Madoff Loss Spawned in ‘Bargain With Devil’ at Cerberus Bank
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By Finbarr Flynn
Feb. 19 (Bloomberg) -- Two of Japan’s eight nationwide banks are braced for $2.6 billion in losses after investments by U.S. private equity groups, which the Obama administration is counting on to help bail out the U.S. financial system.
The lenders took on increased risks under foreign ownership. Aozora Bank Ltd., acquired in 2003 by Cerberus Capital Management LP, reported reverses on subprime mortgages, GMAC LLC shares and Bernard Madoff’s fund. Shinsei Bank Ltd., bought in 2000 by private investors including billionaire J. Christopher Flowers, had losses on a stake in Germany’s Hypo Real Estate Holding AG.
“Aozora and Shinsei were managed like many banks in America, investing in derivatives and other toxic assets,” said Neil Katkov, head of Asia research at Boston-based Celent LLC. “It was a bargain with the devil.”
Buyout firms including Cerberus and J.C. Flowers & Co. are stumbling with investments from Japan to Germany as their acquisitions are battered by the credit crisis and the deepest recession since the early 1980s. As many as 50 percent of companies owned by private-equity firms may default by 2011, according to a study of 328 holdings by Boston Consulting Group.
The failures are affecting a cross section of the global economy. Mervyn’s LLC, Lyondell Chemical Co. and Linens ‘n Things Inc. -- all controlled by buyout firms -- have filed for bankruptcy. Cerberus received U.S. government aid for Chrysler LLC and GMAC, the lender affiliated with General Motors Corp.
Rules Loosened
U.S. Treasury Secretary Timothy Geithner last week urged that private investors take on a role in rescuing financial institutions, and regulators eased rules to promote private takeovers of banks. Carlyle Group LP, the world’s second-largest buyout firm behind Blackstone Group LP, has lined up $1 billion to invest in banks, according to people familiar with the matter.
In Japan, Flowers co-led a group of international investors to buy Shinsei for 121 billion yen ($1.3 billion). The new owners invested the bank’s money in Hypo Real Estate, the German property lender battling to avoid insolvency. That’s contributed to Shinsei forecasting a 48 billion yen loss this financial year.
Flowers said in an interview that the bank invested abroad too much, yet its overall record with his fund is very profitable.
After Cerberus gained control of Aozora, Japan’s eighth- largest nationwide lender, the bank switched its focus from making domestic loans to investing overseas. Last week, it forecast a 196 billion yen deficit for this financial year and ousted Chief Executive Officer Federico Sacasa.
‘Risky Assets’
The Japanese government injected 12.8 trillion yen to rescue the two banks from an earlier crisis that led to their nationalization a decade ago.
“It’s outrageous they were investing taxpayers’ money, our money, in those risky assets,” said Kristine Li, a Tokyo-based analyst at KBC Securities who no longer rates Aozora. “Aozora was chasing only short-term gains.”
Cerberus doesn’t influence Aozora’s investment decisions, said Tim Price, a partner at the New York-based firm. The fund owned 50.02 percent of the bank, Aozora said on Dec. 5.
“Management runs the company on a day-to-day basis, and the independent board of directors gives strategic direction,” he said. “The people on the board that Cerberus has nominated are there because they are highly qualified.”
Sacasa was one of four foreign directors who resigned from Aozora’s board Feb. 10 as it predicted a loss in the year through March 31, 2009.
Insolvent Lenders
Aozora fell 75 percent last year, the biggest drop among 84 stocks in the Topix Banks Index. Standard & Poor’s and Moody’s Investors Service last week cut Aozora’s credit ratings to the third-lowest investment grade, citing eroding earnings and asset quality.
Masaaki Harada, a spokesman for Tokyo-based Aozora, declined to comment on the bank’s future.
Japan’s government sought foreign investors after it started taking over insolvent lenders in 1998. The banks were saddled with 72 trillion yen of bad loans tied to a property bubble that burst in the early 1990s.
U.S. private-equity firms including Cerberus, Ripplewood Holdings LLC and Lone Star Funds, as well as billionaire Wilbur L. Ross, were among those who bought banks that received public funds. Ross and Lone Star have since sold their controlling stakes.
Aozora -- Japanese for “blue skies” -- emerged in 2001 from the ashes of failed lender Nippon Credit Bank Ltd., which was nationalized as the government injected 12.4 trillion yen in capital into the industry over five years. Forced mergers cut the number of nationwide lenders to eight from more than 20.
Clash of Cultures
The Japanese government spent 4.9 trillion yen rescuing Aozora Bank since the late 1990s as it bought back bad loans and assets and boosted its capital.
Cerberus lost a bid to buy the bank in 2000 as the government sold 49 percent to Softbank Corp., a Tokyo-based Internet investor. Cerberus built up a 12 percent stake and returned in 2003 with an offer for Softbank’s shares.
The takeover provoked opposition from investors, politicians and senior management. Hiroshi Maruyama, then Aozora’s president, said in 2002 that investment funds weren’t welcome buyers. Such resistance reflects a clash of cultures.
“Western investors are driven by profit, return on investment and the economic interests of their shareholders,” said Thomas Barrack, a former Aozora director and investor who heads Colony Capital LLC., the Los Angeles private-equity firm that has invested $39 billion worldwide.
‘Japanese Way’
Japanese banks are concerned about their duty to borrowers and the welfare of those companies’ employees, he said.
In April 2003, former U.S. Vice President Dan Quayle, chairman of Cerberus Global Investments, rallied support in Tokyo for the Aozora bid.
“We’re going to make this bank operate profitably, and we are going to make sure that we do it the Japanese way,” Quayle told the Financial Times that month. He didn’t respond to e- mails or calls seeking comment for this story.
Cerberus closed the deal four months later, paying 101.1 billion yen. At the time, Aozora owed the government 355 billion yen from the bailout.
Nine new directors were appointed to Aozora’s 13-seat board in May 2004, joining Quayle and Chairman Edward Harshfield.
Cerberus-appointed directors failed to understand Japan’s banking industry and didn’t trust Japanese managers because of concerns they would pour money into failed domestic companies, a person familiar with the board’s discussions said.
Improved Results
Harshfield signaled a strategy change a month after he took charge in September 2003, telling the Nikkei newspaper he’d allocate as much as 20 percent of assets for overseas investments, including securities backed by U.S. and U.K. loans.
The bank needed to look beyond Japan because domestic lending yielded low profits, Harshfield told the paper. The Bank of Japan kept its key overnight lending rate near zero for more than five years from March 2001.
Results initially improved. Profit more than doubled to 81.5 billion yen in the three years to March 31, 2007. Securities holdings, including collateralized debt obligations, almost doubled to 1.9 trillion yen in the period, according to the bank’s financial reports. CDOs bundle bonds or loans, or both, from a variety of issuers.
Income from investments rose to 42 percent of earnings, from 13 percent, during the same three years, the reports show. Loans and other interest paying assets dropped to 39 percent from 73 percent, even as total lending expanded. Loans in Japan to manufacturers fell 24 percent to 335.9 billion yen.
