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ISB Grade 2 - 1966

International School Bangkok Bringing out the passion in each of us since 1951. www.isb.ac.th


Calendar of events: 2014/2015 TCCC Executives Patron:

HE Philip Calvert Ambassador of Canada to Thailand

Officers: President – Peter van Haren Vice President – Derek van Pelt Vice President – John Stevens Treasurer – Michael Howard Secretary – Dean Outerson Executive Board: John Casella Surachit Chanovan Kobsak Duangdee Michael Howard Don Lavoie Ron Livingston Dean Outerson Jim Patterson John Stevens Peter van Haren Derek van Pelt




February 18, 2015 LUNCHEON WITH DR. YONGYUTH MAYALARP, GOVERNMENT SPOKESPERSON “Setting a Vision for Thailand: Sustainable Stability and Prosperity for 2015 and Beyond” Hilton Sukhumvit, Bangkok TBA




February 27, 2015 Beaver Teaser TBA TBA


Embassy Representative: Yvonne Chin


Sean Brady Sam Cohen Picharn Sukparangsee Peter Bessey

Thai-Canadian Chamber of Commerce 139 Pan Road, Sethiwan Tower 9th floor, Bangkok 10500 Tel: +66(0) 2266-6085-6 Fax: +66(0) 2266-6087 Email: info@tccc.or.th Website: www.tccc.or.th

The Voyageur is the monthly magazine of the Thai-Canadian Chamber of Commerce, covering all Thai-Canadian business, legal and social news of interest to the members and others who are active in expanding Thai-Canadian bilateral trade. Editor: Thai-Canadian Chamber of Commerce Publisher: Scandinavian Publishing Co., Ltd. 211 Soi Prasert-Manukitch 29, Prasert-Manukitch Rd., Chorakeabua, Ladprao Bangkok 10230 Tel: +66(0) 2943-7166-8 Fax: +66(0) 2943-7169 Design: Disraporn Yatprom Email: disraporn@scandmedia.com Advertising Contact: Mr. Finn Balslev, Marketing Director Scandinavian Publishing Co., Ltd. Tel: +66(0) 2943-7166 ext.116 or 08-1866-2577 Email: finn@scandmedia.com

2015 Beaver Invitational Charity Golf Tournament Friday, April 3 and Saturday April 4, 2015 The Thai Canadian Chamber of Commerce and the Flying Farangs Hockey Club with support from Kingdom Property invites you to the 2015 Beaver Invitational Charity Golf Tournament. This 4-player scramble event offers lots of prizes, lucky draws, a silent auction, sumptuous food, beverages, goody bags, great entertainment, a gala banquet and the best networking night of the year! The Beaver Invitational Pre-Reception and Networking Night will be held on Friday, April 3rd and the Beaver Invitational Charity Golf Tournament Awards Dinner on Saturday, April 4th, 2015 at our partner hotel Amari Orchid Pattaya. Thank you for taking time to support this great fund raising event! Email info@tccc.or.th to register and take advantage of the early bird discount before 10th March 2015. For further information visit www.beaverinvitational.com


Trust And Corporate including perceived ethical failures by businesses, governments, religious organizations and the media among others. A 2013 study of 3,800 Canadians by The Muttart Foundation found that levels of trust in organizations were generally quite low: Local governments – 57% Media – 53% Federal government – 45% Provincial governments – 44% Major corporations – 41%

Trust Me – Your Corporate Reputation Needs Stakeholder Trust One of the key responsibilities for public relations and corporate communications professionals is the defense or enhancement of an organization’s reputation. That is, the promotion of the corporate entity as worthy of the admiration, respect and possibly even affection by key stakeholder groups. By securing its reputation, the assumption is that the corporation will reap certain benefits including finding it easier to communicate with its stakeholders, increasing the effectiveness of its marketing communications and making it easier to recruit and retain employees. Further, if there should be an issue or crisis situation, the organization with a strong reputation is more likely to be given the benefit of the doubt by media, regulators or other stakeholders. A key concept related to corporate reputational communications is that of ‘trust’. Trust is often referenced as the result of a positive or strong corporate reputation, e.g. the company that has a good reputation will enjoy the trust of key stakeholders. While this may be true, an important question arises: can a corporation establish or maintain a good reputation in the absence of trust among at least a number of its key stakeholder groups? It is hard to imagine that an organization in any market or culture, which is not already trusted by its stakeholders can enjoy a positive reputation. If this is the case, then trust is precursor to a positive reputation as well as an outcome of that same reputation.

