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The Best Serrated Bread Knife for Your Kitchen
Published: August 23, 2016 Last Updated: April 22, 2019
I've long held two beliefs about bread knives. The first is that you shouldn't spend a lot of money on one. Unlike chef's knives, bread knives are difficult or impossible to re-sharpen, limiting their useful lifespan and forcing you to replace them every five years or so. The second is that, aside from a small amount of variation here and there, there's not much that separates one bread knife from another—as long as their serrated blades can cut bread (and a few other things, like tomatoes), as most of them can, then they're good enough.
Tojiro Bread Slicer 235mm F-737
$23.40from Amazon
Dexter-Russell Basics P94804B 10" Scalloped Slicer/Bread Knife with Black Polypropylene Handle
After testing several bread knives for this story, I've had to revise the latter position: The differences are significant. In my testing, one task in particular separated the great bread knives from all the rest: slicing a very tender white sandwich loaf. Of all the knives I tried, only two—the two I'm recommending here—successfully completed that task.
Those two knives are the Tojiro Bread Slicer 235mm F-737 and the Dexter-Russell 10-Inch Scalloped Slicer/Bread Knife. Read on for more testing details.
Why You Need a Bread Knife
Bread knives occupy a niche role in your kitchen blade arsenal. You won't use a bread knife nearly as often as a chef's knife, the true workhorse of the kitchen, but for a limited set of tasks, they are necessary. What defines them is their serrated blade, which gives them a saw-toothed edge that can make quick work of some of the most rugged items, and also the most delicate ones.
The primary job of a bread knife is to slice bread. A good bread knife should saw through a tough crust without mangling or compressing the tender crumb within. Other knives are often not a good choice for this, since very hard crusts can damage finely sharpened blade edges, while any blade that isn't sharp enough may require too much downward pressure, crushing the airy bread in the process. Bread knives are similarly useful for related tasks, such as leveling the delicate and tender layers of a cake.
Unless you keep your other knives extremely sharp, a bread knife is often your best bet for successfully slicing through a ripe tomato without destroying it. Thanks to their teeth, bread knives fly right through tomato skin without requiring you to press down and risk crushing the delicate flesh underneath. Bread knives are also handy for cutting thick-skinned melons and tough winter squash, since their teeth can cruise through sturdy, resistant peels where other knives often get stuck and fail.
A straight-edged slicing knife is great for carving big pieces of meat, like a prime rib or brisket, but most of us don't carve enough large roasts at home to warrant giving it the extra space in a knife drawer. A bread knife makes a fine stand-in.
Types of Bread Knives
There are a handful of design considerations when you're choosing a bread knife.
The first is length. The blades I tested ranged from a short seven inches all the way up to a little more than 10 inches. Because some of the foods you're likely to cut with a bread knife can be quite large, like big loaves of bread and watermelons, I recommend choosing a knife of at least nine inches.
Next is shape: Most bread knives are straight, with the handle in line with the blade, but some are offset so that the blade is positioned lower than the handle. This is because most bread knife blades are thin, which gives little to no clearance for your fingers when the blade is close to the cutting board. This can sometimes cause your knuckles to grind against the board for the last few strokes when you're slicing through a loaf. In my tests, though, the performance of the offset knives wasn't good enough to recommend them, even though I otherwise like that design. (That said, if you find one you like, go for it.) The good news is that my two top picks performed so well that I never had an issue with my knuckles hitting the board. It helps that they both have long blades, which allows you to position your hand off the board while the blade reaches whatever you're cutting with ease.
The third consideration is the shape of the serrated edge itself. All of the knives I tested had the much more common pointy-toothed edge, but some people are fans of the less common wavy-shaped design. I have a couple of wavy serrated knives at home, and they've always been fine, but not special enough to convince me that it's an inherently superior shape. What amazed me the most was how big a gap in performance I observed, even between pointy-tipped serrated knives that seemed nearly indistinguishable to my eye. Two knives with serrations that looked almost exactly alike could perform wildly differently, one doing an amazing job and the other a terrible one.
Cook's Illustrated analyzed the serration shape in their tests (warning: paywall) and found that knives with more widely spaced teeth tended to perform better. That may be, though I held all my knife blades side by side and could hardly see an obvious spacing difference in most cases.
Another important consideration, especially if you're thinking about cost, is maintenance: A bread knife can be honed by running each scallop up and down along a honing steel (a laborious task!), but its serrated edge is much more difficult to actually sharpen than those of other knives. This is as true for a $200 knife as it is for a $30 one. You could send it off to be professionally sharpened, or possibly attempt to do it yourself, but I tend to think that's more trouble than it's worth. Instead, my advice for most people is simply to replace their bread knife when they notice that its edge has started to wear out. Because I know I'll be replacing my bread knife from time to time, I never spend too much on one.
I wasn't able to test all bread knives on the market—there are far too many. To narrow down my selection, I looked at online reviews and the popularity rankings on sites like Amazon.com. I also looked at reviews by other sites and magazines, like Cook's Illustrated and The Sweethome, to see which ones they liked. (I was not able to get my hands on The Sweethome's runner-up, the Mercer Culinary Millennia 10-Inch, so I can't speak to its quality.) I also set an upper price limit of about $50, although most of the knives I tested were under $30. It's worth noting that I found little relationship between price and cutting ability in my testing group; some of the more expensive ones didn't fare well, while my two top picks, described below, are on the cheaper end.
There is one important caveat to mention: It's almost impossible to pick the "best" of any type of knife. Knife preference is deeply personal, and what feels good in my hand may not feel good in yours. Still, the conclusions of my testing reflect my preference not just in terms of balance and form but also in terms of basic cutting ability. I asked a colleague to repeat some of my cutting tests, just to make sure that the successes and failures weren't the result of my particular cutting style; sure enough, the results were consistent, even when the knife was in another's hand.
Testing and Results
For my tests, I put all the knives through a series of basic cutting tasks, including: slicing a baguette into thin rounds; slicing a large, rustic loaf with a very hard crust; slicing a tender and delicate loaf of white sandwich bread; slicing ripe tomatoes as thinly as possible; and slicing a hard butternut squash (both cutting through the squash and using the knives to remove the peel).
Every knife except for my top two picks mangled the tender sandwich loaf (example at left), while my top two knives cut it cleanly (example, as cut by the Tojiro, at right).
While I found noticeable performance differences among the knives on many of these tasks, the one that most clearly demonstrated the superiority of my top two blades was the soft sandwich bread test. Save for those two, not a single knife could get through the tender loaf without mangling it. In the photo above, at left, you can see the bread after one of my many failed attempts to slice it cleanly; at right, you can see how perfectly the Tojiro blade cut through it.
Every other test mirrored the tender sandwich bread test, just to a less extreme extent. For slicing tomatoes, my two top knives made the thinnest, cleanest slices. Many of the other knives were able to slice the tomato as well, but less cleanly and easily.
When slicing squash, once again, my two top picks performed best, while the other knives managed but didn't breeze through it. For cutting the squash in half, the Dexter-Russell stood out, thanks to its rigid, heavy-duty blade, while the Tojiro excelled at the finer task of taking off the peel.
The Best All-Around Pick: Tojiro 235mm F-737
The Tojiro Bread Slicer 235mm F-737, with as unsexy a name as they could have given it, blew me away. Tojiro makes another bread knife that costs almost three times as much, but this one, just $22 at the time of publishing, was so good that I don't see any obvious need to upgrade to the more expensive one. That said, if this cheaper version is ever unavailable, I wouldn't hesitate to get the pricier one based on my experiences here.
With a 235mm (9.25-inch) blade length and a wooden handle, it feels lightweight and deft in the hand, with fine, sharp teeth that sailed through everything I threw at it. The blade is slightly flexible, making it great for more delicate work, like removing the peel from a hard winter squash.
As for bread and tomatoes, it cut the thinnest, cleanest, and easiest slices of all the knives, a pure pleasure to use. This is going to be my go-to bread knife from now on—in fact, I've already ordered one to replace my current bread knives at home. The one downside is that the thin, flexible blade bowed slightly with heavy-duty tasks, like cutting a hard squash in half (though it managed to get the job done regardless).
If you do a ton of heavy-duty work, I would recommend my other pick, the Dexter-Russell.
My Favorite Bread Knife for Heavy-Duty Tasks: Dexter-Russell 10-Inch Scalloped Slicer
If the Tojiro is all finesse, precision, and delicacy, Dexter-Russell's 10-inch bread knife is a tank. It's a couple of ounces heavier than the Tojiro, with a grippy and comfortable plastic handle, and a thicker spine on the blade that remained rigid no matter the task. I'd happily throw the heftier cutting jobs at this knife without any worry about whether it can handle them.
Amazingly, despite its heft, it was still delicate enough to cut a straight and clean path through the soft sandwich bread and ripe tomatoes—not quite as pristinely as the Tojiro, but close.
