The free trade agreement between China and six additional countries in southeast Asia was launched yesterday (Friday), thus creating the world’s biggest free trade zone in terms of population. Beside China, you can find amongst the members the six founding members of the ASEAN (The Association of Southeast Asian Nations) – Indonesia, Singapore, Malaysia, The Philippines, Thailand and Borneo.

The Association of Southeast Asian Nations

The agreement will cancel 90% of customs duty on import-export between these countries. The average tax price of importing commodities from the ASEAN countries to China decreased from 9.8% to a mere 0.1% and on the contrary, the average price of exporting from China to the six ASEAN members decreased from 12.8% to 0.6%. The trade volume between all these countries had ascended from 39.5$ billion in the beginning of the decade to 192.5$ million at the end of 2008 and is expected to rise even more.

Four additional members of the ASEAN- Vietnam, Laos, Cambodia and Myanmar are expected to join the trade zone within five years. Some experts are already predicting a massive future expansion that might include Japan which is no surprise after China and Japan began talking about uniting, economic powerhouse India and even “offshore” Australia.

During the ASEAN summit the was held last October in Thailand, the members agreed to conduct a feasibility study on the formation of wide Asian free trade zone that will include South Korea too. “Two studies were conducted simultaneously”, explained an official from Thailand’s Foreign Ministry office. The first was for a free trade zone that will include the ASEAN countries along with China, Japan and South Korea and the second was for an alliance that will include India, Australia and New Zealand too.

The quick recovery of southeast- Asian economies from the financial crisis, in relative to the US and other Western countries, have increased the yearn to raise the integration of Asian economies. Japanese prime minister, Yukio Hatoyama who is leading the idea of forming an “East Asian Community” similar to the European Union, said in October that an “Asian economic bloc needs to aspire to lead the entire global economy”.

Omer Shachnai

The CEO Game.

The balance of the global economy is fragile and constantly changing, but now we ourselves are on the verge of a major power change. This change is so comprehensive and great that it will affect every aspect of our lives.  I’m talking about the eroding power of the greatest empire of the modern world: the United States of America.

Losing Money in Iraq

In this article, we’ll discuss how and why the world is moving in this direction, if it is inevitable or if we can fight to maintain the USA’s position as a spiritual, cultural, and economic leading force and if these changes are for the best or if it is just the dawn of total chaos in the world.

It’s well known that America has declined in its status as the leading force in the world over the years. The USA is like a sinking ship; the only problem is that in a global world in which we live this ship is tied to all the other ships.

But what caused the bubble to burst in our face so suddenly one year ago. In my opinion there are several major failures or unwise economic behaviors that brought us to this point, yet, at the time, many of these actions seemed so right

The first reason is the horrible terror attack of September 11^th. This unprecedented event was the trigger to a chain of events such as the change in the paid interest rate direction—it decreased in order to help the market pull out of the economic stress and overcome the uncertainty that followed the September 11^th. This greatly damaged the economy because people tend to take more loans when the interest rate is low in order to invest or consume. Because the American tendency is to consume, many people took loans in order to continue buying goods they could not afford.

The USA is not a leading supplier of goods, because comparative advantage of the USA lies in a highly qualified work force and not in industry products. And so, the USA began to import more and more products from other countries, especially China. This ultimately caused the dollar’s value to drop, especially against the Chinese Yuan.

On top of this, the USA had to fund the war in Iraq that cost a lot of money and had many logistic and economic problems. In addition, it has to find a way to confront the new terrorism threat, which is also money consuming.

It seems clear that the age of US economic hegemony is over. The implications for its cultural and political dominance remain unclear. Perhaps the US should look towards former colonial titan Britain as a model—the former empire knows a little bit about how to handle the end of an era.

Omri.

The CEO Game.

A New East Asian Community?

Although the plans to build this East Asian Community are in their primordial stages, the result of this oriental holy matrimony may pose a threat to major economic powerhouses worldwide including the parallel European Union. Current talks revolve steps to reduce the suspicions and the contention between the two countries. Among this initial steps you can find measures such as canceling the long time obligatory entrance permit (thus, making traveling visa free) and cooperation on environmental issues and energy, as well as public health. If all goes well, the dual countries will be tackling more complex issues from regional agricultural understandings to politics and defense and military cooperation. Another hot issue, and what might be an attempt to strike at the European Union’s foundation stone the euro, is a possible East Asian common currency.

This change in decades long tensions, is possible due to the newly elected Japanese democratic party just a couple of months ago. It is believed that the Japanese PM was the one who started the talks, on his first meeting with Chinese President Hu Jintao in New York. The new Japanese prime minister, Yukio Hatoyama, who won by leading and recruiting brilliant campaign strategists, has brought the winds of change with him, and he focuses his energies at rebuilding the relationships with neighboring China and other countries too. These efforts were previously chopped down by rightist governments, and now they represent a backlash against Washington, some may even say a slap in the face of Japan’s most persistent ally since the Second World War, one that could threaten Obama’s foreign and economic policies.

