How to best activate economic growth in the developing world? I investigate four ways that can quickly stimulate rapid growth in a country and up-skill and transform a traditional primary economy into a secondary economy:

The injection of Foreign Direct Investment has the potential to transform an economy from zero to rapid growth. The transference of tacit knowledge and skills can help develop a country and increase the average income and standard of living. Four ways to transform an economy are as follows:
1. Provide a stable and competitively priced labour force:  
Provide a stable political and social environment with enough competitively priced employees to satisfy demand.  
2. Enact transparent laws with effective provisions to impose penalties and recoup business losses:  
Enact laws in English, which are consistent with western laws and regulations. An effective rule of law, especially in contract, underpins commercial trust and will provide foreign creditors with sufficient security to start and continue to invest in a country. Transparent and equitable laws should provide recourse for creditors against debtors if they fail to repay their loans.
3. Low taxation on foreign investors:  
Foreign investors will be induced to commence operations in a country with lower than average taxation.  
4. Create user-friendly taxation and accounting (reporting) standards:  
Provide accounting and taxation policies, which are simple and easy to navigate and use.   
5. Encourage Foreign Direct Investment (“FDI”) through education and marketing:
Educate and market to potential investors about the benefits of commencing operations in that country.  Make it easy for foreign companies to inject capital into a country and commence operations.  

Are donations enough to save Cambodia? Should the West be looking to substitute charity with more knowledge capital and foreign direct investment?

I just returned from a truly eye opening trip to Cambodia. A question lingers in the back of mind -- How can western nations better help these people? It was immediately evident that the next hurdle for Cambodia will be to convert charitable donations into sustainable / organic economic growth and entrepreneurial activity. The question is how?

As a tourist it is very easy to become lost in the solace of Angkor ruins, massage parlours, yoga studios and French-cuisine in the newly manufactured tourist hubs of Siem Reap and Phnom Penh. Rising scepticism is unavoidable amid the French croissants, tourist polish and glowing travel write-ups, juxtaposed to the real situation with 40% below the poverty line and strong bilateral ties with North Korea (i.e. the poverty line relates to less than USD$1 per day). The glitzy hotel polish, for western eyes does little to disguise the immense poverty, suffering and trauma of the Cambodian people. The country is plagued by deep rooted scarring (both physical and mental), the severity of which only becomes apparent from looking into the eyes of the street vendors, beggars and tuk tuk drivers.

It is quite apparent that the Khmer Rouge (1975-1979) and the Killing Fields are just the tip of the iceberg in a country where there has been a string of wars only officially ending in 1999. Experienced tourists and expatriates, whisper of continued civil unrest rumbling deep in the jungle. This hardly comes as a surprise to me in a country, where political turmoil and political unrest have become simply a way of life. Adverse poverty, physical injuries and post-traumatic stress disorder will continue to haunt the community for many years to come. It seems that everyone has a war story to tell; even my tuk tuk driver, Nga, fought for the Khmer Rouge as a child soldier. He was recruited when he was 12 years old and fought for about 17 years in the jungle near Seam Reap until the end of the war in 1999. I was somewhat shocked as he recounted his time in the Khmer Rouge with fond memories of guns and rocket launchers and complete apathy towards murder and death. This normalisation of war has a broader context in Cambodia as the community has developed an acceptance for many things which are normally perceived unethical or taboo (e.g. slavery, rape, oppression and murder). The ‘Wild-Wild East’ was coined by journalists in the 1990’s and this term is still very relevant in describing the country. Nga summed up Cambodia with one very brief sentence, ‘Phnom Penh have very nice hotels and tourist temples…then as you drive out of the city limits you can get anything that you want….cheap guns, grenades, tanks, drugs and [even] young girls’.    

Amid a renaissance of Angkor tourism, tens of thousands of disgruntled textile workers took to the streets of Phnom Penh in late December 2013 to protest against the minimum wage of USD$80 per month. Prime Minister Hen Sen has taken a very hard-line against the protesters by banning all future demonstrations and street marches in Phnom Penh. The Government’s decision to increase the minimum wage by a measly USD$15 per month was considered insufficient, with expectations for it to double to USD$160 (compared to China with a minimum wage of USD$260). Subsequently the demonstrations were quickly dispersed by a small army wielding steel bars, metal pipes, batons, sticks and axes yielding four deaths. This type of violence and oppression has become normalised in Cambodia and comes as a chilling reminder to the locals and the world of the Pol pot era.