It might be overkill to suggest having two bread knives in your collection, but if you did decide to go that route, these two complement each other perfectly. Even if you get just one, pick according to your needs, and either one will perform admirably.
Daniel Gritzer Culinary Director
Daniel cooked for years in some of New York's top American, Italian and French restaurants - starting at the age of 13, when he began staging at the legendary restaurant Chanterelle. He spent nearly a year working on organic farms in Europe, where he harvested almonds and Padron peppers in Spain, shepherded a flock of more than 200 sheep in Italy, and made charcuterie in France. When not working on, thinking about, cooking and eating food, he blows off steam (and calories) as an instructor of capoeira, the Afro-Brazilian martial art.
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Jessica A. Coope
Associate Professor Emerita of History History jcoope1@unl.edu
JOINED DEPARTMENT
At the University of California at Berkeley I trained in medieval European history and the history of Islam in the Middle East. My primary research interest is medieval Spain, particularly during the period when most of Spain was under Islamic rule, roughly 700 to 1200. My first book looked at Christian conversion to Islam in Spain around the year 800. At present I am completing a second book on relations among the different ethnic groups (Arabs, Berbers, and Iberians) and religious groups (Muslims, Christians, and Jews) who lived in Islamic Spain. My main teaching fields are pre-modern Europe and the Middle East, with an emphasis on history of religion. I have also spent a number of my twenty years at the University of Nebraska doing administrative work, including a four-year term as Associate Dean for Academic Programs in the College of Arts and Sciences.
History of the Middle Ages
Medieval Culture
Religious Conflict in Medieval Spain (graduate seminar)
Jews, Christians and Muslims in the Middle Ages (freshman seminar)
Introduction to Historical Methods (sophomore research seminar)
Crusade and Jihad (graduate seminar)
Introduction to Historical Studies (graduate seminar, team-taught)
World History to 1500
Co-investigator with Anne Kopera, Initiative for Teaching and Learning Excellence, $25,000, UNL Vice Chancellor's Office, "Changing the Culture of Arts and Sciences Advising."
University of Nebraska Faculty Development Fellowship, Spring 2003-2004
NEH Summer Institute, "Origins of Islam," University of Chicago, summer 2000. Fred Donner, coordinator
Arts and Sciences Distinguished Teaching Award, 1998
The Martyrs of Cordoba: Community and Family Conflict in an Age of Mass Conversion, University of Nebraska Press, 1995.
"Marriage, Kinship, and Islamic Law in al-Andalus: Reflections on Pierre Guichard's Al-Andalus," Al-Masaq, Volume 20, no. 2, Sept. 2008, 161-177.
"With Heart, Tongue, and Limbs: Ibn Hazm on the Essence of Muslim Faith, Medieval Encounters, Fall, 1999.
SELECTED CONFERENCE PAPERS
"An Etiquette for Women: Women's experience of Islam in Muslim Spain," Illinois Medieval Association, 2013 meeting
"Christian and Islamic Marriage in al-Andalus before 1000," Midwest Medieval Conference, 2001 meeting
"With Heart, Tongue and Limbs: Ibn Hazm on the Essence of Muslim Faith," International Conference on Medieval Studies, 1999 meeting
Ph.D. University of California, Berkeley, 1988
M.A. University of California, Berkeley, 1983
B.A. Stanford University, 1980
Medieval European History
History of Medieval Spain

redpajama_set_name: RedPajamaCommonCrawl


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Police respond to domestic issue in Warminster
WARMINSTER, Pa. (WPVI) -- Police tell Action News a domestic situation in Bucks County kept some students from getting to school.
Police were called around 7 a.m. Wednesday to a home on the 900 block of Windsor Road in the area of Coronet Road and Henry Avenue.
Action News is told a mother let her daughter's boyfriend stay at the house. At some point, he was told he had to leave. Authorities tell Action News the boyfriend came back to the home, possibly armed with a knife, which resulted in police being called.
Chopper 6 over the scene showed heavily armed officers entering the house around 7:15 a.m.
Chopper 6 Video: Authorities make their way into Warminster home on December 19, 2018.
Authorities called for shelter-in-place in the neighborhood including for students to stay home who had not yet reported to school.
Around 8 a.m., Centennial School District said they received information from Warminster police that the situation had been resolved.
"All students should report to school," the district said.
No injuries were reported.
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Physicians: Are You Ordering Oxygen For Your Patient?
Physicians, Nurse Practitioners, Physician Assistants and Clinical Nurse Specialists - Are You Ordering Positive Airway Pressure Devices For Your Patient?
Some multicomponent surgical dressings contain materials for which no specific HCPCS code exists. This article reviews the coding guidelines for these items.
Products containing multiple materials are categorized according to the clinically predominant component (e.g., alginate, collagen, foam, gauze, hydrocolloid, hydrogel). Other multicomponent wound dressings not containing these specified components may be classified as composite or specialty absorptive dressings if the definition of these categories has been met. Multicomponent products may not be unbundled and billed as the separate components of the dressing.
Products where a single material comprises greater than 50% (by weight) of a product's composition are coded based upon the applicable specific HCPCS code for that material. If a specific HCPCS code does not exist for the predominant component, HCPCS code A4649 (Surgical Supply, miscellaneous) is used.
Products where no single material comprises greater than 50% (by weight) of the composition are coded as A4649 (Surgical Supply, miscellaneous).
The surgical dressings LCD related PA Coding Guideline section will be updated to include this information.
Refer to the surgical dressing LCD and related PA for additional information about coding and coverage.
For questions about correct coding, contact the PDAC Contact Center at 877-735-1326 during the hours of 8:30 a.m. to 4:00 p.m. CT, Monday through Friday, or email the PDAC by completing the DME PDAC Contact Form located on the PDAC website.
Note: A previous version of this article was published in January 2015. The January publication was subsequently removed due to an inaccuracy in a reference to A9270. This article replaces that previous publication.


As my colleague Yann said in an earlier blog, there is a growing shortage of multilayer ceramic capacitors (MLCCs), and the situation is likely to persist through 2020. MLCCs are used in almost every type of electronic equipment, due to their reliability and small footprint.
Manufacturers are now looking to replace ceramic capacitors with polymer or other capacitor types. TI D-CAP+™ control mode multiphase controllers, converters and modules (like the TPSM831D31) can help hardware designers reduce the MLCC count on their motherboard versus competitive solutions.
D-CAP+ control mode is a TI proprietary pulse-width modulation controller and converter control architecture that enables very easy loop compensation and excellent loop stability in the presence of varying conditions such as input voltage and the number of phases.
It is a current-mode constant on-time control that uses a true inductor current-sense implementation rather than the injected or emulated ripple current schemes used in the D-CAP2™ and D-CAP3™ control topologies. The D-CAP+ control mode has fixed on-time in steady state and adaptive on-time during load transient condition (AC response), in which the field-effect transistor switch rapidly adjusts as the input and output voltage change to maintain a constant overall switching frequency.
Because D-CAP+ control mode can respond much faster to a processor/application-specific integrated circuit/field-programmable gate array load transient than a fixed-frequency control architecture, it can meet tight tolerance specifications without the number of MLCCs that you would otherwise need for discharging or charging to provide the required energy to the load.
Figure 1 compares a TI voltage-mode controller vs. a D-CAP+ controller during such a load transient. The TPS53647 D-CAP+ control-mode controller has lower overshoot and undershoot, despite having a lower crossover frequency.
The results are similar when making comparisons to competing multiphase controllers with non-D-CAP+ control. Figure 2 compares a 60-A load step from 180 A to 240 A at a 1-kHz load transient repetition rate. The D-CAP+ controller, again, results in lower overshoot and undershoot. These results were replicated on the same motherboard under the exact same conditions. The TPS53681 D-CAP+ controller can achieve better load transient response and faster output voltage settling.
As a final example, let's compare a central processing unit (CPU) vendor's reference design to our own Vcore design. The thermal design current (TDC) was 116 A, while the maximum current (IMAX) was 395 A.
The test data shows that the D-CAP+ controller enables a faster load transient response, which translates to significant MLCC savings vs. the CPU vendor reference design.
Table 1 summarizes the results. The D-CAP+ control solution still meets the CPU overshoot and undershoot specifications while eliminating 42 MLCCs and >700 µF of output capacitance. The Table 1 comparison is applicable to any D-CAP+ control-mode voltage regulator vs. competing regulators.
MLCC shortages are not going away anytime soon. If you want to reduce the MLCC count in your design bill of materials so that you can get new projects to market faster, consider using TI's D-CAP+ controllers, converters and modules.
Use TI's buck controllers quick search tool.


How do single people fare in the online dating world? The online dating world is a fairly new means by which single people from around the world can get a chance to meet and interact with each other. The online single dating scene is a booming place with multi-cultural and large geographical scope. Once most single men or women pass through their first experience of even one online single dating site, they generally quickly become enticed by online single dating ease of use and effectiveness.
