화는 매입하는 직접 개입을 시작했다고 밝혔다.

이는 세계 최고의 안전통화인 스위스프랑화의 가치 하락을 부추겼으며 이 같은 움직임은 일본 등 여타 국들에서도 나타날 것이라는 예상에 힘을 실었다.

뉴욕 애널리스트들은 모든 통화가 서로 평가절하되는 현상이 나타난다면 금이 최고의 통화자리를 차지할 가능성이 크다고 말했다.

이들은 SNB가 경기 부양을 위해 자국 통화 평가절상을 제한하는 첫 번째 G10 중앙은행이 됐으며 이는 일본 등 여타국들의 본격적인 외환시장 개입을 부추길 수도 있다고 우려했다.

kisme@yna.co.kr

(끝)

<저작권자(C)연합인포맥스뉴스. 무단 전재-재배포 금지.>

EU growth prospects ‘highly uncertain’

EU growth prospects ‘highly uncertain’
유럽 성장률 전망-매우 불안정하다.
By Tony Barber in Brussels

Published: March 9 2009 21:58 | Last updated: March 9 2009 21:58

The European Union’s prospects of returning to economic growth next year are “highly uncertain”, according to a policy paper to be approved on Tuesday by EU finance ministers.

EU 재무부 보고서에 의하면 내년 유럽의 성장률은 매우 불안정한 것으로 드러났다.

In a frank assessment of the depth of Europe’s recession, the document obtained by the Financial Times states that unemployment will rise sharply this year and in 2010, and the 16-nation eurozone will have to tackle persistent gaps in business competitiveness among its member states.

FT가 입수한 프랭크보고서에 따르면 유럽의 실업률은 2009년과 2010년에 급격히 늘어날 것으로 전망했다. 또한 유로존의 국가들은 국가별로 산업경쟁력의 차이가 커지는 것을 막아하 한다고 했다.

The policy paper paints a darker picture of the EU’s outlook than forecasts published in January by the European Commission, which spoke of a gradual economic recovery in the course of next year.

이번에 발표한 정책보고서는 내년에는 점차 나아질 것으로 전망했던 지난 1월 보고서보다 유럽의 미래를 암울하게 전망하고 있다.

The Commission said gross domestic product was expected to fall by 1.8 per cent in the 27-nation bloc this year but would expand by 0.5 per cent in 2010.

위원회는 이번년도 성장률이 1.8% 감소할 것이며 내년에는 0.5% 소폭 증가할 것으로 예측했다.

In further evidence that the economic mood has worsened since January, the European Central Bank last week revised downwards its 2010 growth forecast for the eurozone countries from 1 per cent to zero growth.

경제상황이 더욱 악화되고 있다는 증거는 또 있다. 유럽중앙은행은 내년 성장률 전망치를 1%에서 0%로 하향조정했다.

The policy paper, prepared for the EU finance ministers’ meeting, also says ministers agree that the International Monetary Fund “requires a substantial increase in its resources to assist countries particularly affected by the financial crisis”.

정책보고서에서 재무장관은 금융위기에 처한 나라에 상당한 지원을 해줘야 한다는 점에 동의했다.

European governments represented in the G20 group of advanced and emerging economies agreed in Berlin last month to support an increase in the IMF’s resources for crisis management to $500bn.

유럽정부는 G20회의에서 IMF를 통해 500bn$를 지원하는데 앞장섰다.


The document does not contain precise forecasts but says: “The outlook for 2010 is highly uncertain.
보고서는 정확히 경제를 전망하고 있지는 않지만 2010년은 불안하다고 말한다.

“Feedback loops between the real economy and the financial markets are aggravating the situation. Financial markets remain volatile and credit channels are not yet functioning properly. Unemployment rates are expected to rise sharply in most member-states in 2009 and 2010.”
실물경제와 금융시장 간 악순환의 고리가 이어지면서 상황을 악화시키고 있다. 금융시장은 변동이 심하며 신용시장은 제대로 작동하지 않고 있다. 실업률은 전 EU국가에서 2009년과 2010년 사이에 급격히 오를 것이다.