Only small businesses (81%) and charitable organizations (79%) were widely perceived as trustworthy.

Jeremy E. Plotnick PhD Director, Aziam Burson-Marsteller jeremy.plotnick@abm.co.th Thus, it may be useful to conceive of the relationship of trust and corporate reputation as that of a virtuous cycle, in which increases in one help generate increases in the other. Trust: A Commodity that is in Short Supply The problem is that at present there is a distinct lack of trust between the general public and many large institutions. This is a global phenomena and is due to a range of issues

As a corporate communications professional I have often had executives in Thailand tell me that they wanted to ‘build trust’ among key stakeholders or the society at large. This was often followed with a statement about the need to undertake some type of corporate social responsibility or corporate philanthropy program. The linkage between ‘trust’ and ‘CSR’ is common and while intuitively plausible, it is in fact flawed.

The Meaning of Trust

Before determining what type of activity, or communications program, to employ in order to build trust, the very notion of trust should be clearly defined. When most of us think about trust we share the perspective of former GE CEO Jack Welch who said he ‘knew it when he felt it.’ That is, we get a gut feeling about who is, or is not, trustworthy. Unfortunately, this does not help us create viable trust building campaigns. In the last decade there has been significant academic and corporate research devoted to the defining the concept of trust in order to determine how an organization can create trust or re-build trust-based relations after a crisis. The current consensus is that trust is a concept comprised of several ‘trust factors.’ These factors are each a dimension on which an organization is judged to be trustworthy or not.

The 5 most common trust factors are: • • • • Credit: Terry Johnston, Creative Commons License

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Benevolence – the organization’s generosity and willingness to take care of stakeholders and/or the society Reliability – the organization’s commitment to making good on its commitments Competence – the organization’s ability to execute, to do what it says it can do Honesty – the organization’s commitment to being truthful in its communications Open – the organization’s commitment


Reputation to being transparent and to providing as much information as possible (both good and bad news) If an organization is suffering from a ‘trust gap’ an analysis based on the above factors can help determine the source of the problem and point the way to the correct response. A few hypothetical examples for your consideration: • If a company is not trusted because it is not seen as transparent, the correct communications response is to provide more information about the company’s operations, or at least explain why it can’t provide this information. • If an analysis shows that the organization has a problem with reliability the issue to be address often relates to ensuring that it delivers on its commitments – not just talk about delivering. • If the problem is with competence the company needs to really look at its core business and the quality of its products and services – it may be a very honest,

competence and reliability. That is, if you make a good product and stand behind it, you were considered to be trustworthy. In recent years this situation has started to change due to increase public expectations of corporate transparency and accurate financial reporting.

Credit: Lars Ploughmann, Creative Commons License

generous and transparent organization but if its products fail to deliver it still will not be trusted In none of the above three scenarios will undertaking a CSR program, or making a charitable donation, effectively increase trust in the organization, at best it will make it seem more generous. In Asian markets trust has historically been most heavily associated with the factors of

In order for companies to defend their reputation by establishing, or maintaining, trust-based relations with their stakeholders, they need to move from a simple notion of trust to a more sophisticated (and complex) understanding of the concept. This understanding will then allow their communications team and senior management to undertake programs that effectively target the specific aspects of trust that are relevant to key stakeholders. Using a simple gut feeling idea of trust is like the old saying: If your only tool is a hammer then every problem looks like a nail.