Aozora shareholders led by Cerberus raised 351 billion yen by selling 37 percent of the bank in a 2006 initial public offering.
Lehman, CDOs
Aozora’s fortunes tumbled when the credit crisis erupted in mid-2007.
The bank lost 45.4 billion yen on CDOs in the year through March 2008, cutting net income to 5.9 billion yen, according to earnings statements.
In the first nine months of this financial year, Aozora posted a loss of 109.4 billion yen, including soured hedge fund bets and loans to bankrupt Lehman Brothers Holdings Inc. It also lost 11.7 billion yen on investments related to Madoff, the New York fund manager charged with fraud, the bank said this month.
Among Aozora’s most damaging overseas forays was its purchase of 3.2 percent of GMAC, General Motors’ consumer finance unit, for $500 million. The bank was part of a group led by Cerberus that in April 2006 agreed to buy a controlling interest.
‘Above Our Weight’
By the time the transaction was completed in November of that year, GMAC’s home loan unit, Residential Capital LLC, was getting stung by rising delinquencies on subprime mortgages. Aozora has since written off 97 percent of the investment, according to third-quarter earnings released Feb. 10.
Last December, GMAC received a $6 billion lifeline from the U.S. Treasury.
“At the time, being invited into that consortium, which included Citigroup, seemed like a very interesting opportunity,” Sacasa said in an interview last May. The Cerberus connection let Aozora “play well above our weight,” he said.
Sacasa, 58, declined to comment for this story.
James Fiorillo, managing principal at private equity advisory firm Ottoman Capital Japan, called Aozora the “best deal” among Japanese banks. The stock trades for less than a third of its book value, making it the cheapest one in the Topix Bank Index.
Back to Basics
That’s “ludicrously low,” Fiorillo said. “Aozora is going to survive.”
The shares have gained 25 percent to 104 yen this year, making the company the best performer in the index.
Aozora and Shinsei aren’t the only Japanese lenders to be burned by investments abroad. Mizuho Financial Group Inc., the nation’s second-biggest bank, with 25 times more assets than Aozora, lost $8 billion on securities tied to U.S. mortgages, more than any other Asian lender.
Aozora’s focus on overseas investments led Kimikazu Noumi to quit as chairman in May 2008 after 15 months in the job, according to two people familiar with the decision who declined to be identified, citing confidentiality. Noumi, 64, had sought to return Aozora to its roots as a wholesale lender, the people said. Noumi declined to be interviewed for this story.
Sold at Loss
On Feb. 10, Deputy President Brian Prince, 45, replaced Sacasa as CEO. Prince, who helped clear up $20 billion of bad loans at Shinsei from 2000 to 2003, plans to return Aozora to Japanese lending.
“We should get out of the hedge fund business because these industries are going down,” he said in a telephone interview. “We’re going to focus on our core business in Japan.”
Aozora still owed the government 227.6 billion yen in November, according to financial reports. Japan’s three largest banks, including Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., finished repayments in 2006.
Some investors have already cut their losses, including Belluna Co., a Tokyo-based mail order company that held about 250 million yen of Aozora shares on March 31 last year, according to Bloomberg data.
“There was little sign that the stock would climb, so we sold them at a loss,” said company spokesman Nobuaki Nakanishi. “We lost a few hundred million yen on Aozora.”
Aozora may struggle to survive in its current form, said Masaru Hamasaki, a Tokyo-based strategist at Toyota Asset Management Co. The company’s actively managed funds don’t own Aozora shares, he said.
“They can’t win at home and there’s no surety they can overseas,” Hamasaki said. “Aozora’s days as a bank may be over.”
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China Feasts on Miners as ‘Bank of Last Resort’ (Update1)
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By Helen Yuan and Rebecca Keenan
Feb. 18 (Bloomberg) -- Wuhan Iron & Steel Group and Jiangsu Shagang Group Co., China’s third- and fifth-largest steelmakers, are shopping for iron ore mining stakes in Australia and Brazil, executives said in interviews.
“We are evaluating and selecting” candidates in Australia and Brazil, said Shen Wenrong, Jiangsu-based Shagang’s chairman. “Going overseas is the government policy, so I believe we will get financing from Chinese banks.” Wuhan spokesman Bai Fang said his company is “looking for opportunities” amid lower acquisition costs for iron ore assets in Australia and “won’t rule out other countries.”
The world’s top metal user, China has agreed to acquire $22 billion worth of commodity assets this year after a 70 percent drop in metals and oil since July ended a six-year boom in raw materials. With U.S. and Australian banks still hesitant to lend, Rio Tinto Group and OZ Minerals Ltd., laboring under combined debt of $40 billion, agreed this month to sell stakes to Aluminum Corp. of China and China Minmetals Corp., respectively.
“China has turned out to be the bank of last resort,” said Glyn Lawcock, head of resources research at UBS AG in Sydney. “China is a net importer of copper, bauxite, alumina, nickel, zircon, uranium. China is looking for ways to secure supply of these raw materials.”
Foreign Exchange Purchases
China, whose $1.95 trillion in currency reserves are the world’s largest, plans to spend more foreign exchange on imports and acquisitions. The State Administration for Foreign Exchange said today it will make it easier for companies to purchase foreign-exchange for their overseas investments.
Commodity acquisitions by China would put increasing amounts of the world’s raw materials under control of their biggest consumer and may allow it to influence prices. The investment by Aluminum Corp., or Chinalco as the state-owned entity is known, into Rio may bolster China’s bargaining power to set iron ore prices, China Iron and Steel Association said.
China’s plan to boost the economy with 4 trillion ($585 billion) yuan in spending on roads, bridges and other infrastructure has pushed up prices for steel and iron ore by as much as 37 percent and the cost of shipping commodities has more than doubled.
Oil Fund
The nation may set up an oil fund using part of the reserves to help companies buy fields abroad, according to a statement this week by the China National Petroleum Corp., the country’s biggest oil producer. China this week agreed to provide $25 billion of loans to Russia in return for oil supplies for the next 20 years.
Australia already has signaled concern that China is buying strategic assets on the cheap. Treasurer Wayne Swan last week tightened takeover laws when Chinalco announced its investment in London-based Rio Tinto, the world’s third-largest mining company.
Swan has the power to reject both that deal and Minmetals’ proposition with Melbourne-based OZ Minerals on national interest grounds. When Peter Costello was Australia’s treasurer in 2001, he blocked Royal Dutch Shell Plc’s bid for Woodside Petroleum Ltd. In 2004, Minmetals failed to reach an accord to buy Noranda Inc. amid objections from Canadian politicians.
China’s acquisition hunt is happening as the government ponders where to invest its currency reserves, which increased 27 percent in the past year to about 29 percent of the world’s total. The country already owns $696.2 billion in Treasuries, about 12 percent of the U.S.’s outstanding marketable debt and has been stung by losses of more than $5 billion on $10.5 billion invested in Blackstone Group LP and Morgan Stanley in New York and TPG Inc. in Fort Worth, Texas, since mid-2007.
