The web economy blog

The biggest challenge that Emerging Asia Pacific Economy are facing is the problem of inflation. Almost no Asian country is immune to inflation considering the rocketing rise in crude oil price. To counter the problem the every country has hiked the bank reserve ratio to slowdown the lending and credit growth. The other major problem faced by these economy is rise in food and labor cost which is making things bit more difficult for the emerging economy to sustain the economic growth rate.

Exports in these countries have so far fared well, even though there was uncertainty considering the slow recovery of US economy and debt-laden European countries

China reported export jump in the month of June which helped it in posting its largest trade surplus after many months. While India reported 50% increase in its exports. Other Asian export power house like South Korea and many other exporting Asian countries have seen decent exporting figures, thanks to rising global demand in shipping, steel & auto sector.

Here is a quick summary of some strong Emerging Asia Pacific Economies.

China: The major problem faced by Chinese economy is inflation, slowing consumer spending and slowing real estate and property sector. Chinese’s policy makers are focusing on the challenges faced by the economy in order to curb inflation and to revive and upgrade consumer spending to boost domestic consumption which will help the negatively growing property market to regain its foot.

China has been fighting inflation form last one and a half year after it exceeded the 3% inflation ceiling mark set by China’s National Development and Reform Commission. Rise in input cost have always troubled the Chinese economy to maintain the inflation rate below the ceiling limits. By late 2010 the inflation touched 4% and by May 2011 the inflation rate touched 5.2% mark.

Though China has taken various measures to moderate the rising inflation, since then it has hiked the lending rates four times since October 2010, and the bank reserve ratio have been revised 6^th time to 21.5%.

India: India too faces similar problem like China, with tremendous rise in inflation the economy is seeing pressure in its growth momentum.

To counter inflation the Reserve Bank of India tightened up monetary policy, it increased the cash reserve ratio with banks which made borrowing rates to go up. The raise in borrowing cost has ignited negative sentiments from the private sector. Hence many consumer durable companies have put their expansion plans on hold as they forecast slowdown in sales. Were as many capital intensive industries are giving up some projects due to lack of freely available capital. India’s industrial production also fell in the month of May to 6.3%.

South Korea: South Korea too is no different from the county mentioned above as pressure of inflation is also bothering this economy. South Korean  economy has been battling inflation from past 18 months which was contributed by rising exports, falling unemployment, and rising availability of consumer credit.

South Korean export-based industries have seen tremendous expansion due huge global demand for its consumer durable, auto and industrial input. Exports grew by 22.4% in the month of May.

The growth in export industries has also helped the labor market as unemployment rate was reduced to 3.3% in May. But in the month of May the inflation figures reached 4.1% exceeding the ceiling figure of 4% set by the central bank. The rise in consumer price inflation is also believed to be spreading to core inflation. In May, core inflation figures climbed to a two-year high of 3.5%.

It was surprising to see South Korea’s central bank and the Bank of Korea not raising the interest rates looking at the current trend of inflation in the country.

Taiwan: It was a good time for the Taiwan’s exports industry as exports grew at a pace of double digit for the past several months, until May when the figures dropped down to 9.5%. Taiwan’s economy is highly depended on exports as two third of the country’s total income comes from it.

The inflation figures too recorded an upside in the month of May which reached 1.66% from 1.32% in the month of April, even when export dropped in the country. The reason for inflation growth can be attributed to strong domestic consumption, robust investment and wage rise.

Considering the growth in inflation Taiwan’s Central Bank again decided to hike interest rate by 125 basis points. Since the beginning of 2011 the country is witnessing hike in interest rates for the fifth time.

Well the global market is following its global leads down. Dollar has slipped surprisingly from the record spot earnings. It may spark rally NZX shares drop after Aussie dispute Local shares up in morning trade Wrightson leads gains while NZX falls Wall Street rockets up on strong data Dollar on a high again after upbeat US data Strong data lifts Europe stocks.

Also the Guinness Peat Group which is having shareholder approval to wind down its business and return capital to investors that led the NZX 50 Index lower after a weaker-than-expected jobs report in the US dented optimism about the global economy.