January 2015



Canadian educators create a ‘global village’ in south Thailand By Gerry Morgan, Principal, Global Village School


s we age, some of us look toward retirement…some of us look for meaning, and a crazy few look to reconfigure educational institutions. We are a group that thought we could reconfigure educational institutions and that is how the quest for our own Global Village school began. Schools and particularly international schools are steeped in the past. They are bastions of tradition for which they are suitably proud. Because of excellent quality universal education in Canada, independent schools have not flourished as they have in other parts of the world. The provinces of Canada have developed extraordinary public education through investing in quality teacher programs and supporting excellent infrastructure and we hope to bring some of that know-how to southern Thailand. Canada rates very highly in the comparative studies carried out by the OECD, and the provinces, Alberta and BC stand above the rest. The question is “Can quality education be exported?” The footprint of British and American schools throughout the world is a triumph of marketing over substance and results. Canada has done a poor job on the marketing front and the question is still an open question…Can a great

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Gerry Morgan

public system be made to conform to a for-profit school? The independent schools in Asia are to a very large extent owned as businesses so it should be no surprise that business comes first…then education. Having worked in Independent schools, we thought that although the business side of schooling is important, it played too big a role in decision making. The decisions were not really made by the administrations of these schools but rather by or through the owners. There is nothing more enticing to an educator than thinking about what a school could be if there were no restraints…so the planning began. The name for the school came from a phrase coined by the Canadian, Marshall McLuhan ‘the Global Village”, a great educator from the University of Toronto The school design came from Buckminster Fuller…it would be a geodesic dome representing an icon of change. The staff would be older, semi-retired Canadians who spent their lives building the great education systems Canadians now enjoy. The curriculum would be Canadian… Alberta was the preferred choice. After thousands of other details, we were ready!

In addition to these things, we wished to build a community where older teachers could use their experience to influence the next generation but still keep up with all of the latest research and technology. This “community of learners” model would ensure that every person who worked in or for the school had a say in how it was run. Over a period of year, all of the details began to come clear. The final decision was where? All of us had experience in Thailand so we started our search there. After looking at many places, we decided that Koh Lanta would be a good place. Koh Lanta is a multicultural place of tolerance and respect but equally important…a place that had the population to support an independent school but no independent school. After many trips and a few location scouts, we settled on Koh Lanta.

Our goal is to have a K-12 school here. Today, we have a dozen students, three teachers and huge community support. We have had to adjust our grand goals for a modest start but the future looks promising. A school’s value is in the art of putting together the right mix of people, dreams, curricula and facilities. We don’t have the right mix yet but we are working hard on getting it right. What becomes of the school is really up to the community and the parents here. If there is a local will to have us here, there will be a way. Our school continues to grow and we are still having fun. If you would like to visit our website go to www.gvslanta.com

Community News

Exploring IT education in early years By Ashley Holst


esearch indicates that by the year 2020 there will be over 1,000,000 more jobs in the area of computer science than graduating students who can fill these positions. By exposing students at the early years to skills such as programming, coding, and exploratory practices using technology, we will better prepare students for the rapidly evolving technological world ahead of them. During the 2014-2015 school year, Berkeley International School underwent a complete redesign of their Kindergarten Technology Lab, moving from a traditional desktop computer based instructional lab, to creating perhaps the most innovative and cutting edge Technology Exploration Lab in Thailand, in the hope of fully preparing them for a technology driven future. The room that once held standard desktop computers now hosts a variety of technology tools where students explore their creativity, develop problem solving skills and begin to learn basic programming skills. Berkeley’s newly transformed Technology Exploration Lab was originally constructed for Kindergarten and Lower Elementary, however, teachers and students from the rest of the school cannot wait to get their hands on the new technology tools available. The Exploration Lab houses a variety of new technology available to use, create, and explore with. Among the technology provided are: Robots: Berkeley’s Exploration lab has three different types of robots including; Lego WeDos, BeeBots, and the newest robots on

A full size Green Screen: The Exploration lab also hosts a green screen where students are able to dress up and film their own minimovies using the iPads. Legos: Students have access to Lego manipulatives throughout the room. These Legos are designed to specifically focus on teaching students about simple machines and engineering. Revamping our older, traditional computer lab into a cutting edge Exploration Lab has required not only a change in resources, but also a change in pedagogy. Where once technology was used to practice the traditional skills of literacy and numeracy, it now is used to support students’ creativity, problem solving and programming skills as well as promoting innovative thinking. The skills learned in Kindergarten provide the foundation for future student success, academically and socially. There are several educational benefits that can be identified through an Exploratory Lab model such as Berkeley’s. Some include: * the market, KIBOs (of which a select few are only available through purchase in the states). iPads: The iPads in the Technology Exploration Lab provide access to multiple games that expose students to early programming skills as well as activities that strengthen students’ problem solving skills.