Cambodia has a very dark past and will continue to have a very dim future unless the West steps up and helps. The West have made voluntary foreign aid donations from a combination of Governments and NGO’s, estimated at about USD$5.5 billion since 1993 (Charles 2013). The next challenge for Cambodia will be to convert charitable donations to sustainable economic growth and entrepreneurial activity. Although this is not impossible, in many ways donations and economic growth are competing ideologies. The main outputs that transpire from charitable donations in Cambodia are developments in health, nutrition, infrastructure and education. Once these basic needs have been satisfied, evidence suggests that donations are no longer constructive in terms of aiding development in a society. A number of academics write about the dark side to foreign aid in Cambodia and they talk about corruption, aid dependence and the failure of free handouts developing into true organic economic growth (Ear, 2012 & Keo, 2013). A key goal for the west over the next decade should be to start transferring donations to active foreign direct investment to provide opportunities and organic growth in Cambodia. This would hence provide a continuous drip stimulus of capital into the economy (i.e. capital refers to both knowledge and financial capital). This way, we can organically increase employment in Cambodia and avert another spiral into the grasps of another oppressive regime or worse still a war.

Alibaba and its B2B, C2C and B2C Strategies (Born in 1999)

Western Economists are completely wrong. There are definitely lessons that we can learn from China in terms of E-business and Omni-Channel strategy. Some words to explain the Chinese E-Commerce ecosystem include: Fast moving, aggressive, imperfect and hungry to grow-up.

A few of my Digital Omni-Channel team were fortunate to attend the Alibaba Story yesterday, featuring a very inspiring interview with Porter Erisman. Erisman worked with Jack Ma from 2000-2008 to transform Alibaba from a modest start-up into a multi-billion dollar business, which now dwarfs the likes of E-bay and Amazon combined. Alibaba now dominates the China E-Commerce market and is now one of the biggest E-businesses in the world. It boasts USD4.4 bill in revenues and an impressive market capitalisation of USD170Billion++, accounting for over 60% of the parcels delivered in China. The next step in its lifecycle is to take over competitors or become a target. Interestingly it is now looking to New York rather than Hong Kong for its recently announced IPO which will provide it with much needed capital to help satisfy its appetite for global expansion.

So, how did Alibaba become so successful? Well in a nutshell it was fast moving, aggressive, imperfect and hungry to grow up. Seizing every day of its short life, developing a multi brand, multi business strategy before anyone else (i.e. Business to Business (Alibaba.com), Consumer to Consumer (Taobao.com), Business to Consumer (Tmall.com), Online payment services(Alipay.com) and a Shopping Search Engine (eTao.com)). It basically beat E-Bay, Amazon, Google et al to the China market and now dominates.

We have a lot to learn from Alibaba and I urge everyone to hop on to You-Tube and watch this interview (http://www.youtube.com/watch?v=C53TzSDnzug) or the Crocodile in the Yangtze, which documents Alibaba’s rise to the top of the heap.

E-Business is still bullish, but for how much longer?

I think we can all agree that “Online”, "E-Business" and "Omni-Channel" are the new buzz words across all industries including retail. Anecdotally speaking when I look around Linkedin or take a walk around my local bar in Manly, it seems as though every second primary school friend is now an online entrepreneur working from home. Most of the start-ups I hear about have a nearly nonsensical business case, that I can hardly grasp and these companies are probably destined to fail. A few months ago I came across the founder of one exception, Herocondoms for every condom purchased in Australia, one is donated to Africa (link here). Another notable exception is Accenture alumni Ruslan Kogan who has exponentially grown his online start-up to compete with the big boys in town (link here). Except for a couple of notable exceptions, two of which are listed above, I wonder whether the global market place is robust enough to sustain all these micro start-ups. As you know, the Michael Porter theory argues that the more players in a market the less profitable that market will become. This begs the question as to whether Online is verging towards over supply and market failure or at least failure for the majority of its participants.


All the Talk About the Next Online Bubble:

I actually had a very pertinent conversation on Friday with an Economist specialising in digital markets that I’d like to share with you. According to him all the analysts are saying that the current landscape is saturated with existing local players, foreign players and the late entrant big retail companies such as Myer, David Jones and Harvey Norman. He forecasts that there’s another .com bubble emerging, similar to the one in the early 2000’s, when there were too many market players and simply not enough business to go around. The big retail players have deep pockets and the ability to sustain the hard times in retail, whereas many of the smaller less profitable players do not. I think the simple issue is that many online businesses are inefficient and simply unprofitable. Many of the players are running their operations at a loss and are cannibalising shareholder capital to merely sustain themselves. The issue is that inefficient companies are staying above water due to the unfaltering willingness of investors to keep pumping them full of “free” owners’ equity, powered by the false promises of massive capital growth and that they will be the next Google.  