‘Burnt’ Hands
“China has burnt its hands in the past buying liquid assets like Blackstone, but here they have the chance to buy tangible, useful assets,” said Professor Liu Baocheng at the University of International Business & Economics in Beijing. “There’s no point putting money in the bank or in deposits with low returns.”
China consumes over a third of the world’s aluminum output, a quarter of its copper production, almost a tenth of its oil and it accounts for more than half of the trading in iron ore. Last year, China bought $211 billion worth of iron ore, refined copper, crude oil and alumina.
The deals by Chinalco and Minmetals, both based in Beijing and controlled by the state, come amid difficulties that Australian mining companies face in borrowing A$26 billion to fund for new projects, as detailed in a September UBS report.
Chinalco agreed on Feb. 12 to spend $19.5 billion to acquire debt and stakes in Rio Tinto’s mines in Australia, Indonesia, the U.S. and Chile. Rio was forced to seek a deal from its biggest shareholder to help reduce $38.9 billion of debt largely incurred from its 2007 acquisition of Alcan Inc. Rio’s high-level of debt was one of the reasons why BHP Billiton Ltd. abandoned its $66 billion hostile bid for Rio in November. Chinalco will increase its stake in Rio to 18 percent should it convert the debt.
OZ Minerals Takeover
Minmetals on Feb. 16 said it will take over OZ Minerals for A$2.6 billion ($1.7 billion) and assume debt of A$1.2 billion.
In addition to Wuhan and Shagang, Zijin Mining Group Co., China’s largest bullion producer, may spend as much as 20 billion yuan on acquisitions, Chen Jinghe, chairman of the Fujian-based company, said Nov. 11. Yanzhou Coal Mining Co. said on Dec. 5 that it is looking at deals, following an Australian Financial Review report that the Shandong-based company wanted to buy Felix Resources Ltd. in Australia for more than A$3 billion.
Fortescue Metals Group Ltd., Australia’s third-largest iron ore exporter, surged 12 percent today after it said it held investment talks with China Investment Corp., the nation’s sovereign wealth fund, and Anglo American Plc. Talks are “preliminary and incomplete”, the Perth-based company said.
China Investment may bring in Baosteel Group Corp. and China Shenhua Energy Co. as partners to invest in Fortescue, the South China Morning Post said Nov. 17, citing people it didn’t identify.
‘Chunky Deals’
Excluding the $22 billion of spending this year, Chinese companies last year bought stakes or control of Australian iron ore producers Midwest Corp. and Murchison Metals Ltd. and metals explorer Abra Mining Ltd. In August, China Shenhua Energy Co., the world’s largest coal producer by value, won a coal exploration license in Australia for A$300 million.
“I would’ve thought there is probably many billions of dollars still to come because China does have enormous financial firepower,” said Peter Arden, an analyst in Melbourne at Ord Minnett Ltd., an affiliate of JPMorgan Chase & Co. “We will see some more chunky deals being done.”
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Citi Cost-Cutters Skip Offices, Staff for Ex-CEOs Prince, Reed
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By Bradley Keoun
Feb. 17 (Bloomberg) -- Looking for Charles O. “Chuck” Prince, ousted 15 months ago as Citigroup Inc.’s chief executive officer? Just call his extension at the bank, which still pays for his office and secretary in Midtown Manhattan.
Former Citigroup investment-banking head Michael Klein also has a free office and secretary after receiving a $34.3 million exit package when he quit in July 2008. John Reed, 70, who hasn’t worked at the bank since he resigned as co-CEO in 2000 with a $5 million parting bonus, is entitled to an office and secretary for as long as he wants.
Sanford I. “Sandy” Weill, who retired as chairman in 2006, is ending a 10-year consulting contract with the bank in April after just three years. The agreement gave him millions of dollars in perks, including an office, car and driver and use of company aircraft, which he gave up in February.
Banks that took government rescue funds have been criticized by President Barack Obama, Congress and the public for lavish spending on pay and perks for top executives. Lenders continue to dole out benefits, including the longstanding practice of free offices and secretarial help, to former chiefs. Some of the recipients are blamed for abetting the financial crisis.
“The board should go to the executives and say, ‘OK, we are in a serious cost-cutting mood, and you don’t really need this office and secretary,’” said Paul Hodgson, who analyzes such perks as a senior research associate at the Corporate Library in Portland, Maine. “Or the executives themselves should pony up and say this is an expense that is unnecessary.”
Revamping Citigroup
Citigroup posted a record $18.7 billion loss last year, forcing the bank to seek a $52 billion bailout to stave off a crisis of confidence among depositors. CEO Vikram Pandit, 52, who took over from Prince in December 2007, has eliminated almost 39,000 jobs under a plan to slash costs. Last month, he canceled delivery of a corporate jet, and he told lawmakers Feb. 11 that he would cut his salary to $1 a year until his bank returns to profitability.
“I get the new reality and I will make sure Citi gets it as well,” Pandit said at the hearing before the U.S. House Financial Services Committee.
A Citigroup spokesman, Michael Hanretta, declined to comment.
It’s impossible to determine the cost of the free offices, said Alexander Cwirko-Godycki, research manager at pay consultant Equilar Inc. in Redwood Shores, California. Companies must list perks awarded to former executives when they depart, without estimating the value. Then the benefits don’t appear in annual proxy filings that detail current executives’ pay and benefits.
Merrill’s Former CEOs
“They’re completely under the radar,” Cwirko-Godycki said.
Citigroup isn’t alone in giving former executives office space, secretaries and other perks.
Merrill Lynch & Co., which had to sell itself last year to Bank of America Corp., provides an office and assistant to former CEO Stan O’Neal for the three years from his October 2007 resignation, according to a Securities and Exchange Commission filing. Merrill still maintains offices for ex-CEOs David Komansky, Daniel Tully and William Schreyer, two people familiar with the matter said.
Those costs are absorbed by Bank of America, which took $45 billion of rescue funds and $118 billion of asset guarantees.
Kennedy Thompson, ousted last year as Wachovia Corp.’s CEO, gets an office and assistant for three years, according to an SEC filing. San Francisco-based Wells Fargo & Co., which received $25 billion in bailout funds, is providing the office since buying Wachovia on Dec. 31, spokeswoman Mary Eshet said.
$267,000 a Year
“That’s a contractual item that continues after the acquisition,” Eshet said.
When JPMorgan Chase & Co. Chairman William Harrison retired in December 2006, the New York-based bank agreed to give him office space and administrative support until he turns 70 in 2013, according to a filing. The cost was estimated at $267,000 a year. That’s more than five times the U.S. Census Bureau’s estimate of the nationwide median household income in 2007. JPMorgan spokesman Tom Kelly declined to comment.