The Commission estimated in January that the EU’s jobless rate would rise to 8.7 per cent of the workforce this year from 7 per cent in 2008 and would climb still further to 9.5 per cent in 2010.
위원회는 1월에 EU실업률이 2008년 7%를 기록했던 것에 비해 2009년에는 8.7%, 2010년에는 9.5%까지 상승할 것으로 예측했다.

EU governments fear that the combination of rising unemployment and Europe’s worst recession since 1945 may spark more social unrest and labour protests of the kind seen in recent weeks in Bulgaria, France, Greece, Ireland, Latvia and Lithuania.
EU정부는 실업률상승과 경기침체의 조합이 노동자계층을 자극하는 것에 두려움을 가지고 있다.

Since the world financial crisis exploded in September, three European governments have fallen – in Belgium, Latvia and Iceland, which is not a EU member but may soon apply to join.
지난 9월 세계금융위기가 발생한 뒤, 세 유럽정부는 EU에 가입하지 못했다.

The EU policy paper says the euro area “has to address persistent divergence in competitiveness and current accounts . . . In particular, responsiveness of wages to prices and productivity development is a critical driver for the competitiveness of an economy”.
정책보고서는 회원국들간 격차가 벌어지고 있다고 주장했다. 특히 물가대비 임금률이나 생산성향상은 경제의 경쟁력에 있어 중요한 지표라고 말했다.

The competitiveness of Mediterranean countries such as Italy has steadily declined in comparison with Germany since the euro’s launch in 1999, prompting Peer Steinbrück, Germany’s finance minister, to warn that some countries could face “serious difficulties”.
이태리 같은 중견국가들은 경쟁력이 떨어지고 있다. 독일은 이같은 상황을 주의해야 한다고 경고했다.

The EU is fighting fires on another front in eastern Europe, where some countries are struggling to contain the damage from falling exchange rates, large current account deficits and over-borrowing in foreign currencies.

유럽연합은 동유럽이 금융위기로 어려움을 격고 있는 것과 싸우고 있다. 동유럽은 환율이 하락하면서 위기를 맞았다. 이는 대규모 재정적자와 무리한 외환차입에 의한 것이다.

The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank put together an aid package last month for EU and non-EU countries in eastern Europe worth almost €25bn ($31.6bn, £22.9bn). But Josef Pröll, Austria’s finance minister, said that this amount might not be enough.

세계은행, 유럽은행은 $31.6bn을 긴급투입했다. 그러나 오스트리아 재무장관은 충분하지 않다고 말했다.

Copyright The Financial Times Limited 2009

To nationalise or not – that is the question
By Martin Wolf
국유화이거나 아니거나. 저게 궁금하다.
Published: March 3 2009 19:52 | Last updated: March 3 2009 19:52



Lindsey Graham, the Republican senator, Alan Greenspan, the former chairman of the US Federal Reserve, and James Baker, Ronald Reagan’s second Treasury secretary, are in favour. Ben Bernanke, current Fed chairman, and an administration of liberal Democrats are against. What is dividing them? “Nationalisation” is the answer.
앨런그린스펀과 버냉키는 확연히 구분할 수 있다. 무엇을 기준으로? 국유화다.

In 1978, Alfred Kahn, an adviser on inflation to President Jimmy Carter, used the word “depression”. So angry was the president that Mr Kahn started to call it “banana” instead. But the recession Mr Kahn foretold happened all the same. The same may well happen with nationalisation. Indeed, it already has: how else is one to describe the actions of the federal government in relation to Fannie Mae, Freddie Mac, AIG and increasingly Citigroup? Is nationalisation not already the big financial banana?
불황이 국유화와 함께 나타나고 있다. 페니매 프레디맥 에이아이쥐 시티그룹까지 정부가 그렇게 하지 않았나? 국유화는 거대한 금융위기를 보여주는게 아닌가?

Much of the debate is semantic. But underneath it are at least two big issues. Who bears losses? How does one best restructure banks?
누가 손실을 부담할 건가? 구조조정은행은 어떻게 해야 최상의 모습을 갖출건가?

