"Export-led economic growth and its benefits in the developing world have come at a price. First, it has opened these economies to exogenous factors such as the vagaries of international capital flows. Still it would not be an easy task to move from an export-led growth model to a domestic demand-led model. How tough the challenge is could be gauged by a very limited list of policy changes needed to guide the economy towards consumption.

Counter cyclical fiscal policies are already in play, with all sizes of fiscal stimulus packages being implemented across the export-led and oil-exporting countries. The emphasis of most of these stimulus packages is on infrastructure development, which of course would help both in the short and the long term. But so far there are few examples of governments actually using this additional funding to help industries and services that would boost domestic consumption. The risk is that if the stimulus fails to boost private consumption and domestic demand it could exacerbate production overcapacities, creating further deflationary pressures."

"Singapore's non-oil exports plunged in April, an ominous sign that suggests a severe recession in Asia's export-dependent economies may extend into the second quarter. Exports in April fell 19 percent from a year earlier to 11.3 billion Singapore dollars ($7.7 billion) following a 17 percent drop in March, according to figures released Monday.

As an open economy that relies on trade, finance and tourism, Singapore has taken the brunt of a collapse in demand from the US and Europe during the past six months. The city-state, with a population of about 5 million, has less domestic demand to fall back on than fellow regional exporters such as China, Korea and Japan. Singapore's economy has contracted each of the last four quarters compared with the preceding quarters, including an annualized 19.7 percent in the first quarter. The government expects the economy to shrink as much as 9 percent this year."

"Asians have gone back to basics in the economic slowdown and are opting for no-frills, lower-priced products rather than brand names and items with fancy features that rarely get used. Manufacturers across the region are more than happy to oblige as they scramble for orders that will keep their heads above water until the economic tide changes. In an economic downturn, liquidity problems outweigh the factor of profits.

The 'no frills' attitude goes beyond electronics. Sales of cheap staples such as noodles and fast-food meals have risen even as purchases of items such as meat have fallen due to the slowdown. In Japan, one of the country's leading department stores has reduced the range of products it sells by 40 percent to cut down on inventory costs as Japanese retail sales slow to the lowest levels in four years."

"India's Reserve Bank is set to put in place a mechanism to facilitate settlement of trading in corporate and other bonds through a clearing house, a move that will infuse transparency and encourage development of bond market. At present, as there are few participants in the bond market, traders usually to settle the trade in bonds bilaterally. The new initiatives will do away with bilateral settlement of trades.

The steps, likely to be introduced in the next couple of months, would facilitate settlement of bond trade through a clearing house mechanism. However, despite this reform, the hope of retail participation in debt in secondary market remains bleak as the number of participants in bond market is limited to institutions. Some measures have also been initiated to enhance the depth in the market."

"With the mercury exceeding 45 degrees Celsius in most parts of Sindh and central and southern Punjab, the demand of electricity has crossed 14,000MW and the generation remaining at 12,000MW. The National Power Control Center acknowledged that the supply-demand gap during the peak summer months of June and July might increase to 3,000-3,500MW, resulting in loadshedding/outages of about 10 hours a day in many parts of the country.

Although the power generation has improved this year because of capacity enhancement and weather has been less severe in mid-May than during the same period last year, the shortfall will remain because the generation capacity cannot be increased to above 13,000MW, including 7,000MW coming from thermal sources. Hydel generation stood at around 5,000MW which was better than last year because of increased water supply in recent months."

"Bangladesh, where natural gas reserves are falling while demand for power is rising fast, will not allow new power plants that cannot use both gas and coal. Bangladesh has 13.54 trillion cubic feet of proven and recoverable gas reserves but faces up to 250 million cubic feet of gas shortages a day. The situation will turn more critical after 2011 unless the country finds new gas fields and generates more power.

The country has five coal fields with around 2.55 billion tons of reserves but is unable to extract them until a national coal policy has been finalized. At present about 80 percent power in Bangladesh is produced with natural gas, and the country sees power shortages of up to 2,000 MW a day."

"President Lee Myung-bak urged Asian countries Monday to step up efforts to expand the regional bond market as part of measures to strengthen financial integration. He also warned of rising protectionism in the global economy, saying the continent needs to pursue free trade for economic growth and prosperity. Asia's move to enlarge bond markets reflects concerns that the continent is relatively vulnerable to an external shock because of a heavy dependence on U.S. and European investors.

Earlier this month, Seoul agreed to provide a total of $19.2 billion to the Asia Joint Fund, the Asian version of the International Monetary Fund, to help fight a regional financial crisis. Japan and China will each offer $38.4 billion to the fund, while the remaining $24 billion will be contributed by the 10 ASEAN member countries."

"Southeast Asian nations should delay eliminating their import duties at the end of the year to shield their economies from the global recession, Philippine Trade Secretary Favila said. Eliminating the duties at the end of 2009 is a condition for integrating Southeast Asia's economies under the Asean Free Trade Agreement or AFTA, but that could further hurt their economies, he told reporters.

Eighty percent of the Philippines' tariffs with the Asean are already between zero and 5 percent. The remaining 20 percent -- reserved for critical commodities like rice -- will be affected by the full implementation of AFTA next January. Asean rules require a member to compensate another if it continues to impose the same tariffs in violation of the group's agreement. But Philippine industries claim that removing the tariffs will expose them to severe competition at a time when the economy is hurting."

"Bangladesh is expected to implement the Basel-II framework for non-banking financial institutions (NBFIs) by the end of 2010 in keeping with the global standard, officials said on Sunday. The central bank of Bangladesh took the move to strengthen financial base of the country's financial institutions and ensure management efficiency in the long run through maintenance of the global standard of practices.

Under the Basel-II, the minimum capital requirement and the risk weighted assets for the NBFIs will be fixed considering the overall performance of the sector. Currently, 29 NBFIs are running their business across the country. The new Basel accord has been prepared on the basis of three pillars: minimum capital requirement, supervisory review process and market discipline."

"In the interest of bond market stability in Indonesia, future issuances of local currency government bonds warrant more attention on the absorption capacity of local investors. The government has signaled it may sell more debt than initially expected in order to finance this year's budget deficit. This is in lieu of using the $5.5 billion of standby loans previously secured.

The Indonesian bond market is more susceptible to negative developments overseas. Volatility makes it difficult and expensive for companies to issue corporate bonds, representing incalculable lost economic opportunities. To avoid exacerbating the problem, the distribution of ownership between domestic and offshore investors should be kept in good balance. In other words, the size of future rupiah bond issuances needs to be more aligned with the demand from domestic investors."

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