Financial Crisis and Asian Countries - Research Paper Example

Research analysis for business The world economic outlook contains analysis and projections which are an essential element of International Monetary Fund’s ongoing surveillance of making laws regarding economic development in its member countries as well as worldwide commercial systems. Due to the financial crisis that erupted in Asian countries in the mid-1997, assets values, as well as currency, has been adversely affected due to their pre-crisis levels. Countries such as Thailand, Korea, and Indonesia, have experienced drying up of private as well as foreign finance, leading to a massive depreciation in currency and a tremendous decline in the price of assets, causing a decrease in demand of domestic products that can only be improved through the increase of net export. In Philippines and Malaysia, Similar forces have lowered the growth expectations, leading to a sharp decline in import demand. The Gross Domestic Product is more likely to decline in Indonesia due to uncertainties regarding the course of laws which hinders a decisive change in financial markets (Radelet & Sachs, 1998). Due to financial crisis experienced in Indonesia, Korea, Malaysia, and the Philippines, increased poverty followed suit. Inflation rose, and in response to the crisis, the policy regarding macroeconomic, was restricted, to restore domestic stability. However, the magnitude of the disaster was immense. The law regarding monetary was aimed at stabilizing the rate of exchange of respective currencies that quickly lost value due to a decline of capital from the region (Agyeman, et al, 2003). Countries such as Indonesia emerging markets outlook were altered due to the spillover and contagion effect. The decline in the presence of foreign financial support an increase in interest, contributed to external borrowing, fall in the prices of market stock and tightened laws, to reduce vulnerability to changes that are disruptive in the market sentiments. This disruption leads to weak growth. Adverse effects were moderate with the stable growth. However, factors such as sharper slowdown due to the crisis were envisaged through weak prices of commodities such as oil. For developing countries who are the net importer of oil products, they benefit tremendously from the trade however for the net exporter they experience an adverse effect on the expansion and current account as well as fiscal position which is crucial (Radelet & Sachs, 1998). Indonesia’s advanced economy sharply deteriorated; due to homegrown problems such as weakness in its financial sector, lousy loan problems, delays in structural changes implementations which reinvigorate the economy as well as significant withdrawals in fiscal stimulus. Indonesia’s, further interventions were needed to bring growth despite the implementation of measures to address problems of a financial crisis, and supplementing the demand domestically due to economic decline. United States, Canada and United Kingdom’s rich domestic demand conditions, facilitates the adjustment of the present account position needed in Indonesia’s emerging market due to a sharp decline in capital inflow. The adjustment process in Indonesia’s market reduced in terms net exports as well as an experienced reduction in direct foreign investment. The financial investment redirection to markets helped lower the interest rates on the one hand, and on the other, the terms of gains in the trade helped in supporting the demand domestically (Radelet & Sachs, 1998). In response to the economic condition on the financial crisis that affected macroeconomics. Income and employment creation such as public work programmes, microcredit as well as small and medium enterprise programmes such as unemployment insurance schemes were introduced, leading to boost in the income lost that led to financial crisis. Jobs were created, and infrastructure was expanded in Indonesia, due to public works programmes implemented. However, given the nature of the job offered such as heavy construction, women and the elderly were not able to participate in such activities. The programmes were also located in Indonesia’s rural area and never attracted individuals and people from urban areas who lost their jobs informal sectors. The programmes duration was also short leading to joblessness (Agyeman, et al., 2003). Indonesian women with low education levels greatly benefited from microcredit programmes, and as a result, they were able to finance activities that would generate their income within a short period. However, these microcredits failed to reach those people who were most affected by lack of finance including those unemployed living in formal urban areas. Those unemployed people living in urban areas were unable to form microcredit groups since the credits were used by the recipients to finance consumption rather than investments that are productive and reflective in barriers to necessary and essential requirements (Agyeman, et al., 2003). Evaluation is a part of project cycle consisting of identification preparation, appraisal and assessment, implementation and last assessment was done to improve future work and accountability (Food And Agriculture Organisation Of The United Nations, 1985). Regarding Indonesia’s evaluation of competitor on the existing product, the United States, purchased from Indonesia some reserved mushrooms which brought about questions regarding the current antidumping duty orders which were likely to cause revocation. Antidumping duty orders revocation on certain preserved mushrooms from Indonesia caused continuous dumping recurrence. Determination on duty absorption was made from commerce with respect to the sales. The margins of weighted average dumping occurred after anti-dumping duty orders were revoked. With anti-dumping rules in place, trade issued various scope determinations regarding certain preserved mushrooms from Indonesia entering the United States, hence affecting Indonesia’s market competing against