Investors continue to be bullish towards online, due in part to intense hype and speculation propagated in part by glossy company prospectuses and the media. Financial Analysts say that investors have a gold rush mentality towards the online retail market and label the market as a speculative bubble that must bust. There is a notable trend and inefficient belief amongst shareholders that all new entrant start-ups will experience massive success and capital growth like seen at Kogan. The Facebook IPO is probably the best example of investor speculative value (i.e. the amount that shares are subjectively valued at) versus the actual value (i.e. the amount that the shares are objectively valued at using financial analysis). In a nutshell, the Facebook public offer was hugely overvalued (as calculated by the size of the gap between the speculative value and actual value). Unfortunately speculative shareholders bought into a dodgy business case and glossy magazine rather than analysing objective financial indicators. Within hours of the Facebook IPO the market realised that shares were grossly overvalued and the share-price slumped and then the shareholders wheeled in the lawyers and the rest is ancient history ;-)   

Perhaps Facebook marks an early warning sign that the market is not buoyant enough to carry all of these overvalued assets and hence goes towards proving that there is an opportunity to “cut the crap” out of the Online market. Perhaps it will mark the beginning of a long process of aggresive attrition and M&A activity. I say may the best company win the new online saga.

Challenging a Statutory Demand in New South Wales

I was cleaning up my bedroom and stumbled across some of my old law school files and found myself engrossed in the statutory powers, which protect corporations against statutory demands served against them by creditors to recover outstanding debts.  I figured that a very tiny percentage of fellow Googlers might actually find the following extract interesting:-

What is a statutory demand and what is its significance?
- It represents the creditors commencement of a winding up order against a debtor.
- The statutory demand must require the company to pay the amount of debt within 21 days after the demand is served on the company (see: s459E(2)c). The demand must also provide an attached affidavit.
- If the company fails to comply with the demand, then the creditor may apply to the Court to wind that company up in insolvency (see: s459Q).

How can a debtor challenge a statutory demand? 
- The company may apply to set aside a statutory demand within 21 days of the demand being served on them. The grounds to set aside are as follows:
     1.There must be a genuine dispute between the parties about the existence or the amount of the debt,  
      to which the demand relates (see: s459H(1)a).
     2. That the company has a claim offsetting that outstanding amount (see: 459H(1)b). An offsetting
      claim means a "genuine counter claim or cross demand against the creditor" (even if it does not  
      arise out of the same transaction or circumstances as a debt to which the demand relates).

How to set aside a demand on other grounds?
- If there is a defect in the demand.
- Substantial injustice will be caused unless the demand is set aside
- There is some other reason why the demand should be set aside.

Order subject to the conditions 
- Respondent may also ask the Court to make an Order subject to the conditions (see: 459M).

Costs
- Where the respondent wins and the demand is set aside the Court may order that person making the demand to pay the Companies costs in relation to the application.

The changing world order

We all appreciate that much of the world's relative wealth is shifting from the western hemisphere to the eastern hemisphere. Research indicates that the actual cost of all things in the western hemisphere will increase. Even though the west will continue to grow to be "bigger and better" than it has ever been. The actual disparity between the haves and the have not nations will decrease. Such non-disparity means that more people will have access to more cash and therefore the actual relative value of that cash in terms of purchasing power will likely decrease. So perhaps China will eventually take the position of the developed world.

Why is the AUD declining?

In the last 30 days the AUD has declined against the USD by about 10.67% from $1.0636 to approx $0.95. Further, the AUD has declined by 9.3% against the Yen, 9% against the Yuan, 5.38% against the Pound and 3.5% against the EURO. It appears that certain proprietory traders must be making a motza out of this decline, because the fundamentals for such a decline simply do not add up. Business Journalists justify the declining AUD by arguing that it has been caused by the Greek debt crisis, declining natural resources and a rumour that the RBA might cut interest rates. But these arguments simply fail to make any funadamental economic sense, when analysed in respect to the global predicament in the US and Europe. In fact Australia is a diversified and modern economy and produces much more than mere iron ore. Moereover, Australia has a growing GDP, whereas the rest of the world does not. So why then is the AUD being punished? The answer is that the market has been indulging in PURE SPECULATION. Unfortunately there is a ridiculous perception that the AUD is completely related to the price of natural resources and that the failure of Greece is going to lead to economic armagedon and thus lower prices of iron ore and cause the AUD to reduce to X. The fact of the matter is that, if Greece defaults, there will be many other dominoes that will fall flat before Australia. Economists doubt that even if Greece, Ireland, Portugal, Spain and Italy fail that it will cause China's demand for natural resources to decline below growth on the year proceeding. The fact of the matter is that Australia will be exporting more goods and services to Asia than the year prior, even if America and Europe slumps into depression. So this argument should not be a question of why the AUD is failing, but rather why its not gaining against the rest due to the inherently bad economies in the EU and USA. Perhaps we should be arguing about why the USD and EURO are trading at such an over inflated level given their domestic predicaments?