The NZX 50 fell 19.22, or 0.6 per cent, to 3436.910 as at midday, heading for its fifth straight daily decline and the lowest level since the end of June. Stocks on Wall Street fell on Friday, with the Standard & Poor’s 500 Index down 0.7 per cent after US non-farm payrolls rose by just 18,000 in June.

That set the stage for weaker equity markets across Asia and Guinness Peat sank 6.3 per cent to 74 cents. The diversified investor has cancelled 227.9 million of its shares in exchange for payment of 35.07 pence apiece. Shareholders voted in favour of a capital return at their June 8 annual meeting and GPG is now looking to sell down its assets.

Cavalier slipped 0.3 per cent to $3.77 after Wool Equities emerged as a rival bidder for NZ Wool Services International, saying it has funding in place to make an offer for the wool scouring company.

Cavalier Wool Holdings, made up of Cavalier, ACC’s investment arm and private equity investor Direct Capital Investments was ordered to make a temporary halt to its offer for WSI on Friday pending an appeal by carpet maker Godfrey Hirst, which opposes that deal.

The Commerce Commission approved Cavalier’s $40 million takeover even though it would create a monopoly in New Zealand wool scouring because it agreed the competitive threat was from Chinese rivals.

Pyne Gould Corp was unchanged at 37 cents after the finance company confirmed it has taken a $14 million stake in a National Australia Bank loan to a related fund, Equity Partners Infrastructure Company (EPIC).

The deal will help EPIC avoid default and will help the orderly sale of its assets, the investment company said in a statement.

The NAB facility was due for repayment on April 30, but the lender waived that condition on the proviso EPIC significantly reduced its debt by the end of June, according to the NZX Market Supervision decision allowing the related party deal.

New Zealand property values crept up last month as a resurgent Auckland market bumped up the nationwide figures which were otherwise flat or negative.

National property values were 0.9 per cent below June 2010, compared to a deficit of 1.6 per cent in the rolling valuation for May, according to government valuer Quotable Value.

That’s just 5.2 per cent below the market peak in last 2007.

The improvement was largely off the back of a 1.4 per cent gain in Auckland property values compared to the same month a year ago, offsetting Wellington’s decline and Dunedin’s flat result. Christchurch values were still excluded given the uncertainty since the region’s earthquakes.

New Zealanders increased spending on credit and debit cards by 0.8 per cent last month, government figures show.

The seasonally adjusted value of total electronic card transactions climbed to $5.32 billion in June from $5.28 billion a month earlier, and was up 7.7 per cent compared to the same month a year earlier, according to Statistics New Zealand.

Spending on core retail industries, which strips out spending on vehicle-related industries, climbed 2.1 per cent to $3.35 billion.

The biggest gain came from spending on durables, which climbed 2.4 per cent to $996 million, while expenditure on consumables climbed 1.4 per cent to $1.46 billion.

The New Zealand dollar may continue to track upwards and test fresh post-float highs against the greenback this week, with local growth data expected to paint a more upbeat picture of the local economy versus its international peers.

Three of the five economists and market strategists surveyed by BusinessDesk saw the Kiwi gaining, while two saw the currency falling from its current level but remaining well supported.

Also the Kiwi group which was recently at US83.54 cents might trade between a mean range of 81.83 cents and 84.10 cents, according to the survey.

This week, the House Subcommittee on Immigration and practices within the law to arrange a hearing called “Legal Employment Act” (HR 2164). Bill sponsored by Representative Lamar Smith (R-Texas), would be authorized to use the E-verify system for all employers.

Although hailed as a success by Rep. Smith, E-Check program is actually a deeply flawed. If made mandatory, it would cripple the U.S. economy, destroy its social environment and lead to discriminatory results for workers, especially those in the Asia-American and Pacific Islanders (AAPI) community.

E-Verify is a federal program on the web program that provides employers a way to check work permits an employee and supplements I-9 form for new employees. In theory, employers can electronically verify the employment eligibility of their employees by the two federal agencies: 1) Department of Homeland Security (DHS), and 2) the Social Security Administration (SSA).

Sounds simple enough, right? Wrong. The drawbacks to the program far exceed its benefit.