Chile, India, and China (Commission, U.S. International Trade, 1998). Regarding Indonesia’s qualitative assessment of financial sector on sales forecast, Indonesia’s bank financial review based the evaluation of the banks risk on the stress test. The stress test whereby comparison was made with other Asian countries after trend analysis was carried out to determine lending growth, liquidity, maturity as well as mismatches involving both domestic and foreign currencies. Close monitors were performed, on the performance of bank shares on the market capital and then stress assessment was conducted for the deterioration of the quality of the loan, the rate of exchange and the changes on interest rates (Worrell, 2004). Assessment of Indonesia’s sales forecast shifted to a more prominent approach which included rural energy development, which initially developed as rural electrification. The rural energy development placed a high priority in ambitious rural electrification which was much focused at reducing imbalances in economic spheres as well as reducing social disparities between the urban as well as rural areas through equal distribution of electricity. According to ACE (2000), 83% of the Indonesian villages that is 62000 had received power by the end of 1999. However, the vast size and weak Indonesian structures made it very expensive to reach most communities using the greed programs which was centralized. In response to this, the Indonesian government reduced its target of village’s electrification by lowering is the target, which makes 3000 communities not to receive electricity by the end of 2019. However, the areas that were said not to have received power by 2019 were targeted for decentralized electricity generation programs which involved the use of renewable energy technology to make use of sunlight, biomass, wind, hydropower, and locally available resources. Due to economic nationalism, Indonesia was compelled by the globalization and recession to open its market to liberalize its economy. However, due to political reasons, certain barriers to liberalization existed, and the role of the state in the economy remained significant. A proper mixture of state and private sector participation in the economy led to Indonesia’s economic development. Indonesia adopted an idea which was properly blended in secret as well as states participation in the economy which reflected the tension between the necessity of liberalization and modernization of the economy as well as a considerable tendency towards economic nationalism. The modernization and liberalism led to the mixture in financial systems between the market and Indonesia’s driven economy; however, the roles in the market and economy never changed. After Indonesia got its independence, the private sectors operated freely, as the public policies gained momentum (Grabowsky & Grossheim, 1997). A mixed market economy refers to the mixture of individually owned enterprise systems economies which are planned together. Private enterprise systems and planned economies in a diverse market economy adopt different approaches to operate their savings. The market economy is a type of economy that runs in industries. Market economy invites competition and private investment into sectors previously operated as government monopolies. In a mixed market economy, the proportion of private and public enterprise varies widely. Most countries have changed companies managed by government and privatized them. The government may privatize state-owned industry to raise funds and improve the economy by cutting costs and running the operations more efficiently (Kurtz & Boone, 2008). Mixed market economy, relies upon liberal market with free and open contractual agreements, robust and independent industries as well as efficient financial systems which emphasized on macroeconomic management. Closed market economies refer to a type of economy which typifies substantial involvement of a country’s direct role in organizing economic activities and controlling it. The nation may also set the framework by making rules and regulations that guide the operation of the business and commerce (Thompson, 2005). The market economy methodology has an impact on the market economy in that it changes business by determining the duty rate. The changes may have mixed results such as eliminating states duty rate which reduces the duty level for companies that are not assigned personal determined rates. Combined economy the people in public enterprises often limits the possibilities of consumption among citizens, due to their outputs which is very costly (Freeman, 1989). Regarding the assessment of how Indonesia's current credit market conditions, especially interest rates and the availability of financing, affecting demand for product or services, there was an increase in production of various commodities. On the other hand, lower production influenced by the changes in the rate of price as well as the domestic terms of trades. The higher local prices emanating from the decline in currency value led to increased production of the commodities, which was right for necessary and essential products for which its value received for output, increased tremendously, surpassing the prices paid for the inputs (Bolling, 2000). In Indonesia, trade was adversely affected due to the import prices which rose due to depreciation in the value of the currency. Firms expanded their activities, due to increased cost. The lower priced and poor quality of Vietnam rice became an alternative supply source, and cotton from Thailand and Korea was substituted with polyester. The high quality of cattle skins and hide was replaced with low-quality skin and hides, hence affecting Indonesia’s textile industries (Bolling, 2000). In examining Indonesia’s Central bank, the bank played a significant role in the country’s economy as it provided a framework where all states could engage in long-term investment such as lending. The Central bank also imposed restrictions on significant