ADBI E-Newsline

"President Yudhoyono has issued a presidential instruction for the disbursement of $1.55 billion in direct cash assistance to help 19.1 million lower income households cope with planned fuel price increases. The presidential instruction would serve as the legal basis for the cash disbursement program, expected to be launched in June when the government plans to raise fuel prices.

Under the scheme, households that qualify will receive Rp 100,000 per month in compensation for the maximum 30 percent increase in fuel prices. The government is preparing a number of programs, including direct cash disbursements, to help lower income households cope with the higher prices. With these programs, the government hopes to cut the poverty rate from 14 percent in 2008 to 12.5 percent in 2009."

"Cyclone-hit Myanmar faces food shortages and may need to import rice if farmers in devastated areas do not get immediate help to plant a new crop, the U.N. Food and Agriculture Organization said on Thursday. Some 20 percent of rice fields in five declared disaster zones, including the Irrawaddy delta rice bowl, were damaged by the cyclone.

Myanmar's agriculture ministry says it needs $243 million for rice seed, fertilizer and to rehabilitate paddy fields after the cyclone flooded 5,000 sq km in the delta. The ministry estimated 650,000 hectares of paddy mainly in delta and around the former capital of Yangon were damaged out of a total 3.2 million hectares."

"China's annualized growth in yuan lending dropped slightly to 14.7 percent in April, but the lending volume in the first four months amounted to nearly half of the preset target for this year, triggering concerns excessive lending could stoke high inflation this year. The devastating earthquake that hit Southwest regions on Monday will further complicate authorities' macroeconomic policymaking, analysts said.

The earthquake could push up the already-high inflation, although many economists believe the consequential increase would not be significant. Sichuan is one of the country's major grain producers, while food prices remain a key driving force of the country's inflation."

"Foreign entrepreneurs can invest profitably in development of infrastructure in India, which the government plans to enhance a big way over the next several years, top Indian officials have said. Over the next five years, India would need $500 billion in infrastructure to ensure that it is able to sustain its fast growing economy and the government alone cannot find this type of money.

As India expands its power production as also distribution, it needs a lot of equipment including transformers and hence the manufacturers would have a lot of opportunities too. Surveys have shown that the poor are willing to pay for quality public service, for at present they end up paying more than the rich for access to basic services which are substandard."

"Relentless increases in the price of steel are halting or slowing major construction projects world-wide and investments in shipbuilding and oil-and-gas exploration, setting the stage for a potential backlash against steelmakers. In New Delhi, an ambitious bridge project has been put on hold because of steel-related cost overruns, and contractors are postponing or reining in construction of much-needed housing for the poor, prompting the Indian government to freeze steel prices for the next three months.

As a result, steelmakers are taking steps to cut their costs. To shield themselves from higher raw-material prices, more of them are acquiring their own iron-ore and coal mines or deposits, as well as producers of scrap steel."

"The dabbling of major state-owned enterprises in fields of business beyond their core competencies, e.g, an oil company building a tourist resort, or a construction company creating its own bank or stock brokerage, has begun to raise concerns in Vietnam's financial sector and beyond. A large portion of the capital for these 'boutique' business ventures comes from commercial bank financing, placing the burden of risk on banks, experts warn.

SOEs themselves have explained that they need to turn to other areas that are more profitable and capable of giving them a quick return on capital, as many were facing difficulties with the profitability of the core industries and lines of production due to volatile world markets and rising costs. Many wonder, however, why state funds and loans are used to invest in other areas while neglecting core lines of business to turn to other sectors, sometimes with negative impacts on the country's economic development."

"The Philippines is lagging behind its Asian peers on spending for social protection to reduce poverty, according to an Asian Development Bank study released Wednesday. The bank said the country has done 'little in the way of major pro-poor targeted programs,' and has a social-insurance system only for the formal sector. In its Social Protection Index ranking, the Philippines ranked 'below average' with an index score of 0.21. The index ranges from zero to 1.

Japan was rated highest with an index of 0.96, followed by Korea with 0.76. Papua New Guinea was at the bottom with a Social Protection Index of zero. While India and Pakistan have similar levels of per capita gross domestic product, they posted contrasting scores. India had an index of 0.46, Pakistan 0.07."

"To attract investment into piped water distribution and boost access to clean water, the World Bank has urged state-owned tap water companies in Indonesia to speed up debt restructuring. There has been almost no investment in water distribution in the past five years. It is not as attractive as energy and telecommunications and it is not clear how to structure investments.

There are a total of 316 local tap water companies in Indonesia, the majority of which cover only urban areas. Only a fifth of Indonesians had piped water connections to their homes by 2006, and the overwhelming majority rely on self-supply (household wells and other sources)."

"Viet Nam's local banking sector has made strides one year after WTO accession, but local bankers are still facing many challenges from integration. Inadequate technology, risk administration and lack of experience are creating barriers for Viet Nam's banks to remain in the domestic market while experienced foreign banks are increasingly entering the market.

Capital adequacy ratios of most banks are higher than 8 percent and the average equity of commercial banks is only $500 million. Some joint stock banks are desperate for enough capital to cover daily business. Risk management falls short of expectation and does not comply with the international standards of Basels."

"Kazakhstan's credit rating has been downgraded from stable to negative, according to Standard & Poor's, but economic chiefs in Astana remain resolutely upbeat despite rising inflation, stalled construction projects and a shaky global outlook. Liquidity problems in the global banking sector may tempt Kazakhstan to dip into its National Fund, a stockpile of $23 billion in energy revenues, and a last refuge in times of hardship, but it is a move that would dent Kazakhstan's image.

Financial experts say a quick cash fix to bolster banks now troubled by a property slowdown and outstanding loans to international creditors would tarnish the reputation of Central Asia's largest economy. However, tailored short-to-medium term strategies such as increased oil export tariffs and a financial stimulus package focusing on public works may be enough to see Kazakhstan ride out the global credit crunch."

"Life has never been easy in India's cotton belt, but for many farmers facing crushing debt, life is unbearable. But the farmers say their plight is largely being ignored as the country rushes to embrace the global marketplace. A decade ago, the government began cutting farm subsidies as it liberalized the managed economy. The farmers' costs rose as tariffs that had protected their products were cut. That made small farms even harder to sustain.

Meanwhile, banking changes forced farmers to turn more to moneylenders. These generally allow the farmers only 11 months to repay their loans at interest rates of more than 100 percent a year, or else they seize the land at a drastically reduced rate. The 2008 national budget made special provisions for farmers, forgiving debts to state banks. But the waivers apply only to farmers who own less than five acres, disqualifying millions. And they don't apply to loans from moneylenders."

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