Global Economic News

The Collapse in Asia Deepens

Jan. 6 (EIRNS)—The devastating pace of the global collapse is hitting the major Asian economies with full force. Some data from today:

* India: Federation of Indian Export Organizations head A. Sakthivel said that 10 million jobs could be lost by March, noting that "Exporters don't have orders beyond January"—a fact that reflects conditions globally, with trade credit unavailable. Textiles and jewelry are the main victims in India, although the auto collapse is taking its toll, with Tata and Hyundai cutting back.

* Japan: Toyota will close 12 factories for 11 days in February and March. U.S. sales for both Toyota and Honda U.S. fell by a third in December. Global sales for Toyota fell 15% for 2008, Honda 7.9%, Nissan 18%. Overall Japanese domestic auto sales fell 5% in December, with a 28-year low for the year. (Overall sales in the U.S. were down 36% in December over last year.)

* South Korea: Hyundai's U.S. sales fell 48% for the month. The company announced a program to buy back purchased cars within 12 months if the buyer experiences an "involuntary loss of income," e.g., looses a job.

* Singapore: The fourth major shipping company has filed for bankruptcy protection. Armada (Singapore) Pte filed for protection from creditors in Singapore and the U.S., after a 92% plunge in commodity shipping rates last year. Customers are defaulting on contracts as demand for iron ore used to make steel collapses, Armanda's statement said.

Aircraft Orders Falling Out of the Sky

Jan. 9 (EIRNS)—China may cancel as many as 25% of all aircraft orders in the world this year, and many other nations will be making cancellations as well. The combination of declining airline travel and, even more, inability of all but the largest airlines to get financing for the planes they've ordered, is causing orders to disappear, hitting both Boeing and Airbus.

On Jan. 7, the head of China's Civil Aviation Authority, Yang Guoqing, issued a statement, "It is the duty of airlines to cut capacity, defer plane orders, return leased aircraft, and ground or sell older planes." Up to 200 aircraft deliveries, out of 241 due in China this year, could be gone right there.

Boeing's new orders had already fallen by half in 2008, and although it and Airbus have booked orders for 7,500 aircraft—ten years' worth of production—it is those orders that are going to be hit by the cancellations.

As for financing, the three largest aircraft financing organizations are ILFC (owned by AIG), GCAP (owned by GE), and RBS Aviation (owned by the Royal Bank of Scotland)—all of whose parent companies are bankrupt and unable to issue further financial instruments.

The aerospace industry employs 497,000 workers in the United States—down from 950,000 in 1990—and 113,000 in Britain, for example. Aerospace represents the second-largest machine-tool reserve and capacity in the U.S. economy, half the size of the auto machine-tool sector, and aerospace machine capacity is generally newer and more advanced than auto.

Indonesia $10 Billion Infrastructure 'on Government's Shoulders'

Jan. 5 (EIRNS)—Indonesian Finance Minister Sri Mulyani Indrawati announced today that $10 billion has been allocated for infrastructure projects to begin immediately, developing ports, turnpikes, railways, bridges, irrigation systems, etc. Bambang Susantono, a deputy to Sri Mulyani, noted that "funding for infrastructure projects comes from long-term investment, which may be difficult to obtain during an economic downturn, as many investors prefer quick-yielding investments. Therefore, it rests on the shoulders of government to push these projects."

Sri Mulyani said that about one-fourth of the funds will be channeled to local administrations to strengthen their capacity to implement infrastructure projects.

The government has estimated that about $65 billion will be needed in new infrastructure investment in the next three years. It estimates that next year's infrastructure projects would be able to absorb up to 1.1 million new workers. Millions of Indonesians are facing layoffs from the global collapse.