2 new members in the past 24 hours!
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Wow! Merci à toute l'équipe chez Webconnexions. Grâce à vous j'ai fait plusieurs belles rencontres ici en Outaouais. Depuis ce temps, votre site de rencontre m'a permis de trouver l'amour!


Alex Chalk is calling on Cheltenham's Lib Dem Council to offer free parking to shoppers this Small Business Saturday (Saturday 6th December).
Mr Chalk said "We're fortunate in Cheltenham to have such a fantastic range of small businesses. But we need to support them whenever we can. That's why I'm calling on the Lib Dem Council to follow Shire Hall's lead by offering free parking in Council controlled car parks on this crucial trading Saturday. It would be a shot in the arm for local retailers, and improve our reputation as a key local shopping destination. Local Lib Dems have dismissed this as a 'red herring'. That is complacent and out of touch. They need to think again."


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Category: Global Macro
Forex-Based Hedge Funds: Are They Now In Vogue?
There are said to be more than 10,000 hedge funds now in operation around the world, many of which are beginning to look towards forex as a means of chasing volatility and higher gains. Historically, forex markets have been less appealing to hedge funds and proprietary trading groups, as the number of instruments is small and not well-suited to investors wanting diversified portfolios. However, fast forward to the present day and pooled funds and hedge funds are now the second-biggest players in the forex markets.
Today, FX trading online gets you immediate access to as many as 40 different currency pairs, allowing forex-based hedge funds to better diversify and spread their risk across various currencies. Perhaps the biggest forex hedge fund in recent memory was FX Concepts which, at its peak, was managing a currency portfolio of over $14bn. It's worth noting that despite its impressive standing, even they weren't immune to the increasingly difficult market conditions and growing interventions from central banking authorities in the aftermath of the global financial crisis. FX Concepts were eventually forced to close their doors in 2013.
The Bank for International Settlements revealed a seismic slump in the total assets run by quantitative forex hedge funds. In 2008, prior to the worldwide recession, total assets amounted to $35bn, falling to just $6bn in 2013. Much of this decline was due to increased interference from central bank authorities, while a compression of interest rates in the western world virtually put a stop to the straight-forward 'carry trade' that was the bread-and-butter move of many forex hedge funds. Investors would borrow a low-yielding currency and sell it to purchase a higher-yielding currency. Nevertheless, with the global economic climate experiencing steady recovery, there is increasing positivity in the forex markets once again; but it's not occurring where you might expect.
In the last 12 months, much of the talk in the currency hedge fund world has been about growing plans to bring more of the world's currency transactions to Asia. Singapore, which now processes the third-highest amount of currency transactions in the world, is throwing its weight behind a currency trading platform offering lower fees than elsewhere in the city-state. Spark Systems is part-owned by Dymon Asia Capital, whose currency hedge fund yielded a 56% return in 2016, as well as Singapore's central bank. Their system is designed to match orders in forex markets within two milliseconds, compared with the 200 milliseconds it takes on average to route market orders to London or New York. As the shift towards electronic forex trading continues, speed is most definitely of the essence and this could certainly improve liquidity in the region.
Significant stock market gains and remarkably low volatility are forcing hedge funds to look beyond bond markets and equities for sizeable returns. If you're looking for a relatively high-risk investment in 2018, there's no doubt that increasing numbers of hedge funds will be looking to leverage currency pairs to your advantage. In 2016 through to November, currency-focused hedge funds returned 1.2% on average, the strongest returns since 2010. Hathersage G10 Macro Access Strategy was proof that year that significant gains could be made, returning 41% during the same period.
The Chicago Mercantile Exchange confirmed that trades on the dollar and Euro late last year were at their strongest in almost five and ten years respectively, reinforcing the increasing attention paid to forex markets. With the influence of quantitative easing now diminishing, other macro drivers will influence the markets, bringing with it the divergence and volatility that hedge funds crave.
Posted on 19 Mar 2018 19 Mar 2018 Author Stephen WattsCategories Global Macro, News
Foreign Investment in Guangdong: New Incentives Announced
Guangdong province, China's manufacturing heartland, has announced new measures to attract foreign investment.
On December 1, the Guangdong provincial government issued a report delineating 10 policies to expand the province's openness to foreign investors and foreign capital.
The measures are in support of the State Council's Measures to Expand Opening-up and Actively Utilize Foreign Investment (Guo Fa [2017] No. 5) and the Measures to Promote Foreign Capital Growth (Guo Fa [2017] No. 39). They include policies to improve Guangdong's business environment, promote fair competition between foreign and domestic companies, expand market access, and offer investment incentives.
The 10 measures for relaxing foreign investment:
Further expand market access, including relaxing ownership limits and/or operation scope in the following industries:
Special vehicle manufacturing;
New energy vehicle manufacturing;
Ship design;
Regional aircraft and general aircraft maintenance;
Human resources service agencies;
International maritime transport companies;
Railway passenger transport companies;
Construction and operation of gas stations;
Internet service and call centers;
Performance brokerages;
Brokerage, banking, securities, futures, and life insurance companies;
Law firms jointly owned by Hong Kong/Macau investors and domestic investors; and
Hong Kong/Macau airlines will be treated as special domestic airlines.
Increase the use of financial incentives for foreign investment for the 2017-2022 period, including:
For new projects worth more than US$50 million, replenishment projects worth more than US$30 million, and for multinational or regional headquarters worth at least US$10 million, the provincial government will give financial bonuses worth no less than two percent of the year's actual investment amount, capped at RMB 100 million (US$15.1 million).
For Fortune 500 companies and leading global companies with actual investments (new projects or replenishment projects) in manufacturing worth over US$100 million in one year, and newly established IAB (new generation of information, automatic equipment, and bio-pharmaceuticals) and NEM (new energy, new material) projects with actual investments of no less than US$30 million in one year, the provincial government will provide financial support on a case-by-case basis.
For multinational or regional headquarters that contribute over RMB 10 million (US$1.5 million) to provincial revenue, 30 percent of the contributions will be awarded to the company in a lump sum payment, capped at RMB 10 million (US$1.5 million).
Local governments can provide other financial incentives based on provincial incentive standards.
Strengthen the use of land security, including land-use incentives for Fortune 500 companies, regional headquarters, and advanced factories.
Support innovation and research & development (R&D), including financial support for foreign R&D institutions and encourage participation in the development of public service platforms.
Increase financial support, particularly for Fortune 500 companies, global industry leaders, and cross-border mergers and acquisitions.
Strengthen personnel support, including incentives and visa conveniences for high-level foreign talent.
Strengthen the protection of intellectual property rights, including by accelerating the construction of the China (Guangdong) Intellectual Property Protection Center.
Enhance the level of investment and trade facilitation, including the full implementation of the Negative List and access to national treatment.
Optimize the environment for attracting foreign investment in key parks, including implementation of administrative streamlining in eligible development zones and other supportive policies.
Improve the use of foreign investment guarantee mechanisms, including setting up a coordinated mechanism to coordinate and solve the key problems that prevent investment in Guangdong.
The measures represent a step forward in boosting Guangdong's competitiveness in attracting foreign investment. Although Guangdong is China's richest province by GDP, and already one of the most open to foreign investment, rising labor and land costs have seen many businesses relocate their manufacturing operations to lower cost alternatives, such as Western China, Vietnam, and India.
Some areas in Guangdong have been successful in upgrading their local economies beyond low-value manufacturing. Most notably, Shenzhen has emerged as a hub for innovation and high-tech startups, and also boasts a robust financial sector.
Guangzhou has also had success in moving up the value chain, by producing higher-end goods like automobiles and high-tech products, while surrounding cities like Foshanhave also benefited from regional integration and high-tech manufacturing.
The new measures reflect Guangdong's continued desire to attract high quality capital-heavy investments; many of the policies specifically state a preference for Fortune 500 companies or recognizable industry leaders.
Stephen O'Regan, Senior International Business Advisory Associate at Dezan Shira & Associates in Guangzhou said, "These new regulations certainly show a more open approach by the Guangdong government towards foreign investment, particularly in trying to attract high level talent. However, many smaller companies still find it difficult to incorporate in China; the country is lowering entry barriers only for already strong enterprises."
According to O'Regan, "The new policies show a step in the right direction, but overseas SMEs may still find it difficult to enter the south China market without more government support". In this environment, local expertise proves valuable.
O'Regan noted that SMEs can still benefit from some of the new measures both directly and indirectly, as well as other regional incentives. He explained, "Many of Guangdong's cities offer incentives and subsidies that foreign SMEs find attractive. The Guangdong government is ultimately paving the way for more foreign SME investment by making it easier to access incentives."
Alexander Chipman Koty contributes to Editorial and Research operations for Asia Briefing in China.
This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.
