Eldon-Online

World Without End

So, I guess I stole the title. But then Ken Follett's 2007 book title (good book, by the way), and the track of the same name from Laurie Anderson's 1994 Album "Bright Red" could just as easily have been taken from any Thesaurus. 

 Look. No apologies and no beating about the bush. We are in the middle (or perhaps not yet!) of a financial and social crisis. I hoped it might be different and that good sense would eventually prevail. I believed that Governments would ultimately be made to see they were not grasping the nettle firmly enough and, through strong leadership together with a willingness to take some tough decisions, would show responsibility through appropriate and measured actions to stem the bleeding. Yes it would be painful; operations to save a life or a limb often are, but the surgeons were either "retiring" or wanted to retain their house jobs.

 I am a closet optimist. I spent most of my banking career preaching caution and common sense, to the chagrin of some who thought I was merely being awkward. But, I was brought up to believe that bankers (commercial ones, anyway) were supposed to be responsible. I haven't changed those views, but I also always secretly hoped that my preference for caution would be proved wrong and people would take decisions based on fact and informed opinion, leading them to a better outcome than expected. 

 My comments 11 months ago in "What, Me Worry? - Yes, Me Worry" were written because I was genuinely worried but thought, even back then - and despite the feeling that the USA was already in recession (since confirmed) - there was time to act. My thoughts in June this year in "Let the Good Times Roll, Crisis Over?" reflected a continuing concern that not enough was being done. I claim no "rights" of guruhood, I merely try to reflect what I hear from the market place and put it into words that are factual and non-sensational. Maybe that's a mistake! But then the media does a darn sight better job than I ever could of stirring up peoples emotions - and they do it without ever thinking of the consequences. 

 So where are we?

  Without any real leadership, it seems, and a media out of control. (I am a firm believer in "freedom of speech" and have said so elsewhere in these columns, but as the various media forms roll us on to the next perceived disaster, as reported by their own staff, they are often guilty of creating self-fulfilling prophecies.) We have some newly nationalised banks, particularly in Britain, full of taxpayer money, which they then refuse to lend out. Perhaps they are short of good credit officers who actually understand how to evaluate businesses - I know a few who would probably be pleased to return to work if they thought they would be listened to this time! We have growing unemployment around the world, and that is going to lead to greater hardship, socially.

 People ask, therefore, is this the end of the free world - a return to protectionism and socialism? Is globalisation dead? Are centrally controlled economies the answer? I, for one, hope not.

 Globalisation is not the greatest creation of the free world, but neither is it a disaster. It has been responsible for bringing more people out of poverty than anything else, although it has undoubtedly created problems in some quarters. Rather it has been the failure of nations - usually those that already enjoy developed economies, at whatever historical cost - to fully embrace some of the provisions of the various WTO deliberations and subsequent agreements. 

 A return to protectionism seems quite likely in some quarters, and given that some industries are already in the throes of becoming Government bodies, so too does socialism. Both would be a mistake, no matter how appealing the concept may seem to some in the short term. A descent to the lowest common denominator is not the answer. It will not encourage the innovation that is going to be needed for the creation of new industries, new ideas and new jobs.

 Yesterday an old established British firm went into administration. However, unlike other recent examples of companies in trouble, a buyer has been found, saving about 1,000 jobs. It's a start!

 The day before yesterday a friend and neighbour came to see me. He has left his former employer under circumstances that are not entirely clear. Nothing untoward - more a question mark over "left" or "pushed ", but it doesn't matter. The point is he came to have a chat about a few ideas he is working on for the future. About five or six of them, as far as I could tell. All potentially viable - some in a longer time frame than today's market will allow, but some relevant to today.

Here we go again - closet optimism? Think about it. We are in a mess. When does the human race become creative? - When it is faced with a crisis! This is not going to go away soon, and there will be pain and suffering for many - and frankly, no matter how bad we all feel, it will probably affect more people in the underdeveloped economies than the developed ones. There will be severe social pressures, which need to be understood and dealt with, to avoid mob rule and anarchy. We need leaders - and they are definitely out there - who can do just that - lead! We need rational thought, and not be subjected to the latest insights from "The Daily Lemming!".  

