The Asian Productivity Organisation (APO) in Japan has a small glossary of words used when talking about productivity. It includes a definition of the 5 Cs (or 5 Ss) that many organisations in Thailand have adopted.

[Link to glossary]

Here is the introduction to their glossary which stresses taking a broad and open-minded view of what productivity is:

INTRODUCTION

The word "productivity" relates to the "output" (of goods and services produced) in relation to the quantity of resources or inputs used to produce them. Some examples of input are labor, materials, machinery, and energy. Productivity is basically concerned with how efficiently the output of goods and services is produced and the value created by the production process. In other words, if a product is made at the lowest possible cost with high quality and can be sold competitively on the market at a good price, then its productivity level is considered high.

The productivity concept is often expressed with this simple equation:

Productivity = Output/Input

As the equation shows, the objective of productivity is to maximize output and minimize input. Productivity can also be defined as the sum of efficiency and effectiveness. In other words, it can be stated as:

Productivity = Efficiency + Effectiveness

However, productivity should not be viewed merely as a narrow technical concept. It has many different facets too. The philosophical aspect of productivity could be explained with the following statement:

Productivity is above all, an attitude of mind. It seeks to continually improve what already exists. It is based on the belief that one can do things better today than yesterday and better tomorrow than today.

Indeed, the concept of productivity has evolved over the years to represent more than an efficiency ratio. From cost and quality issues, its scope has expanded to embrace social concerns, such as job creation and security, poverty alleviation, resource conservation, social responsibility, to business excellence, governance, and environmental protection (referred to as Green Productivity by APO). Today, there is also reference to productivity as ‘social productivity”, and the concept of “knowledge productivity” is also evolving. Such is the dynamic nature of productivity!

There are many different terminologies and acronyms in use for making references to these productivity concepts, tools, techniques, and practices. This P-Glossary is an attempt to explain these terminologies in simple language for a better understanding of productivity and related activities. The P-Glossary acknowledges the contribution made to evolution of the definitions by the various experts, authorities, references, and sources, too many to be singled out here. Please click the topics to view the definitions or to print.

Extensive definitions of economics terminology with quite detailed information and references to the economics literature.

[Link to glossary]

Defines many economics terms and points to relevant resources at the OECD.

[Link to glossary]

This glossary includes both very common terms such as "exchange rate" and "emerging market" as well as more specialised IMF terms such as "ESAF - Enhanced Structural Adjustment Facility."

[Link to glossary]

Brad DeLong professor economics at UC Berkeley writes about the long-term relation between good central bank governance and healthy economies. Central bank independence is an important part of the equation:

IT HAS been 20 years since Alan Greenspan became chairman of the US Federal Reserve. The years since then have seen the fastest global average income growth rate of any generation, as well as remarkably few outbreaks of mass unemployment-causing deflation or wealth-destroying inflation. Only Japan's lost decade-and-a-half and the hardships of the transition from communism count as true macroeconomic catastrophes of a magnitude that was depressingly common in earlier decades. This "great moderation" was not anticipated when Greenspan took office.

US fiscal policy was then thoroughly deranged - much more so than it is now. India appeared mired in stagnation. China was growing, but median living standards were not clearly in excess of those of China's so-called "golden years" of the early 1950s, after land redistribution and before forced collectivisation turned the peasantry into serfs. European unemployment had just taken another large upward leap, and the "socialist" countries were so incompatible with rational economic development that their political systems would collapse within two years. Latin America was stuck in its own lost decade after the debt crisis at the start of the 1980s.

Of course, the years since 1987 have not been without big macroeconomic shocks. America's stock market plummeted for technical reasons that year. Saddam Hussein's invasion of Kuwait in 1991 shocked the world oil market. Europe's fixed exchange rate mechanism collapsed in 1992. The rest of the decade was punctuated by the Mexican peso crisis of 1994, the east Asian crisis of 1997-98, and troubles in Brazil, Turkey, and elsewhere, and the new millennium began with the collapse of the dotcom bubble in 2000 and the economic fallout from the terrorist attacks of September 11 2001.