Requiring use of E-Verify will prevent millions of American workers from getting jobs and cause many more workers to lose their jobs. Every day, employers already wrongfully receive red flags on workers, known as “tentative non-confirmations” (TNCs), based on errors in the E-Verify databases. These errors arise, for example, if a person’s name is misspelled or if his or her records are outdated.

E-Verify is particularly harmful for foreign-born workers, as green card holders and naturalized citizens are 20 times more likely than native-born citizens to falsely receive TNCs. This is especially troubling for AAPIs because more than 8 million AAPIs are foreign-born.

Furthermore, workers have little or no protection when they are falsely suspended or terminated as a result of E-Verify. Fane, a Tongan woman who was naturalized in 1993, was a victim of an improper E-Verify TNC. Although a U.S. citizen, E-Verify flagged her as unauthorized to work. She was not allowed to return to work until the issue was cleared up, losing out on two weeks’ worth of pay. Only after multiple trips to SSA did she discover that why she received a TNC: when she became a U.S. citizen, her records at SSA were not updated. Under E-Verify, Fane was never able to receive her two weeks’ worth of back pay – a heavy burden for a single mother of four children.

E-Verify promotes discrimination against AAPIs, as under-trained employers may assume a worker is undocumented if they receive a TNC in error and unduly fire the worker or simply not hire them at all. A government-funded study found that employer noncompliance with the E-Verify pilot program’s rules was “substantial,” finding that employers 1) engaged in prohibited practices such as pre-employment screening, 2) took adverse employment actions based on tentative non-confirmation notices, and 3) failed to inform employees of their rights. The proposed law would also allow employers to use E-Verify to prescreen job applicants. AAPI workers and other foreign-born or foreign-looking employees will have a harder time getting a job because employers may want to avoid the risk of E-Verify mismatches or errors. This opens to door to discrimination based on national origin and race.

In an ailing economy, we cannot afford to divert the time and resources of workers like Fane. The American Council on International Personnel reports that corrections at SSA usually take in excess of 90 days, and that employees must wait four or more hours per trip, with repeated trips to SSA frequently required to get their records corrected. E-Verify will jeopardize the productivity of its AAPI workers by creating hardship for employees.

Do not think the fans when they say that E-Verify will help our economy. E-Verify, with their high error rates and potentially discriminatory results will affect all workers, including U.S. citizens and green card holders. As the error rate is reduced and better implementation and accountability procedures are in place, we’ll let you hit the gas in this car broken. E-Verify is not ready for prime time and should not be mandatory.

European share fell for the sixth day Wednesday, with sentiment hit by a bearish assessment of the U.S. economy by Fed chairman Ben Bernanke.

The last strip was defeated by nearly 4.4% dropped out of the pan-European FTSEurofirst 300 index as a string of disappointing data of the largest economy in the world, including the weak labor market and production has raised fears that the pace of recovery may be slowing.

At 04:51, the index fell 1.1% to 1092.25 points, after falling as low as 1,089.78 – its lowest intraday level since March 21.

Investor sentiment was rattled after Bernanke acknowledged a slowdown in the economy but made no suggestion of a further stimulus to boost the economy.

“The question marks regarding the growth dynamics for the global economy are becoming bigger and this is weighing on the markets,” said Tammo Greetfeld, equity strategist at UniCredit.

“If we put this in perspective, the Euro STOXX could move towards the region of 2,650 or 2,700 points, which is the lower end of the valuation that we have seen over the last two years,” he said, adding that whether these levels could attract buyers depended on the extend of economic slowdown and deterioration of the euro zone debt crisis.

The Euro STOXX 50, the euro zone’s blue chip index, was down 1% at 2,746.68 points.

Mining shares, which are the worst performing sectors in Europe so far this year, fell 2.1% as copper prices shed 1.5%, reflecting a rise in the dollar as risk aversion intensified.

LOOKING UNLIKELY

Some investors were likely to have been disappointed by a lack of indications from Bernanke of further quantitative easing measures to support the economy in the wake of the Fed’s current $600 billion government bond buying, known as QE2, which is set to end in June.

