APEC region exhibits strong recovery in investment levels

Issued by APEC Policy Support Unit

 

Singapore, August 2, 2011 – – Foreign direct investment (FDI) levels in APEC rebounded significantly in 2010 with  the region's  share of global FDI inflows more than doubling in the last five years, according to an analysis by the APEC Policy Support Unit (PSU).

 APEC Policy Support Unit Director, Dr. Denis Hew, provided an Asia-Pacific perspective on current foreign direct investment (FDI) trends in the region.

His analysis is based on data found in the United Nations Conference on Trade and Investment (UNCTAD) World Investment Report (WIR) 2011, which was launched last week.

 Weighing in on the economic outlook, Hew explained that UNCTAD forecasts that world output growth will fall to 3.2 percent in 2011 from 3.9 percent in 2010 and that Japan's output growth will drop to 0.7 percent in 2011 from 3.9 percent in 2010.

He went on to say that the World Bank estimates that the damage caused by the earthquake and tsunami in Japan could be as much as US$ 235 billion."

 Looking at 2010, FDI levels in APEC rebounded significantly from 2009. Inflows to the APEC region grew 32 percent, reaching US$ 627 billion, while outflows from the region grew 14 percent, reaching US$ 742 billion.  

 "Although the APEC region is still falling a bit short of 2008 pre-crisis levels, it is out-performing other regions," Hew said.

APEC's share of global FDI inflows rose from 32 percent in 2005 to 50 percent in 2010, and its share of global FDI outflows increased from 17 percent to 56 percent over this same period.

 FDI inflows to the APEC region grew by 15 percent per year on average between 2005 and 2010, while inflows to the rest of the world declined by 2 percent per year on average over this same period. 

Similarly, FDI outflows from the APEC region grew by 38 percent per year on average between 2005 and 2010, while outflows from the rest of the world declined by 5 percent per year on average over this same period.

 The increase in FDI is more pronounced in developing APEC economies.

[1] FDI inflows to the developing APEC economies have recently been even larger than the developed APEC economies and were valued at USD 344 billion in 2010, growing by 11 percent per year on average between 2005 and 2010.

FDI outflows from the developing APEC economies have grown by 26 percent per year on average between 2005 and 2010 to reach US$ 292 billion.

 Hew said that increased FDI activity has been advanced by the efforts made by several APEC economies towards increased investment liberalization and facilitation.

These measures include the streamlining of admission procedures and the opening of new, or expansion of existing, special economic zones.

 "However, we cannot ignore that one of reasons for APEC's growing share of global FDI is the EU's declining share," said Hew

The EU's share of global FDI flows has decreased significantly – from 50 percent in 2005 to 24 percent in 2010 for inflows and from 69 percent in 2005 to 31 percent in 2010 for outflows.

 Hew observed that mergers and acquisitions (M&A) is the preferred mode over greenfield projects by investors in the APEC region, and is likely to continue.

 "The value of M&A sales in the APEC region rose sharply in 2010 to US$ 176 billion, with strong growth experienced by both developed (88 percent increase) and developing (40 percent increase) APEC economies compared with an 11 percent increase in the value of M&A sales in the rest of the world," Hew added.

 The value of greenfield FDI to the APEC region continued to decline in 2010, falling another 9 percent to US$ 395 billion, compared with a 21 percent drop in the value of greenfield FDI to the rest of the world from 2009 to 2010.

Only seven APEC economies experienced increases in the value of greenfield FDI into their economies from 2009 to 2010.[2] 

 A more detailed PSU briefing can be found here.

Official probe into PM’s health status

  GOVERNOR-General Sir Michael Ogio is expected to instruct the PNG Medical Board today to appoint two physicians to inquire into the health status of Prime Minister Sir Michael Somare and report to cabinet within 28 days, The National reports.
This followed yesterday's handing-over of a report by the prime minister's physician, Dr Isi Kevau, to Acting Prime Minister Sam Abal.
Last night, Abal said it was up to the medical board to appoint two physicians, either within PNG or abroad, to inquire into Sir Michael's health and report independently to satisfy the constitutional requirements.
The report by Kevau stated in part that Sir Michael was being well looked after by a team of four specialists at Singapore's Raffles Hospital and that his recovery was "better than expected".
The two physicians' report would allow parliament to decide whether or not the prime minister is physically and mentally fit to remain the chief executive of Papua New Guinea.
This is the first time the constitutional provision on the disqualification of a prime minister had been evoked and, at its conclusion, the nation might see the position invalidated and a vacancy in the job occurring.
Were that to happen, parliament, if it is not sitting, would be recalled and the business of the election of the prime minister will be its main business.
Until that happens, all the powers and responsibilities of the prime minister are vested in the acting prime mi­nister.
While the prime minister's position is not on parliament's agenda, when it meets today, it is expected to create enormous debate during the sitting with possible moves to force an early election of the prime minister