So far, none of these events - aside from Japan starting in the early 1990s and the failures of transition in the lands east of Poland - has caused a prolonged crisis. Economists have proposed three explanations for why macroeconomic catastrophes have not caused more human suffering over the past generation. First, some economists argue that we have just been lucky, because there has been no structural change that has made the world economy more resilient.

Second, central bankers have finally learned how to do their jobs. Before 1985, according to this theory, central bankers switched their objectives from year to year. One year, they might seek to control inflation, but the previous year they sought to reduce unemployment, and next year they might try to lower the government's debt refinancing costs, and the year after that they might worry about keeping the exchange rate at whatever value their political masters preferred.

The lack of far-sighted decision-making on the part of central bankers meant that economic policy lurched from stop to go; to accelerate to slow down. When added to the normal shocks that afflict the world economy, this source of destabilising volatility created the unstable world before 1987 that led many to wonder why somebody like Greenspan would want the job.

The final explanation is that financial markets have calmed down. Today, the smart money in financial markets takes a long-term view that asset prices are for the most part rational expectations of discounted future fundamental values. Before 1985, by contrast, financial markets were overwhelmingly dominated by the herd behaviour of short-term traders, people who sought not to identify fundamentals, but to predict what average opinion would expect average opinion to be, and to predict it before average opinion did.

When I examine these issues, I see no evidence in favour of the first theory. Our luck has not been good since 1985. On the contrary, I think our luck - measured by the magnitude of the private sector and other shocks that have hit the global economy - has, in fact, been relatively bad. Nor do I see any evidence at all in favour of the third explanation. It would be nice if our financial markets were more rational than those of previous generations. But I don't see any institutional changes that have made them so.

So my guess is that we would be well-advised to put our money on the theory that our central bankers today are more skilled, more far-sighted, and less prone to either short-sightedly jerking themselves around or being jerked around by political masters who unpredictably change the objectives they are supposed to pursue year after year. Long may this state of affairs continue.

Apple outsources the manufacture of the iPod device to several different Asian companies. To get the big picture of the whole global supply chain behind the iPod, you have to look at all the companies involved from those making simple parts or complicated components like hard drives right up to final assembly:

"...let us look at the production process as a sequence of steps... At each step, inputs like computer chips and a bare circuit board are converted into outputs like an assembled circuit board. The difference between the cost of the inputs and the value of the outputs is the “value added” at that step, which can then be attributed to the country where that value was added....

"...The profit margin on generic parts like nuts and bolts is very low, since these items are produced in intensely competitive industries and can be manufactured anywhere. Hence, they add little to the final value of the iPod. More specialized parts, like the hard drives and controller chips, have much higher value added....

"...The researchers estimated that $163 of the iPod’s $299 retail value ... was captured by American companies and workers, breaking it down to $75 for distribution and retail costs, $80 to Apple, and $8 to various domestic component makers. Japan contributed about $26 to the value added (mostly via the Toshiba disk drive), while Korea contributed less than $1...

"...The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain." (Source: Economist's View quoting from the New York Times)

Martin Wolf is the chief economics commentator at the Financial Times [Bio and selection of articles]. Recently, he has been addressing the trade imbalances between China and the US, whether they pose a threat and how to address them. This is the latest instalment in a series [previous instalment]:

"Is it possible to take advantage of the financial brain's abilities, while limiting its capacity for irresponsible, short-sighted and destructive behaviour? What are the policy issues that we would be examining if we wanted to do so.

First, for essentially political reasons, we must re-examine the taxation of income and wealth.

Second, we should recognise that emerging and small economies have to manage their involvement with the global financial system cautiously.

Third, we must also realise that the mixture of floating exchange rates with a number of important pegged rates is creating huge distortions.

Fourth, we must look more closely at how monetary policy interacts with the financial sector and asset prices.

Fifth, we should also look once again at how well vast rewards are aligned with risk in financial markets.

Finally, we must encourage regulatory and fiscal authorities to achieve higher levels of co-ordination.