“I don’t know why these guys are not capable of paying their own freight when they leave with millions and millions of dollars,” said Graef Crystal, a former compensation consultant and author of “The Crystal Report on Executive Compensation.” “You want an office? Get one yourself.”
Prince’s Perks
Companies often say they provide offices and secretaries to outgoing executives under consulting contracts or provisions that bar them from raiding employees, said Mark Poerio, co-chair of the executive compensation practice at law firm Paul, Hastings, Janofsky & Walker LLP.
Prince, 59, retired in November 2007, as the bank’s subprime losses approached a record $9.83 billion in the fourth quarter of that year. After paying him a total of $66.8 million in the three previous years, Citigroup gave Prince a $10.4 million bonus for his last 10 months in the job, according to a filing.
He also got perks worth about $1.5 million a year, including an office, assistant, car and driver and any resulting income taxes, according to the filing. Those benefits last for five years or until he gets another full-time job, according to the filing.
Weill, 75, built Citigroup through acquisitions over 17 years, including the 1998 merger of his Travelers Group Inc. with Reed’s Citicorp. Weill and Reed shared chief executive duties for two years until Weill won a boardroom showdown in February 2000.
Retirement Planning
Reed received a $5 million parting bonus that year and a $2 million annual “retirement benefit,” according to a filing.
He also received financial-planning services for up to five years, a car and driver, an office and secretarial support “for as long as you deem useful,” according to the company. A message left at Reed’s Citigroup office was returned by an assistant, who said Reed wasn’t giving interviews.
Prince, Klein and Weill didn’t respond to messages left at their Citigroup offices.
Weill got an office and secretary under the consulting contract awarded when he retired as chairman in 2006, according to a Citigroup filing. He also received a $1 million-a-year retirement pension, consulting fees of $3,846 a day for up to 45 days a year, a car and driver, private security, financial- planning fees and medical and dental coverage.
Weill Ends Contract
The bank agreed to reimburse him for income taxes owed on the perks. He received $69 million in salary, bonus and other pay during his last three working years, according to the filing.
In August 2008, Weill told Citigroup he wanted to end the contract, less than three years into it. The benefits stop in April.
On Feb. 1, the New York Post reported Weill used a Citigroup jet in December to take a family vacation to Mexico. Later that day, Weill’s Citigroup assistant, Michael Conway, sent reporters an e-mail saying Weill decided to give up personal use of company aircraft “in light of the unprecedented circumstances that Citi finds itself in.”
Costs associated with an office “probably pale in comparison with the costs of a lot of other things you can envision,” said Stuart Alperin, a partner at Skadden, Arps, Slate, Meagher & Flom LLP, which has Citigroup as a client. Even so, “you’ll probably see a decrease in this going forward, because directors and especially compensation-committee members are likely to be sensitive to anything that looks like you’re going against the current.”
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Russia opens new energy supply front to Asia
By Catherine Belton in Moscow and Mure Dickie in Tokyo
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Russia launched its $22bn (€17bn, £15bn) liquefied natural gas project on the Pacific island of Sakhalin on Wednesday, opening a big new front to supply energy to Asia and to North America as the Kremlin seeks to diversify energy markets from Europe.
The inauguration of the Sakhalin-2 project comes after years of delays and political wrangling over control of the venture in which Royal Dutch Shell was forced to sell control to Gazprom, Russia’s state-controlled gas monopoly, at the height of the Kremlin’s bid to reassert control over the energy sector in 2006.
Dmitry Medvedev, the Russian president, said the project would be able to supply 5 per cent of global demand for LNG once at full capacity next year. “This strengthens Russia’s position as a major energy market participant,” he said at the opening ceremony in Sakhalin, which was also attended by Taro Aso, the Japanese prime minister.
The project, which will ship 50 145,000-cubic-metre tankers of super-cooled gas this year to Japan, South Korea and potentially to North America, will open a big energy route for Russia, which has built most of its geopolitical clout as an energy supplier.
“This is the first significant outflow of Russian energy to Asia,” said Chris Weafer, chief strategist at Uralsib investment bank in Moscow. “Russia will look to piggy-back that new energy relationship with a closer political relationship.” About 65 per cent of LNG produced at the plant will be shipped to Japan.
The launch of the project ends Europe’s position as the only foreign consumer of Russian gas – all of Russia’s existing gas export pipelines are directed into Europe.
The launch comes a day after Russia signed off on another big push to send energy east, a $25bn oil-for-loans deal with China.
Under the deal, Russia agreed to supply China with 30m tonnes of crude from east Siberia over 20 years in return for loans for Transneft, the state-controlled oil pipeline monopoly, and Rosneft, the state-controlled oil group. The first branch of a pipeline across Siberia to a Pacific hub is expected to be completed this year, with a spur also expected to be built to China.
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BoJ to buy Y1,000bn of corporate bonds
By Michiyo Nakamoto in Tokyo
Published: February 19 2009 05:19 | Last updated: February 19 2009 07:08
The Bank of Japan on Thursday stepped up measures to help embattled companies weather the credit crisis, unveiling plans to buy up to Y1,000bn ($10.7bn) in corporate bonds and extend its purchases of other assets in an acknowledgement that Japan’s economic downturn would last longer than it had initially expected.
The BoJ said it would buy corporate bonds rated A and higher from financial institutions as well as extend its programme to buy commercial paper and provide unlimited collateral-backed loans to financial institutions, but kept its key policy rate unchanged at 0.1 per cent.
“Economic conditions have deteriorated significantly and are likely to continue deteriorating for the time being,” the BoJ said in a statement, adding that Japan was likely to see prices falling by the spring.
Although the central bank continues to predict that the Japanese economy will start recovering from the latter half of fiscal 2009, “uncertainty is high,” it said.
The gloomy assessment follows the release of data earlier this week showing the Japanese economy was in its worst downturn in 35 years.
Gross domestic product contracted sharply in the third quarter, by a seasonally adjusted 3.3 per cent, as export demand evaporated.
However, the Japanese government has been paralysed by political instability following the sudden resignation of the finance minister on Tuesday, which has hardened the political opposition’s stance against passage of the 2009 budget.
The central bank’s move, which was widely anticipated, failed to ease concerns about the outlook for the Japanese economy.
“There were no surprises,” said Masaaki Kanno, chief economist at JP Morgan in Tokyo. The BoJ’s moves have had somewhat of an impact, “but this is not going to solve [companies’] credit problems,” he said.
The latest measures come on the heels of the BoJ’s decision to buy a total of up to Y3,000bn in commercial paper by the end of the fiscal year, increase its purchases of government bonds and accept corporate bonds issued by real estate investment trusts as collateral for loans to financial institutions.
The central bank has also re-introduced a stock purchase programme under which it will buy up to Y1,000bn in shares held by financial institutions.
Analysts, including the central bank’s own chief economist, expect the Japanese economy to suffer another large decline in the current quarter, prompting calls for the BoJ to do more to support the economy.
“We fear that Japanese policymakers will continue to do too little, too late,” said Julian Jessop, chief international economist at Capital Economics.
