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Asia’s Financial Connection with the World

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As economies in East Asia and the Pacific (EAP) have developed, they have also become important in international financial transactions, both as sources and destinations of cross-border bank lending, foreign direct investment (FDI), and portfolio investments. But, as we document in a new paper (Didier, Llovet, and Schmukler 2017), the composition of these financial connections has been changing in recent years on at least two fronts: (i) the partners with which EAP countries interact, and (ii) the type of financial transactions conducted.

Traditionally, economies in the North (the Group of 7 countries, excluding Japan, and 15 Western European economies) have been the most important counterparts of the EAP’s inter-regional financial transactions. Although economies in the North still capture the bulk of the region’s inward and outward investments, the EAP’s connectivity with the South (non-EAP and non-North economies) has grown relatively faster and has become more relevant for the EAP. For example, during 2003–2014, investments to and from the South grew at an annual average rate of 23% for portfolio investments, 30% for syndicated loans, 86% for mergers and acquisitions, and 9% for greenfield investments. In contrast, cross-border investments involving North economies grew at an annual average rate of 10% for portfolio investments, 14% for syndicated loans, and 17% for mergers and acquisitions; and decreased at a rate of 3% in the case of greenfield investments. The rising importance of the South for the EAP can be traced to expansions not only in the value of financial connections (the intensive margin) but also in the number of active connections (the extensive margin).

EAP countries also have strong connections among themselves. That is, EAP economies are important sources and destinations for intra-EAP cross-border financial investments. Although EAP economies are more financially integrated with global markets than with regional ones, intra-regional investments are actually larger than those with the South, and, in the case of FDI, they are as large as those with the North. Moreover, the EAP stands as the most regionally integrated region in both the intensive and extensive margins when compared to Latin America and the Caribbean, Europe and Central Asia, South Asia, Sub-Saharan Africa, and the Middle East and North Africa.

Another notable feature of the EAP’s international financial integration is the differences in how it connects with different types of countries. EAP economies are relatively more connected intra-regionally and with the South via FDI, whereas they are more connected with the North in arm’s length investments (portfolio investments and syndicated loans). These existing differences in financial integration patterns across investment types can be related to the relatively less developed financial markets in the EAP and the South vis-à-vis those in the North.

Differences in the degree of financial and economic development can also help explain the heterogeneous financial integration patterns across EAP economies. The more developed EAP economies (as measured by their gross domestic product per capita) integrate in a way that is similar to that of the North (having a larger role in the EAP’s arm’s length investments), whereas less developed EAP economies integrate similarly to economies in the South (having a larger participation in the EAP’s FDI financing). For example, during 2003–2014, developed EAP economies accounted on average for 92% of the EAP’s inter-regional syndicated loans, whereas this share was only 47% for greenfield investments. The rest was captured by the less developed EAP economies. Similarly, the more developed EAP economies accounted for 71% of the EAP’s intra-regional portfolio investments but only 49% of intra-regional greenfield investments.

The recent trends come with benefits but also possible risks. On the one hand, the EAP can benefit from greater financial diversification, which reduces the concentration and dependence on North economies. Moreover, as far as economies in the region are more familiar with the institutions and cultures of other EAP economies, greater regionalization can foster financial inclusion by serving smaller and less informationally transparent segments. On the other hand, the EAP could also bring imported volatility from the newly connected economies. In addition, increasing regionalization can imply a higher exposure of an economy to shocks originating within the region and a faster spread of foreign shocks once they hit an economy in the region.

Furthermore, to the extent that financial institutions in the South and the EAP are less tightly regulated than those in the North, the latest developments can negatively affect the stability of the overall financial system. Therefore, a call for more intensive cross-border cooperation would be desirable for global financial stability.

Differences across financial instruments suggest that as the EAP continues to grow and become richer, its patterns of financial integration will more closely resemble those of the North, with less relative emphasis on FDI and more on portfolio and bank investments. Although this type of arm’s length financing arises naturally in more developed countries and is a conduit for more sophisticated transactions, it can have an impact on financial stability as FDI is perceived to be more resilient when negative shocks occur.

