October 30th, 2009
12:30 PM GMT
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Abu Dhabi, U.A.E. - A central bank has to exude a sense of calm, stability and solidity. I have had the chance to enter a few of these landmark buildings around the globe, most notably the U.S. Federal Reserve, the former Bundesbank in Frankfurt and the Bank of England. 

Abu Dhabi's Formula One debut is seen as the emirate's coming out party.
Abu Dhabi's Formula One debut is seen as the emirate's coming out party.

The halls of the central bank of the United Arab Emirates provide the feeling of a different era. The Bank's communications director has been in his post for nearly four decades, the central banker himself, Sultan Nasser Al Suwaidi, for two decades.

The pace is measured inside the Bank, a complete contrast to the activity outside as the capital of the UAE hosts its first Formula 1 race this weekend - an event that is Abu Dhabi’s coming out party after neighboring Dubai commanded the spotlight for the past 20 years as the financial, trade and tourism hub of the region.

The emirate is buzzing with activity -– singer Beyonce led a weekend line up of concerts -– the corniche in the city center is filled with visitors around the new $2 billion landmark the Emirates Palace Hotel and workers at our hotel the Fairmont were scrambling to put the final touches on rooms to accommodate a surge of arrivals.

One gets the feeling that life here in Abu Dhabi will change dramatically after this weekend. The Emirate sits atop eight percent of the world's oil reserves and has the largest single sovereign wealth fund, with seven others created in the last few years as well. Money is not an issue for the 400,000 or so local Emiratis.

Abu Dhabi owns stakes in Daimler, EADS, GE, Rolls Royce and most recently Ferrari, which led them nicely into the F1 business by affiliation. With that backdrop of activity, one would expect a rethink perhaps of its partnerships and policies. That would be a miscalculation.

Back at the central bank, the Governor in our exclusive interview knocks back any suggestion of change: "We do not see any alternative so far to the U.S. dollar." I probe a bit more to get his views on the secret talks that reportedly took place around the IMF-World Bank meetings in Istanbul, to which he replied, "There was absolutely no discussion on the issue of re-pricing... absolutely not."

The look was consistent with the tone: Steady, serious and matter of fact. It is the same response that came from the Bank in the past 12 months. Al Suwaidi believes the worst is behind the UAE and is confident that the economy will end up in positive territory when the final tally is marked on 2009.

From the calm within the Central Bank, it is time to go back outside where the pace is markedly different and it is literally back to the races.

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Filed under: Marketplace Middle East


October 29th, 2009
10:53 AM GMT
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Gary Locke may be the top commerce official in America, but he's a rock star in China.

Locke was a hit with locals on a recent visit to China.
Locke was a hit with locals on a recent visit to China.

This week, the Chinese-American politician who is now U.S. Commerce Secretary, visited cities in the manufacturing heartland of China ahead of his high-level trade talks in Hangzhou.

Locke is joined by U.S. officials such as Agriculture Secretary Tom Vilsack, Trade Representative Ron Kirk, and Ambassador Jon Huntsman, who are here meeting with top Chinese officials including Vice Premier Wang Qishan.

I managed to catch up with Locke in Guangzhou, the capital of the province of Guangdong, where his grandfather was born. You would have thought Locke was a celebrity. During his tour of a Sam's Club superstore and a local university, Locke was mobbed by fans, press, and curious on-lookers all eager to catch a glimpse of their hometown hero.

Locke's grandfather lived in a village in this part of China before leaving for the United States in the hope of a better life. Grandfather Locke emigrated to Washington state where he took a job as a servant for a local family who lived one mile away from the Governor's Mansion. I wonder if Grandfather Locke ever dreamed his grandson would be serving people as well - as governor and now commerce secretary.

Locke told me his personal story is "thoroughly American" but that his Chinese heritage comes in handy in trade negotiations here. "I bring, perhaps, a greater understanding of the culture and history of the Chinese people," he said during our exclusive interview.