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Russia and Japan agree fresh approach on disputed islands
By Mure Dickie in Tokyo
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Japan and Russia agreed yes-terday to adopt an "outside the box" approach to resolve a bitter territorial dispute over contested islands seized by Moscow in the second world war.
However, a summit meeting between Taro Aso, Japan's prime minister, and Dmitry Medvedev, the Russian president, yielded no narrowing of their differences over ownership of four islands near Japan's northern island of Hokkaido, a dispute that has long clouded ties between the Asian neighbours.
Mr Aso and Mr Medvedev met on Sakhalin Island, once claimed by Japan but now accepted as Russian territory, as Russia opened its first production base for liquefied natural gas on the island, to supply Japan and other Asian markets.
The LNG project at the vast Sakhalin-2 field is seen as a symbol of the potential for economic co-operation between Russia and Japan, which has been hampered by the dispute over the four islands known as Northern Territories in Japan and the Southern Kuriles in Russia.
The islands have been administered by Moscow since Russian troops occupied them in the final days of the second world war, but their return is a cause célèbre for the Japanese right and a long-standing goal of Japan's foreign ministry.
The launch of the LNG project looked set to put trade relations on a new footing, with the plant due to supply 7.2 per cent of Japan's LNG imports, with other shipments headed for South Korea and North America. Mr Aso said: "To have an LNG plant in close proximity to Japan has been Japan's dream for many years."
At the summit meeting, the two leaders agreed to adopt a "new, creative and out-of-the-box approach" to the territorial dispute and accelerate efforts to agree a final territorial demarcation.
Yet a Japanese foreign ministry official said the Japanese understanding of the "out-of-the-box" formulation, offered by Mr Med-vedev, was that it referred to innovation in how negotiations should be handled, rather than signalling any fundamental shift in negotiating position.
Some Japanese officials had hoped the summit might yield new concessions from Russia, which would have given a welcome political boost to Mr Aso, who is struggling to cope with an ailing economy and weak support ratings.
Moscow has in the past suggested that it might agree a deal to divide the islands, with two being kept by each side, a stance Tokyo has rejected. Mr Aso has in the past sought new ways to resolve the dispute, suggesting in 2006, while he was foreign minister, that they be shared equally by area.
The two leaders agreed to work for a solution within their "generation".
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US and China eye naval accord
By Raphael Minder
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Washington and Beijing are considering a code of conduct to avoid an accidental confrontation at sea, according to the US commander in the Pacific.
Asked whether the US would consider signing a deal to avoid incidents at sea, along the lines of an accord between Washington and Moscow during the cold war, Admiral Timothy Keating said: "There are efforts under way to address that issue. They are preliminary, very preliminary."
His comments underline the extent to which the US is taking seriously China's rapid military build-up.
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Japan cannot afford to wait
Published: February 17 2009 22:02 | Last updated: February 17 2009 22:02
If you get rich by selling goods to wastrels, do not expect to survive when your customers run out of money. The Japanese government has been loath to take measures to stimulate domestic consumer demand and reduce Japan’s export-dependency as the big spending deficit countries have fallen into recession. But as Japan’s recent economic results demonstrate, the surplus countries can ill afford to wait for a world recovery. The Tokyo government must get Japan’s frugal savers to spend freely.
In the middle of last year, exports accounted for 18 per cent of Japan’s output. In common with the other big current account surplus countries – notably China and Germany – the Japanese economy is structured to feed off the excess demand of other nations. But this both couples them to, and exacerbates, the vulnerabilities of the deficit economies.
The exporters have suffered as output in the importer countries fell sharply in the fourth quarter of last year. Germany’s output declined by 2.1 per cent in the fourth quarter, Even the master massagers who produce China’s statistics were unable to hide the depth of the crater in which they now sit. Japan’s problems were exacerbated by the strong yen, which appreciated by 10 per cent in the fourth quarter. Output fell by 3.3 per cent in those three months – the worst result for 35 years.
Japan’s politicians have long been timid on the need for reform, shying away from challenging the country’s prevalent corporatism or its massive export-dependence. They must now do more to expand domestic consumption – not just to rebalance the world economy, but to save their own country from this severe recession.
Taro Aso’s Liberal Democratic party government does not look up to the task. The government lacks control of the upper house and may not be able to push through its current modest stimulus plans. Shoichi Nakagawa, the pro-stimulus finance minister, has resigned following erratic behaviour at a meeting in Rome. Junichiro Koizumi, the former prime minister, has meanwhile questioned Mr Aso’s leadership of the LDP.
An election is required by September. It is hard to see a way out of this mess before it – or after. The opposition, the Democratic party of Japan, opposes fiscal stimulus. And the political debate does not yet reflect the depth of the crisis. Even so, if the government is unable to act in the country’s interests, it should call an election. At this moment, it is dangerous for an administration to continue in office when it has already lost power.
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Chinese Guantánamo detainees suffer setback
By Demetri Sevastopulo in Washington
Published: February 18 2009 19:50 | Last updated: February 18 2009 19:50
The Pentagon does not have to release a group of Muslim Chinese held at Guantánamo Bay for seven years into the US, a federal appeals court ruled on Wednesday.
The appeals court overturned a landmark decision in October when a district court ordered the Pentagon to release 17 Uighurs – a Muslim minority group from Xinjiang province in China – into the US.
The ruling comes as President Barack Obama grapples with how to close the controversial Guantánamo prison. In his first week as president, Mr Obama ordered its closure within one year.
In October, Judge Richard Urbina ruled that the US constitution barred the government from indefinitely detaining the Uighurs who have been held at the prison since 2002, adding that they did not pose a security threat.
However, in a 2-1 decision on Wednesday, an appeals court overturned the lower court decision, ruling that it did not have the authority to compel the Pentagon to release the men. It questioned, for example, whether the men would qualify to enter the US under domestic immigration laws.
Pakistan handed 22 Uighurs over to US forces in 2002 after the men fled a camp in Afghanistan following the 2001 US invasion of that country. Beijing has accused the men of being part of a separatist terrorist movement in the northwest province of Xinjiang.
The Pentagon cleared most of the men for release in 2004, but has had trouble persuading other countries to accept them. Albania was the only country willing to help, taking five of the Uighurs.
Some countries were reluctant to help because the US itself refused to grant them asylum, while other countries were more concerned about antagonising China, which wants the Uighurs repatriated.
“The government has represented that it is continuing diplomatic attempts to find an appropriate country willing to admit petitioners, and we have no reason to doubt that it is doing so. Nor do we have the power to require anything more,” the appeals court said on Wednesday.
Human rights groups criticised the decision, and called on President Barack Obama to bring the men into the US, which he could do by providing a waiver to existing immigration rules.
“President Obama should exercise his power to release the Uighurs into the US,” said Sharon Bradford Franklin, senior policy counsel at the Constitution Project.
“The appellate court’s ruling that the trial court lacked the power to compel the executive branch to release the Uighurs into the United States in no way limits the ability of the executive branch to release the Uighurs on its own.”
