ACCOUNTING TREATMENT FOR INVESTMENT

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Ford building $1bn manufacturing complex in India

On a plot of land acquired by Ford India for its new automobile manufacturing plant near Sanand, some 60 kms from Ahmedabad. Ford has started construction on a $1 billion manufacturing and engineering complex on the site. The complex will create 5,000 jobs and be able initially to produce 240,000 vehicles and 270,000 engines a year from 2014, Ford says. AFP - US auto giant Ford has started construction on a $1 billion manufacturing and engineering complex in India as it bets on the country to help drive global growth, a company statement said on Tuesday.

The new manufacturing facilities in Sanand in the western state of Gujarat will create 5,000 jobs, and will be able initially to produce 240,000 vehicles and 270,000 engines a year, Ford said.

The first vehicles and engines are due to come off the line in 2014.

The complex highlights the automaker's plan "to aggressively grow the Ford brand in India," said Ford India president Michael Boneham.

The new manufacturing facilities are targeted at helping Ford reach its goal of increasing worldwide sales by nearly 50 percent by the middle of the decade to eight million vehicles a year.

"We are aggressively expanding in markets around the world that have the most growth potential," said Joe Hinrichs, president of Ford Asia Pacific and Africa.

Ford has made several moves to support its aggressive expansion plan in India, with the company's total investment in the country to date now at $2 billion.

Rising incomes and rapidly expanding young populations have turned Asia into a battleground for global car manufacturers such as Ford, GM and Toyota, which hope to grow revenues by steering towards the Asia-Pacific region and Africa.

Ford began selling its cars in 1996 in India and in China one year later, but it only recently stepped up its game as it emerged from recession and restructuring in the United States.

Last year, Ford announced it will bring eight new vehicles to India by mid-decade, the first one being the Fiesta, launched in July.

The Detroit firm still has a long way to go to make the region a significant revenue generator. Ford is a comparative minnow in China and India with only three percent of the markets -- the two fastest-growing globally.

During the 1990s, the Philippines made significant progress in fighting poverty. According to the Family Income and Expenditure Survey of 1997, poverty incidence fell from 49.3% of total population in 1985 to 40.6% in 1994 and 36.8% in 1997.

According to an ADB study conducted by Ernie Pernia and Arsenio Balisacan, however, the decline in poverty rates did nothing to improve the country's notoriously inequitable income distribution. Despite the more-or-less sustained economic growth from 1985 to 1997, the poorest 20% of the population only improved their income 0.5% for every 1% growth in average income. In other words, they slipped further behind and income inequality became even more extreme.

The absolute gains were attributable to rapid economic growth during the Ramos administration, increased foreign investment, relative political stability, and decent public sector revenues associated with the privatizations introduced as part of the FVR reform agenda. (see Globalization Part 1 and Globalization Part 2).

Although the Philippines escaped the Asian financial crisis in better shape than many of its neighbors, the crisis did have a significant impact, an impact exacerbated by the damage done to the agricultural sector by the El Nino phenomenon during 1997-98. Both urban and rural sectors were hard hit by rising prices and a weakened labor market, causing poverty to begin edging up again. These factors contributed to a major increase in the number of Filipinos earning less than $276 a year (considered the minimum required to meet basic living requirements here), from 27 million in 1997 to 31 million in 2000 (39.4% of the population)

Enough statistics! Let's turn to a brief discussion of two practical areas that illustrate what we're talking about.

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