We will have to live with today’s financial markets, since policymakers would seek to curtail them only after a disaster. Even their critics should fear such a disaster. The task is, instead, to exploit the many benefits, while managing the risks. This will never be done perfectly. But it can be done at least tolerably well. The alternative is too awful to consider." (Source: Dani Rodrick's Blog)

UC Berkeley economist Barry Eichengreen writes on the current risk of a crisis ten years after the 1997 crisis, finding parallels to the current Asian situation in American economic history. He warns that any future crisis would likely be fundamentally different from the 1997 crisis:

"Ten years after the 1997 crisis, Asia is booming again. It is still at risk but any new crisis will take a different form. The trigger would be a sharp drop in asset valuations that causes China’s investment boom to bust."

The Board of Investment of the Thai Government publishes online indicators of private investment in Thailand. There are also exports and imports broken out by product classification as well as an interesting overview of industrial estates in Thailand.

Chang Noi reflects on the impact (or lack of impact) on local rural Thai politics of the recent court decision to disband of Thai Rak Thai:

...All politics are local politics. People like this kamnan have been the bedrock of Thai politics for the last two decades. They were around before Thai Rak Thai was invented. They are still around after Thai Rak Thai has been destroyed.

Even though Thai Rak Thai has gone, the local politicians who made up the party are still there. Some 260 former MPs were not banned from politics. The 111 banned executives have brothers, wives, sons, daughters, or “our people” who can stand in their stead. If the generals block the 260 from joining another party, they have brothers, wives, sons, daughters and allies too.

If you look at Thai politics from top down, the disappearance of Thai Rak Thai might seem to open up space for its biggest rival, the Democrats. But if you look at those politics from the bottom up – from the point-of-view of this kamnan “choosing” his party – then it looks quite different....

World Economic Forum on East Asia 2007

The World Economic Forum on East Asia is underway at Singapore this week. Of special reading interest are the interviews in Issues in Depth and Briefing Material that provides a summary of key topics: Asian leadership, risk management, sustainable growth, and competitiveness. Thailand's Finance Minister Chalongphob Sussangkarn participated in the panel Global Risks: Managing Threats to Asia’s Prosperity :

"...One of the most pressing [issues] is that of global financing, according to Tharman Shanmugaratnam, Minister for Education and Second Minister for Finance of Singapore. There is a big build-up in global finances and risks which is fuelling fears of a big shock to come. Although everything seems fine now, there are bubbles everywhere – in commodities and even in property markets, he said. It is no longer a matter of the US spending less, but of “vicious unknowns,” and it will be difficult to see how they will play out in the market because the linkages now are more complex than before. Emerging markets must have shock absorbers, requiring astute management and a combination of policies to overcome it. Like the earlier Asian financial crisis, it is all unpredictable.

"Agreeing, Chalongphob Sussangkarn, Minister of Finance of Thailand, said something must be done now to prepare for the ‘unwinding’ tail of the current global situation. He, and the other panellists, agreed that both government and corporate sectors must work together to develop the right policies and new leadership to tackle the new challenges.

Bangkok Post Article June 18, 2007

Credit card debt under control

The volume of card usage rose 19% year-on-year to 68 billion transactions in April, compared with 21% year-on-year growth to 57 billion baht in the same period last year. Outstanding loans grew 15% year-on-year to 170 billion, compared with 20% year-on-year growth to 147 billion baht in 2006.

The Bank for International Settlements said in its latest report that Asia's rapidly growing credit card business could prove dangerous due to its short cycle, although it added that Thailand's card market was developing at a more manageable pace than in some other countries.

Tarisa Watanagase, the Bank of Thailand governor, said that credit card lending had slowed with outstanding loans at just 2-3% of total outstanding debt.

"The central bank prepared a long time ago to cushion the effects of credit card growth on the economy, by issuing regulatory measures," she said.

The central bank set the minimum salary for credit card applicants at 15,000 baht per month, from 10,000 baht in 2002, and raised the monthly installment to 10% of the outstanding balance from 5% in March 2004.

Kasikorn Research Center expected outstanding credit to rise following the central bank's increase in monthly instalments and interest rates from 18% to 20%, which would affect the repayment ability of some debtors. It said the decline in outstanding credit cards was in line with the banking system, which recorded 0.26% growth of net loans after provisions, totalling 13 billion baht in April.