“Other Fed members were also speaking yesterday with much the same message coming through: monetary policy is likely to remain accommodative for some time yet, but further QE looking unlikely at this stage,” Evolution Securities analysts wrote in a note.

Among individual fallers, Kabel Deutschland fell 6.2%, as traders pointed to unsurprising earnings and a proposed dividend that was not as high as some had hoped.

The euro, which has been used by a number of investors as a barometer for “risk-on/risk off” trends over the past year, has been sending a contrary signal over the past two weeks, rising about 5% while the Euro STOXX 50 has dropped 5% over the same period.

The 30-day rolling correlation between the euro and the Euro STOXX 50 has fallen to 0.2 from 0.6 back in early May, highlighting the fact that correlation strategies may be becoming less effective in the short-term.

Technical indicators also painted a bearish picture for equities, with the 14-day relative strength index on the FTSEurofirst 300 at 31.9 — inching towards “oversold” territory of 30 and below.

With the addition of a downbeat mood, German exports in April fell more than in January 2009, the Federal Statistical Office reported.

With the QE2, set at five weeks and Greece down the hill towards the global standard is not best suited to withstand an economic slowdown.

This is precisely what seems to happen when Asian demand is affected by a cooling of China and Japan struggling.

Let’s take a look at the evidence:

Japan’s economy shrank by 0.9 percent in the three months to March, battered by the earthquake, tsunami and ongoing nuclear fiasco.

The preliminary HSBC/Markit purchasing managers’ index for China fell to 51.1 in May from a final reading of 51.8 in April, holding in expansionary territory above 50 but amidst growing evidence that China is coming off the boil. Chinese demand for raw materials and semi-finished products has been one of the global economy’s principal supports, but now a monetary policy tightening campaign may be gaining traction.

The Chicago Fed national index, derived itself from 85 economic indicators, came in at negative 0.45 in April compared to 0.32 in March. There are numerous signals of an industrial slowdown in the U.S., while the housing market continues to weaken, threatening financial stability and consumer spending.

Finally, in Europe the euro zone composite flash PMI, an indicator combining service sector and manufacturing purchasing, fell to 55.4 from 57.8. More worryingly, the headline manufacturing index had its biggest fall since Lehman Brothers failed, falling by 3.1 points to 54.8.

“All in all it seems to us that the odds are high that a domestic and global economic slowdown is already in place.  In the U.S. the slowdown is happening with only weeks to go before the end of QE2, a program that has been a major prop for even the tepid recovery we’ve undergone so far,” said Charlie Minter of fund managers Comstock Partners in a note to clients.

“For the stock market nothing seems to matter until, suddenly, it does.”

It has begun to matter recently to the stock market, which has fallen in recent sessions after a sustained rally. The bond market has already figured this out; since mid-April U.S. 10-year yields are down more than 12 percent to 3.12 percent. Given that the U.S. debt market faces a debt showdown and the end of QE2, both factors which should theoretically send yields higher, this slide in yields shows real doubts about future growth.

CRUEL SUMMER

It is worth noting that the euro zone’s woes were not this time concentrated in the weak peripheral states; this time Germany got whacked too. That may well reflect the wrench thrown into production from Japanese plant closings, which in itself will self-correct. It is also likely reflecting a slowdown in demand for German products from China. If you believe that Chinese demand was artificially boosted by very easy credit, and that Chinese demand in turn was driving global growth, then this is an indicator of a very busy and volatile summer in financial markets.

Global markets have ignored, more or less, the euro zone’s issues for more than a year, but did so in a very supportive atmosphere. The Federal Reserve was buying up Treasuries, sending cash into risk markets in waves, while China continued to grow at a blistering pace. It may be that China is important not just because its slowdown affects demand, but because it lets investors focus on the actual prospects in the euro zone.

Will Germany and France be as willing to foot the bill for Greece if their own manufacturing bases begin to shrink? It is possible but a lot less likely.

Meanwhile the crisis both builds and spreads, with a dispute over debt reprofiling (a sort of doe-eyed default) between the European Central Bank and European officials and a fantasy plan by Greece to raise 15 billion euros through asset sales.