aspects such as the reopening of bank industries, and how foreign banks operated (Rosser, 2013). Regarding Indonesia’s availability of education and job skills of the workforce, the most powerful gap in job-specific skills was composed of jobs theoretical and practical knowledge by the employers demand on the essentials of specific capabilities of the job. In line with the age group, the employee's perception of skills needed differs. This skill was attributed to the occupational difference as well as generational shift (Suryadarma & Jones, 2013). Political instability is the greatest challenge to international production. Due economic and political crisis, most countries assume the leadership roles in international monetary management. United States strength of the economy, the interwar lesson as well as security incentives, led to the acceptance of the United States leadership. Countries such as Japan accepted the United States management (Gill, et al. 2007). Indonesia faced significant challenges in its attempt to make and sell its products to other countries. One of those obstacles was protecting the traditional knowledge of genetic resources, which was composed of plants and herbs. Many cultural problems arise due to cultural context as well as the scientific and biological basis of genetic resources, making it a center of controversy (Gill, et al. 2007). Regarding oligopoly as a business strategy, characterized by stability in price, there is a high risk in changing amount for one’s business due to the reaction from other firms. In an oligopolistic market, non price competition is typical compared to the competition in prices. Regarding the price stability, the business maintains stable rate over a season of pricing, which lasts for several years. If prices are raised in an oligopolistic market, market share is lost due to competitors follow of the suit (Chapman, 2011). This report recommends strength distribution policy which determines whether the users depend on the distributors or the providers, as a crucial technological information source and availability in supply. Since uncontrolled distribution is more likely to come with some long-term problems, caution should be exercised through examining the relationship of the product type which forms the preference that the customer needs. The firm can manage its future production by synthesizing the macroeconomic and microeconomic through effective and efficient demand. If the order is deficient, most public resources will be wasted. It is recommendable for individual enterprise who wants to bring supplies into action, to operate within the odds loaded against them. Firms compete and offer similar products as well as identifying target customers. Since rivalry exists in competition, the outcome of the contest is necessary to influence firm’s ability in sustaining the competition to its advantage; companies should hence embrace competition. According to Armstrong et al. (2014) firms can sustain its success of going forward by evaluating the findings from demand trends, price elasticity, current stage of the business cycle, and government through the creation and capturing of customers value. This report recommends that firms put customer’s value at their heart while marketing since it helps build a customer’s relationship that is profitable. Firm’s competitive strategy concentrates on the industry’s competitive advantage. A good company should find a way to conceptualize on how to expose the competitive gains by expanding and sustaining it (Porter, 2008). Out of the value that a firm can create for its customers, this report recommends tremendous growth and competitive advantage. Competitive advantage takes the form of lower prices to competitors. Reference ACE. (2000), Indonesia - Solar : Current and Planned Utilisation, Promotion of Renewable Energy Sources in South East Asia(PRESSEA), ASEAN Centre for Energy (ACE), Jakarta.Availablefrom:http://www.aseanenergy.org/pressea/indonesia/solar/current_and_planned_utilisation.htm.Accessed: 09/01/2018 Armstrong, G., Adam, S., Denize, S., & Kotler, P. (2014). Principles of marketing. Pearson Australia. Agyeman, J., Bullard, R. D., & Evans, B. (2003). Just sustainabilities: Development in an unequal world. MIT press. Bolling, H. C. (2000). International financial crises and agriculture. Chapman, R. J. (2011). Simple tools and techniques for enterprise risk management. John Wiley & Sons. Commission, U.S. International Trade. (1998, February). Certain Preserved Mushrooms fromChile, China, India, and Indonesia. Retrieved January 09, 2018, from https://www.usitc.gov/publications/701_731/pub3159.pdf Food And Agriculture Organisation Of The United Nations. (1985, September 30). Appropriate Forest Indusries. Selected papers for Expert Consultation held in Jakarrta, Indonesia. Retrieved January 09, 2018, from https://books.google.co.ke/books?id=lSJIDX4hgFoC&printsec Freeman, J. R. (1989). Democracy and markets: The politics of mixed economies. Cornell University Press. Gill, I. S., Kharas, H. J., & Bhattasali, D. (2007). An East Asian renaissance: ideas for economic growth. World Bank Publications. Grabowsky, V., & Grossheim, M. (1997). Nationalism and cultural revival in Southeast Asia: perspectives from the centre and the region. Otto Harrassowitz Verlag. Kurtz, D. L., & Boone, L. E. (2008). Contemporary business. Cengage Learning. Radelet, S., & Sachs, J. (1998). The onset of the East Asian financial crisis (No. w6680). National bureau of economic research. Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior performance. Simon and Schuster. Rosser, A. (2013). The politics of economic liberalization in Indonesia: state, market and power. Routledge. Suryadarma, D., & Jones, G. W. (2013). Education in Indonesia. Institute of Southeast Asian Studies. Thompson, G. (2005). Economic dynamism in the Asia-Pacific: the growth of integration and competitiveness. Routledge. Worrell, D. (2004). Quantitative assessment of the financial sector: an integrated approach. Read More