 The world is not going to end as a direct result of what has happened, but a failure to treat the problem may create a more difficult scenario than is necessary. Or, as in the words of  Laurie Anderson's first record - "It's Not the Bullet that Kills You (It's the Hole)". 

 Here's to 2009.

 

Suffer The Little Children

While the hand-wringing continues over the melt down in the financial markets, and some CEOs and Chairmen in some countries are agonising over how many millions of dollars they are going to be paid for bringing their companies into near bankruptcy or disrepute I have been struck, in comparison, by the increasing incidences of, but lack of serious publicity given to, some of our more devastating social ills.

A bizarre connection? Well, a little random perhaps, but not entirely off the wall.

In the last month I have been in China, South Korea, Singapore, Spain, UK (very briefly) and Vietnam; From Javea to Hanoi, Seoul to Shanghai, and so on (Okay; so much for retirement!). Six countries in different stages of development, but more about that, perhaps, in my next notes.

For the purposes of this blog, the country I want to focus on is Vietnam because it was as a result of a newspaper article in Hanoi that started me off on this research, involving the treatment of children.

We are all familiar with stories that emerge, too frequently, of yet another tragic schoolyard killing in America. Stories that receive prominence in the global media, involving losses of young lives in a society that should know better. But the pictures are beamed around the world, the killer analysed to the "n"th degree - and the media wagon moves on to the next "newsworthy" item. Meanwhile, back in Lai Chau Province in Vietnam yet another child has been snatched from its home at knife point or when the parents have been away in the fields working - and it rarely makes the local news, yet alone the national.

Kidnapping of children in Asia, it seems, is a growing problem, and Lai Chau Province in Vietnam, which shares its border with China, is in the front line. International criminal rings receive "orders" for boys or girls - usually aged between one and four years old to meet the demand from China and other countries.

A review on Google, for example, additionally reveals that the problem is widespread; everywhere from Africa through Europe - but save the recent one-off publicity when the French medical workers were accused of trying to kidnap 103 children from Chad - there appears to be little on the subject that is deemed worthy of comment by the international media.

So, what is it that needs to be done to highlight and then do something about this dreadful human trafficking? The problem has no Sir Bob Geldof to highlight the issue. And is it going to take a busload of infants to be abandoned and then to die in appalling conditions before the international media becomes aware that there is a problem out there, in the middle of our society?

What, Me Worry? - Yes, Me Worry!

The well known figure of Alfred E Neuman that has graced MAD Magazine for decades, and his catch phrase "What, Me Worry?" was only changed to a "negative" - "Yes, Me Worry" in 1979 at the time of the Three Mile Island nuclear meltdown in the USA.
I have long been considered a "conservative Scottish banker", (or some such similar terminology), with a reputation for urging caution in credit, property and stock markets. Advice that I tended to aim at the general public rather than the big investment houses and banks. Why? - Because all too often I have seen unsophisticated and under-informed investors getting into these markets, at the time the big players were leaving. Okay, so I worked for one of the big players, but that doesn't mean you cannot have a conscience.

Despite my reputation, and as I said in a speech some five years ago, "I am neither a raving pessimist, nor a naive optimist. Rather, I'm a realist." Well, I think I am. And I have been asked a number of times in the last week for my views on the current situation, which led me to think about what I should say.

So, what am I worried about? Sub-prime debt? - not anymore really; we've been there and now we seem to be getting all optimistic about financial industry figures that will finally disclose the extent of the damage - albeit some municipalities that bought the paper will go bankrupt - and some banks will have a tough time explaining to their shareholders just what they thought they were doing. (And it’s about time the rating agencies did the same, if only to clear their names!). And if you read the same papers as me, we believe that the package of financial measures being discussed in the USA will be the panacea for the remaining ills of sub-prime. Oh, and according to one US newspaper I read last week, it is really only Florida and California in the USA that will be affected by on-going sub-prime problems!