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About the Author 

This article was written by , and  of Asian Pathways, blog of the Asian Development Bank Institute which was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in the Asia-Pacific region.

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Entrepreneurship

The 6 Habits of Amazing Leaders

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Great leaders all seem to have this commanding and magnetic force about them that follows them in and out of each room they enter. It’s that something that you can’t quite put your finger on. Maybe it’s charisma, ambition, drive or personality. In many ways, it’s probably a little bit of all those things, which is why great leaders always seem to be the total package.

But it’s also accurate to say that these effective leaders didn’t just wake up one day with all of these skills and expertise. On the contrary: any good leader knows that, in order to be effective, you need to make time for personal growth and develop good habits that hone these skills.

There are many lists out there with great suggestions, but we’ve put together the six most important habits of truly effective leaders.

1. Lead without title.

Some of the best leaders out there got themselves started by stepping up in the work place and self-leading. Having personal initiative is the key to personal professional growth and turning your methods and attitudes into a productive and, at times, commanding presence. This doesn’t mean arrogance. In fact, it really means the opposite.

As you continue to grow and develop as a leader — and actually gain titles — it’s important to remember where you came from. In this way, you can identify other individuals under your leadership that exhibit the same type of self-motivation you did. Be understanding and welcome failure as you lead. If you don’t get caught up on your title in the workplace, you’ll foster an environment that encourages inquiry and innovation.

2. Take responsibility.

And when failure does indeed happen, don’t create a scapegoat. You’re the leader of the group, and you are responsible for that group. Take this moment as an opportunity to teach and mentor those around you instead of assigning blame. You’ll keep the work environment productive and positive this way, and encourage more and better dialogue between your team members.

Remember: failure is ultimately necessary for truly great success, because it serves as one of the best teaching tools out there. Knowing you support them, no matter what, will allow your team to really get creative.

3. Think outside the box.

Leaders are innovators — there’s no question about it. Really effective leaders tend to look at things in very different ways than most people, and they encourage those they work with to do the same.

This also means reframing an idea once the first attempt has failed. If you can continually inspire flexibility, invention and adjustment — and treat them as positives — you will sit among truly world-class leaders like Steve Jobs of Apple, Sheryl Sandburg of Facebook or Reed Hastings of Netflix.

4. Have a vision and objective that’s shareable.

Nevertheless, this innovation and out-of-the-box thinking has to be easily communicated to your team. You not only need to be clear, organized and honest, but you also need to be a persuasive communicator that’s adept at listening to grievances, questions and feedback (without arrogance).

If your grand vision can’t be shared and adopted by the team you’ll be working with, the likelihood of success is virtually non-existent. There’s a reason why leaders have a team: people are stronger together.

5. Don’t be afraid to delegate.

Working together with others means that, as a leader, you recognize you can’t do everything by yourself. The best leaders learn to delegate and the most effective daily habits of business leaders focus on ways to involve the whole team. Accounting for the importance of effectively organizing and delegating tasks not only makes others feel included, but is essential for the daily functioning of your business.

6. Find time for relaxation and rejuvenation.

Finally: remember that all this talk of productivity is useless if you’re feeling burned out, or less than 100%. It’s extremely important for strong leaders to make sure they maintain a work/life equilibrium. Don’t shy away from physical activity or time off. These two things are extremely important for maintaining your sanity and health.

Practice daily meditation exercises, and make sure you take time to disconnect. This also sets a great example for your entire team and has a ripple effect. If they understand that you place importance on self-care, then they’re likely to practice the same methods — which will make everyone more productive in the end.

If you’re toying with the idea of a leadership position, take the plunge! Be a self-starter and inspire others. Leadership can be difficult, it’s true, but the results of carrying a team successfully through a project and inspiring them to step into new roles themselves is extremely rewarding. It will also give you the opportunity to push your limits and grow personally and professionally.