Posted on 04 Jan 2018 Author Alexander Chipman KotyCategories Asia, Global MacroTags China, economy, Foreign Investment, Global Macro, Guangdong, Investing, investment
China's Pollution Crackdown: How Severe is the expected Macro-Economic Impact?
China is undergoing an environmental paradigm shift, transitioning from the world's top polluter to global leader in the fight against climate change. In recent months, China has dramatically strengthened the enforcement of its environmental regulations as it pursues its goal of promoting 'ecological civilization', and has inspected and fined countless businesses in the process.
Many areas in China suffer from severe levels of pollution, and the central government under the leadership of President Xi Jinping has initiated several crackdowns on heavily polluting industries that are non-compliant with current environmental regulations. These measures have affected business as usual in various sectors and have had rippling effects throughout the economy.
Measures taken by the government
The Ministry of Environmental Protection (MOEP) and the environmental bureau have adopted an intolerant stance against businesses flouting environmental laws over the last year, which is expected to cut air pollution levels in northern cities. Although predominantly targeting air pollution, the authorities are also stringently curbing other types of pollution, including water and soil pollution, in addition to scrutinizing waste management systems across the country.
It is important to note that although environmental laws have not been substantially altered recently, the enforcement of pre-existing laws has been tremendously increased. As enforcement of environmental laws has been historically lax in China, this sudden change in government policy has rattled the industry and made polluting businesses cautious.
In 2016, the government began conducting a series of investigations in heavy industries, and as a result, several non-compliant and illegal steel mills, coal mines, aluminum smelters, and other manufacturing units were shut down. To date, it is estimated that more than 80,000 factories have been shut down across the country by the anti-pollution drive. Other establishments caught infringing environmental regulations have been ordered to clean up their operations within a short time frame or risk closure by the inspection squad.
Penalties have been levied on around 40 percent of factories across the country as environmental inspectors have been dispatched to more than 30 regions in recent months. Inspectors have reportedly imposed hefty fines totaling over RMB 870 million (US$132.2 million) to date, and in some cases criminal liability on employers who are facing jail time for violating environmental regulations. Further, additional inspectors have been deployed to act as watchdogs and ensure that local inspectors are fulfilling their duties.
In addition, municipal authorities have filed a large number of environmental pollution cases in the past year. Beijing municipality alone has filed close to 13,000 cases against non-compliant polluters.
Rippling impact on business and economy
The sectors most severely impacted by the anti-pollution drive have been textiles, energy, heavy metals, coal and gas, mining, cement, paper, automobile, and consumer goods. The impact is also expected to shock international supply chains due to disruption in exports from China.
Inflation has spiked as firms cope with increasing costs of compliance with environmental regulations and adapt to clean energy. Increased production costs will ultimately have to be shouldered by the consumer, and the middle class will be particularly vulnerable to inflationary trends in consumer goods and electricity.
Financial and social stability has also been disrupted as more than 60,000 jobs have been lost as a result of factory shutdowns. Employers who are unable to repay debts have left their factories closed and unproductive.
In many manufacturing sectors, small-scale firms are closing down, as they are unable to compete with larger rivals due to financial incapacity to adapt to clean energy. As a result, the firms that manage to survive and adapt to the new environmental regulations and successfully switch to clean energy will significantly benefit in the medium run as they gain the market share previously held by smaller firms.
The shutting down of small and medium scale firms has also resulted in greater consolidation among surviving firms in many industries like iron and steel, resulting in a steep increase in global prices.
The business impact of the anti-pollution drive has been particularly harsh in the north as well as Beijing-Tianjin-Hebei region. It is expected that these measures may reduce GDP growth by up to two percent in the short run due to disruption in manufacturing and supply chains across industries coupled with increased costs of compliance and technological upgrading.
However, experts opine that the anti-pollution drive will have minimal macro-economic impact in the long run and, if successful, will have huge health benefits for the country's 1.4 billion citizens. Pollution and related health and safety issues are consistently among the top concerns of Chinese people, and addressing these issues would also boost China's international reputation as an authority in green technology and climate change leadership.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Vietnam and the Asian region.
Posted on 04 Jan 2018 Author Dezan Shira AssociatesCategories Asia, Global MacroTags business, China, economy, Environment, Investing, pollution
China SOEs Bid On Philippines Clark International Airport Development
Four of the seven bidders on the design and development contract for the Clark Airforce base in the Philippines are Chinese State Owned Enterprises, according to the Philippines Bases Conversion and Development Authority (BCDA). The China State Construction Engineering Corp Ltd, China Harbour Engineering Co Ltd and Sinohydro Corp Ltd have all submitted tenders.
Clark International Airport is north of Manila and previously served as an American Airforce base until the facility was closed in 1991. The Airport serves the Clark Freeport Zone, an important tax and duty incentivized area that aims to encourage investment in airport-driven urban facilities, targeting high-end IT, aviation and logistics related enterprises, tourism and other sectors. The area is connected to Manila by the Subic-Clark-Tarlac Expressway, which is in turn connected to the North Luzon Expressway, some 43km from Manila.
Chinese SOEs have been prominent in bidding on development contracts aligned with China's Belt & Road Initiative, and has special encouragement to do so with the Philippines and ASEAN nations as China has both a Free Trade Agreement with ASEAN and a Double Tax Treaty with the Philippines, providing tax savings on the provision of certain products, services and manpower.
"It will be interesting to note, should a Chinese bid win, whether this will include Chinese labor" says Chris Devonshire-Ellis of Dezan Shira & Associates. "It is important that Philippines labor is deployed in development contracts in the Philippines".
The contract is worth about US$250 million, meaning that opportunities will arise for subcontractors and materials suppliers familiar with airport and related constructions. The plan is to finish the Clark International Airport New Terminal Building by 2020, increasing Clark's annual capacity from four million to twelve million passengers. This will give airlines an alternative to Ninoy Aquino International Airport (NAIA), which at the moment is the main international gateway to the Philippines, but suffers from congestion problems.
Posted on 03 Jan 2018 Author Dezan Shira AssociatesCategories Asia, Global MacroTags Airport, Clark Airport, Investing, Manila, Philippines
Why Iraq's Prime Minister Needs To Win The War on Graft Before Reconstruction Begins
Having put Islamic State to the sword, Iraq's premier Haider al-Abadi has now set his sights on a new challenge – curbing the country's endemic corruption, a struggle that must be won if his ambitious plans to revive regions devastated in the war against the insurgents are to be achieved.
The government has estimated that it needs $100 billion in reconstruction funds over the next ten years to restore Sunni cities and regions that bore the brunt of the conflict. Abadi is widely respected across Iraq's highly sectarian political landscape, but in order to win the support of Sunni voters in elections next year he will need to demonstrate substantial progress on pledges to rebuild their heartlands.
The international community appears ready in principle to back Abadi's rebuilding efforts though the scale of its support will likely be predicated on whether the country has the systems in place to ensure that funds are used effectively. So far, about half a billion dollars of assistance has been pledged. A donors' conference in Kuwait early in 2018 is expected to secure more finance – however, Iraqi hopes of a Marshall Plan-like settlement for their country currently seem unrealistic.
While there is no shortage of goodwill towards Iraq, with world and regional powers acutely aware of the need to stabilise the country to avert an IS resurgence and stave off Iranian influence, there are real concerns that funds will be misspent or lost to corruption, as they were following the toppling of Saddam Hussein. A 2013 US government audit of its financing of Iraqi reconstruction over the previous decade, which came in at around $60 billion, found that nearly 15 per cent of money had been wasted, with American military oversight of projects sharply criticised.
Iraqi leaders will be conscious that donors' concerns over the distribution of funds may limit contributions, which is why they aim to supplement the latter with private investment. Already, Britain has earmarked $12 billion in loans available to UK companies engaged in Iraqi infrastructure projects. Baghdad is hoping that investment is directed towards public/private partnerships and the nascent small-to-medium-sized business sector, which could play a critical role in helping Iraq diversify its oil-dependent economy.
In the wake of IS's defeat, Abadi launched what he described as a war on corruption. This has resonated strongly with many fellow Shia leaders – notably the hugely influential Muqtada al-Sadr – and Sunni politicians, whose constituencies want an end to a scourge that has blighted the country. The premier has been under pressure to act for some time. Last year Sadr supporters twice stormed the heavily fortified Green Zone, which houses government buildings and embassies, in protest over perceived government foot-dragging. But fraud is so endemic that Abadi may struggle to make any headway. Some critics suggest that his combative pledges are little more than rhetoric aimed at boosting his electoral prospects or just a ploy to neuter political rivals.
Yet there are tangible signs that Iraq is committed to tackling fraud. In August a court jailed 26 high-ranking officials for up to 15 years after they were convicted of corruption. They included former ministers of defence, electricity and agriculture. It was a ground-breaking development as political interference in the judiciary has undermined efforts to prosecute and convict those suspected of graft.