Greece may turn out to be a minor worry; Belgium and Italy have been threatened with credit downgrades by Fitch.

So what happens from here? A palatable outcome would be a gentle decline in economic momentum followed by a strong second half. This makes absorbing the impact from Europe easier, and makes it easier for Europe to come to terms with itself.

A less likely, perhaps, but still possible scenario is that the manufacturing slowdown gains speeds just as Europe faces a contagion from the periphery, either to parts of the core, to the banking system of the core, or both.

At this stage, the Federal Reserve is a horrible choice, we extend the quantitative easing supported by the recent economic slowdown, or peace of mind, the rhythm is a recession, and I hope to get something else?

What’s the Latest Development?

Another attempt to make a go of using the power of the web to create an economy of “micro-payments” whereby individuals and corporations could charge tiny sums for their content. Flattr, a micropayment startup founded by Pirate Bay co-founder Peter Sunde, is preparing to launch a new feature that will combine its payment system with Twitter, and allow any Flattr user to send money to someone via their Twitter name.

What’s the Big Idea?

Could this help launch a “tip jar” system that actually works on a large scale and transforms the online content industry in much the same way The Pirate Bay disrupted it, but for the better? Or will it just be the latest failed micropayment startup? Since there aren’t any of the physical restrictions on money and transactions that occur in the real world this kind of micro-economy should work quite well. The only problem is that it never has.

The global economy is likely to fuse on its recovery from the global economic meltdown as reported by the International Monetary Fund (IMF) Deputy Director, African Department Mr.Saul Lizondo. He mentioned about this economic recovery plan during the launch of IMF’s Semi-Annual Sub-Saharan African Regional Economic Outlook held in Lagos.

Lizondo told that Sub-Saharan African’s economic recovery from the crisis-induced delay is going fine and under the way, with growth in most countries now back fairly close the high levels of the mid-2000s. As accord to Lizondo, “The main recovery remains multi speed 6.5% growth in emerging market and two and half  per cent growth in AE; four and half  per cent global growth”.

He put in plain words that evidence of the economic recovery is borne out by high frequency data, noting that after an inventory acceleration-slowdown cycle activity seems poised to re-accelerate in 2011.

Abebe Selassie, Regional Studies Division chief added that the severity of the shock imparted by the financial crisis and the global recession that followed, after a brief hiatus, output expansion in most countries in sub-Saharan Africa has returned to the high precrisis levels.

Selassie said “with the advent of another sharp increase in food and fuel prices, the resilience exhibited by the region during the last few years is about to be tested again. The price shocks (coupled with the recovery) are likely to lead to higher inflation in most countries and to deteriorating current account deficits in a number of fuel importers”.

Permanent Secretary, Federal Ministry of Finance, Mr. Danladi Kifasi assuredly said the Nigerian economy and that of the sub-Saharan region will continue to be strong and resilient.

Kifasi, who represented the Minister of Finance Mr. Olusegun Aganga said “the policies we are implementing are targeted at ensuring the sustainability of that growth as well as building it on a strong and diversified foundation.”

Speaking on Nigeria’s revenue base, he disclosed  plans by Government to diversify revenue base away from oil and gas by broadening the tax base adding that the Government is determined to bring the budget back to balance through the enhancement of revenues and by increasing the efficiency of its expenditure.

He said, “we will achieve this by modernizing and improving the efficiency of tax framework” IMF, in a statement  “the overall sanguine picture must be judged alongside still lingering dislocations from the global financial crisis. The region’ progress toward the poverty reduction Millennium Development Goals has been delayed by rising unemployment and the impact of the 2008 spike in food and fuel prices”

“With strong growth and rising inflation pressures, the broad direction of fiscal policy in most countries should be moving away from the supportive stance of the last few years. Nevertheless, fiscal support to poor households hit by rising food prices will need to be accommodated in some countries”.

In a statement, IMF clearly stated that economic policy remains looser than desirable in many low income countries or economically backward countries in the region, even before the recent heave in food and fuel prices. The IMF statement also states that “To counter incipient inflationary pressures, monetary policy will need to be tightened, particularly where growth has already regained pre-crisis level.”