Treasurer prepares K606 million additional budget

By ISAAC NICHOLAS

TREASURY and Finance Minister Patrick Pruaitch is expected to hand down a supplementary budget of K606.8 million against a backdrop of stronger  economic growth and high revenue for this year, The National reports.
He said PNG's economy was expected to grow by 9.3% this year, higher than the forecast 8%.
He said growth in the non-mining sector was expected to hit 10.2% –  well above world averages.
Pruaitch revealed the projected additional surplus budget when releasing the Mid-Year Economic and Fiscal Outlook report for 2011 yesterday.
He said the total revenue and grants for 2011 were estimated at K9,935 million while total expenditure and net lending should be about K9,328.2 million as appropriated in the 2011 Budget. 
He said this gave a projected surplus of K606.8 million.
"The projected K606.8 million surplus is entirely a result of increased revenue projections, driven largely by higher personal income tax collections than expected, higher commodity prices and higher mineral revenue."
Pruaitch said no over-spending or under-spending were projected saying a supplementary budget was expected later in 2011.
He said the projected additional revenue could be allocated to high- priority expenditures in the key areas of health, education, infrastructure and law and justice.
He said there were also obligations to consider such as the PNG LNG-related commitments and the 2012 national election preparations.
He said this was driven by higher levels of economic activity in the non-mining sector and the construction of the PNG LNG pro­ject.
"If this positive growth rate eventuates, the economic output in PNG will have ex­panded for more than a decade, representing the longest period of uninterrupted eco­nomic growth in PNG's history."
He said the strength of the economy was reflective of stronger investor and consumer confidence following sustained macro-economic and fiscal stability as well as critical microeconomic reforms.
Pruaitch  said although the global eco­nomic recovery was expected to continue in the remainder of 2011, significant down­ward risks remained.
He said the risks included the European sovereign debt concerns, fiscal and financial imbalances in other advanced economies, and the effect of the Japanese earthquake and tsunami on industrial production.
He said that emerging and developing economies were growing strongly although economic overheating was becoming a concern.
He said prices of PNG's major export commodities continued to climb, following strong demand from emerging and deve­loping economies and supply shocks.
"The prices of PNG's major mineral exports of gold, copper and oil have risen well above the 2011 Budget forecasts, and are expected to remain at elevated levels through the remainder of 2011.
"As a result, the price assumptions have been revised upwards for the MYEFO report, recording more than 20% for oil and 25% for gold and copper, compared to the price assumptions used in the 2011 budget.
"This has resulted in higher projected government revenue in 2011."
Pruaitch said rapid economic growth was now a major concern in PNG as it had a direct impact on inflation. 
He said annual inflation was now forecast to be 9% in 2011, an upward revision from 2011 Budget forecast of 8.2%.
"This is largely due to the high level of economic growth, a continuing shortage of skilled labor and land which underpinned wages and rental prices, and higher food and fuel prices from high global demand."
He said the appreciation of the kina since the start of the year had partially off-set the acceleration in these inflationary pressures. 
"However, there is also a concern that official inflation figures are under­esti­mating the true extent of inflationary pressures in the economy."

