Damage caused by currency fluctuation

Here is a good example of the damage caused by currency fluctuation. It is difficult for a business to make long term plans that affect investments and employment of workers.

http://www.cnbc.com//id/45431195

It takes a few years to plan and set up a factory and a longer period to recover the investments. The profitability of this business depends on predictability of the revenue and cost. If the cost can fluctuate wildly due to currency rates, it will be difficult for any business to invest.

It is a good idea to have floating exchange rates to reflect the economic fundamentals of a country. However, the wild swings, caused by large speculators such as hedge funds, are causing tremendous damages, beyond their useful purpose. There must be some way of preventing these big speculations. Perhaps, the proposal to impose a financial trading tax will be useful. Apart from preventing the wild speculation, it will also raise revenue for the government.

Risk of investing overseas

I read a newspaper article about a British mining company having a dispute with an Indonesian company on a joint venture after discovering coal in their land. This incident shows the risk of investing overseas, where the law may not be clear and the partner may not be reliable (and I am not referring to this specific incident).

The same risk applies to a small investor who wishes to buy shares and properties overseas. You may be subject to risks and other expenses that you are not aware of. It is better to invest in local shares (and let them take care of investing overseas). At least, you know what the law in your own country.

There is still the risk that the management of the company that you have invested in, may be venturing overseas and be subject to the same type of risks. At least, they are better equipped to handle these legal and other issues - compared to an individual. In the same vein, it is better to avoid companies that are venturing overseas, without the experience. I have read stories of big listed companies involved in million dollar disputes over contracts with foreign parties.

Labor unrest in China

Factories are cutting the overtime that workers depend on to supplement their modest base salaries, after a drop in overseas orders.

According to CLB, the average basic wage for electronic workers is about RMB1,500 ($236) a month, but rises to RMB2,500 with overtime. “Their basic wage is never enough on its own without overtime,” Mr Crothall said.

http://www.cnbc.com//id/45422953 


My comment: The cost of living should be in line with wages. It is risky to ask a worker to depend on overtime work (which depends on global growth) to earn enough to pay the bills. If the cost of living is kept within control, this type of risky situation should not arise. The greed of the rich is pushing up the cost of living - and this is happening all over the world!

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Difficult to operate a small business

Dear Mr Tan,
I am just starting a new business of importing some baby products. I have done some market research and was intending to send a proposal to NTUC Fairprice to consider. Can you advice - is this the right way to go about doing it?

I have also seen in some forums, it is not easy as a new comer who has no connection or do not know anyone inside beforehand. I really hope you could share with me how I should approach them? Or who should I contact?

REPLY
Three years ago, I approached Fairprice to sell some of my products. They required me to pay a joining fee of $1,000 and to go through quite troublesome procedures. They also want to take a big cut from the sales amount and require me to handle the delivery to all their outlets and collect back the unsold stock. I abandoned the idea. (Note: connection does not count -as I knew the managers. Only money count!).

It is not easy to sell products to these big retailers. They want to charge you a lot of money before you make the first dollar. Their payment terms are also quite bad. (I had to wait one year before collecting payment for the sale of my books though a book distributor!).

If you wish to go into this business, make sure that it is a big business, otherwise, the costs will kill the business.

Currency speculation cause damage to the economy

This article explains the damage that currency speculation is causing to the economy of many countries. The speculation is being promoted by the financial sector, i.e. the hedge funds, banks and other financial institutions. It is time to find ways to stop the harmful speculation.

http://singaporemind.blogspot.com/2011/11/world-of-wild-fiat-currency.html

Population and public transport

Alex Au has written a good article. I like the point about feeder service taking 15 minutes to arrive. This is the weak point of our transport system. He also question about the need to increase our population to 6 million. I agree that we should not increase the population, as Singapore is already too crowded and the facilities are inadequate.

http://yawningbread.wordpress.com/2011/11/24/additional-public-transport-capacity-hard-to-estimate-benefit/

Visit to Sri Lanka

I have just returned from a 5 day trip to Sri Lanka. I went to Kegalle and Kandy and also took a tour of Colombo (apart from attending an insurance conference). It was a nice experience for me, to enjoy the warm hospitality and friendliness of the people of Sri Lanka.

My return flight on Sri Lankan Airlines was delayed by 10 hours. They put me up at a beach hotel quite close to the airport. Although it was inconvenient to be delayed so long, I had the chance to experience a short holiday at the beach, and to learn about the livelihood of the people in the village, which caters mainly to tourist.