The effects of an orient economic alliance would be humongous, with Japan and China being the world’s second and third largest economies appropriately. Media observations pointed out it was Japan’s will behind the wheel that revived the talks. However, why does Japan want the alliance so much? Like the old saying says “if you can’t beat them, join them”, the global economic crisis has shown Japan that it needs to aspire to garrison its economic strength, which China might soon surpass, by actually aligning with China and some newly emerging economies in the area. They also want to establish a powerful, influential Japanese leadership in East Asia, don’t forget this once was an Empire, and a shot at solving territorial issues such as who will hold significant areas of the East China Sea, which contain oil and natural gas.

It seems like if they do actually form this union that the West will suffer a blow. But, will the western world gain any profit from the alliance at all? The West could actually enjoy from a closer relationship between Japan and other surrounding Asian countries, which may help US interests in the region. The US administration also believes that more involvement from China’s side in the global stage would help world economics. However, many obstacles still lay ahead: to ease the tension that dates back to the first Sino-Japanese war in 1894, when Japan led an offensive campaign against China and destroyed it’s military under less than a year. There were more wars to follow, with the protruding World War II when 300 thousand Chinese innocent civilians were killed by the Japanese occupying troops. Over the years, the Japanese colonial rule became like a thorn in China’s side, pervading from relations to improve.

Furthermore, some polls show that two thirds of the Chinese are in favor of a wider Asian cooperation like the one being discussed for quite some time now, which will include more countries such as Indonesia, South Korea, Singapore, New Zealand and mighty India. Nevertheless, experts agree on communist China’s unwillingness to jump into a swift arrangement. Especially a wide agreement, that might include another one of China’s traditional rivals- India as mentioned above, with China already fearing the India-Japan space alliance; suspecting that the US is masterminding this regional space alliance, behind the curtains. But, according to the Chinese, they are still advocating and engaged at setting up an East Asian Community and its integration process. We suggest continuing following this hot topic, when talks resume on October 10 in Beijing.

Omer Shachnai

The CEO Game.

do the games bring benefits to make up for the constant rising prices? Some do and some just don’t work out as well as planned, like described in part 1. The Olympic games brought a fresh breeze of regeneration to Barcelona, allowing authorities to use the games as an excuse to rebuild the coastline making Barcelona a worldwide popular travel destination and they gave Sydney a status of a “world class city”- live and kicking. The problem is that you can’t precisely put a figure on rebranding and giving a makeover to a city and a country. “This is the most emotional day in my life”, said Brazilian President Luiz Inacio Lula da Silva and he should be excited according to the next figures. The current cost estimations for the Rio games stand at $15bn while predicted profits are around $50bn, a worthy investment, but remember what happened to Greece’s first estimations. The Brazilians also claim that the games will create 120 thousands jobs a year for the following years. The IOC announced that the games will bring up the quality of life for the city’s residents, but in order to make it possible, Brazil’s leaders will have to step up, invest and upgrade infrastructures, fight the sky high crime rates and corruption. The same things were heard six years ago, when China was chosen to host the games, so that brings us to the next question.

The Olympic Games printed money for Beijing will it do the same for Rio?

What did the games do for Beijing? The Olympics committee’s people said that choosing Beijing will increase China’s involvement in western politics and economics and will help improve issues regarding human rights in the country. The result was kind of controversial. The diligent Chinese were efficient as usual and built mega structures who now decorate National Geographics’ magazines, in no time. It also had such pervasive influence both on national pride and on the economy that it even made China temporarily replace the images of Mao Zedong on their paper bills to the ones of the Olympic stadiums like the “Bird’s nest”. But, aside from these organizational and construction related achievements, it raised the inflation (partly due to the new demand for Yuan) and the horror stories about the relocation of thousands of people, some who lost their homes entirely because of the location of Olympic facilities, are still remembered. It did nothing to address the regional and ethnical inequality in China, a problem that Brazil faces every day. Finally, when the Olympic delegations returned to their home countries, Beijing resunk in its totalitarian routine.

In conclusion, the most important competition, in the Olympic Games, is neither the marathon nor the 100 meter swim in the glittering Olympic pool; instead it is the race for profit. The problem is that the staging costs can’t be calculated at the beginning, the same goes for estimating the benefits of placing your city as the host of the games. While, the short term effects are pretty obvious, no one can predict accurately what will happen in the long run. Issues like this, really concern us here in the CEO game and we believe that by using the simulation, and the ideas and theories you will encounter while using it you can assess such financial impacts to get a better view of the bigger picture. As for the question of how significant the Olympics will be? The answer is that Brazil is far from being a dark dictatorial country like China, but only time will tell whether the Olympics will actually change the problematic face of Rio for good and make it a pleasant, progressive city or will the corruption and crime return to rule the streets as soon as the games end like the pollution and tyranny in Beijing.

Omer Shachnai.

The CEO Game.