Banks are us. Often the debate is conducted as if they can be punished at no cost to ordinary people. But if they have made losses, someone has to bear them. In effect, the decision has been to make taxpayers bear losses that should fall on creditors. Some argue that shareholders should be rescued, too. But, rightly, this has not happened: share prices have indeed collapsed. That is what shareholders are for.
비용은 국민이 댄다. 주주들이 책임을 져야한다고 하지만 이미 주가가 바닥이기 때문에 그들은 더이상 책임질 게 없다.

Yet the overwhelming bulk of banking assets are financed through borrowing, not equity. Thus the decision to keep creditors whole has huge implications. If we accept Mr Bernanke’s definition of “nationalisation” as a decision to “wipe out private shareholders”, we can call this activity “socialisation”.
반면 엄청난 양의 은행자산이 자본이 아니라 부채로 조달되었다. 따라서 채권자들을 지키는 것은 큰 의미를 갖는다. 만약 버냉키의 말대로 사적인 주주들을 싹쓸이 하는 것을 국유화라고 한다면 이것은 사회주의와 다를바가 없다.

What are its pros and cons?
장점과 단점은 무엇인가?

The biggest cons are two. First, loss-socialisation lowers the funding costs of mega-banks, thereby selectively subsidising their balance sheets. This, in turn, exacerbates the “too big to fail” problem. Second, it leaves shareholders with an option on the upside and, at current market values, next to no risk on the downside. That will motivate “going for broke”. So loss-socialisation increases the need to control management. The four biggest US commercial banks – JPMorgan Chase, Citigroup, Bank of America and Wells Fargo – possess 64 per cent of the assets of US commercial banks (see chart). If creditors of these businesses cannot suffer significant losses, this is not much of a market economy.
단점은 크게 두가지다. 첫째, 손실사회주의는 거대은행들의 자금조달비용을 낮춘다. 따라서 그들은 재무제표를 유리하게 만들 수 있다. 이것은 대마불사라는 문제를 악화시킨다. 둘째, 주주는 주가가 올라가기만을 기대할 것이고 떨어지는 위험은 부담하지 않는다. 파산을 향해 돌진하는 거다. 따라서 손실사회주의를 하려면 잘 관리해야 한다. 4대상업은행들이 미국상업은행의 자산을 64%나 소유하고 있다. 만약 채권자들이 손실에 고통받지 않는다면 이는 더이상 시장경제가 아니다.


The “pro” of partial socialisation is that it eliminates the risk of another panic among creditors or spillovers on to investors in the liabilities of banks, such as insurance and pension funds. Since bank bonds are a quarter of US investment-grade corporate bonds, the risk of panic is real. In the aftermath of the Lehman debacle, the decision appears to be that the only alternative to disorderly bankruptcy is none at all. This is frightening.
장점은 보험이나 연금같은 유사산업의 투자자들이 패닉에 빠지는 것을 막을 수 있다는 점이다. 미국투자등급채권의 25%가 은행채였던 이 후로 패닉은 현실이 되었다. 리만파산 이 후 국유화만이 파산을 막을 수 있다고 믿게되었다. 이는 공포다.

The second big issue is how to restructure banks. One point is clear: once one has decided to rescue creditors, recapitalisation can no longer come from the debt-into-equity swaps normal in bankruptcies.
두번째 이슈는 어떻게 구조조정은행을 만들거냐 이다. 한가지는 확실하다. 신용제공자로서 은행을 살리기로 했다면 더이상 채무를 자본이로 이전하는 방식은 안된다.

This leaves one with government capital or private capital. In practice, both possibilities are at least partially blocked in the US: the former by political anger; the latter by a wide range of uncertainties – over the valuation of bad assets, future treatment of shareholders and the likely path of the economy. This makes the “zombie bank” alternative, condemned by Mr Baker in the FT on March 2, a likely outcome. Alas, such undercapitalised banking zombies also find it hard to recognise losses or expand their lending.
???좀비뱅크를 만들자는 건가? 좀비뱅크가 된다는 건가????