* *

* * * *

Shifts technology use from simple consumption and skill practice to creation and innovation, which is much higher on Bloom’s Taxonomy Strengthens problem-solving skills both independently and as a group Exposes students in early years to programming and coding language, which is becoming more and more prevalent in today’s society Provides a safe environment for students to take risks to be innovative Urges students to collaborate on projects together Students get exposure to using technology as a tool for creating instead of simple content consumption Strengthens language acquisition, fine, and gross motor skills

Creativity, problem solving and programming skills are such important issues within the field of education that the East Asia Regional Council of Schools (EARCOS) has selected Berkeley International School to lead a cutting-edge, action-research project based on their new Kinder Technology Exploration Lab. The findings will be shared with the EARCOS community and other educators interested in the topic.

January 2015


infinity the history and evolution of the world the thoughts and graphic narration of children 9 to 11 years

THE EARLY LEARNING CENTRE FAMILY OF SCHOOLS THE CITY SCHOOL Ages 3-11 years #18 Soi Arkaphat, Sukhumvit Road 49/4, Bangkok 10110 Tel: (662) 381-2919, 391-5901, 712-5338 Fax: (662) 391-1334


THE COUNTRY SCHOOL Ages 2-5 years #44, Samakee Road 20, T.Tasai, Muang Nonthaburi 11000 Tel: (662) 588-1063, 952-4147 Fax: (662) 589-4809

THE PURPLE ELEPHANT Ages 18-36 months #44 Soi 53/1, Sukhumvit Road, Bangkok 10110 Tel: (662) 662-7653, 662-7654 Fax: (662) 260-5947

CHEZ NOODLES L Ages 18-36 months #61 Soi Prommitr, Sukhumvit Road 39, Bangkok 10110 Tel: (662) 662-4570, 662-4571, Fax: (662) 662-4572


Member Profile

We are part of Asia – the A

sia has been capturing the imagination of visitors for centuries. And for the past two decades EXO Travel (formerly Exotissimo) has been helping its clients discover exactly why. With local teams in every major Asian destination, it seeks out, refines and delivers a diverse range of travel experiences for a global audience. It succeeds because it is as passionate about its job as it is professional. The company’s values are rooted in its dedication, determination and unquenchable thirst for adventure. Package tours range from adventure to classic culture, luxury travel, cycling, trekking, cruising and also focus on the family, honeymoons, culinary tastes, beach and city breaks and day trips.

Company Evolution

The Exo Travel journey began in 1993 in Ho Chi Minh City, Vietnam, when the company was established by three young entrepreneurs Eric Merlin, Denis Colonna and Olivier Colomes. At that time Vietnam was emerging from years of isolation and Exo Travel (then Exotissimo) was the first foreign company to be granted a tourism operating license in Vietnam. The company was an immediate success as Vietnam opened up to intrepid and curious travelers, arriving in great numbers to explore this exciting destination. 1995 saw further growth in SE Asia when Exotissimo partnered in Myanmar with Su Su Tin to open Exo Travel Myanmar. The company quickly built a reputation as a groundbreaking and pioneering travel company, providing high-end international services within exotic and remote destinations. By the turn of the millennium, Exo Travel had become a successful destination management company specializing in providing a deeper, cultural experience for tour operators with clients that wanted to understand a destination rather than just see it. Incentive operators also began taking an interest in Indochina and Exo Travel was the first to operate groups in Halong Bay, Hanoi and Bagan, building unique and imaginative programs in unusual and less explored places.