These days, the U.S. and China could use a little more understanding. Because of the economic crisis, the bond between the two trading partners has been stretched.

Earlier this year, the Obama administration slapped tariffs on Chinese tires sold in the U.S. Soon after, the Chinese threatened to cut off imports of American poultry products and auto parts.

Locke played down fears of a coming trade war. "When you look at the relationship of say brothers and sisters, the relationship when you are small and young might be very simplistic. But as the families get older they get into more complicated issues," he explained. "But it is the sign of a healthy relationship."

Locke insists the trade disputes won't distract the two nations from cooperating on larger issues such as climate change or regional security. However, even before Secretary Locke has left China, Beijing has informed Washington it is launching a trade investigation that could lead to new import duties on vehicles made by Detroit's struggling Big Three automakers (General Motors, Ford, and Chrysler), according to a U.S. auto industry official.

Hopefully, Locke's experience bridging two cultures will help bridge any economic split.

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Filed under: AsiaBusinessChina


October 28th, 2009
01:21 PM GMT
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October 26th, 2009
03:15 PM GMT
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Hong Kong, China - As long as there are free markets and humans remain emotional creatures, there will always be financial crises.

So says renowned British historian Niall Ferguson. The Harvard University professor and I had a chance to meet in Hong Kong at a recent investors' conference. He shared his observations on the current economic crisis.

CNN: Is there anything unique about this recession?

Ferguson: This isn't a recession is the first point to make. It's a near depression. In fact, I am calling it the Slight Depression to distinguish it from the Great Depression of 1929 to 1933. And the unique thing is that we nearly repeated history. In other words we nearly repeated the Great Depression, but we avoided it with massive monetary and fiscal stimulus. So we are in new territory.

CNN: When does government intervention work?

Ferguson: We need to be very careful when we talk about government intervention. That covers a multitude of sins. There was a lot of government intervention in the Soviet Union and we know how that story ended. So we are talking very specifically here about two policies: one is the use of central bank money creating power to avoid a liquidity crisis that crunches the entire banking system. So intervention by the (U.S.) Federal Reserve beginning in 2007 and escalating in September of 2008 was primarily designed to avoid massive bank failures of the sort that made the Depression so serious in the early 1930s. And I think there is no question that we have learned from history and Ben Bernanke, as chairman of the Fed, has learned from history, that it's a good idea to avoid a generalized collapse of the banking system.

CNN: When does government intervention not work?

Ferguson: The other kind of government intervention, which is slightly more problematic, is the sort in which the government runs a large deficit in order to stimulate the economy by building roads and building bridges in order to get people back to work in the hope that in doing that, it will generate a recovery. This is the model developed by John Maynard Keynes back in the 1930s and it's been used by countries around the world to varying degrees. And to some extent, this has been effective. But the problem is, in the United States, you are adding a stimulus on top of an already huge structural deficit in the public finances, and the prospect of a trillion dollars of new borrowing every year for the decade ahead, that scares me and it should scare everybody.

CNN: There's been a backlash against the financial world, especially Wall Street. Have we seen the same level of fury after past crises and where does that vitriol lead?

Ferguson: It's not, by any means, the first time that people have felt furious of what they have seen going on in Wall Street: a financial speculative bubble that bursts and causes a recession which drives other people, ordinary folks out of jobs. The question is just how far this populous backlash is going to go in the United States and indeed around the world now. My suspicion is that it's got a ways to go. Each time an American loses his or her job, not surprisingly, he or she looks around and asks who's to blame for this. And when they see on Wall Street, the banks paying out million-dollar bonuses with what appears to be, and in some cases is, taxpayer money from the TARP fund, I am not at all surprised that people feel mad. And when they feel mad, they turn around and they say, 'How can I express this anger? Who can I vote for who is going to articulate my feelings of frustration?' And I wouldn't be at all surprised to see, as we approach the mid-term elections, more and more politicians, particularly Republicans, trying to articulate that sense of popular grievance.