The US Treasury’s response is its “stress-testing” exercise. All 19 banks with assets of more than $100bn are included. They are asked to estimate losses under two scenarios, the worse of which assumes, quite optimistically, that the biggest fall in gross domestic product will be a 4 per cent year-on-year decline in the second and third quarters of 2009 (see chart). Supervisors will decide whether additional capital is needed. Institutions needing more capital will issue a convertible preferred security to the Treasury in a sufficient amount and will have up to six months to raise private capital. If they fail, convertible securities will be turned into equity on an “as-needed basis”.
미국정부는 스트레스테스트를 실시할 거다. 19개 은행이 대상이다. GDP가 -4%일 경우를 가정해서 필요한 자금을 측정한다. 그 양만큼 정부는 전환우선채를 발행한다. 정부는 이를 6개월간 가지고 있는다. 만약 자금을 긴급하게 조달해야 할 경우 전환우선채를 필요한 금리를 받고 주식으로 전환해서 자금을 조달하는 방식이다.
This, then, is loss-socialisation in action – it guarantees a public buffer to protect creditors. This could end up giving the government a controlling shareholding in some institutions: Citigroup, for example. But, say the quibblers, this is not nationalisation.
이는 정부가 주주들을 통제하는 방법이 될거다.

What then are the pros and cons of this approach, compared with taking institutions over outright? Douglas Elliott of the Brookings Institution analyses this question in an intriguing paper. Part of the answer, he suggests, is that it is unclear whether banks are insolvent. If Nouriel Roubini of the Stern School in New York were to be right (as he has been hitherto), they are. If not, then they are not (see chart). Professor Roubini has suggested, for this reason, that it would be best to wait six months by when, in his view, the difficulty of distinguishing between solvent and insolvent institutions will have gone; they will all be seen to be grossly undercapitalised.



In those circumstances, the idea of “nationalisation” should be seen as a synonym for “restructuring”. Few believe banks would be best managed by the government indefinitely (though recent performance gives some pause). The advantage of nationalisation, then, is that it would allow restructuring of assets and liabilities into “good” and “bad” banks. The big disadvantages are inherent in organising the takeover and then the restructuring of such complex institutions.

If it is impossible to impose losses on creditors, the state could well own huge banks for a long time before it is able to return them to the market. The largest bank restructuring undertaken by the US, before last year, was that of Continental Illinois, seized in 1984. It was then the seventh largest bank and yet it took a decade. How long might the restructuring and sale of Citigroup take, with its huge global entanglements? What damage to its franchise and operations might be done in the process?

We are painfully learning that the world’s mega-banks are too complex to manage, too big to fail and too hard to restructure. Nobody would wish to start from here. But, as worries in the stock market show, banks must be fixed, in an orderly and systematic way. The stress tests should be tougher than now planned. Recapitalisation must then occur. Call it a banana if you want. But bank restructuring itself must begin.

martin.wolf@ft.com

Emerging market finance: a gap to fill
By Alan Beattie in Washington

Published: March 1 2009 19:22 | Last updated: March 1 2009 19:22


Crisis call: a metal worker protests during a recent demonstration in the financial centre of São Paulo against job cuts (사진설명)
상파울루에서 해직당한 철강노동자들이 시위를 하고 있다.

Two years ago, nearly a trillion dollars flowed into emerging markets as investors in rich countries toured the globe in the hunt for yield. Now there is a melancholy long, withdrawing roar as private capital flees to safer havens.
2년전 약 1조달러가 이머징마켓으로 들어왔다. 부자나라의 투자자들이 야생에서 사냥하듯 투자여행을 했다. 지금 그곳에는 취소하라는 외침만 있다. 사모캐피탈들이 안전한 천국으로 도망치고 있기 때문이다.

In the past, when the money stopped flowing in, it precipitated financial meltdowns – across Asia and in Russia in the 1990s and in Latin America a decade earlier. This time, it is increasingly clear, the official institutions set up to cushion the impact are too small for the task.
과거에, 돈이 흘러들지 않을 때는 아시아와 러시아 남미의 금융업이 녹아버렸다. 이번에는 확실히 정부기관들이 파급효과가 심하지 않도록 방어하고 있다.