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About The Author:

This article was written by Kayla Matthews, an editor of Productivity Theory.Kayla is a freelance writer, blogger and topic researcher and, because I want to churn out tons of articles and blog posts every week, I have to manage my time as efficiently as possible. I use lots of Google Sheets, Google Calendar reminders, tons of apps and lots and lots of personally cultivated habits to stay on top of everything.

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Callum Connects

Andrew Schorr, Founder of Grata

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Taking a different route throughout his life, Andrew Schorr ended up in China and started several businesses.

What’s your story?
I moved to China after I graduated from college in 2004. English teaching was the easiest way to get there, so I looked on a map and picked a small town in Hubei, because it looked to be more or less in the middle of China. I was the only foreigner there.

Back then, everything was about the upcoming Olympics in Beijing, so I moved to the capital after my year of teaching. Pretty soon after arriving, I met the co-founder for all three of my companies. We decided to start a company together the first day we met. He has now moved back to the US and builds flight software at SpaceX.

Our first company, an online city guide, was re-purposed into our second company, GuestOps, a web concierge platform. We sold GuestOps to most of the major international hotel brands in China and still operate it. The genesis of our latest company, Grata came from looking at the intersection of hotels and WeChat in 2012, when WeChat was just starting to blow up. Grata expanded from hotels into a live-agent customer service console.

What excites you most about your industry?
Our thesis with Grata has always been that what is happening with WeChat in China is the future of messaging platforms globally, and as an international team building on WeChat, we would be well-placed to capitalize on that trend. It’s taken longer than we expected for the industry (and us, for that matter) to get there, but finally, we’re starting to see messaging as a platform to get better traction in other markets.

What’s your connection to Asia?
I’ve always been a bit of a contrarian. I grew up in Texas, where all my friends studied Spanish in school. I studied German for no reason in particular. I took a similar path in college: Chinese and Japanese seemed like languages that not a lot of people who look like me studied. I was one of only two students in my third-year Chinese class.

Concur conference in San Francisco, Calif., Wednesday, Oct. 2, 2013. (Photo by Paul Sakuma, Paul Sakuma Photography) www.paulsakuma.com

Favourite city in Asia for business and why?
Shanghai. I should live there, but Beijing has been home for so long. I take the night train down to Shanghai every two-three weeks to meet with clients. Domestic flights are way too unreliable here.

What’s the best piece of advice you ever received?
Don’t plan too far ahead; otherwise, you plan yourself out of good opportunities.

Who inspires you?
Has anyone said “Elon Musk” yet? Barack Obama would be another.

What have you just learnt recently that blew you away?
The gravitational waves recently detected from neutron stars colliding, were so subtle as to only affect the distance from earth to our closest star, Alpha Centauri (4.24 light years away) by the width of a human hair. Perhaps in another life or in the future, I’ll be an astronomer, but a telescope doesn’t do me much good in Beijing.

If you had your time again, what would you do differently?
When I give advice to students looking to get into entrepreneurship, I advise them to work for a post-Series A startup first and learn from a company that’s already doing things well. I learnt everything on my own, which is slower and you pay for your own education. If you work for a startup that’s small in the beginning, you risk learning bad habits.

How do you unwind?
I Hash! The Hash is a drinking club with a running problem. The Hash attracts good people from all walks of life and doesn’t take itself too seriously. It’s a great way to meet fun-loving people all over the world. It’s also how I met my co-founder, our first lawyer, and my girlfriend.

Favourite Asian destination for relaxation? Why?
Pulau Perhentian, Malaysia. A fantastic beach and where I first learned to scuba dive.

Everyone in business should read this book:
For business in China, Tim Clissold’s, Mr. China.

Shameless plug for your business:
Grata does WeChat contact centers for many top-tier brands in luxury retail, travel, financial services and hospitality. We started developing on WeChat before they even had an open platform. Grata provides the most value for large enterprises with complex routing and content demands for their contact centers.

How can people connect with you?
Check out www.grata.co or email me: [email protected]

Twitter handle?
My personal handle is @andrew_schorr and we tweet about messaging from the company handle @grata_co.

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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