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In 2005, a head office was established in Bangkok, Thailand, with Olivier Colomes as CEO and Hamish Keith taking on the role of COO, leading a team to centralize sales, marketing, technology and strategic management. Exo's reputation as the leading destination management company providing top quality services and creative tailor-made touring in Asia was growing fast. This fresh approach with unique travel products attracted a diverse international client base, with further sales offices soon established in Germany (2005), North America (2005) Australia (2007) the UK & Ireland and Latin America (2012). In 2009, Indonesia became the sixth Exo destination when Erik Meriot and Trisna Agustini became partners in Exo Travel Indonesia. Then in 2011 Exo Travel Japan was opened by Ines Zand in Tokyo. The opening of both destinations was driven by strong demand from Exo’s clients. In 2012, Exotissimo opened their eighth and largest destination, China, capping an unprecedented period of expansion that saw Exo Travel China grow out of Southeast Asia into the wider Asia region. Led by Olivier Marchesin from the Beijing office, China represents the strength of the company’s business and the clients’ desire for unique, in-depth programs throughout Asia. Today Exo has 13 international offices and over 700 full-time staff working from destination-based offices in Vietnam, Thailand, Cambodia, Laos, Myanmar, Indonesia, Thailand, Japan and China. Although now a large global business, Exo Travel remains firmly committed to its roots in each destination. Each Exo country is managed by the original local partners as well as an experienced General Manager who is responsible for the operations and reservations in their country. There are also dedicated teams in place within each destination for adventure, MICE and luxury, supported by multilingual reservations teams. Through expert knowledge from Exo Travel staff throughout the region the company creates tailor-made itineraries that are well suited to individual needs, following a

philosophy of bespoke travel as opposed to standard “off-the-shelf” vacations. Because of this, Exo Travel is the first choice destination management company for clients with specialist interests or who require highlyskilled agents and knowledgeable people on the ground.

What sets Exo Travel apart? •

A timely response – Exo Travel knows that a fast response is imperative for success in the travel industry and is committed to getting back to every inquiry the same day or at the most within 48 hours. A professional organization – Exo Travel uses the internationally recognized and fully integrated travel software “TOURPLAN”. Its reservations and operations teams receive complete and regular professional training which allows it to deliver fast and consistent service and seamless itineraries through eight countries. High quality service on the ground – The Company is committed to providing the highest quality of service possible in its destinations. It has a strong guide training program, uses the best vehicles and works only with preferred suppliers, which are all subject to regular and rigorous inspections. Staff who are consultative - Through training, regular inspections and a strong service culture, Exo Travel’s teams are capable and willing to make suggestions and give you qualified advice rather than simply process reservations. A direct line to its General Managers - All Exo Travel’s clients receive contact details of its expatriate general managers who are always available and happy to solve any problems that may arise during the booking process or when the clients are in country. Specialized teams and personal service – Exo Travel has developed small specialized teams to handle each market segment and a group of clients to deliver the personal service you deserve. Each destination has a department or designated person to handle MICE, adventure

Member Profile

Exo Travel experience •

or luxury requests. An investment in product development - In each destination Exo Travel has a specialist Product Team to ensure that its product offerings are the most creative and up-to-date. This includes negotiating the best rates with preferred hotels and ensuring its tariff is comprehensive as well as creating “Signature Tours and Excursions”, which not only show the established “highlights” but also the secret and special places often overlooked by tourists. Well-trained staff - In conjunction with one of Southeast Asia's premier training organizations, Exo Travel has developed its own comprehensive training programs that ensure our staff are the best and most professional in the business. Financial stability - As part of the Apple Tree Group of companies that includes hotels, real estates and other asset holding companies in Asia, Exo Travel is financially secure.

Summing up what gives the company its competitive edge, Hamish Keith, Exo Travel’s COO says, “We don’t just operate in Asia; we are part of it. We offer truly authentic experiences that go beyond the mainstream. After 20 plus years, we know our destinations and we know what’s possible; we know our clients and what they want. We are perfectly positioned to deliver the right experience every time.”