Net capital flows to emerging markets will drop to just $165bn (£115bn, €130bn) this year, down from $929bn as recently as 2007, according to estimates by the Institute of International Finance, which represents the world’s leading financial companies. Net lending from commercial banks, the IIF says, is likely to go into reverse.
IIF에 따르면 이번 년도에 이머징마켓으로 흘러들어간 자금은 1650억 달러이다. 2007년 9290억이 유입됐던 것에 비해 줄었다. 상업은행들은 순대출금이 마이너스로 돌아섰다.

The reasons for this are not altogether straightforward. Some accuse rich governments, particularly the US, of “crowding out” emerging markets, sucking up all the available capital to finance their stimulus packages. But Brad Setser, a former International Monetary Fund and US Treasury official, notes that as the private sector retrenches, the US current account deficit – and hence its need for outside financing – has actually been declining.
이런 현상이 발생한 이유는 간단하지 않다. 어떤이는 미국이 경기부양하느라 돈을 모두 써버려서 그렇다고 한다. 그러나 브래드셋서는 미국의 재정적자는 줄고 있다고 말한다.

More likely, he says, is that emerging markets are being hit by a general decline in demand for riskier assets, as banks and investors haul money back home to shore up balance sheets and reduce borrowings. Similarly, the global shortage of the trade credit that finances cross-border commerce reflects a general desire of banks to reduce leverage, not the rich countries hogging all the available loans.
그는 남미사람들이 위험자산에서 돈을 빼서 집에 돈을 쌓아 놓기 때문에 돈을 빌리지 않는다고 말한다. 비슷하게 대외무역시 신용보증이 줄어든것은 은행들이 레버리지를 줄여서지 부국들이 대출을 모두 먹어치웠기 때문은 아니다.

Enter, in theory, the official sector. In the same way that the rich world’s governments are proving to be the consumers and lenders of last resort, movements in international private capital flows can be offset by the IMF and its sister, the World Bank – along with smaller cousins including the regional development banks for Asia, Africa and Latin America. “At a time when the other financial institutions in the world are in turmoil, we can lean forward to help,” says Robert Zoellick, World Bank president.

But they cannot lean forward very far without overbalancing. “There was a very large run-up in the private sector’s exposure to the emerging world during the boom years, and no equivalent increase in the official sector’s lending potential,” Mr Setser says. “It is just not big enough to fill the gap.”

For example, Mr Zoellick says the International Bank for Reconstruction and Development, the arm of the World Bank that lends to middle-income countries, can increase its lending to about $35bn a year. That is two or three times its level in recent years, but it is not enough to fill a hole that could total hundreds of billions of dollars. Its limited capital constrains it from going too much further.

Last Friday the World Bank, along with the European Investment Bank and the European Bank for Reconstruction and Development, announced a €24.5bn ($31bn, £21.7bn) plan to shore up banking systems in central and eastern Europe. But markets were unimpressed, judging it too small.



Similarly the World Bank, together with national export credit agencies and other institutions, is trying to put together a package of $25bn to ease trade finance. But as Mr Zoellick admits: “Frankly, given the need out there, I’m not sure it’s going to be enough.” Private sector participants at a World Trade Organisation trade credit conference last year said there was a $25bn shortage that needed to be filled right now.

Even more pressing, given its role as a short-term lender to countries in crisis, is the size of the IMF. The fund in effect cycles money among its member governments like a credit union. The “quotas” that each government contributes determine how many votes it has on the executive board. The IMF currently has $142bn in easily available resources, plus another $50bn or so it can borrow from its richer governments if necessary. On top of that, Japan recently finalised an ad hoc loan of $100bn outside the quota system.

Déjà vu, but with a difference

Often buffeted by financial crises, Brazil is an emerging market now facing a novel set of problems because of the credit crunch, writes Jonathan Wheatley.

Earlier this decade, problems in attracting capital to fund current account and fiscal deficits threatened a classic debt and currency crisis. In 2002 Brazil was forced to take the largest rescue loan in the history of the International Monetary Fund. Now, having run surpluses for years, it has built up some $200bn (£140bn, €158bn) in foreign exchange reserves and is regarded as sufficiently stable to be allowed to borrow via special swap arrangements with the Federal Reserve.

