Internationally 2009

Oil Prices

Oil prices have dropped dramatically in the previous half year. Last July, oil prices were US$147 per barrel, but by December they fell to below US$40. And just as high oil prices threatened to rework the international order of things, low oil prices are now doing the same. Hopefully 2009 will see positive effects for the winners of this 70% drop.

Most of the world has enough oil for the immediate future. The US Strategic Petroleum Reserve, for instance, is full to the brim. The demand for oil is dropping sharply, and strangely enough OPEC is not making the production cuts that would be necessary to jack the price back up again.

Low oil prices are good for some countries and bad for others. Thankfully the biggest winners in the low oil price sweepstakes are the countries that need it most: the United States, Germany, Italy, Spain, India, South Korea, China, and Japan. The United States is a significant winner because of its gigantic fuel consumption, and also because it definitely needs all the breaks it can get in order to help the world recover from the global financial crisis, which it dropped us all into in the first place. Germany, Italy, and Spain are significant winners also because the EU is looking at a less favorable economic outlook than the US, and for longer too. India needs energy savings to shore up its governmental support. The East Asian countries benefit more indirectly - their biggest customers are the US and the EU, so lower prices in those countries help Korea, China and Japan by increasing exports. Hopefully this trend will continue well into 2009.

Shrinking Global Capital

Another major impact of the global financial crisis is the shrinking amount of investment monies that are available in the world. Investors worldwide are seeing heavy losses and a state of fear in markets worldwide has caused them to actually start hoarding capital.

This means that many projects which require investment in 2009 will have to be postponed. This has already been illustrated specifically in Brazil's development of its massive offshore oil fields - it will not likely be seen in 2009 due to lack of funds. Also, infrastructure growth in countries that are dependent on foreign capital, such as Latin America, Eastern Europe and the Balkans will see their progress almost come to a complete halt.

This also means that banks will have major problems staying open, especially in Europe. It seems that the switch to common monetary policies in the EU has created over-stimulated economic sectors. This year may see some bank closures or bailouts in Europe.

A third major trend in 2009 related to global capital shortages will be a slowdown in manufacturing, especially in East Asia, particularly China, which is home to much of the world's manufacturing. Countries that rely heavily on exports, such as South Korea, will also face export crises as the market dries up.

Political Unrest in Asia

If economic problems continue into 2009, political unrest will also most likely accelerate. There have already been some signs of political unrest in Greece, with large-scale rioting and strikes by approximately half of the entire country's workforce. Greece has a long history of activism and anarchism, which makes this latest outburst in December 2008 somewhat understandable. However, it could also be a herald of coming unrest in other countries with no such precedents, but greater amounts of dissatisfaction with the status quo.

East Asia might be especially susceptible to this particular brand of economically-motivated political unrest. The Asian financial system is based on different principles than the West - it emphasizes labor rather than capital. Asian countries including China, Japan, South Korea, Thailand and Malaysia consider fiscal losses from bad loans to be worth the cost so long as they result in more employment. Keeping most of their population employed is the mechanism that these East Asian countries use to ensure political stability. However, this becomes a major political problem when the money dries up. If East Asian exports slow down, and cheap credit and cash disappear from the system, the social glue binding these countries will come undone and old rivalries can emerge, sometimes resulting in social unrest and even revolution. If East Asian exports do not pick up in 2009, there may be political instability fuelled by a repeat of the 1998 Asian financial crisis.

The Korean Year of the Ox

Green New Deal

The government plans to invest 50 trillion won over the next four years to provide business opportunities to small and medium sized companies. President Kim Ki-moon of the Korea Federation of Small and Medium Business added: "Twelve small and medium business associations and 900 industry cooperatives must work together to provide financial support and training to the field of business." The Green New Deal project aims to create nearly 960,000 new jobs and provide a clean environment for the well-being of Koreans.

New Growth Engines

The original New Growth Engine Industry list has been altered to confront the crisis in the most efficient manner possible. This updated list of the New Growth Engine Industry is expected to be announced in the near future, but current guesses have narrowed it down to three major areas: Green Technology Industry, Advanced Convergence Industry, and Software Power Industry. The Green Technology projects are focusing on alternative energy solutions. The Advanced Convergence Industry includes the convergence between broadcasting and communications technology, and a convergence between nanotechnology and advanced materials. The Software Power Industry refers to service areas such as the content industry and medical industry. The new growth engine list originally contained twenty-two industries, but the preliminary development plans are being reevaluated to update and confirm the agenda for the upcoming year.

Four-River Redevelopment Project

The Lee Myung-bak administration's vision to revitalize four rivers is in the spotlight and is proving to be highly controversial, but the project has officially begun with rivers in four regions: Andong, North Gyeongsang Province, Naju, and South Jeolla Province. The Four- River Redevelopment Project will cost approximately 14 trillion won (US$10.7 billion) over the next four years, aiming to invigorate local economies and help prevent natural disasters by upgrading levees and reservoirs and dredging riverbeds. The government states that the project is designed to prevent floods and droughts while rehabilitating river water to improve its quality. According to a government estimate, the entire project is expected to create 190,000 new jobs nationwide and boost Korea's economic activity by about 23 trillion won.