The likes of the IMF will probably be looking for concrete state sector reforms which, even if Abadi is minded to introduce them, would meet considerable political resistance, possibly even from his own ruling Dawa Party. Cutting civil service jobs and salaries would undermine a deep-seated system of cronyism and patronage. It enables many parties to fund themselves and keep their constituencies onside – the former from kickbacks and the awarding of contracts to party-affiliated companies, the latter through the provision of public sector posts, which often furnish the incumbent with significant money-making opportunities.
Little wonder then that Abadi has warned that his battle against corruption may be more difficult than the one against IS. It might also explain why he is encouraging more private sector involvement in Iraq's reconstruction, although overseas investors, like international lenders and foreign governments, will want to be reassured that they will not be channelling money into black holes.
So far, Abadi has been saying and doing the right things, albeit without really addressing government rent-seeking. Among headline anti-corruption measures, the courts will issue warrants against those who have allegedly smuggled money out of the country while contracts for past projects or investments that have failed will come under scrutiny. Sadr has been setting the pace by expelling dozens of people suspected of graft from his political movement.
Abadi has some time to formulate a more thoroughgoing anti-corruption strategy. His defeat of IS and retaking of the oil-rich city of Kirkuk from the Kurds has raised his stock among Iraqi Shia and Sunni communities who, for now, may feel that the jailing of officials for graft and robust pledges to tackle the latter are sufficient sign of progress. But international donors will likely want to see, at the very least, plans for substantial anti-corruption reforms as they assess how much they are prepared to commit to Iraq's reconstruction efforts.
Ambrose Carey is a director at Alaco, a London-based business intelligence consultancy. He has particular experience in the Middle East, and has been involved in some of the most high profile asset-tracing cases of the past few decades.
Posted on 02 Jan 2018 Author Ambrose CareyCategories Global Macro, MENATags Corruption, economy, Iraq, Islamic State
5 Reasons Russia's Banking System Is Heading For Trouble
Russia's recent bailout of two major banks will cost the country billions of rubles. But the future of the Russian banking system, and its impact on the nation's economy, is still uncertain.
Russia is finally emerging from a serious recession, with growth predicted for 2018. However, the recent rescue of B&N Bank and Otkritie Bank highlighted serious problems in Russia's banking industry – problems that have not gone away following the bailouts, and could endanger the economic recovery if it doesn't progress quickly enough.
A tale of two banks
Bank Otkritie FC, Russia's biggest private lender in term of assets, started seeing huge cash outflows in June 2017. Then, in August, came a sudden ratings drop by Fitch.
"Otkritie, B&N Bank, Prosuyazbank and Credit Bank of Moscow are among the banks that have been subject to Russian media speculation in recent weeks, regarding the liquidity position of some and the potential knock-on effect on others."
Fitch Ratings report, 18 August
The day before, Moody's had placed Otkritie on review for a possible downgrade, citing increased financing of assets held by its parent company Otkritie Holdings, and volatility of customer deposits.
"Since mid-2017 and following the recent regulatory changes regarding the placement of non-state pension funds' and state budget deposits, BOFC has experienced a significant outflow of customer deposits."
Moody's report, 17 August
It wasn't long before the Central Bank of Russia (CBR) was forced to intervene. In late August, it became the biggest owner of Otkritie with a 75 percent stake, worth approximately US$51 billion. The strategy was to assuage depositors' fears of losing their deposits, and stabilise the Russian banking system.
The takeover hurt Otkritie's shareholders. Their ownership in the bank was reduced to a maximum of 25 percent, with the risk of seeing their investment wiped out completely. CBR deputy chairman Vasily Pozdyshev indicated that the bailout and Otkritie's recapitalization would cost between US$4.34 billion (250 billion rubles) and US$6.96 billion (400 billion rubles), though the final tally could be higher. This bailout far surpassed the CBR's rescue of the Bank of Moscow in 2011, which totaled 395 billion rubles. But another disaster was soon to follow.
Three weeks after the Otkritie bailout, B&N Bank, also known as Binbank and Russia's 12th largest bank by assets, sought help from the CBR. Customers reportedly withdrew approximately 56 billion rubles from B&N in September 2017. Affiliated lender Rost Bank and other banks were rumoured to also require emergency financing from the CBR's Fund for the Consolidation of the Banking Sector.
The five reasons behind Russia's banking system troubles
1. Rapid expansion
Otkritie and B&N both had a propensity for rapid expansion through acquisitions. Otkritie was permitted to grow at a very fast pace by purchasing Russian banking competitors such as Nomos, bailing out Rosneft Bank in 2014, while diversifying into non-bank companies. B&N had ambitiously expanded its operations after 2010 by acquiring smaller institutions such as Moskomprivatbank, SKA-Bank, and others, prior to making its biggest acquisition in 2016 by merging with MDM Bank, a large Russian lender. However, it turns out that the banks that B&N acquired had financial problems more serious than previously reported. B&N's assets expanded fivefold in less than four years while also obtaining funds from the state in order to salvage smaller banks. As it turned out, Otkritie and B&N purchased big financial headaches that later came back to haunt them – and other Russian banks may be in similar situations.
2. International sanctions
US and EU sanctions over Ukraine probably did more economic damage than President Vladimir Putin is willing to admit – and Russia's banking sector has not been immune. B&N's situation was aggravated by the residual effects of an economic slowdown partly caused by the sanctions, and the rise of bad debt during the previous three years. Moreover, a key provision of the sanctions prevents Russian banks from raising financial capital on Wall Street. This prevents American investment firms and commercial banks from buying equity stakes or making long-term financing deals, and restricts Russian banks access to foreign capital. For example, Vnesheconombank (VEB)'s access to foreign capital was cut off due to the sanctions and looking at in foreign currency debt totaling US$16 billion. A bailout of VEB could cost the Russian government at least US$18 billion or 1.3 trillion rubles.
3. Sharp decline in oil prices
Under Putin, Russia has effectively become a petrostate, heavily dependent on oil as a source of revenue for the government. The higher the price of oil, the more rubles the Russian government can deposit into state and private banks resulting in a greater influx of financial capital. However, the price of oil has dropped in recent years as the market has become awash in oil due to increased uses of clean energy. This has lowered the amount of funds the Russian government can put into the nation's banks and, therefore, hurt their cash flows. Compounding the problem is that Russian banks made loans to the nation's oil companies under the assumption that oil prices will rise.
4. Ruble devaluation
The Russian ruble has lost value in recent years leading to a lack of liquidity for the nation's banks. In an attempt to stabilize the ruble exchange rate, the Bank of Russia raised interest rates to 17 percent from 10.5 percent. But this move was not enough and the ruble devalued further. The combination of a depreciating ruble and rising inflation has made it more difficult for large, and especially small Russian banks, to remain liquid. As many Russian banks rely on cash as their main asset, the ruble's depreciation causes them to lose value and have to acquire more funds. This means increased borrowing at possibly higher rates or seeking government bailouts so they can stay solvent.
5. High number of bankruptcies
As if Russia does not have enough financial headaches, the country has seen a wave of bankruptcies among banks in recent years. Adding to these closings is the increased amount of non-performing loans (NPLs). For example, NPLs went from 6 percent in all of 2013 to 9.2 percent in the first quarter of 2016. The higher the number of NPLs, the greater the chance of bankruptcies among Russia's financial institutions. Officially, these NPLs make up about 10% of all loans. However, the International Monetary Fund (IMF) estimates the true level of bad loans could be closer to 13.5%. Either way, many Russian banks are facing financial catastrophe. In order to stem the tide of these bankruptcies, between January 2014 and mid-2016, the CBR revoked 214 bank licenses and placed 28 banks into open bank resolution, using public moneys totaling 1.1 percent of Russia's GDP.
Persistent risks
"The bailout was good for investors, probably bad for the system. They prevented the Lehman effect in the Russian banking system and created a too-big-to-fail mentality. How many other banks in Russia with the same sort of problems will need a bailout soon?"
Dmitri Barinov, Portfolio Investor, to Bloomberg News
In September there seemed to be a glimmer of hope when Fitch revised upwards the outlooks of 23 Russian banks. Tellingly however, this was off the back of a sovereign outlook upgrade, meaning that it wasn't the strength of the sector that prompted the change, but the allegedly improved ability of the state to bail them out if required.
Even that capability is in question. Russia is probably in worse financial and economic shape than its policymakers and leaders are willing to admit. It's well known but worth repeating, that Russia has become too dependent on oil at a time of sustained low oil prices. Oil was supposed to be Russia's source of financial capital that it could put into its banks and always provide them with the cash flow they needed in good and bad economic times.
But now Russia is walking a financial tightrope that could impact the nation's banking system for years to come. Unless Russia makes a strong economic recovery in the near future, its banking sector could see more hard times that the CRB will not have the power or resources to bring under control.
