Asian Business Environment

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Question 2

a) What sort of industries do you expect to perform the best from this sort of spending?

Industries such as renewable energy and environment-friendly industry, new energy industry such as solar energy, wind energy, and hydra energy will perform well to provide abundant clean and cheap energy to rural areas. Access to electricity can improve socio‐economic conditions in rural areas through its influence on key components of poverty, health, education, income and environment. Also, transportation and transportation equipment industry will ensure the smooth connectivity in those thousands of islands.

b) What consumer markets will begin to grow.

The introduction of electricity often profoundly affects village life. Household electronic products (lighting, TV/radio, washing machines, air-conditioners etc.) market, telecommunication products such as cell-phones and personal computers and healthcare products will certainly do well in rural areas. Also, access to electricity can lead to more time in leisure and productive activities. And education market will also grow. Power machinery market is promising because it can raise productivity and improve working conditions. electrification has supported growth led by a dynamic agricultural sector, so agricultural products will be more affordable, so this market will grow. Financial market will also increase due to more access to banking system. Those means more disposable income among rural people, so food and beverage market and other retail market. The improvement of transportation system (integrated road network and illuminating system) will lead to increase in transportation market.

c) What are the three or more concerns that you might have as this country starts spending heavily on these projects

First concern I have is corruption, if the government approve a huge amount of fiscal appropriation, it is impossible to make sure that all the governors and other parties will not misuse that amount of money. And the companies who sell electrical products and maybe implementing services to the government, they may charge more money from the government but they use low-quality products. So maybe the low quality of electrical facilities in rural area also remains a big concern. Those resources are not being used reasonably lead to waste.

Secondly, I may be worrying about the distribution of government funds. Because the implementing the electrical network require a very huge amount of money and very heavy amount of work. Government may suffer from the shortage from funds, that results in budgetary deficit. To tackle this problem, government will probably begin to issue national bond to borrow money from other entities, that is a big liability. Or government will increase the tax rate, but tax payers in city may feel unfair, that harms social harmony.

Thirdly, maintenance of electrical facilities also remains a big problem. That means how to maintain and ensure security of facilities and evaluate the condition of those facilities. Also, some residence may be resistant to the new changes. Some implementation work may affect their daily work and post danger to them.

d) deficit and inflation concerns

Inflation is defined as a sustained increase in the general level of prices for goods and services.

As stated in last question, government may face big shortage of money that lead to huge amount of budgetary deficit. To solve this problem, government may increase corporate tax rate, which will increase the costs of companies, and this will reflect in the increasing price of final products in the market. Also government will use some strategies to stimulate consumption, when the demand exceed supply it will lead to increased price among the society. So the inflation rate will increase.

Question 3

Manufacturers continue to seek flexible health care options to reduce their costs. Manufacturing businesses recognize that providing health care coverage is a necessity for them to remain competitive in attracting talent and maintaining a healthy, stable workforce. By instituting health care plan will help companies to maintain employees. It’s a positive thing for manufacturing base. However, the raising corporate taxes means a significant decrease in corporates ‘profits. Corporates may be unwilling to pay this taxes if they see little margins.

Being a member in ASEAN means all goods can flow across ASEAN countries without taxes, so it’s quite profitable for manufacturing companies to be more productive. So that manufacturing base can be improved. However, in ASEAN, companies may encounter more competitors, lots of cheap products (that country has comparative advantage in producing that kind of product) may have a crash on domestic manufacturing base. But in the global perspective, being a member in ASEAN can increase that country’s global influence and make the manufactured products more competitive. So it really depends on all other factors and global environment.