Separately, Eric Holder, the attorney-general, on Wednesday announced that he would visit Guantánamo Bay on Monday.
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US and Uzbeks in supply route talks
By Isabel Gorst in Moscow
Published: February 17 2009 18:52 | Last updated: February 17 2009 18:52
A top US military commander held high-level talks in Uzbekistan on Tuesday aimed at securing new supply routes for troops serving in neighbouring Afghanistan.
General David Petraeus, the commander of US forces in the Middle East and central Asia, met Islam Karimov, the president of Uzbek-istan, and senior officials at the Uzbek ministries of defence and foreign affairs.
General Petraeus’s visit to Uzbekistan comes at a challenging time for US strategists in central Asia where Kyrgyzstan ordered the closure this month of a US military base on its territory after accepting an offer of $2bn (€1.6bn, £1.4bn) of financial aid from Russia.
Talks were expected to focus on plans for the US military to transport non-lethal goods across central Asia to Afghanistan, a proposal that has won support from other countries in the region, including Russia.
Closure of the Kyrgyz base, a key hub for cargo and refuelling aircraft bound for Afghanistan, will complicate US plans to deploy an extra 30,000 troops in Afghanistan to counter growing instability.
The resurgence of the Taliban poses a threat to central Asian countries already facing a rise in religious extremism and drug trafficking from Afghanistan.
The US established military bases in Kyrgyzstan and Uzbekistan in 2001 to support the war against the Taliban in Afghanistan.
But Mr Karimov ordered the US to leave in 2005 after western governments criticised the violent suppression by Uzbek law enforcers of an armed uprising in Andijan, a city in Uzbekistan.
Germany, which uses a military base in Uzbekistan to ferry humanitarian aid to Afghanistan, has lobbied successfully for the European Union to re-engage with Uzbekistan.
Robert Gates, the US defence secretary, called the Kyrgyz base “important, but not irreplaceable” last week.
General Petraeus won approval for use of the central Asian land route to Afghanistan from Kazakhstan, Tajikistan, Turkmenistan and Kyrgyzstan during talks with regional leaders last month. Russia has also offered to support the scheme.
Most US supplies enter Afghanistan through Pakistan, but escalating insurgency has undermined the security of the so-called southern route.
Kyrgyzstan’s parliament said on Tuesday it would debate the closure of the US base Thursday.
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Investors rush into gold coins
By Javier Blas and Chris Flood
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Investors in Europe and north America went on an extraordinary shopping spree for gold coins and bars in the final quarter of last year, snapping up 148.5 tonnes, a jump of 811 per cent compared with the same period in 2007, as the collapse of Lehman Brothers led a massive increase in safe haven buying.
This rush into physical gold by western investors pushed global retail investment up almost 400 per cent to 304.2 tonnes, according to the industry-backed World Gold Council, which released its fourth-quarter Gold Demand Trends report yesterday.
The WGC's data confirmed earlier reports from traders about widespread shortages of coins and exceptional buying interest. Retail investors in France, for example, become net buyers of gold for the first time in a quarter of a century at the end of last year.
Investment inflows into gold exchange traded funds (ETFs) reached 94.7 tonnes in the fourth quarter, up 18 per cent on the same period in 2007, but down from the record 150 tonnes of inflows seen in the third quarter of 2008.
ETFs have seen strong inflows continue this year. The SPDR Gold Trust said its holdings surpassed the 1,000 tonne mark on Tuesday, reaching 1,008.8 tonnes, up by 228.6 tonnes so far this year.
The SPDR Gold Trust, the largest physically backed exchange traded fund, is now the world's seventh-largest holder of gold bullion, having absorbed about 10 per cent of global annual mine output in the past seven weeks.
Looking ahead, the WGC said investment demand was likely to be underpinned by the extreme levels of uncertainty surrounding the outlook for the global economy and other asset classes.
The strength of investor interest has analysts wondering just how far the gold price could rise.
"There is a very strong case to be made that the current rally in gold is potential pre-positioning ahead of a much larger move at some point in the future," said Michael Jansen, analyst at JP Morgan.
Mr Jansen said that if ETF investment inflows and demand for coins and bars remained as robust this year and the last half of 2008, there was a "very good chance" that the gold price would remain supported.
Mr Jansen said that if current buying was accompanied by a broader portfolio shift by investors who were worried about possible currency debasement, sovereign risks, the outlook for monetary or fiscal policy or the threat of inflation, then "quite simply, the outlook for gold is stellar".
"This is because the liquidity in the gold market is simply a fraction of the potential demand if the market truly believes that gold is the store of value," said Mr Jansen.
However, John Reade, precious metals analyst at UBS says investment demand needed to stay "super-strong" if gold prices were to move higher in the face of weak demand from the jewellery and industrial sectors.
The WGC noted that the surge in investment flows had been partially offset by the fall in jewellery consumption and decline in industrial demand, down 5.5 per cent to 538.9 tonnes and down 10.4 per cent to 98.6 tonnes respectively in the fourth quarter compared with the same period in 2007.
Rising prices have also led to an increase in gold scrap returning to the market, up 15 per cent to 320 tonnes in the final quarter of last year, and accounting for just under a third of total supply in the period.
"Our refinery contacts tell us they are groaning under the weight of scrap returning to the market, especially in Asia," said Mr Reade.
Gold surged closer to the $1,000 mark yesterday, reaching a seven-month high at $984.65 a troy ounce, up 1.6 per cent in late trading in New York.
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Insight: Gold primed to be ‘mania asset’
By Steve Ellis
Published: February 18 2009 16:26 | Last updated: February 18 2009 23:32
Gold is exhibiting all the classic signs of being in a structural bull market. On fears of inflation in early 2008, it rallied. Then, on fears of deflation in late 2008, it rallied again.
So does gold perform better during inflation or deflation?
In our view, that question is the wrong starting point. On the contrary, the rationale for owning gold, as it once again approaches the $1,000 an ounce level, is the prospect of mounting monetary disorder.
The US Federal Reserve, having flooded the market with liquidity by more than doubling its balance sheet in less than six months, may be unable or unwilling to withdraw it in time for fear of precipitating a secondary relapse in economic activity. Other central bankers will also face intense pressures to “support” their domestic economy by weakening the currency, leading to competitive currency devaluations.
The race to the bottom in fiat currencies has begun and hard assets, particularly gold and silver, should be the primary beneficiaries.
Gold is a prime candidate to become a “mania asset” once its demand becomes chiefly financially driven as opposed to jewellery and/or industrial demand driven where its upside could be capped by “sticker shock”.
In fact, gold is currently one of the few remaining major asset classes where a case could be made for it to rise in a parabolic fashion. Once the psychologically significant $1,000 an ounce is breached convincingly, the speed of the move beyond that level could accelerate sharply. One precondition for a mania is there must be uncertainty about how the asset is properly valued which allows “new era” thinking to take hold. This is very true for gold.