No, actually, I am worried about much more than sub-prime. The fallout from sub-prime woes may not, at the end of the day, be overly significant in terms of, say, US GDP - painful, but not life-threatening. My "Yes, Me Worry" is much more directed at the impact from credit card defaults than we saw in the sub-prime market, and as there is going to be a global impact on trade as a result of all this bad news, I am worried about Asia.

On the financial side first, I see the chain of events as having securitised commercial property loans being the next to fall. Perhaps not with the same impact as the sub-prime residential mortgages, and perhaps with more value in the underlying properties - on average. But then will come the credit cards. Receivables have been bundled up and sold, just like the sub-prime mortgages, but delinquencies are rising as American Express has already announced. People who have been using their credit cards to pay off their mortgages are now "running out of room" in their limits. Receivables have been securitised and sold on to anyone who was looking for yield pick-up - but unlike sub-prime loans - with not a whisper of security in most cases. Sorry, but watch this space because I think that potentially there is real trouble brewing.

If I am near enough to the mark - and I am not an economist, so someone will be able to produce all sorts of figures to prove me wrong (statistically), let's then think about the impact on Asia with the US economy in (or near to) recession.

China is going to come under pressure, but I don't think it is likely to be a disaster scenario. A reduction in orders from the USA will have an impact on China, for sure. But it will help the country to focus on a much-needed growth in domestic consumption. It may also still have orders from a Western economy that is weathering the storm so far, and an intra-Asian market that looks interesting. It is certainly big.

What will China do? It will continue to produce goods, in greater quantities for the local market, but it will switch to much more import substitution. Those goods they currently import (as much as 60% content, in some cases) before they add value and then export as finished products, will in future be made in China. This will see a decline in number and value of goods imported into China, which is unlikely to be good news for other Asian producers.

China will also, according to an economist friend of mine, boost spending. This will take place in the rural areas as well as in other geographical regions of China, and will be for a number of reasons. One is to create jobs for at least some of the factory workers who will inevitably lose jobs. Failure to do so could lead to unrest in, for example, Southern China where there are many migrant workers who will otherwise be reluctant to return to their homes. Another will be to boost agricultural production that seems to have been slipping.

I could go on, but this is long enough already. It is, for those who ask, a brief picture of what I see coming - and by the way, I think we have the potential to survive it.

The wife of a friend of mine used to say she preferred the thought of earthquakes to typhoons. While we would of course rather have neither, most other people I know prefer the fact that you can make preparations for a typhoon that you cannot do for an earthquake. I think we need to consider those preparations now, to stand a chance of weathering whatever storm might come.

Korea - Land of the Morning Calm

The western nickname for Korea has not proven so true in my house for the last couple of days, where my telephone has been ringing off the hook, ever since President-elect Lee Myung-bak announced my appointment as co-chairman of the special committee on National Competitiveness. It seems it is the first time a foreigner has been appointed to such a role, and let's not be coy, I am both flattered and honoured (not to mentioned somewhat amazed).

There will be many who ask why I agreed to take this on, and you may be sure that I asked myself the same question. I did not seek the role, and there is no compulsion for me to do so. I owe nobody anything, and I am beholden to no-one. I was rather amused, in fact, by a suggestion reported in the UK newswire Times Online that I might be able to influence the Korean regulators to approve an application from my former employer who wishes to invest in a Korean bank. It only goes to show that the commentators don't know me at all, and the comment from the regulator who said I would not influence them was absolutely right; I wouldn't dream of even trying. The piece, under the byline of Andrew Salmon suggested that I was "unavailable for comment". I think, on reflection, that about the only journalist from Korea who didn't call me yesterday was Andrew Salmon.

So, for those good people who swamped my blog site yesterday - and look like doing the same today - here are some facts (that might also correct some of those in the Times Online's rather inaccurate "potted" CV).