Recent episodes of credit card distress in Asia

Asian economies have experienced sharp boom and bust cycles in credit card lending since 1998. Credit card usage and outstanding balances have "increased three- to six-fold between 1998 and 2005." Three examples of boom-bust cycles occurred in the economies of Hong Kong (2002), South Korea (2003), and Taiwan (2006). Credit card usage in Malaysia, Thailand, and Singapore "has shown a more steady pattern of growth." (Bangkok Post, 12-06-07, B1)

Abstract: Not only has credit card lending in Asia grown rapidly, but also several episodes of sharp booms and busts have been experienced, posing new risks to financial stability. Policymakers need to learn more about the risks arising from this type of consumer lending and respond with appropriate prudential measures.

Chalongphob Sussangkarn, Pakorn Vichyanond (2007) "Ten Years After the Financial Crisis in Thailand: What Has Been Learned or Not Learned?" Asian Economic Policy Review 2 (1), 100–118. [html, pdf, comment1, comment2]

Current Finance Minister Chalongphob Sussangkarn has co-authored an academic paper on developments in the Thai economy during the ten years since the 1997 economic crisis. The paper is freely downloadable at the academic journal Asian Economic Policy Review (June 2007).

Abstract: "The 1997 financial crisis provided many lessons about the weaknesses of Thailand's economic and financial system before the crisis, weaknesses that eventually led to the crisis. Since then, these lessons have led to many economic and financial reforms. This paper reviews the lessons and reforms that have been carried out. These include improvements to the data system needed for adequate macroeconomic monitoring, changes to the macroeconomic management framework and monetary policy regime, and various aspects of financial sector reforms. This paper also indicates the lessons that might not yet have been sufficiently learned and new risks to future economic stability. These include political interference in financial institutions, leading to inappropriate or excessive lending, and lack of transparency in fiscal liabilities that could mislead macroeconomic management." (Source)

A Chang Noi article "A prophet on Thailand’s political future" (19-02-07) that discusses Thai political scientist Anek Laothamatas is also pertinent to this topic:

"In his book, Thaksina-prachaniyom (Thaksin-style populism) Anek worries that Thaksin could be a signal of even worse to come. Thaksin gave people things they wanted, and was rewarded with massive support at the polls. Even if Thaksin and TRT vanish from Thailand’s political map, this populism will stay. Other leaders will copy it. Once one party offers people the moon, then its rivals must offer the moon and the stars. But Anek fears the risks are massive. The people become dependent on state handouts. The bureaucracy is politicized. The economy dives into the same kind of economic crises as populist Latin America. Society is sharply divided between the lower-class who benefit from populism, and the middle and upper classes who have to pay for it."

Professor of economics Brad DeLong at UC Berkeley has an insightful analysis of the situation Asian economies face vis-a-vis the West:

"...As for Asia's governments, with China in the lead, the US remains the importer of last resort. The key to their development strategy is to put migrants from the countryside to work making exports destined for the US market. They doubt that an alternative development strategy based on boosting domestic demand would succeed. Thus, the real values of their currencies must be kept low relative to the dollar, which means that their reserves now invested in the US must continue to grow.

Someday, of course, this will come to an end. Perhaps Asian real currency values will rise sharply as a result of a burst of inflation in Asia. Perhaps the dollar will collapse and there will be a burst of inflation in the US as the Federal Reserve Board decides that temporarily abandoning its price-level peg is a lesser evil than the unemployment fallout that will result from a dollar collapse and interest rate spike.

A government that buys political risk insurance by placing an ever-growing stock of reserve assets in dollar securities guards against some dangers. But it is exposed to other risks, especially if it confines its investments to that slice of the asset pool, US Treasury and high-grade corporate bonds, that US politicians are comfortable having foreigners own. Nominal bonds are not well hedged against inflation and, over the long run, assets that are claims to cash without effective control are highly vulnerable to financial vultures. Prudent foreign government and private investors would find some way to diversify.

"But how? Buying other countries' bonds would mean abandoning the goal of keeping real currency values low against the dollar. Buying up whole enterprises triggers angry speeches in the US Congress. What are needed are intermediary organizations that will grant a measure of control to foreigners, allow diversification across a wider range of US-located assets, and yet still appear 100 percent American to US politicians...(Source: Taipei Times, Brad DeLong Blog, Project Syndicate version not up yet)