Price explosion might not be imminent, however. Gold is experiencing unprecedented buying by exchange-traded funds, offset by substantially reduced jewellery demand. The fall in the Indian rupee has meant Indian gold prices have reached record levels. This is causing a slowdown in jewellery purchases (even though rupee expenditure levels are holding up, the tonnage of gold imports is suffering).
The long-term story for gold, however, is as a remonetisation play as investors lose faith in fiat currencies. Keep an eye on gold lease rates; a spike would be a good lead indicator that gold is about to punch higher as this would reflect a shortage of lendable bullion. Rising lease rates will cause gold to go into backwardation as holders of gold may not want to sell their gold forward under any circumstances a trend currently evidenced by the high physical premium being paid for gold coins.
Rising lease rates prefigured the last big move in gold back in the spring of 2007 just as the two Bear Stearns hedge funds were blowing up. Central Banks feared counterparty risk for the first time in 20 years and substantially curtailed gold lending and sales. This led to a 40 per cent rally in gold from $700 to over $1,000.
How high can gold ultimately go? A Dow Jones Industrial Average/gold ratio of 2:1 would be a good sign the bull market in gold is getting well advanced. We saw this in 1932 and 1980. Only nine years ago in 2000, however, this ratio reached over 40:1.
Arriving at 2:1 again does not necessarily mean the Dow must decline significantly from here; more likely gold prices surge and the Dow stays range-bound but volatile. Investors are looking for good risk/reward investments.
I cannot say with any confidence that gold will not be without risk and volatility but at least it offers early participants plenty of upside reward to compensate them for the wild ride.
Speaking to central bankers, this is the first time I can recall them actually favouring a high gold price. Normally they see high gold prices as a lack of trust in the financial system (not to mention their ability as central bankers). Alan Greenspan, the former Fed chairman, for example used to target a gold price of around $400 to $500 an ounce.
Recently, the central bankers have become more enamoured of higher gold prices as it would suggest that their attempts to stave off deflation were starting to work.
Central bankers in favour of higher gold prices? Things really have changed.
The writer is manager of the RAB Gold Strategy
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Iran invitation
By Jon Boone in Kabul
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Franco Frattini, the Italian foreign minister, yesterday said he wanted to invite Iran to a G8 conference on Afghanistan, writes Jon Boone .
As president of the G8 group of rich countries, Italy will organise the meeting in June.
Mr Frattini said he would invite all of the nearby countries that have influence in Afghanistan, including Pakistan, China, India, Saudi Arabia and the United Arab Emirates.
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Trade at Iraqi port highlights problems
By Andrew England in Umm Qasr Port
Published: February 17 2009 17:37 | Last updated: February 17 2009 17:37
From one large cargo ship, stevedores unload 50kg bags of Vietnamese rice. At another, clouds of dust rise as grain is offloaded into a truck, while nearby a ferry waits to transport Iraqi passengers down the Gulf to Bahrain or Dubai.
Umm Qasr, Iraq’s only deepwater port, is bustling with activity. A large proportion of the country’s imports pass through its docks but, as a critical artery for the nation, it offers a glimpse into the state of Iraq’s faltering economy after years of sanctions and war. While imports flow in, there are no goods going in the opposite direction; many of its outdated cranes do not work; and it is far behind the rest of the world in terms of the size of vessels it can accommodate.
“It’s a flashback to 25 years ago,” says Tom Quaye, a Royal Navy officer involved in the port’s rehabilitation. “A massive amount of work still needs to be done.”
But progress is slowly being made. A year ago the port on the southern tip of the nation was run by militias who would intimidate dockworkers to slow the pace of their work so ships would stay at the port for longer than necessary, all the time paying fees.
“Every day I was called [and told] ‘you will be killed’,” says a senior Iraqi port official. “Corruption was everywhere in the Iraqi government facilities.”
The official, who is still nervous and does not want to be named, left his job and returned only after an Iraqi-led security operation last March removed the militias.
Traffic has steadily increased at the port, as has the quality of goods – battered secondhand cars are being joined by new four-wheel drive vehicles and lines of Mann trucks and Mercedes tankers, ready to be driven north into Iraq’s heartland.
To some, this is a sign of improving confidence in Basra province – home to Iraq’s five ports – and beyond as security gains made over the past year mean people have been able to start turning their thoughts to development rather than day-to-day survival.
Ensuring development takes place will be critical to sustaining the gains, as militias have been able to draw support from poor, unemployed men.
“It all depends on how economic reconstruction goes,” says a western diplomat. “If you are able to deliver and continue improving the standard of living and increasing the number of jobs, you will suck away whatever air [the Mahdi Army, the militia that controlled the port] will need to resurface.”
There are many barriers ahead. In spite of Basra’s riches – it is home to 70 per cent of Iraq’s proven oil reserves – unemployment is high and the infrastructure dilapidated. In Umm Qasr town, electricity runs for three hours on, three hours off and homes lack running water and an effective sewage system.
Many hope last month’s provincial elections, the most open and hotly contested since the US-led invasion, will trigger further improvements. But some question how much better the next administration will be in terms of ability and experience.
“I think they will be better,but how much better remains to be seen,” says the diplomat.
In Basra, the provincial council had a budget of $300m (€238m, £211m) in 2008 but has only been able to spend 46 per cent of it because of a combination of over-burdensome bureaucracy and a lack of skills and experience, say British officials.
Business people, meanwhile, complain about rampant corruption and patronage – ailments that afflict the entire country.
“It’s very difficult [to do business] if you don’t have connections with people in the right places,” says Alaa, a Baghdadi businessman visiting Basra. “If you have a bank account [to pay bribes] you can do anything, even if your work is not very good.” While much blame has been heaped on local officials, western experts say the central government in Baghdad has also hindered investment and reconstruction in the province.
There has been foreign interest in managing Umm Qasr port, including from Dubai’s DP World, but the transport ministry has only offered three-year contracts to run container berths.
Foreign companies have also expressed interest in ventures with state-owned enterprises in Basra, including steel and petrochemical plants. These factories should be key providers of jobs and economic activity but suffer from obsolete machinery and a lack of spare parts and skilled workers. Government sluggishness and bureaucracy are blamed for slow responses to the investment proposals.
There is a “reticence to sign away the crown jewels”, says one British official.
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UAE moves to safeguard locals' jobs
By Simeon Kerr in Dubai and Andrew England in Abu Dhabi
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
The United Arab Emirates labour ministry yesterday said it would regulate the dismissal of nationals working in the private sector, raising another level of protection around the local workforce as the ravages of the financial crisis cut deep into the Gulf state.
Issued by Saqr Gobash, labour minister, the order threatens to raise concerns among investors in the Arab world's second-largest economy as the financial crisis forces companies to trim staff levels that ballooned during the six-year petrodollar boom.
Property and financial companies, especially in Dubai, have been shedding staff since the credit crunch triggered a real estate crash in the emirates. The gloom has spread to other previously vibrant sectors, such as tourism, with the recently opened Atlantis hotel cutting staff and Dubai hospitality giant Jumeirah planning redundancies.