So let us wait and watch the progress and the outcomes of this global economic recovery plan. It may help the World Economy in a way or other.

It is not unusual for the American Heritage Credit Union in Philadelphia to get 500 resumes for a job advertisement, reports CBS News senior business correspondent Anthony Mason.
But business is growing, the company is taking: tellers, managers and assistant vice-president.

“We potentially could bring in 38 new positions by the end of the year,” said Flora Caranac with American Heritage.

Economist Ellen Zentner said when you base it off the last three months of data; it looks like the economy is getting some momentum on job growth.

“We’ve had the unemployment rate drop a full percentage point very quickly over just four months and that’s nearly unprecedented,” Zentner said.

In February, employment increased in 35 states. The biggest overall growth coming in California, Pennsylvania, Florida, Texas and Illinois.

But more than 6 million Americans have been unemployed now for six months or more, like Marianne Gannon, a former sales manager with Mastercard. She’s joined a job search group in Westchester County, New York.

Gannon, who has been out of work for 15 months, thinks there’s a bias against people who have been out of work for a long time.

“I applied one night to a particular company on their website,” Gannon said. “And two and a half minutes later I got an email saying ‘Thank you very much. We’ve reviewed your application and resume and we do not feel it is a fit.’”

On job web sites we found repeated postings for sales and management positions that required applicants to be “currently employed.” CBS contacted four firms for an explanation but none replied.

“Even friends or neighbors or whatever around here – they’re like, ‘you’re still out of work?’ It’s like what don’t you understand? The job market stinks,” Gannon said.

The new study, UCLA and the State University of New York at Stony Brook, the researchers found evidence of a trend towards the unemployed, according to a report that is often marked, even if they are voluntarily leaving a position.

Craig Alexander, senior vice president and chief economist at TD Bank Financial Group, recently spoke with members of the business community and local politicians in the framework of the 6th edition of the Economic breakfast.

By Lindsey Cole/The Oshawa Express

Flooding. Earthquakes. Tsunamis. Political instability. A recession.

Put all of these ingredients together and you have a recipe for a global economy that is facing some significant challenges.

But, believe it or not, the world is beginning to rally, with Canada fairing incredibly well in the mix, says Craig Alexander, senior vice president and chief economist for the TD Bank Financial Group.

He spoke to a group of local members of the business community as well as City staff and councilors at the 6^th Annual Economic Outlook Breakfast, put on by the City of Oshawa.

During his speech he highlighted several areas of improvement and the challenges that are facing the world, North America and the local economy.

He says it’s a tangled web and Canada’s success depends largely on the rest of the world.

“It was a severe recession,” he says of the 2009 economic downturn. “People didn’t know how bad the recession was going to be. People didn’t see a light at the end of the tunnel and if they did they thought it was a train.”

But, he says, overall countries are rebounding well and though a natural disaster can be seen as a setback, the tsunami in Japan will not completely decimate the country.

In North America imports will be affected for a short time when it comes to automobiles and technology but overall, things will rebound.

“The rebuilding will actually stimulate economic growth,” Alexander says of Japan. “The economic conditions are improving (on the whole). It’s a very positive outlook. Having said that, it’s a very risk filled environment. There are some very big challenges out there.”

Those challenges include inflation, the cost of food, oil prices and countries facing large deficits.

When it comes to food prices, nature is again to blame.

“Food prices have soared. There just isn’t that much food in the food we buy. An awful lot of it is the marketing, the packaging,” he says, adding prices soared six to eight per cent year over year. “The story is mother nature.”

But when it comes to oil prices, political unrest in the Middle East is the cause and it is cause for concern. Alexander says that is driving oil costs up and the worry is that the unrest will spread to large oil companies in large countries like Saudi Arabia.

“It’s a low probability that we’re going to have an oil shock,” he says, adding it’s something they are keeping an eye on. “If things cool down in the Middle East then you will see oil prices go down.”

Closer to home, the United States is beginning to rally, despite the housing crisis. This, in turn, is benefiting Canada.

“It (the Canada) just chugged along. It’s now recovered all the ground it lost. The U.S. is still in a hole, it’s still got a long way to go but there’s no question that it is improving,” he explains.