Responsible Travel

Put simply, “Responsible Travel” is about enabling the sustainable development of destinations by minimizing negative impacts and maximizing the positive for the benefit of all stakeholders. Exo Travel is wholeheartedly committed towards being a responsible travel company who genuinely cares about how its business impacts the people and places it touches. This is underlined through its involvement with the Travelife scheme, the certification process that offers industrywide standards for sustainable management, providing best practice guidance and support

as it looks to further develop and instill Eco Travel’s ethical and environmental principles throughout all areas of its business. Throughout our tours, Exo Travel is continuously developing responsible activities and via its EXO Foundation, it actively supports a variety of projects that are making a real difference in communities.

Community-based Tourism

EXO Travel actively supports community based tourism (CBT) projects with local organizations as part of our attempt to spread revenues to the most remote and poorest communities. Through these projects, visitors have the opportunity to learn more about authentic cultures while improving local welfare and supporting environmental and cultural preservation. With the EXO Foundation, it has worked alongside international development organizations to support a number of CBT projects in areas of rural Cambodia and Vietnam.

EXO Foundation

EXO Travel believes the privilege of living and operating within a marvelous natural and cultural heritage carries with it the responsibility of preserving it for generations to come, while ensuring our business is significantly beneficial for the destinations and the communities living there. Reflecting its founders’ philosophy and ethics, EXO has been supporting charities and local communities through its travel programs and donations. For the Cyclone Nargis Relief Effort in 2009, the collection of nearly USD 200,000 in donations became the catalyst for the decision to set up the Exo Foundation in 2011. The role of Exo Foundation is to educate and advise EXO Travel teams and clients on best practices in responsible travel, ensuring their activities support the sustainable development of tourism in the region. In addition to providing promotional and financial support for external initiatives, it also establishes and runs its own projects at the grass roots level.

Cultural Respect

Exo Travel places a huge emphasis on

cultural exchange as a means to truly experience and better understand a country. Travel in Asia is full of opportunities to learn about local cultures and ancient traditions, now evolving in a modern context creating some extraordinary paradox and contrasts between cities and rural areas. Each Asian country, although at first glance can appear similar in a number of ways, has their own unique ethics and codes, so it is important to keep an open mind to respect local customs, practices and beliefs to ensure an enriching travel experience.

Treading Lightly

When conducting tours Exo Travel aims to tread as lightly as possible by turning off all idling engines and selecting eco-friendly modes of transport whenever possible and upon request. On adventure trips through remote areas it encourages the use of biodegradable cleaning products, disposes of waste and ensures that no litter is left behind. In addition, it works alongside a selection of eco-friendly resorts and hotels such as Kamu Lodge near Luang Prabang, encouraging travelers to opt for these.

Local Charities

By supporting local charities or choosing enterprises and organizations that assist our environmental and social cultural causes, Exo Travel is able to maximize the benefits of tourism on the local society and economy. Wherever possible, it encourages guests to partake in sustainable tourism projects, shop at fair trade shops and eat at restaurants run by vocational institutions training local youths or the disadvantaged. It participates in events such as the now famous Angkor Wat Marathon held each year in early December, encouraging clients, travelers and our EXO teams to run for a selected charitable cause with each participant raising funds. If you wish to know more and provide support visit www.exofoundation.org. To find out more about Exo Travel or to enquire about your next holiday, please contact travel agency manager Paul Jeffels – paul@ exotravel.com January 2015


Canada-ASEAN Business Forum T

to be held in Bangkok

he second Canada-ASEAN Business Forum will welcome over 200 business leaders and senior government officials from Canada and Southeast Asia to discuss issues of trade and commerce along with the impending integration of the ASEAN Economic Community Describing the event, Peter Nesbitt, the Forum’s Chairman, says, “The Canada-ASEAN Business Forum is the premier networking event for anyone doing business between Canada and ASEAN. The participants are essentially the ‘Who’s Who’ of the CanadaASEAN Business Corridor.” The first Forum was held in Singapore in October 2013 and was a huge success. Some of the more recognizable names who participated at that conference were: Ed Fast, Canadian Minister of International Trade; Brad Wall, Premier of the Provincial Government of Saskatchewan; Dr. Surin Pitsuwan, Former Secretary General of ASEAN; Sabi Marwah, Vice Chair, Scotiabank; Pote Videt, Managing Partner, Lombard Investments, Thailand; Philip Hampden-Smith, Executive Vice President & Chief Marketing Officer, Asia Manulife Financial; Karen Oldfield, CEO, Halifax Port

