Whither Protectionist Measures?

by Patrick Liew on March 29, 2018

The recent proposed protectionist measures by the US and China raise many potential challenges for not only both countries but also for the world at large.

Currently, both countries are posturing to make their points, negotiate from a presupposed position of strength, and fight for their own interests.

1. While leaders on both sides should have calibrated their moves, however, there is a possibility of misjudgment and it may exacerbate bilateral tensions and other challenges.

If they do not maintain their cool and should protectionist measures escalate, it may result in a lose-lose-lose outcomes for all parties.

2. A tit-for-tat series of reactions may eventually put both countries in a gridlock.

Or worse, it may result in erosion of economic and trading partnership, and start a trade war that may cause protracted geopolitical conflicts.

3. For example, the Smoot-Hawkes Tariff in 1930 was enacted to protect US farmers from agricultural imports from Europe.

By the time the bill made it to Congress, additional tariffs were initiated.

Those tariffs caused many countries to retaliate, resulting in a trade war that deepened the extended severity of the Great Depression.

4. Protectionist measures will increase prices of targeted imported products.

Consumers may have to pay more for their purchases and have less choices, resulting in a decrease in their satisfaction levels.

5. The increase in costs may have a multiplier effect on related industries and eventually, the economy as a whole.

Manufacturers that are dependent on imported goods and raw materials will have to pay more for them.

That will have a negative effect on their competitive edge, productivity and profits.

6. Inflation may drive the Federal Reserve to increase the interest rates and that may have a dampening effect on business growth, and economic welfare and stability.

7. Manufacturers may even relocate their operations to countries that are not affected by the protectionist measures, leading to a loss of jobs and taxes.

8. If those operations are moved to countries with relatively low corporate governance standards, it may result in abuses of labor and destruction of the environment.

9. Once protectionist measures are adopted, it may be difficult to remove them as it will cause hardships on companies that are reliant on such measures to protect them.

10. Over time, these measures may prevent both countries from optimizing their specialization levels and affect efficient allocations of limited resources and thus, put downward pressures on their economies.

11. Exporters that are hit by protectionist measures may have to market and channel their goods to other countries.

The surge in such imported goods may trigger affected countries to introduce their own protectionist measures.

In short, protectionist measures can potentially cause social unrests and hardships, and affect economic growth.

Go4It!

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Uber-Grab Deal: Boon or Bane?

by Patrick Liew on March 29, 2018

Recently, a fake news that Temasek has made substantial losses when Uber sold its operation to Grab has gone viral.

Many have unwittingly believed in the fake news and shared it with their friends.

1. To put the record straight, a wholly-owned subsidiary of Temasek was an early investor of Grab.

Since then, Grab’s market capitalization should have increased.

https://www.todayonline.com/singapore/taxi-booking-app-gets-least-s125m-temasek-unit

2. From the news release, “Grab will integrate Uber’s ridesharing and food delivery business in the region into Grab’s existing multi-modal transportation and fintech platform.

“With the combined business, Grab will drive towards becoming the #1 online-to-offline (O2O) mobile platform in Southeast Asia and a major player in food delivery.”

https://www.grab.com/sg/press/business/grab-merges-with-uber-in-southeast-asia/

Grab is poised to be a major contender for the Fintech market, starting with providing financial services through GrabPay and moving into providing micro-loans and insurance products.

The Uber-Grab deal will bode well for Temasek’s investment in Grab.

2. While there’s no detailed account of the size of the investment and details of the proposed Uber-Grab deal, Uber has not gone belly up.

Through the deal, Uber will own 27.5 % of Grab.

That share would translate to $1.6 billion as Grab was recently valued at $6 billion according to CB Insights.

Not a bad deal because Uber claimed to have invested about $700 million in Southeast Asia over the past five years.

https://www.channelnewsasia.com/news/singapore/grab-uber-deal-competition-watchdog-not-notified-10077256

3. As a result of the Uber-Grab deal, the two companies will not fight each other in the future and as a result, cause more losses.

There’ll be greater economy of scale, resulting in cost savings and improvement in efficiency.

4. Uber will be in a better position to focus on its strengths and in markets where it has dominance or can dominate in due time, including Japan and India.

https://www.google.com.sg/amp/s/venturebeat.com/2018/03/26/ubers-merger-with-grab-in-southeast-asia-lets-it-focus-on-core-markets-elsewhere/amp/

5. Uber will also be able to clean up its balance sheet, expedite its plan to list the company, and potentially raise more funds to strengthen its growth.

https://www.gov.sg/sgdi/ministries?agency_subtype=dept&agency_id=0000004564

6. According to Uber CEO Dara Khosrowshahi: “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.

“This transaction now puts us in a position to compete with real focus and weight in the core markets where we operate, while giving us valuable and growing equity stakes in a number of big and important markets where we don’t.”

7. The Uber-Grab deal should bode well for both Uber and Grab and investors of both companies, including Temasek and GIC.

8. Moving forward, the Uber-Grab deal will open up new markets and opportunities for both companies.

9. In the words of columnist Christopher Tan, “The implications extend beyond the point-to-point transport industry. Card companies such as EZ Link and Nets should also be worried, as Grab’s GrabPay mobile payment platform grows in coverage.

“Ditto food delivery players. As well as the emerging fintech industry, which Grab has already dipped its toes into.

“Armed with powerful data garnered in the five years it has been a ride-hailing rival to Uber, Grab is poised to be a serious contender in the financial services arena. Its two-week-old venture with Japan’s Credit Saison to provide micro loans is just a start.

“In the words of a Grab insider, “our new businesses will be 100 times larger than ride-hailing”.”

http://www.straitstimes.com/singapore/transport/grab-uber-a-deal-which-will-disrupt-more-than-the-ride-sharing-industry

Go4It!

I hope this message will find a place in your heart.

By the way, I have also recorded other reflections.

Please ‘Like’ me on https://m.facebook.com/patrickliewsg

Please visit my website, http://www.patrickliew.net

Follow me on:

https://www.quora.com/profile/Patrick-Liew-5

Visit my Inspiration blog at https://liewinspiration.wordpress.com/

For my opinions on social affairs, please visit my Transformation blog at http://hsrpatrickliew.wordpress.com/

Let’s connect on instagram.com/patrickliewsg
– via @patrickliewsg

https://twitter.com/patrickliew77

– via @patrickliew77

My LinkedIn

http://www.linkedin.com/in/liewpatrick

My Quora https://www.quora.com/profile/Patrick-Liew-5?share=24abf3c1&srid=uL2Gz

Please read my reflections and continue to teach me.

Life is FUNtastic!

{ Comments on this entry are closed }

Uber-Grab Deal: Boon or Bane?

March 28, 2018

Uber-Grab Deal: Boon or Bane? Recently, a fake news that Temasek has made substantial losses when Uber sold its operation to Grab has gone viral. Many have unwittingly believed in the fake news and shared it with their friends. 1. To put the record straight, a wholly-owned subsidiary of Temasek was an early investor of […]

Read the full article →

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My Wishlist For Budget 2018

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