19 Feb,2014 ET 47 Taiwanese Electronics Firms to Set Up Shop in Bangalore Cluster

Over 320 enquiries received for tie-ups in electronic systems design and manufacturing sector OUR BUREAU BANGALORE Taking Karnatakas hardware story to the next level, 47 Taiwanese companies are coming to Bangalore to set up a cluster on 300 acres near the Bangalore International Airport. Work is expected to start within the next few months. The 300 acres will be developed by Taiwanese realty company Century Developers. A convention centre is also due to come up on 36 acres, the civil construction of which is beginning soon. Over 320 enquiries for tie-ups in the electronic systems design and manufacturing (ESDM) sector have been received from the Taipei Computer Association, said former additional chief secretary of Karnataka, MN Vidyashankar. He was speaking on the sidelines of a workshop organised by the Manufacturers Association of IT, an electronics hardware industry lobby, in Bangalore on Tuesday. The Taipei Computer Association, which has 4,500 companies listed with it, has already set up a Bangalore office, according to its Representative Officer Peter Hsieh. Taiwanese companies such as Acer, Asus and HTC will be the direct beneficiaries if a Bangalore hub developed. Potentially, Acer could look at relevant component and sub -assemblies from this ecosystem, says S Rajendra, CMO, Acer India. It is a great development to have embedded solutions in the software cap ital of India which can bring about huge synergistic upside for manufacturing, he said.There are also plans to set up a hardware hub between Tumkur and Shira on 1,500 acres where companies from Japan are expected to set up a manufacturing base. The Union cabinet also recently approved the setting up of two semiconductor fabrication units in the country. Although India has seen a significant growth in PC sales over the last few years, penetration is as low as 10% compared to more than 45% in countries such as Brazil, Malaysia, Russia, Saudi Arabia, Turkey and 35% in China, according to Anwar Shirpurwala, executive director of MAIT. Outlining the reasons for this, Alekh Tiwari, associate director of KPMG said that the cost of ownership of PCs is still very high in India. Typically, only a household with income of . 3 lakh and above can afford to have a PC. While mobile phones invite indirect taxes of 6%, PCs invite taxes of 12%. A credit-linked scheme for small and medium sized businesses to secure PCs benefits only specific verticals, he said.

19 Feb,2014 ET Why IMF Wants to Rock Finance Boat

Countries would be required to force private creditors to accept losses when the borrowing countrys debt sustainability is uncertain. IMF will act as the lender of last resort only if the private sector shares the pain.
Douglas A Rediker & Angel Ubide

Hoping to learn from what it sees as its missteps in handling the Greek bailout and other recent crises, the International Monetary Fund is quietly wading into one of the most sensitive issues in international finance: How to balance political, economic and financial considerations when a country might not be able to pay back its debts. Specifically, some at the IMF are suggesting that, as a precondition for financial assistance, countries would be required to force private creditors to accept losses when the borrowing countrys debt sustainability is uncertain and market access has been lost. The fund will act as the lender of last resort only if the private sector shares the pain. However well-intentioned, such a policy shift would probably disrupt markets, increase episodes of default, raise borrowing costs and discourage countries from seeking the IMFs help when they most need it. The IMF argues that countries sometimes wait too long to seek its assistance, increasing the amount of money required for a bailout and allowing some private investors to cash out their holdings at public expense. The IMFs first Greek rescue program, for example, allowed investors, including German and French banks, to be paid in full, thus avoiding responsibility for their poor lending decisions. The IMF justified this decision by citing the risk of a systemic meltdown. To better protect its resources in the next crisis, the IMF is considering abandoning this systemic exception and establishing more rigid rules for the model it uses to assess a countrys ability to repay its debt. Under the system being considered, the IMF would establish thresholds for debt sustainability, and if a country breaches those limits, it would be judged on its perceived sustainability and ability to access markets. If both sustainability and market access are found wanting, there would be a presumption of limited costs imposed on creditors, forcing the country to temporarily delay repayments to its bondholders in exchange for IMF support. The problem with this model is that predetermined thresholds will inevitably conflict with the unpredictable circumstances of reality. The IMFs analyses must always involve a degree of judgment and subjectivity. It is hard to imagine a model that captures the particularities of Argentina and Greece, but excludes those of Italy or Japan. Regardless of its form, the imposition of costs on investors -- known as private sector involvement -- requires them to accept less than they are entitled to. Forcing bondholders to take a loss may occasionally be necessary to exert discipline, but should never be easy or common. After all, restructuring is simply a more diplomatic term for a fundamental breach of

contract between a country and its lenders. Were such imposed losses to become more common, funding costs would almost certainly rise for all but the safest of nations. The IMFs role should be to rescue countries in times of crisis and bolster market confidence and stability. Therefore, its financial support should never be disruptive. Yet, in part because of its preferred creditor status, the IMFs most recent intervention in the euro area resulted in higher borrowing costs for the very nations it intended to help. The IMFs suggested plan would have a similarly destabiliz ing effect and countries would almost certainly be less likely to seek early IMF involvement in the future, the opposite of the policys goal. Making private sector involvement the norm would also reduce the global supply of risk-free assets, with more countries bonds potentially subject to losses in times of financial crises. Injecting credit risk into otherwise risk-free sovereign debt could cause a migration of the investor base, introducing return-hungry credit-investors who base their decisions on default probabilities rather than economic fundamentals such as growth. There is a better way to meet the IMFs goal of limiting its risk while staving off contagion. For example, a more rational pricing of risk could be achieved by earlier and more thorough IMF surveillance, including better scrutiny of cross-border flows, corporate currency mismatches and debt holdings. Regular assessments of debt sustainability could be included in the IMFs World Economic Outlook and the Global Financial Stability Report. Louder naming and shaming to force early policy corrections is a far better approach than promoting a presumption of risk for the private sector. IMF rescues should seek to achieve success at the least possible cost to growth. If losses to bondholders are appropriate, then they should be part of a solution that reflects a countrys needs and systemic circumstances. Private sector involvement should never be ruled out. However, there is no reason to abandon the IMFs current case -by-case policy or to presume that breaches of contract are necessary. Formulas are doomed to be misapplied with unanticipated consequences. By using these instruments, instead of fostering financial stability, the IMF could introduce greater risk, uncertainty and costs to the global financial system. Surely, that isnt the funds goal. Bloomberg