Arthur Guarino is an assistant professor in the Finance and Economics Department at Rutgers University Business School. Article as originally appears at: https://globalriskinsights.com/2017/12/russia-banking-system-risks/
Posted on 21 Dec 2017 Author Arthur GuarinoCategories Europe and CIS, Global MacroTags bank, banking, economy, Russia
'Blue Gold' Will Be Turkey's Key To The 'Dry Crescent'
Next year will mark a full century since the Ottoman Empire lost control of the areas now known as Syria and Iraq. Now Turkey is pursuing an increasingly nationalistic and assertive foreign policy that's being called 'Neo-Ottomanism'. Ironically, water is the geopolitical asset that gives Turkey influence over the area historically referred to as the Fertile Crescent.
The Tigris and Euphrates rise in the Anti-Taurus mountains of Eastern Turkey, giving Turkey effective control of the water resources of Syria and Iraq. In an age of growing population and climate change, water is truly becoming 'blue gold'.
Contentious dam construction
Turkish dam construction has long been contentious. Since 1975, Turkish dams have cut the volume of water reaching Iraq by 80% and Syria by 40%. Conflict has almost spilled over on many occasions. In 1990, conflict brewed when both Syria and Iraq believed that Turkey had deliberately cut off their water supplies as both noted a simultaneous, serious decline in water flow. The situation was only diverted by Iraq's invasion of Kuwait. NATO has a conflict scenario in which Iraq and Syria simultaneously attack Turkey, while the UN 'Uppsala Model' includes a scenario in which Iraq and Turkey are brought to the brink of war over water.
Political instability, foreign interference and the Kurdish independence movement in Syria and Iraq present challenges and opportunities which are likely to drive Turkey to weaponize water to extend its political influence. In the summer of 2014, Erdoğan ordered the water in the Euphrates to be held back, reducing water levels in Lake Assad, which supplied IS-held Raqqa. The disappearance of credible opposition in Iraq and Syria with the appearance of IS has given Erdogan greater freedom to extend control of water through the South-Eastern Anatolia dam project (GAP). While GAP's main purpose is hydroelectric power and economic growth, Turkey is aware of its geopolitical value. TheIlisu hydro-dam, the latest of the 22 planned dams in GAP, will straddle the Tigris just 30 miles north of the Syrian border. The water from these rivers is not just vital for Iraq and Syria's food and water, it is also important for their economies. Prior to the rise of ISIS, Iraq's oil industry required 1.8 billion cubic metres of water to function. Once GAP is completed, it is estimated that half the water from the Tigris and Euphrates may never leave Turkey.
Weaponising water
Turkey's control of water resources can be instrumentalised to thwart or hinder Kurdish independence. Iraq Kurdistan relies on 6 major rivers for over 75% of its water, three of which originate in Turkey, and the other two which flow from Iran; also hostile to a Kurdish state. If Turkey were to limit water supplies to Iraqi Kurdistan, it would hamstring the Kurdish oil industry, central to Kurdish politico-economic autonomy. It would also generate food and water shortages. The water dynamics in the region provide a new perspective on the hardline attitude Turkey has taken towards domestic Kurds. Eastern Turkey holds many of Turkey's 15 million Kurds, but controlling the region's watershed is crucial to maintain Turkish territorial integrity and generate influence in the region.
In the future, Turkey's control of water will become an increasingly potent lever. Population growth, climate change, and poor management are making water a scarce resource. According to the UN, by 2050, Iraq's, Syria's, and Turkey's populations are expected to grow by 130%, 89%, and 22% respectively. A conservative estimate is that over the coming years climate change will reduce rainfall by 20% and massively increase evaporation, halving the amount of water available per person in the Middle East. Of course, the effects of climate change will be greater in some places; predicted weather patterns could result in the desertification of over half of Syria. Unsustainable water management, particularly digging illegal wells in Syria, have also decreased groundwater resources in the region, adding unnecessary strain.
A need for sustainable management
The growing centrality of water and the political fragility of Iraq and Syria have given Turkey the agency to expand its influence in the region. It is certainly exploiting this opportunity. Yet, this combination of factors also means Turkey's influence is likely to sustain if peace returns. This could generate political friction and spark further economic and political instability, something the region certainly does not need. A lasting political resolution to the instability in Iraq and Syria should incorporate sustainable management of the region's water economy.
Ben Abbs is an Analyst at Global Risk Insights. As originally appears at: https://globalriskinsights.com/2017/12/turkey-water-influence/
Posted on 20 Dec 2017 Author Ben AbbsCategories Global Macro, MENATags politics, Turkey
WTO Condemns Brazil Industrial Policy: Brazilian Government Discusses New Subsidies Rules
According to the WTO, Brazil's industrial programs are inconsistent with the international agreements signed by the country, in addition to providing prohibited subsidies.
Brazil's industrial policy in check
The European Union's (DS472) and Japan's (DS497) disputes against Brazil's industrial policy benefits are close to a conclusion. After almost four years since the beginning of the processes, the World Trade Organization (WTO) Dispute Settlement Body released the Panel's report of the cases this past August, and argued that seven Brazilian programs that sought to promote technological innovation and boost exports do not comply with the Organization's rules.
One of the main complaints was against the tax exemption granted to automotive companies that produced a percentage of their products locally. This would represent a disguised subsidy and distort international competition.
The Panel concluded that Brazil should withdraw all illegal subsidies within 90 days of the final text's approval. On September 29th, the Brazilian government appealed to the WTO report on both cases. If the panel's report is confirmed and Brazilian government does not comply with the WTO's recommendation, parties could retaliate against the country. This could have direct impacts on companies doing business in Brazil.
The future of Brazilian industrial policy
The Brazilian government must now reassess its industrial policy during one of the country's worst political and economic crises. For two years in a row, Brazil's GDP has contracted by more than 3%. This in turn has helped drive the unemployment rate of to 13.7%. This economic contraction complicates Brazil's ability to comply with the WTO's requirements.
On the one hand, industrial policies have the objective of promoting innovation and productivity. On the other, policies aimed at alleviating the economic crisis should reduce government spending and increase public revenues.
The government will have to think of alternatives to tax breaks to spur industrial development, all with minimum intervention. The new policy will have to follow a more functional development policy, simplifying taxes and reducing the cost of doing business in Brazil, while supporting innovation and creating a proper environment for companies to invest in this kind of activity.
This is no easy task, especially given Brazil's unstable economy and political scene. This task is further complicated by the lack of attention that the private sector has paid the WTO ruling thus far – even though it will need to be a major partner in drafting legislation, the public sector has largely remained uninterested in the rulings.
The Brazilian government's ability to carry out these policy changes is further hampered by its entanglement in several ongoing corruption scandals. The government has spent the last 5 months focusing on defending President Michel Temer against two charges on corruption presented by the Attorney's General Office. Temer's refusal to resign has had a high cost for the country, and postponed the approval of highly important proposals for a faster economic recovery.
Now, for the next following months, the government will have to articulate to approve several unpopular measures, such as the pension reform, the postponement of salary readjustment for civil servants, and the end of benefits for several sectors. Additionally, the constant corruption scandals revealed by several plea bargains under negotiation by top politicians arrested and the upcoming 2018 presidential elections. Temer's cabinet will continue to be affected by scandals, and changes might affect the continuity of the undergoing policies.
Starting in around April 2018, the runup to the October 2018 general elections, will further complicate the government's agenda and make difficult to approve any proposal. It is important to note that any ministers that intend to run for the elections will have to leave their positions.
If the Minister of Development, Industry, and Trade, decides to run for instance, the ministry might be left without a clear leadership until 2019. Something that would reduce political influence in the draft of the new policy, however, without someone ahead of the ministry, the final decision over the policy would be postponed.
A new policy might take longer than expected
Brazil's appeal of the WTO's ruling will postpone the final decision against the programs at least 2018. Brazil might also benefit from the number of processes currently under analysis at the WTO and their constant delays – the WTO already broke all deadlines for the final report on the Brazilian cases.
The Trump administration's recent attempt to block the appointment of new member to the Appellate Body exacerbates the likelihood of further delays. The Appellate Body is already operating with five members instead the normal seven, and will be down to four in December.
If the block continues and no new members are appointed, the delays might increase even more. This delay would allow Brazil to maintain the current policies while the appeal is processed, and would provide the government with more time to work on a long-term and sustainable industrial policy.
Amid major reforms, corruption scandals, and elections, the industrial policy reformulation might not have the attention it needs to comply with the demands of the WTO. There is a high chance that any changes will have to be postponed to the next administration.
This exposes Brazil to a medium term risk of retaliatory sanctions from other countries. It is important to note, however, that this retaliation is not an immediate action and it has to be submitted to the WTO and takes a while to be settled. Without the possibility of counting on the government to focus on the discussion, the private sector and the civil society will have to participate actively in the draft of the new programs to promote innovation and productivity in the country.