Opposition plans to vote in new PM

By JEFFREY ELAPA

A NUMBER of parliamentarians from the government coalition were reportedly in camp with the opposition last night, spiking speculations that a motion to vote in a new prime minister will be tabled when parliament resumes at 2pm today, The National reports.
Although the media was banned from entering the camp, hosted by Moresby Northwest MP Sir Mekere Morauta at his Toaguba Hill residence in downtown Port Moresby, inside sources said a faction from the government coalition, including senior cabinet ministers, were among those in attendance. 
Their attendance had boosted the opposition tally to 55 members, just over half the number required for a quorum and to form government.
The motion, if moved, would rescind the extension of leave of absence for sick Prime Minister Sir Michael Somare and to allow parliament to elect a new prime minister.
Sources said by law, an acting prime minister could not be allowed to govern the country for more than three months.
"We have the numbers now and the support is overwhelming," a source said by mobile phone last night.
It was also understood that the government would seek an adjournment of parliament this afternoon.
Meanwhile, the reporter who went to confirm reports of the camp in town at 10 o'clock last night was denied entry by private security guards and police.
The entire car park and streets leading to Sir Mekere's house was filled to capacity with more than 100 cars

Sir Peter: Madang has become ‘rubbish town’

 SCENIC and idyllic Madang town has been described as "rubbish town" by the man who promotes it as the best holiday destination in PNG, The National reports.
Sir Peter Barter, who owns and runs the Madang Resort Hotel and Melanesian Discoverer cruises, said the "once beautiful and clean town, known as one of the most beautiful in the Pacific, has been littered with rubbish and plastic bags" of late.
He said: "It is not only the township, the waterways in the harbour, even offshore islands are a disgrace. Plastic bags, bottles, condoms as well as effluent have created an environmental nightmare created by man.   
"Apart from the environmental damage, plastic bags are creating serious economic problems by blocking water intakes on outboard motors and larger vessels causing severe damages."
Not a man to complain without taking action on his own, Sir Peter has mobilised his own Melanesian Foundation to clean up the town. Using children from the staff compound at the Madang Resort the foundation has set about cleaning up the fish market, Rotary Park, Bates Oval are public areas around the court house and behind the Madang Medical Clinic. 
In two days the workers filled two truck loads of plastic bags. They are now targeting the waterways around Yamilon Lagoon.    
Sir Peter said: "This should not be the sole responsibility of these children, the entire community should be involved and somewhere along the line all business houses must accept some responsibility to stop or reduce the use of plastic bags and to assist in providing rubbish bins around their stores with signs telling the public not to litter the place!
"Every store in Madang is using too many plastic bags, every store could reduce the number of bags dramatically if your staff were better trained and perhaps some of the business houses could begin to provide re-usable environmental bags and hopefully in the near future the Madang Provincial Government and MULLG will introduce and implement strict litter laws. In the meantime, all I can do as a citizen is ask every business house to help reduce the use of plastic bags by whatever means available."
And Sir Peter ended his call with a thinly-veiled threat: "If you have any desire to return Madang to its former glory, you will accept this suggestion seriously.  If you do not, a campaign will be funded by this foundation to recommend to the public not to patronise your business!"

Agriculture extension system needs revitalising

Caption: Joshua Lumba of Yamiufa village, Eastern Highlands province checking his rice field. Smallholder rice growers such Lumba could be supported through an effective extension system, thus improving smallholder rice production in PNG       

By JAMES LARAKI

           

 AGRICULTURE continues to be the economic backbone of Papua New Guinea, supporting the livelihood of over 80% of the population.

In recent years, PNG agriculture sector faced many difficulties and has not fared well, except for one or two sub-sectors.

A number of factors have been identified as responsible for the lack of or limited growth and poor agricultural extension has been one of the significant factors.

The dismal performance of extension began with the decentralisation of extension services from the National Department of Agriculture and Livestock (NDAL) to the provinces soon after independence.

This created 19 extension systems without any plans and adequate resources.

This followed with the creation of commodity boards and proliferation of NGOs, church-based extension services and other service providers, all with varied plans and client base.

This resulted in extension services becoming very fragmented, with most of the providers working on ad-hoc basis.

In addition, lack of partnership, collaboration and coordination of the extension system had led to duplication of activities, leading to wastage of resources.

All these have collectively led to decline in the extension services delivery systems.

The overall result is the stagnating performance of the agricultural sector since independence.

This scenario is likely to remain unless something is done to revitalise the agriculture extension system in the country. The situation here calls for a policy intervention more than anything.

A new policy on agriculture extension system is required to focus on the development of an effective and efficient extension system.

The new policy should aim to developing a cost effective and sustainable extension delivery mechanism that is market and farmer-driven.

It will encourage  the  various  partners  and  agencies  within  the  national  agricultural  extension  system  to provide  efficient  and  effective  services  which  complement  and  reinforce  each  other,  increasing the efficiency and productivity of the sector.