“Before Americans were spending like drunken sailors. Consumers have been going without for about two years.”
He says two million jobs were created in 2011 in the U.S., but the jobs lost during the recession amounted to 8.7 million. It shows a slow but steady growth rate, he adds.

When it comes to Canada and the local economy, Alexander says the nation is doing well.

“There was nothing fundamentally wrong with Canada. We were hit with a massive external shock,” he says. “Canada was chugging along nicely when it was sideswiped.”

He says locally Oshawa struggled on the manufacturing side of things, but as the country began to rebound so did Oshawa as car sales ramped up and jobs were created.

However, he adds that while Canada has managed to get most of the jobs back numerically, they went to different areas.

“The jobs haven’t been created in the places that lost them.”

It has moved to service jobs and for Durham that has meant huge improvements.

“The GTA is very competitive. The GTA is very robust. The region as a whole is very strong,” he says. “When you get in the Durham Region it gets a little more diversified.”

He says the GTA unemployment rate is 8.3 and Oshawa is 8.9, so Oshawa is still higher, but Oshawa’s plan is in the right direction, focusing on skilled labour, competitive taxes, retraining and building infrastructure.

“There are still a lot of people out there that need our support,” he says.

“The economy is fundamentally changing. It’s becoming a knowledge-based economy.”

A study by the World Bank published reports Thursday that the online gaming industry has become a company of 3 billion U.S. dollars offered wages to migrant workers in Asia to play all day, raise money virtual and sold to wealthy clients in the Western world for real money.

The report also highlights a new industry in which companies seeking to increase the popularity of its brands to pay low-skilled workers abroad to become his followers to Facebook or Twitter followers.

The study “Knowledge Map of the virtual economy,” World Bank is the first look in depth the impact of online gaming and social media in the developing world. The report was prepared by infoDev, an organization financed by donors to the bank. Lehdonvirta Vili, co-author, said that the bank should not pay the money in the industry because he said the dealmaking violates some of the terms of game publishers and service is cheating.

Known as “gold farming,” the game-playing profession took off in the early 2000s with games such as World of Warcraft and has become a complex industry.

Low-educated laborers in Asia spend hours each day advancing through levels of an online game, picking up gold, swords and gems that enhance a player’s status. Then gaming studios, which employ the players, sell those virtual goods to online retailers. Finally, the retailers sell those items to more than 120 million players worldwide, many of them in North America and Europe, who are unwilling to play the games all day to gather the items on their own.

The bank’s report indicates that online gaming has a positive impact in Asia because 70 percent of the industry’s revenue remains in the gaming countries, with most of that money going to the gaming studios. Compared with the $70 billion coffee market — in which only a small fraction of the revenue remains in the bean-growing countries — gaming has a “much better development impact,” the report concludes.

The report also includes a survey of 26 players and studio managers that offers a rough, yet rare demographic look at their lives: Most of the players work out of studios in China, in Beijing or Changsha, the capital of Hunan province. They earn an average wage of $2.70 an hour, one dollar more than Beijing’s minimum wage for part-time factory work.

“The larger point is that online gaming is often viewed as exploitation. Certainly it’s not a dream career, but the players’ earning is not at sweatshop levels,” Lehdonvirta said.

The gaming studios keep about two-thirds of the industry’s $3 billion in revenue. “Previous studies presumed that the players sold the goods, but that’s not true,” Lehdonvirta said. “If you’re a rural online game player in China, you have no way of setting up a Web site and developing a customer database, and maintaining customer relations.”

The report also focused on a trend in which companies pay low-skilled workers in India, Bangladesh and the Philippines to “like” their Facebook fan pages or become a follower of that company on Twitter. The practice inflates a brand’s popularity.

Twitter regularly suspends accounts created only to follow others. Sean Garrett, a company spokesman, wrote in an e-mail: “We’ve seen numerous instances wherein the accounts that are bought are later suspended. . . leaving the company with few followers and no recourse.”

Facebook spokesman declined to comment on. Site rules allow companies to offer coupons, for example, people, if “as” a page of ads across Facebook.