Growth Attraction
Indonesian beauties, GDP growth, boosting sustainable energy, China's green finance, sustainable information governance, nature's water cycles, USA Asia wars and Geneva diplomacy 1955-1957
UPDATE: The Long Mekong Weekend edition starts with a beautiful story on the world’s fifth largest moneymaker - The Beauty Business. Asia is powering global economic growth as the poor economic choices of the Global North sends its economies backwards. China is boosting Asia’s green energy transition. The Long Mekong Weekend covers China’s green finance market and its policies, incentives, investment and opportunities. The Bank of International Settlements (BIS) releases a working paper on Information governance in sustainable finance. Scientific American provides a story on nature’s water cycles and how the world can benefit from re-establishing wetlands, bogs, flood plains and estuaries. And, the official US historian releases documents about diplomacy in Geneva from 1955-1957 during the USA’s disastrous wars in Asia. All in all, something for all in the Long Mekong Weekend, enjoy!
Indonesian D2C beauty brands build foundation for regional expansion
In 2020, Indonesian beauty marketplace Sociolla expanded to its first overseas market – Vietnam. Like in its home turf, Sociolla Vietnam offers products from global brands like Maybelline and Neutrogena as well as South Korea’s Laneige. The marketplace also stocks cosmetics from Esqa, Avoskin, and Carasun – all Indonesian brands making their international foray.
Amid the direct-to-consumer (D2C) boom in Indonesia, some brands have begun eyeing growth opportunities abroad. Regional ecommerce players like Shopee and Lazada offer international seller programs that allow for cross-border transactions.
However, while the rewards are obvious, expansion can be a daunting task.
Entering a new market is “equivalent to building your brand locally from scratch,” says Willson Cuaca, co-founder and managing partner of East Ventures. The VC firm is an investor in both Sociolla and Esqa.
“Overall, we believe it is important to be the champion in your market and focus on your core strength and market first,” he adds.
Being on Sociolla gives Indonesian beauty brands a unique advantage since its services could reduce complexities that these companies would otherwise face in Vietnam. That said, having a beauty retail partner is not the only route for overseas expansion.
Read full article here.
Reflections on the Changes in East Asia under the New Situation
Reconfiguration of the East Asian Economic Network - East Asia is the centre of gravity of the world economy and the centre of world economic growth. As the most dynamic region, East Asia is characterised by the following features: Firstly, countries have adopted a universal policy of open development, participating in regional and global industrial chains, and forming a closely interconnected industrial division of labour and supply chain among economies.
In this complex network system, different companies seek their own strategies, layouts and ways of participation according to their own structures and interests. The differences in the level of economic development, economic resources and factor endowments of the economies in the East Asia region provide room for all parties to make inclusive choices.
Secondly, the openness of the East Asian economic network is reflected in two aspects: firstly, it does not draw political lines and accommodates the participation of various economies, which is very politically inclusive; secondly, it is in the form of a regional network as a whole, which has established close connections with the world, mainly North America and Europe (EU), forming a division of labour and supply chain structure based on the different characteristics of the region. By 'regional network as a whole', we mean that the US and Europe have also embraced this regional construction of East Asia based on political inclusiveness.
Read the full article here.
How China can boost Southeast Asia’s energy transition
Southeast Asia is today one of the world’s most economically dynamic regions, maintaining annual per capita GDP growth of over 3.5% in the decade up to the pandemic, higher than the US, Japan and Europe. Rapid growth has raised living standards significantly, but also brought serious environmental problems including smog, water pollution and CO2 emissions. The main cause of these problems is the extraction and use of fossil fuels.
In recent years, the major energy-consuming countries of ASEAN (the Association of Southeast Asian Nations) – including Indonesia, Vietnam and Thailand – have made “carbon-neutral” commitments and introduced a series of policies for promoting their transition to low-carbon power. But effecting that transition is no simple matter. Difficulties in developing solar photovoltaics (PV) in Vietnam, after the sector was initially hailed as very promising, and the struggle to get renewable energy off the ground in Indonesia, highlight the complexity of implementing the transition. China, as an electricity-transition pioneer among developing countries, can be a “booster” for the transition in ASEAN by formulating stronger policy cooperation with the region, as well as sharing its own experience and lessons learned.
China’s Green Finance Market: Policies, Incentives, Investment Opportunities
China's Guidelines for Establishing the Green Financial System aim to mobilise and incentivise more capital to invest in green sectors, while restricting investment in polluting sectors. It includes a series of policy incentives, such as re-lending operations by the People’s Bank of China, specialized green guarantee programmes, interest subsides for green loan-supported projects, and the launch of a national-level green development fund.
The Guidelines encourage commercial banks and other financial institutions to evaluate their loans and the exposures to assets in high environmental risk areas, and to analyse both the credit risk and the market risk in a quantitative way. The Guidelines also spell out the important role of the securities market in financing green investment and require a unification of the domestic green bond standards. They call for the development of green insurance and trading of environmental rights, the drafting of laws and regulation introducing a mandatory pollution liability insurance system, and a gradual establishment of the mandatory environmental information disclosure system for listed companies and bond issuers.
Before the release of the Guidelines for Establishing the Green Financial System, China established green credit guidelines. In 2018, the Asset Management Association of China, supervised by China Securities Regulatory Commission issued Guidelines for Green Investment, the first official policy guidance for Chinese investors on integrating ESG factors.