Existing national policies on agriculture are becoming increasingly irrelevant to farmers and other stakeholders in the sector.

While successive strategy and policy papers have emphasised agriculture as the most important economic sub-sector, their implementations have been impractical.

Agriculture extension forms a major component of the National Agriculture Development Plan (NADP 2007 - 2016) but its credibility has been seriously questioned over allegations of the alleged misuse of the K200 million allocated for its implementations.

 It is considered as a wasted opportunity with accusation of grants under this plan made to individuals and 'paper farmers' through dubious practices.

 As with the National Agricultural Development Strategy Horizon (NADSH 2002 – 2012), the NADP has been viewed poorly by many in the agriculture sector.

Some sub-sectors have queried the government's Vision 2050, claiming the projections of these commodities as unrealistic.

They claim the plan was put together by bureaucrats in Waigani without proper consultation with respective commodity organisations and other stakeholders.

The general consensus with this scenario is that agricultural development, in general, and extension services in particular, will continue to decline.

Thus, the need to revive agriculture extension and make it effective is of great concern nationwide.

The National Extension Summit (2004) noted the seriousness of extension delivery failures and the desire of the sector agencies to revive the extension system.

This summit called for the need to improve the performance of the agricultural extension systems through better coordination and linkages between the various sector agencies.

The recommendations of the summit to set up a National Extension Steering Committee (NESC) needs to be revisited and considered as the national coordinating agency.

Such committee will oversee and provide advice, guidance and direction on national extension delivery system and needs.

Currently extension services are being promoted without any consideration for their sustainability.

The establishment of NESC will ensure extension systems and packages are environment and community friendly, and address specific needs of the farmers in each sub-sector for effective stakeholder participation, benefits and sustainability.

The NESC would have guidelines in place to monitor and evaluate the performance of the national extension system on a regular basis.

Effective extension delivery systems also require enabling environment in terms of resources, coordination and capacity building.

Lack of credit access, declining road and infrastructure and inadequate marketing infrastructure are some of the reasons for the decline in the agriculture in PNG.

Women are resources and assets for development, but they are ignored in the development planning process.

The disadvantaged position of women is considered as a key constraint in developing the agricultural sector as women play a significant role in the production of food and other agricultural products.

Effective linkages between research and extension are very essential, to ensure innovations and technologies developed from research are disseminated to stakeholders on timely basis. Except for some of the export crops sector, integration of research, extension and the farmer is weak.

These linkages need to be prioritised based on national importance and on community needs.

Agricultural information development, promotion, and dissemination and capacity building have been on the decline, and this is unfortunate in this era of information and technology advancement.

There is a need to promote access to adequate information, resources and enhance capacity to effectively implement the national extension services.

Enhancing the capacity of extension agents and farmers through increased information, knowledge and skills will equip them towards improvements in agriculture production and productivity.

Other development issues confronting smallholder households such as climate change, HIV and AIDS, and food and nutrition security calls for all stakeholders to make a positive contribution to innovative agricultural development.

It is essential that government and responsible stakeholders intervene to revitalise the declining performance of the agriculture extension system.

This is because, unless the extension services delivery systems improves, improvements in agriculture sector which supports the livelihood of over 80% of the population will remain dismal and thus compromised.

MPs to debate bills, K1.9 billion payout

 THE health status of Prime Minister Sir Michael Somare is expected to be made public soon, as parliament resumes tomorrow, The National reports.
Also on the agenda would be the debate on the reported K1.9 billion payment by National Planning.
There was also speculation that the opposition, with support from rebel MPs within government, would move for the election of a new prime minister.
People of Hela and Ji­wa­ka would also be watching closely for parliament to pass legislation for them to achieve full provincial status by next year.
The Electoral Boundaries Commission would travel to Tari this month in the first leg of a 10-day tour of the proposed provinces to gauge views on electoral boundaries.
Two weeks would be given for any objection to the proposal. 
A public inquiry would then be conducted to review the proposals.
At the end of next month, the commission would prepare the first report to be tabled in parliament.
Opposition parliamentarians were believed to be meeting in Lae and would return to Port Moresby before the sitting of parliament.
The bill to have women in parliament would also be debated in this session.