Juliano Griebeler is an analyst at Global Risk Insights. As originally appears at: https://globalriskinsights.com/2017/12/wto-condemns-brazil-industrial-policy-brazilian-government-discusses-new-subsidies-rules-amidst-worst-economic-political-crises/
Posted on 18 Dec 2017 Author Global RiskCategories Global Macro, Latin AmericaTags Brazil, economy, Industry, WTO
Precarious Nepalese Reconstruction Efforts Could Be Bolstered By New China-Leaning Government
Two and a half years after Nepal`s worst earthquake in over 80 years, the scars it left are still evident across the country. In the Kathmandu Valley, home to about 20% of the population, piles of rubble and roofless buildings are a common sight. Many temples in the centre of Kathmandu, Patan and Bhaktapur have been damaged beyond recognition. While scaffolds have been erected around some of the larger temples, smaller ones are propped up by wooden beams. The most seriously damaged are little more than piles of bricks and tiles, and are cordoned off.
Nepal`s infrastructure was also severely hit, and while the country`s communications network was restored soon after the earthquake, there are now tangles of telephone and electricity cables along many streets. Operations to restore transport networks are ongoing, yet a high proportion of Nepal`s roads remain heavily potholed.
Despite over $4 billion of international aid pledges since the 7.8 magnitude earthquake in April 2015, reports suggest that less than 10% of the worst-affected citizens have begun to rebuild their homes. In Kathmandu, earthquake victims beg on the streets for food and water. The government's decision in March to bulldoze a relief camp in the capital, where nearly 2,000 survivors lived, has not helped the situation. While officials claimed the action was taken to encourage people to return to their villages and start rebuilding them, the financing for reconstruction does not appear to be forthcoming.
I spoke to a number of locals whose properties were damaged, and it was evident that very little has reached those most in need. These people told me that they lay most of the blame at the feet of the government, accusing the National Reconstruction Authority of failing to deliver promised funds to worst-hit areas in the aftermath of the quake.
The authorities' apparent failure to disburse funding is widely attributed to a combination of political instability and inefficient aid delivery mechanisms – although some I spoke to suspect that corruption may have been a factor. That perception is not surprising given that Nepal is ranked as the third most corrupt country in South Asia by Transparency International. Some wonder whether graft is also eroding public finances. But local NGO and media sources told me that while only 50% of this year's budget had been deployed to date, they understood the underspend would be carried over into 2018. They thought little of it would be pocketed by dishonest Nepalese officials.
As a result of the authorities' poor record on aid delivery – which officials blame on bureaucratic hurdles – many NGOs and foreign governments, in particular Beijing, have taken on reconstruction responsibilities themselves. Not only has China sought to assist with the post-earthquake recovery, it is furthering its strategic interests too, notably building a railway line between its restive autonomous region of Tibet and Nepal. The project, part of China`s 'One Belt One Road' policy to improve Eurasian transport infrastructure, will boost Nepal`s ability to trade with the Asian giant when completed in 2020.
Along with Nepal, China has also invested significantly in Pakistani infrastructure, and this month Chinese President Xi Jinping indicated that discussions to form an economic corridor between China and Myanmar are at an advanced stage following the visit of Myanmar`s State Counsellor Aung San Suu Kyi. New Delhi sees growing Chinese influence in Nepal as a threat to the Indian economy and worries that Beijing will exploit Nepal's 1,088 mile border with India to export Chinese products to the latter.
While Nepal has strengthened its ties with China, its relationship with India, which still holds a monopoly over the Nepalese market, has deteriorated significantly in recent years. Kathmandu blames New Delhi for a five-month blockade of the Indo-Nepal border between September 2015 and February 2016. The minority Madhesi community in the south of Nepal – closely related to the Indian population across the frontier – disrupted traffic in protest over a new constitution, which they claimed disadvantaged them. Their actions caused severe shortages of oil and cooking gas.
The geopolitical battle for influence over Nepal cast a long shadow over last week's final round of voting in elections to the national parliament and new provincial assemblies. The Left Alliance, comprising former Maoist rebels and moderate communists, looks to have triumphed in the December 7 vote, and is now poised to form the next government and control most of the regional administrations. The outcome favours China, and could have significant implications for Nepal's recovery. With friendly authorities in place in Kathmandu, Beijing might step up investment in infrastructure projects.
The Left Alliance appears to want to distance itself further from India as Nepal seeks to reduce its reliance on its southern neighbour. The coalition`s manifesto includes plans to terminate the India-Nepal Peace and Friendship Treaty, a bilateral agreement allowing the free movement of people and goods between the two countries. However, Nepal does not aim completely to cut its ties with India: a new trade deal is expected to replace the treaty if it is abolished.
For those worst hit by the earthquake, the possible geopolitical implications of the poll are of little concern. Their immediate needs are more basic. They hope that with the Left Alliance in power, there will be a renewed focus on reconstruction efforts across the country.
Freddie Kleiner is an analyst at Alaco, a London-based business intelligence consultancy.
Posted on 17 Dec 2017 Author Freddie KleinerCategories Asia, Global MacroTags earthquake, economy, infrastructure, Nepal
India And Hong Kong Finalize Double Tax Avoidance Agreement After Years Of Negotiation
India and the Hong Kong Special Administrative Region (HKSAR) of China recently entered into a double tax avoidance agreement (DTAA). After years of negotiation, the bilateral DTAA was approved on November 10, 2017.
When it comes into force, the India-Hong Kong DTAA will hold important tax implications for international businesses operating in both countries. The agreement will also benefit trading companies that do not have a permanent presence in India but service to an India-based entity.
What is DTAA?
Non-resident Indians (NRIs) and foreign nationals doing business in India make profits in India as well as in other countries of operation. Such businesses often have to pay tax twice on the same source of earned income or profit in India.
As a general principle, international businesses in other countries are taxed on their territorial income, which is the income generated within the territory of that country. India, on the other hand, imposes a corporate income tax on the worldwide income of business enterprises that have a permanent presence in India. As a result, India-based multinational companies deriving income from other countries face double taxation on their earned income.
A DTAA creates a fair and certain tax environment for business activities carried out between two countries. It prevents international businesses from paying tax in the country where the income or profits are generated. Or, in some cases, it allows the country to deduct tax at source, and offers businesses a foreign tax credit to reflect that the tax has already been paid.
The methodology for double taxation avoidance, however, varies from country to country.
India's DTAA with Hong Kong
India has over 86 DTAAs in force with various countries, which provide tax relief on transactions carried out between India and those countries. Each DTAA specifies the agreed rates of tax and the jurisdiction on the specified types of income involved.
The India-Hong Kong DTAA offers similar provisions. The DTAA will give protection against double taxation to over 1,500 Indian companies and businesses that have a presence in Hong Kong as well as to Hong Kong-based companies providing services in India. It will provide clarity to businesses regarding tax rates and tax jurisdictions, as they will now be taxed in only one of the signatory countries. This will allow investors to be more confident about their investment decisions.
Aside from tax relief, there are several other benefits that the India-Hong Kong DTAA will offer to the concerned businesses. These include:
Lower withholding tax (tax deducted at source or TDS) rates, which can be as high as 40 percent in the absence of a DTAA;
Lower dividend distribution tax (DDT), which is an additional tax levied on foreign investors besides the corporate income tax; and
In certain circumstances, credits for taxes paid on the double-taxed income that can be encashed at a later date.
Other details regarding the DTAA are yet to be announced.
Chris Devonshire-Elllis of Dezan Shira & Associates comments: "Hong Kong has a very well established Indian diaspora that has been there for decades and has much wealth and business influence within the territory. It is a very positive sign that the DTAA has been agreed as businesses in both India and Hong Kong have finally been given better financial incentives work together and increase trade and prosperity in both their respective areas".
Posted on 16 Dec 2017 Author Dezan Shira AssociatesCategories Asia, Global MacroTags economy, hong kong, India, Investing, tax
Investment Incentives in Vietnam's Central Highlands Region
The Central Highlands have long been a strategic economic, political location in the history of Vietnam. Sharing borders with Laos and Cambodia, this region is one of the most important location for the economic development of Vietnam in the next few years.
A region full of potential
The Central Highlands, or the Western Highlands, is located in the West and South West of Vietnam. The region contains five provinces: Lâm Đồng, Daklak, Dak Nông, Gia lai and Kon Tum. These provinces are expected to show high potential for development in renewable energy, agricultural and tourism in the coming years.
According to the Minister of Public Security's speech in the fourth conference on investment promotion in Central Highlands total investment capital has reached VND 266 trillion in 2015 with an annual growth rate of 11.3 percent between 2011 and 2015. To date, there have been 140 FDI projects worth US$772.5 million in the Central Highlands. This number is expected to grow significantly in the next few years, especially as the government is trying to improve the region's infrastructure and paying more attention to renewable projects in its long-term plan of development.