What lessons have you learned from the current economic crisis? Tell us what your experiences are.



October 23rd, 2009
03:57 PM GMT
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You would not know that we were in the midst of a sputtering economic recovery when examining the price of oil these days. At around $80 a barrel, which we witnessed this past week, the price of the precious commodity is about $60 above its 20-year average.

New oil finds are promising and seemed to surprise even the most seasoned hands in the business .
New oil finds are promising and seemed to surprise even the most seasoned hands in the business .

The math adds up for the Arabian Gulf producers who are part of what one seasoned energy consultant called the supply management club - OPEC. For all the back seat analysis in the cascade down from $147 to the mid-thirty level, this price recovery to a one-year high speaks wonders about how to manage your assets.

I had a chance to catch up with the core group of oil ministers, senior executives and those who consult the industry at the annual Oil and Money conference in London. Prices are double what they were a year ago, when we did not know whether some of the world’s money center banks would be able to keep their doors open. But, this steady march back to the current level makes a lot of sense.

The OPEC supply management club and a lack of oil are two key elements, but what else is driving this market? Especially when you consider that one half of the world – the East - has recovered while the other half – the West - is in danger, economically speaking, of being parked in neutral?

This requires a two-part answer: one deals with getting access to the giant fields, according to Jonathan Stern of the Oxford Institute for Energy Studies. The other with political uncertainty in countries such as Nigeria, Iran and Venezuela.

“What we are looking at here is really quite expensive oil that you need at least a $40-50 oil price to be confident you will make a decent return on,” commented Stern.

The market was quite excited about new finds in the Gulf of Mexico, off the coast of Brazil, and in Kazakhstan. They are promising and seemed to surprise even the most seasoned hands in the business. The problem is that the older fields in the Middle East and the North Sea, for example, are dropping fast and replacement costs are much higher today than four decades ago.

After the new promising discoveries of the past year, there is less discussion about “peak oil” – where oil production is in steady decline - but the $80 price may be pointing to a new era. “The low-hanging fruit has already been taken,” says Vahan Zanoyan, Chief Executive Officer of First Energy Bank in Bahrain, “After 40 years of this process, it is not surprising that all of what is left are the tough ones.”



October 22nd, 2009
03:02 AM GMT
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China = 1.3 billion people.

That’s an equation that intoxicates marketers and drives businesses to invest serious cash in capturing the Chinese consumer.

But experts in brand marketing in China warn businesses not to get dazzled by the numbers. China's consumer market is large, but it is also complex, fragmented and fiercely competitive. If you want a piece of the action, you better do your homework and be prepared to stay for the long term.

Here are a few tips from our experts.

Target your customers

Only 33.5% of retail sales now come from China's top 24 cities, according to a study from Ogilvy & Mather Group China. China's smaller cities and towns are a growing market for foreign brands.

However, consumers in these areas have considerably different shopping habits than those in big cities. They are less hurried, spend more time in public spaces and have limited access to the Internet. Differences like these can be crucial for market strategy.

Regional, cultural and ethnic differences have to be considered as well. Chris Reitermann, President of Ogilvy Shanghai, says focusing on a smaller market segment can pay off more than a broad, unrefined strategy.

Have a local partner

There are a lot of benefits to choosing the right Chinese partner and building a strong relationship with them. GM, a long-term success story in the Chinese market, has made out of its joint ventures with Shanghai Automotive Industry Corp. "They know the market," says GM marketer Joseph Liu. "They help us on the distribution side. They bring the government relationship which is extremely important in China."

Take your time

Both our experts advise that building a brand in China is an energy and time-consuming business. Liu recommends putting someone in China full time to build relationships. Reitermann says studying the Chinese way of life can help you build a marketing campaign that is sensitive to local culture and appeals to local tastes.

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