Read more here.
Information governance in sustainable finance
To function properly, the financial system depends on information flows that facilitate capital allocation. These flows comprise information disclosed by companies that raise funds, collected and disseminated by third-party intermediaries such as rating agencies, and privately acquired by individual investors. The first two channels are often subject to regulations to ensure that market participants, including the less sophisticated ones, receive a baseline of reliable information. These regulations are the bedrock of information governance in financial markets.2 They are designed to contain market failures, which arise from the inability of private contracting to fully contain opportunistic behaviour in the information-production process. Instead, regulatory provisions are needed to constrain actions and, in turn, curb the incidence of conflicts of interest.
In this paper, we focus on information governance in sustainable finance, a sector of funding markets that, in addition to financial returns, considers social and environmental benefits. In such a context, the production of accurate information is particularly useful in addressing excessive pollution, which is the quintessential “tragedy of the commons”. Governments, firms and households over-pollute because they do not pay the full price of their actions. Information produced by financial- market participants can help to set the appropriate price for externalities (eg carbon taxes), thus enhancing the sustainability of economic activity.
At a high level, there are many points of contact between information governance in sustainable finance and in traditional finance. In both cases, the key objective is to ensure the integrity of corporate disclosures and of various types of external ratings. At the same time, new challenges emerge from the novelty of sustainable finance and the complexity of the information needed to gauge its impact. In this context, the main risk is greenwashing, whereby companies or raters disclose biased information for financial benefits such as business volume. By improving information quality, governance frameworks can help steer funds towards objectives consistent with sustainability preferences and policy objectives, all the while mitigating the risk of capital misallocation that can, eventually, affect financial stability (Borio et al (2022)).
Download the BIS Working paper here.
How Water Cycles Can Help Prevent Disastrous Floods and Drought
To prevent devastating droughts and floods, humanity can tune in to natural solutions to repair water cycles that human development has disrupted. Broadly speaking, the detectives are discovering that water wants the return of its slow phases—wetlands, floodplains, grasslands, forests and meadows—that human development has eradicated. People have destroyed 87% of the world’s wetlands since 17002, dammed almost two-thirds of the world’s largest rivers3, and doubled the area covered by cities since 19924. All these have drastically altered the water cycle. The water detectives’ projects—part of a global ‘slow water’ movement—all restore space for water to slow on land so it can move underground and repair the crucial surface–groundwater connection.
Although the uses of slow-water approaches are unique to each place, they all reflect a willingness to work with local landscapes, climates and cultures rather than try to control or change them. Slow water is distributed throughout the landscape, not centralized. For instance, wetlands and floodplains are scattered across a watershed—an area of land drained by a river and its tributaries—in contrast to a dam and giant reservoir. Around the globe, water detectives are beginning to scale up these projects.
For most of California’s state history, groundwater and surface water have been treated as separate resources from both a legal and regulatory perspective. But physically they are linked—by gravity and hydraulic pressure. When river levels run high and spill over into wetlands and floodplains, the flow slows down and seeps underground, raising the water table. Later, that groundwater feeds wetlands, springs and streams from below. “It is hydrologically ridiculous to treat groundwater and surface water differently,” says Kiparsky. “That is as non-circular as you can get.”
That legal separation has resulted in overtaxing California’s water supply. The state’s massive water infrastructure—huge dams, levees and long-distance aqueducts—prevents the great rivers of the Central Valley region from occupying their floodplains and naturally recharging groundwater. Plus, when surface water is scarce, people aggressively pump groundwater. But because the two are connected, that further decreases surface water. This depletion means that people have to drill deeper, more expensive wells to reach water. It can also collapse the land, destroying infrastructure. And pumping groundwater near the ocean can allow seawater to push salt inland.
Read full article here.
The USA’s East and Southeast Asian Wars - 1955-1957 Geneva Talks
This microfiche supplement to Foreign Relations of the United States, 1955–1957, Volume III, China, presents documents concerning the ambassadorial talks between representatives of the United States and the People’s Republic of China held in Geneva from August 1955 through December 1957. It includes all the reports and comments on the meetings from Ambassador U. Alexis Johnson, the U.S. representative at the talks, instructions sent to him by the Department, related mes- sages exchanged between Geneva and the Department, and a series of official-informal letters between Johnson and the Director of the Office of Chinese Affairs. The documents are arranged in chronological order.
Most of the documents are in the Department of State central files, chiefly the 611.93 file, which includes almost all the documenta- tion directly related to the talks. The official-informal letters are in the Geneva Talks Files, Lot 72D415, which consists of files relating to the ambassadorial talks at Geneva and Warsaw for the years 1955–1968. These files were maintained by the Office of Chinese Affairs, which had responsibility for drafting and coordinating the clearance of the Department’s instructions to Ambassador Johnson.
A small proportion of the documents presented in this supplement and additional documents relating to the ambassadorial talks, includ- ing some from the Dwight D. Eisenhower Library, are printed in For- eign Relations, 1955–1957, Volumes II and III. The diplomatic exchanges which led to the initiation of the talks are documented in Volume II. Conversations with leaders or diplomatic representatives of other governments concerning the talks are documented in Volume III. The documents included both in Volume III and in the supplement con- sist primarily of the brief, summary reports that Johnson sent to the Department immediately after each meeting in advance of his detailed reports, which are presented in the supplement.
Download the full volume here.