Tourism and agriculture are two important sectors that appeared very promising to foreign investors, especially investors from Korean, Japan, and China. However, Central Highlands are not being fully explored, thus, bringing more opportunities for future investors to enter the race.
Opportunities for renewable energy projects
The Central Highlands is a prominent location for solar potential maps in Vietnam. According to Vietnamese authorities, the total hours of sun in Central Highlands varies from 2000 to 2600 hours per year. Korean Solar power investors in this area are upbeat on the prospects for the region and have published findings indicating a direct solar radiation generation of 5 kWh per square meter. With this in mind, Vietnam's Central Highlands is an ideal place to develop a solar power plant.
In addition, the region's wind power capacity could reach 2000MW, which is even more than the second largest hydro power plant of Vietnam in Hoa Binh.
Realizing the favorable conditions for developing renewable energy of this region, Central Highland provinces have issued a number of preferential mechanisms and policies as well as simplified administrative procedures, to attract investors. Daklak is topping the list with 4 projects worth US$3.3 billion from AES Corporation, Vietnam's Xuan Thien Limited Company, South Korea's Solar Park Limited and Vietnam's Long Thanh Infrastructure Development and Investment Company.
Promising land for coffee, tea, and pepper
In addition to its advantages in solar and wind power, the region is also getting more and more popular as a promising land for FDI projects in agriculture. Central Highlands cover an area of 5.46 million ha, in which 2 million ha are used for developing agricultural. Besides, the region contains 74.25 percent of the red basalt soil of Vietnam, making it an ideal place for large-scale production specialized in coffee, pepper, tea, cashew, cassava, rubber.
Realizing the growth potential of this sector, investors from Korea and Japan have launched several projects with advanced agricultural techniques to maximize production in the region. New policies and tax incentives are also available to encourage and attract investments. Although climate changes may appear to be a threat, agriculture will continue to grow and strengthen its position as an important sector of Central Highland's provinces.
Top destinations for tourism
Dalat, Kon-Tum and Gia Lai are famous destinations for eco-friendly and historical tourism. Cool weather, beautiful natural sight-seeing, historical museums and also the variety of food specialties are the reasons why more and more tourist chose these destinations for a get-away on the weekend. In 2016, Dalat city of Lam Dong province welcomed 5.4 million visitors, an increase of 6 percent compared to 2015. On top of this, the number of international visitors reached 270,000 people with most travelers coming from South Korea, China, Thailand and the United States.
The city also has been ranked by The New York Times as one of top 52 tourist destination in the world. Although the region's tourism industry used to suffer from the past because of poor infrastructure and facilities, the situation is getting better recently thanks to investments from government also foreign investors. New tourist products with better services are now provided, making the region even more attractive to tourist. Besides, many investments in hotels, amusement park, restaurants are about to kick off in the near future, helping these provinces to fully exploit tourism potential of this region.
The Central Highlands contributes 9 percent of Vietnam's GDP. Ignoring all the advantages it has developed in its economy, the region still remains poor compared to others. Foreign investment is limited in both quantity and quality. However, with new incentives and support from the government, the investment's environment of Central Highlands becomes more and more attractive.
Beside many investment incentives such as corporate income tax exemption, land use rental reduction, import tax exemption, etc., FDI projects can benefit from province-specific investment support. For example, investment project in high-tech applied agricultural business can receive support from Kon Tum province for the development of greenhouses and net houses with a support level of VND 50,000 per square.
Each province in the region have different types of support and incentives to attract foreign direct investment, thus to maintain the sustainable growth of the region. In the future, Central Highlands will continue to consolidate its position as an important region in the economic development of the whole country.
Posted on 16 Dec 2017 Author Dezan Shira AssociatesCategories Asia, Global MacroTags economy, Industry, Investing, renewable energy, Tourism, Vietnam
ASEAN's Free Trade Agreements With The Asia-Pacific Region's 5 Biggest Economies
Apart from the ASEAN Free Trade Area (AFTA) between ASEAN member states, the regional trade bloc has signed several FTAs with some of the major economies in the Asia-Pacific region. These include the ASEAN-Australia-New Zealand FTA (AANZFTA), the ASEAN-China FTA (ACFTA), the ASEAN-India FTA (AIFTA), the ASEAN-Korea FTA (AKFTA), and the ASEAN-Japan Comprehensive Economic Partnership (AJCEP). The aim of these FTAs is to encourage and promote businesses of all sizes in ASEAN to trade regionally as well as internationally without tariff barriers. Businesses with operations in ASEAN can use the FTAs to gain easy access to new export markets for their products at low costs, and benefit from simplified export and import procedures.
ASEAN-Australia-New Zealand Free Trade Area
The agreement establishing the ASEAN-Australia- New Zealand Free Trade Area (AANZFTA) entered into force in January 2010. The FTA is the most comprehensive agreement covering a wide range of issues including trade in goods and services, investment, intellectual property, competition as well as economic cooperation. Since its inception, the AANZFTA has encouraged trade in goods and services by removing barriers and reducing transaction costs for companies wanting to do business in member countries. According to the agreement, 99 percent of the Australia-New Zealand trade in goods with Indonesia, Malaysia, the Philippines, and Vietnam will be duty-free by 2020. Upon full implementation in 2025, almost all trade between the member countries will be free of tariff, helping businesses save millions of dollars in tariff duties each year.
ASEAN-China Free Trade Area
Over the past decade, trade and investment between ASEAN member states and China have expanded significantly under the ambit of the ASEAN China Free Trade Area (ACFTA). The Agreement on Trade in Goods was signed in 2004 and implemented in July 2005 by all the member countries. Under the agreement, the six original ASEAN members and China decided to eliminate tariffs on 90 percent of their products by 2010, while Cambodia, Lao PDR, Myanmar, and Vietnam – commonly known as CLMV countries, had until 2015 to do so. Since the signing of the agreement, China has consistently maintained its position as ASEAN's largest trading partner. In 2015, ASEAN's total merchandise trade with China reached US$346.5 billion, accounting for 15.2 percent of ASEAN's total trade. Additionally, ASEAN received US$8.2 billion in foreign direct investment (FDI) from China in 2015, placing China as ASEAN's fourth largest source of FDI. By 2020, ASEAN and China are committed to achieving a joint target of US$1 trillion in trade and US$150 billion in investment through ACFTA.
ASEAN-India Free Trade Area
The ASEAN-India Trade in Goods Agreement entered into force on January 1, 2010. The signing of the agreement paved the way for the creation of one of the world's largest free trade area market, creating opportunities for over 1.9 billion people in ASEAN and India with a combined GDP of US$4.8 trillion. AIFTA creates a more liberal, facilitative market access, and investment regime among the member countries. The agreement set tariff liberalization of over 90 percent of products traded between the two dynamic regions. Accordingly, the tariffs on over 4,000 product lines were agreed to be eliminated by 2016, at the earliest.
ASEAN-Republic of Korea Free Trade Area
The ASEAN-Korea Trade in Goods Agreement was signed in 2006 and entered into force in 2007. It sets out the preferential trade arrangement in goods among the ASEAN Member States and South Korea, allowing 90 percent of the products being traded between ASEAN and Korea to enjoy duty-free treatment. The Agreement provides for progressive reduction and elimination of tariffs by each country on almost all products. Under the Trade in Goods Agreement, ASEAN-6 including Brunei Darussalam and Korea have eliminated more than 90 percent of tariffs by January 2010.
ASEAN-Japan Comprehensive Economic Partnership (AJCEP)
The ASEAN–Japan Comprehensive Economic Partnership (AJCEP) came into force in December 2008. The Agreement covers trade in goods, trade in services, investment, and economic cooperation. The FTA provides for the elimination of duties on 87 percent of all tariff lines and includes a dispute settlement mechanism. It also allows for back-to-back shipment of goods between member countries, third party invoicing of goods, and ASEAN cumulation. Both ASEAN and Japan have also initiated several economic cooperation projects that include capacity building and technical assistance in areas of mutual interest. These areas include intellectual property rights, trade related procedures, information and communications technology, human resources development, small and medium enterprises, tourism and hospitality, transportation and logistics, among others.
Posted on 14 Dec 2017 Author Dezan Shira AssociatesCategories Asia, Global Macro, NewsTags AANZFTA, AFTA, Agreement, ASEAN, ASEAN Free Trade Area, Investing, trade


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Conduct continuous inspections of all key process points in the facility, to identify anything abnormal. If an issue is identified, make necessary machinery and equipment adjustments and implement the proper response, including notifying supervisors.
Ensure that the products being produced under their supervision meet all specifications. May gather samples for laboratory analysis, and perform quality control analyses.
Responsible for maintaining detailed reports of operations. Update process logbooks with activities and process adjustments made, noting any issues they encountered and measures taken.
Program and operate the facility's computer system that operates the machinery. Use the system to start up the plant, shut it down and run the production of material.
$10.00 per hour during training with increases upon completion of each training segment.