Authority; Terry Matthews, Chairman of the Wesley Clover Group of Companies; John Scully, former CEO of Apple and Chairman of Inflection Point Canada; and Yuen Pau Woo, President of the Asia Pacific Foundation. The objectives of the 2015 Forum are to raise the profile of Canada in ASEAN and prepare

the Canadian business community for the opportunities that ASEAN economic integration can bring. This senior level networking opportunity also provides a platform for senior executives from Canada and ASEAN to discuss opportunities and challenges for doing business in the region and in Canada, providing strategic information and intelligence for Canadian companies interested in investing in ASEAN, and vice versa. The 2015 forum is expected to attract a larger audience and have wider exposure than the inaugural event. It is scheduled to take place on March 18th and 19th at the Four Seasons Hotel in Bangkok, starting with an official reception and dinner on March 18th with a full day seminar on March 19th. This is an invitation-only event; if you are interested in attending please contact forum@canasean. com (http://www.canasean.com). For more information visit http://www.canasean.com.

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Business News

2015 Outlook: Hazimemaste! I t was a great pleasure to speak with the economist Prof. Steve Keen at the IDEA economics Asia launch in December.

Steve is one of only 13 economists in the world who predicted the global financial crisis.1 Not only that, he’s the chief economist of IDEA (of which I am an advisory board member) – a non-profit organization suggesting alternative solutions to the failing policy alternatives of quantitative easing and austerity measures which dominate central bank economics throughout the world today. Its board also includes respected economists Ann Pettifor and James K. Galbraith (son of Canadian-born John Kenneth Galbraith). I’ve been reading a lot in the past year how the crisis is apparently over in some countries2 – even Mario Draghi, the head of the European Central Bank, has said so!3 Not only that, Bank of Canada Governor Stephen

Poloz has said that “Central banks were first invented for what we’d now call financial stability reasons,” and that, “We’ve come full circle. We’re back to our roots.”4 From what Steve said during his talk in December, he shares my lack of faith regarding Messrs. Draghi and Poloz. Anyone who has read the excellent Lords of Finance5 by Liaquat Ahamed would know that we’ve only come full circle and returned to our roots when central bankers are once again ostracized as little more than charlatans, as they were following the Great Depression and World War II, 2 catastrophic events for which they were largely responsible.

companies to lend to business and individuals, stimulating spending.7

So forgive my scepticism when I read that apparently quantitative easing (QE) has saved the day. According to some sections of the media, QE involves central banks printing money6. Central banks claim that eventually this new money gives incentive to financial

Any claim that QE has given people confidence to borrow money again is blown away by a look at the Federal Reserve’s own data. There was indeed a spike in private borrowing but that was temporary and soon tailed off back to immediate post-crisis levels:

The ‘printing money’ claim is just not true. What the Bank of Canada, the Bank of Japan, the Federal Reserve and the Bank of England have been doing is buying assets, such as bonds, mainly from non-bank financial companies. Instead of using the huge amounts of cash received, these financial institutions did not pump it into the economy as a whole: their traders started to speculate with it to bring in greater returns. The London Whale case is one example of what has been happening.8

Source: US Bureau of Economic Analysis 1 2 3 4 5 6 7 8

http://barnabyisright.com/2013/05/30/an-historical-warning-for-proponents-of-a-modern-debt-jubilee http://www.forbes.com/sites/jamesgruber/2014/01/29/welcome-to-phase-three-of-the-global-financial-crisis/ http://www.marketwatch.com/story/euro-zone-crisis-over-at-least-the-financial-crisis-is-2014-04-09 http://www.bloomberg.com/news/2014-12-01/central-banks-likely-to-stay-easy-in-2015-as-normalcy-is-elusive.html Liaquat Ahamed, Lords of Finance: The Bankers Who Broke the World, Penguin, 2009. http://www.torontosun.com/2013/03/28/printing-money-doesnt-make-sense http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bloombergview.com/quicktake/the-london-whale January 2015