Still, fears of recession have made banks reluctant to lend and, as in 2002, Brazilian companies have been hurt by a sudden shortage of trade finance. With foreign capital in short supply, Brazil has had to fill some of the gap itself. Since September the central bank has made available R$100bn ($42bn, £29bn, €33bn) from reserve requirements – the share of their deposits banks are obliged to park at the central bank – in an attempt to stimulate lending.

Last October it said it would sell up to $50bn in derivatives to help companies caught up in the liquidity shortage. About $16bn has so far been disbursed. Last month it said it would lend up to $36bn from its international reserves to companies with foreign debt falling due by the end of 2009.

Multilateral organisations have again helped out. The World Bank’s International Finance Corporation is providing a $60m credit line to Unibanco, one of Brazil’s biggest banks, to boost trade finance.

But a flurry of lending to small and medium-sized countries in trouble – Iceland, Ukraine, Hungary – has already started to deplete its resources. Crises involving a string of bigger countries such as Turkey – already in talks with the fund – could threaten to exhaust its supply.


Dominique Strauss-Kahn, IMF head, wants to double its lending capacity to $500bn: last month he won European Union leaders’ backing for the boost. But Simon Johnson, a former IMF chief economist, reckons the fund might need $2,000bn to be a serious global player. As in Hungary and Iceland, the IMF can encourage institutions such as the European Commission or individual governments to supplement its rescue programmes with bilateral money.

But private investors are more likely to be reassured by a multilateral lender arriving on the scene with a big war chest than one passing round the hat each time. Other options include borrowing direct from the markets, or issuing special drawing rights – the IMF’s own “currency” – to members, but officials say these are complex and time-consuming. So it is hard to imagine the fundraising that kind of money without tapping countries with huge reserves, such as China, Korea and Saudi Arabia.

But unlike Japan, emerging markets such as China seem reluctant to recycle more of their surpluses to deficit countries through the IMF without a bigger say over how the fund is run. Asked about increasing IMF contributions in a recent interview with the FT, Wen Jiabao, the Chinese premier, said that first “we should increase the voting share, the representation, and the say of developing countries”.

European and some IMF officials say the longer-term question of voting power is separate from the campaign to raise ad hoc contributions. But emerging market governments have been pushing the issue ahead of the Group of 20 summit of industrialised and developing nations in London in April.

After its latest bruising review of quotas, the IMF last year reached a fragile compromise that gave a little more power to those emerging markets, particularly in Asia, currently under-represented relative to their weight in the global economy and trade. But the deal still overweights the smaller European countries.

In the past, voluntary increases in contributions have proved an effective way for countries including Saudi Arabia to lay the groundwork for an increase in official quotas later. But Europeans may have to make prior commitments to a shift in voting power – at the very least accelerating the next discussion of IMF quotas from its planned date of 2013 to 2010 or 2011 – if they want to attract contributions.

Some question the whole obsession with recycling the official reserves of the surplus emerging markets to deficit countries’ governments. Jerome Booth, head of research at Ashmore Investment Management, notes that emerging markets requiring traditional balance of payments support are mainly confined to eastern Europe. Other emerging markets have used inflows to build up their reserves rather than running current account deficits. Some, such as Mexico, have been able to keep borrowing in the capital markets. East Asian governments recently upgraded the so-called Chiang Mai currency swap arrangements to create a common pool of foreign exchange reserves.

“Much of Asia and Latin America haven’t got the same credit crunch and deleveraging issues because they didn’t leverage up in the first place,” Mr Booth says. Fixing trade finance, he adds, should be tackled not by recycling money from government to government but by encouraging private lending, perhaps by relaxing regulatory constraints on banks lending to emerging market governments.