I am a career banker, who started out in 1964, left Britain in 1968 and who has worked and lived in a variety of Middle East countries as well as Hong Kong and Malaysia. I have been traveling globally on business since the late 1980s, and first started visiting Korea regularly from about 1992. I retired from the HSBC Group over two and a half years ago after an association of 37 years. I believe it was a mutually satisfactory relationship, but since leaving them I have got on with my life and have no association with them other than some shares and some friends. I live in Hong Kong.

I am independent, and always have been, sometimes to the dismay of others who wished I was more "flexible". I believe in fair play and get easily irritated by bullies (and by companies like Amazon.com who still refuse to answer my letters on identity theft (mine) - even though I have sent the recent letters earlier this month by registered mail - see "Up the Amazon (.com) Without a Paddle" posted 17 September 2007).

I first got to know President-elect Lee Myung-bak when I chaired the Seoul International Business Advisory Council (SIBAC). I found him to be a man with drive and vision. His views on creating Cheonggyecheon were being criticised by many people, it seemed, but having lived through some of the disruptions caused in Hong Kong by the creation of the Mass Transit Railway, I could see that there was a long term benefit to be gained by short term inconvenience. I believe that today the benefits of Cheonggyecheon are plain for all to see, and I expect Mr Lee has not finished yet.

I have no illusions (or delusions) of "guruhood". I am conscious that I am a foreigner with a remit to suggest ways in which Korea might become a more "acceptable" destination for foreign direct investment. Korea itself has to determine if this is what it wants. I have no magic, no crystal ball, but I hope I bring a degree of openness and objective thinking with no pre-conceived ideas or bias to a country with potential that in my view should be realised.

"Hello Kitty" Supports Globalisation in Korea

Gave a speech in Seoul today at a conference dealing with Globalisation and the Korean Financial Sector, and shared my podium with a cartoon cat that very nearly stole the show! The speech - "Mastering Globalisation: as simple as A-B-C?" focused on three attributes needed to be considered global - A - Attitudes, B - Brand, C - Competitive.
Korea sends mixed messages to the world about its commitment to Globalisation. On the one hand we have the Government regularly proclaiming that the Korean economy is wide open (a view vigorously reinforced today by Kim Yong-Duk, Economic Advisor to the President), and the lingering perceptions that an "us" versus "them" attitude still prevails; where off-handed comments from some officials that it is foreigners who are reaping the profits from the recent bull market, while domestic investors lose money and where, in the words of the Financial Times, Korea "..wants the capital, but not the capitalists".
As my central theme I used HSBC (as you might expect), as an example of an organisation that had opened itself widely to an international market place, and compared it with Korea Inc., which shows a blushing bride attitude - not sure whether it should be excited or terrified of the prospects ahead - and Dubai as a country which in terms of its "internationalism" had almost gone to the other extremes - why else would they be prepared to have a foreigner as the Chairman of the DIFC.
Korea must realise that it does have advantages that would enable it to become the financial hub it craves. For a start, look at where it is geographically located and the economies on either side of it. But it needs to look outwards more.
The fine "words" are okay, and encouraging, but it's the actions that tell you everything. Globalisation is as much a desire by the people within the country who can recognise there are advantages to going global - you cannot "legislate" for globalisation. People who recognise that the participation of foreigners in the domestic market place is not a threat but a vote of confidence in the future of Korea.
Oh..., and "Hello Kitty"? - Used as a prop to demonstrate the power of the brand; of the time when this particular and very friendly looking toy had bigger and better brand recognition, was more respected and had better top of mind recognition, than HSBC - and it was not so long ago at that. And she was also there to help demonstrate how "global" the world is today when I pointed out to the audience that they had just spent 25 minutes "listening to a retired Scottish banker from a former British colony that is now a Chinese Special Administrative Region drawing on his Middle Eastern experiences and all the while sharing the podium with a Japanese cartoon character." Honestly, what one will do to raise a laugh!!