Business News The effect of QE on the overall economy has been minimal. In 2010, then Federal Reserve chairman Ben Bernanke claimed that, “Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”9 I don’t claim to be an expert in behavioural science but I really don’t see the connection between stock market prices and consumer confidence. If I hear on the news that the prices on the TSE, the SET or the S&P have gone up, it doesn’t inspire me to go out and buy anything. I’d hazard a guess that it’s disposable income and confidence in paying back credit that influences our purchasing decisions. But I’m not the head of a central bank. One of the many interesting things mentioned by Steve at the event is the incredible practice of conventional economists to ignore private debt levels. They do this on the assumption that it represents a “pure redistribution” which should have “no significant macroeconomic effects” – as described by none other than Ben Bernanke.10 Frankly, this suggestion is absurd. I would venture to say that the rate of unemployment is a significant microeconomic indicator. A quick look at empirical data in the US since 1990 reveals that there is a massive correlation (0.93) between private debt levels and unemployment. It is incredulous that, in spite of the global economy crashing under the colossal weight of debt, central bankers of major economies universally refuse to challenge the status quo. What is more worrying though, is that there are indications that another crisis is looming and we still haven’t learnt how to deal with the current situation. It’s difficult to say when the crisis will come, or what will trigger it, but the recent crash in oil prices has all the hallmarks of such a trigger. Some analysts believe that lower crude oil prices will act as a catalyst to make the booming shale oil industry more efficient.11


That’s all very well, but the rise in the shale oil industry has been financed by junk bonds.12 Junk bonds. Remember those? High-yield bonds with a high risk of default. In 2008, illiquidity of junk bonds – repackaged and backed by overvalued subprime mortgages – led to the GFC. A J.P. Morgan analyst estimates that, should prices for crude oil remain at the relatively low level of around US$65 a barrel for the next three years or so, up to 40% of all energy junk bonds could default. He added that even if default rates hovered at 20% to 25%, the consequences would be “dire”. In fact it doesn’t necessarily take actual default to trigger a crisis. Merely the threat of default can make bonds illiquid: if everyone is trying to get out of them at the same time, no-one wants to buy them. Does this mean we’re heading for the abyss? Possibly, but more likely Japan. If there isn’t a fundamental re-think amongst central banks, we could well be facing a prolonged period of deflation, with low economic activity as products and materials become less affordable. If that sounds familiar, that’s because it’s been happening in Japan for the last 25 years.

Since 1990, each tentative revival in Japan has given way to another collapse back into recession. This has happened because the Japanese government uses QE to stimulate the economy; just as the economy shows shoots of recovery, the government tries to reduce its own haemorrhaging debt. That starts a return to private sector deleveraging – where the rate of change of private debt is actually negative. This takes money out of the economy, and causes another recession. To offset this the government invests a fortune to provide stimulus and so it continues. The US – and given their penchant for QE, possibly Canada and the UK – look likely to fall into this private debt trap. So, while 2015 may see some economic revival, it will be just a part of the vicious cycle.

Paul Gambles is co-founder of MBMG Group and can be reached at: Tel: +66 2665 2536 e-mail: info@mbmg-group.com

Please Note: While every effort has been made to ensure that the information contained herein is correct, I cannot be held responsible for any errors that may occur. My views may not necessarily reflect the house view of MBMG Group. Views and opinions expressed herein may change with market conditions and should not be used in isolation.

http://www.forbes.com/sites/robertlenzner/2014/06/20/the-fading-out-of-the-feds-qe-bond-buying-may-mean-the-end-of-a-5-yearbull-market/ 10 Ben Bernanke (2000), Essays on the Great Depression. Princeton: Princeton University Press. 11 http://fortune.com/2014/12/08/oil-prices-drop-impact/ 12 http://blogs.wsj.com/moneybeat/2014/12/01/falling-oil-prices-could-lead-to-massive-junk-bond-defaults/

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