But with eastern Europe in particular being swept by confused alarms of struggle and flight, there seems little doubt that official institutions will have a big part to play in preventing capital market dramas turning into economic crises. And the gradual shrinking of those institutions over the years relative to the global markets is now becoming all too obvious.
Copyright The Financial Times Limited 2009

Asia trade suffers as Chinese imports fall
중국의 수입이 줄어드르면서 아시아의 무역이 어려워지고 있다.
By Raphael Minder in Hong Kong and Christian Oliver in Seoul

Published: March 1 2009 19:01 | Last updated: March 1 2009 19:05

Asia, whose economic resilience was in part meant to be guaranteed by booming regional trade, is confronting growing signs that such trade remains much more dependent on western demand than previously hoped.
지역무역이 붐을 일으켜 경제가 회복할 것으로 여겨지던 아시아는 무역이 여전히 서구의 수요에 의존하면서 성장징표가 한계에 부딪혔다.

Michael Buchanan, Asia chief economist at Goldman Sachs, says the dramatic fall in Chinese imports from other Asian countries in January shows that Chinese consumers have not replaced their US and European counterparts. Instead, he says a lot of intra-Asian trade still “smells a lot of just supply-chain dynamics” feeding exports to other regions.
중국의 대아시아 수입이 급격하게 줄어드는 것은 중국소비자가 아직 미국과 유럽을 대체하지 못하는 것을 보여준다. 대신 많은 아시아내 무역은 여전히 공급...

In January, exports from Taiwan and South Korea to China fell by 50 per cent and 33 per cent year-on-year respectively. South Korea said on Sunday its overall exports fell less rapidly in February than in January. But it will release only on Monday a breakdown of shipments to China and elsewhere.
1월에, 대만과 한국에서 중국으로의 수출은 각각 50%, 30%씩 감소했다. 일요일 한국은 2월달 수출량이 1월에 비해 덜 급격히 감소했다고 발표했다. 그러나 월요일에 중국과 기타국으로 가는 물류가 줄어들면 드러날 것이다.

More bad news is expected to follow, at least until the second quarter, as most export-focused Asian companies cut jobs and manufacturing capacity because of anaemic western consumer demand. Government stimulus packages, heavily geared towards infrastructure spending, will only gradually help Asia recover, rather than act as an overnight cure.
더욱 안좋은 뉴스가 있다. 적어도 2분기까지는 아시아의 수출기업들이 일자리를 줄이고 생산량을 감소한다는 것이다. 이는 서구소비의 감소때문이다. 정부의 경기부양책은
Asia’s most open economies – Japan, South Korea, Taiwan, Hong Kong and Singapore – are suffering the most. Each of them is set to see their economies contract this year. In Hong Kong and Singapore, the problems are compounded by a furious race to expand a financial sector that is now bleeding jobs and triggering a tumble in high-end property prices.

Among Asian nations, only the Philippines and Indonesia have a lower ratio of exports to gross domestic product now than in 2001. Some economists are warning that other Asian nations should stop counting on intervention from Beijing to lift the region out of its economic quagmire.

“There is a sense in Asia that as long as China continues to grow relatively quickly, then the rest of Asia will benefit . . . China is now the most important market for many Asian export-oriented economies, but it appears to us that China’s economic stimulus plan will support domestic investment, which is not necessarily import-intensive,” says James McCormack, Fitch’s head of Asian sovereign ratings.

Nevertheless, many economists are still expecting a regional rebound in the second half. Some of the optimism stems from a belief that the recent slowdown was in part self-induced.

A year ago, authorities were facing surging oil and food prices, which convinced them to review their traditional bias towards growth and worry more about inflation. But having raised interest rates aggressively, they were confronted with a worldwide credit meltdown, so that “at a time when they should have been infusing liquidity to strengthen financial sector fragility, they actually constrained it,” says Subir Gokarn, Asia chief economist at Standard & Poor’s.

The good news, Mr Gokarn and others note, is that central banks, other than Japan’s, have room to cut rates further and feed into an Asian banking system that still has plenty of liquidity and has not suffered anything like the subprime-induced losses of western banks.

Furthermore, Asia will reap great long-term benefits from additional infrastructure spending, because of years of under-spending and a booming urban population.

Despite some concerns about how efficiently the money will now be spent, “Asia is one of the very few regions of the world where there is a really valid case for expanding infrastructure,” says Glenn Maguire, Asia chief economist at Société Générale.
Copyright The Financial Times Limited 2009