In an order that underlined existing legislation, private companies will only be able to dismiss UAE nationals for serious misconduct, including, among other reasons, absenteeism, theft or drunkenness. The economic downturn will not be reason enough to make Emirati staff redundant.
Employers seeking to dismiss locals will have to apply to the labour ministry 30 days in advance of any termination order, Humaid bin Demas, acting director general of the labour ministry, said at the ministry's Dubai office.
One human resources officer, who declined to be identified because of the sensitivity of the issue, said the move could impact on the flexibility of employers and could hurt the competitiveness of Dubai.
Emiratis already have stronger employment rights than expatriate counterparts, and firing nationals is tricky, say employers.
The ministry passed the order after studying a proposal from a government body that promotes local employees in the private sector, which highlighted the case earlier this month of 20 nationals made redundant by local conglomerate Al Futtaim Group, which has extensive retail and real estate interests, who then complained to the ministry.
UAE nationals form a tiny proportion of the private
sector workforce, preferring the more comfortable public sector, along with "quasi-governmental" companies, which while nominally private maintain close links to the government.
But some businessmen are worried the order will make it even harder to discipline and manage local staff. The ministry shrugged off such concerns. "How can 15,000 locals out of a 3m private sector workforce be such an issue?" said Mr bin Demas.
The onshore financial sector could be particularly affected, but not the Dubai International Financial Centre, which like other free zones is exempt from such labour legislation.
Under the existing Emiratisation quota system, banks have to recruit nationals at rate of 4 per cent and insurance companies at 5 per cent annually. Any commercial company that has more than 50 employees has to recruit UAE nationals at 2 per cent.
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Three may be a crowd in Dubai
By Emiko Terazono
Published: February 18 2009 02:00 | Last updated: February 18 2009 02:00
As the economic gloom stretches to Dubai, and the cars abandoned by departing expats pile up at the airport, the emirate's ruler Sheikh Mohammed bin Rashid Al Maktoum is shaking things up at his investment companies.
He is merging two companies under his Dubai Holding conglomerate, Dubai International Capital - the private equity group led by Liverpool fan Sameer al-Ansari that narrowly failed to buy Liverpool FC on two occasions - and a sister company, Dubai Group, to reduce costs.
DIC chairman Mr al-Ansari and Dubai Group chairman Soud Ba'alawy will co-chair the new entity, Dubai Holding Investment Group. There will be job losses among back-office staff but there are no immediate plans to merge the two companies' management teams.
Dubai Group and DIC have been hurt by leveraged purchases into shares, real estate and private equity deals. And with Dubai Group's chief executive Thomas Volpe becoming chief of the merged group and acting chief of DIC, the talk around town is that the presence of the UK-trained accountant Mr al-Ansari - the public figure of Dubai's highest-profile investment company - and Mr Ba'alawy may bring too many cooks to the Dubai investment kitchen.
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Loan set to ease Dubai default fears
By Simeon Kerr in Dubai
Published: February 18 2009 02:00 | Last updated: February 18 2009 02:00
Borse Dubai, a government-owned exchanges group, is expected to close a $2.5bn loan today, a vote of support for the emirate amid fears that the commercial hub of the Gulf could default.
The company, which controls Dubai's two equity markets and has stakes in the London Stock Exchange and Nasdaq, needs to pay off a $3.4bn (€2.7bn, £2.4bn) loan next week, the first major test in 2009 of Dubai's ability to refinance $20bn in loans that mature this year.
The fact that Dubai has met the challenge of opening clogged credit markets should go some way to assuaging investor concerns about its risk of default.
Dubai's globalised economy has been hit hard by the credit crunch. Job losses are mounting across the economy as the property bubble bursts, triggering concerns about the government's $80bn debt pile.
Bankers said HSBC, which has arranged the $2.5bn loan, had been struggling until a few days ago to raise the full amount. The money is to be used to help retire the $3.4bn loan, due next week. Reports said the UAE federal government stepped in to make up the shortfall.
A Borse Dubai official said he was not aware of a federal cash injection. He said Borse Dubai's main shareholder, the Investment Corporation of Dubai, had pledged to support the group as it sought to reschedule the debt. Beyond the $2.5bn loan, Borse Dubai's government-linked shareholders had pledged the remaining $800-900m to repay the debt, which was used last year to buy exchanges group OMX.
Other officials said ICD, which controls the Dubai government's commercial assets, might have helped persuade local banks to lend to the exchanges group. ICD borrowed $6bn for corporate purposes last year and deposited it in the local banking system.
Dubai officials have said for months that the emirate will be able to meet its debt obligations. But they also privately conceded that if the economic situation deteriorated further, federal support might be necessary.
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Euro Nickel's Turkish delight
By Neil Hume and Bryce Elder
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
European Nickel jumped 83 per cent to 5.45p after it finally got the green light to start the development of its flagship nickel laterite project in Turkey.
"This is fantastic news for European Nickel; Caldag is a blue-ribbon asset," broker Ambrian said, adding that the company had been waiting for a permit since June 2006.
However, analyst Nick Mellor warned investors that European Nickel now had to find the cash to develop the project and in the current environment that would not be easy.
"While funding is not a given, the lowest quartile cash costs (and capex) for the project will no doubt stand the company in good stead," he added.
Kalahari Minerals added a further 34 per cent to 81p on talk that Rio Tinto, which had amassed a 15 per cent stake in the Namibian exploration group, could launch a hostile bid. Traders said Rio would have to offer in excess of 100p a share to stand any chance of success.
Rio's interest can be traced to the fact that Kalahari owns a 40 per cent stake in the Rossing South uranium discovery, which in turn lies adjacent to one of Rio's big mines in Namibia.
Urals Energy dipped 13.6 per cent to 2.37p in spite of reports that China's Sinopec was preparing a bid.
Autism specialist Neuropharm slumped by 83.6 per cent to 17p after its lead drug failed to reach a key goal in a large scale clinical trial.
There was heavy trading in stockbroker Numis , down 5.7 per cent at 125½p. More than 26m shares changed hands as chairman Michael Spencer sold his 12 per cent holding and then announced he was stepping down.
London Capital Group put on 3.4 per cent to 271¾p after full-year results impressed and the spread betting group said it was on target to meet its targets for 2009.
"The customer growth we are getting will read through into profit for this year," chief executive Frank Chapman said.
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De Beers loses its sparkle
By Tom Burgis in Cape Town
Published: February 10 2009 18:41 | Last updated: February 10 2009 18:41
De Beers does not expect any recovery in demand for diamonds until Christmas next year at the earliest and is planning to cut production drastically.
The world’s biggest rough diamond producer is scrambling to scale down its business as consumers cut their spending on luxury goods and diamond cutting houses struggle to finance their purchases of rough gems.
“We are going to significantly reduce production levels to align them with levels of demand,” Stephen Lussier, executive director for external and corporate affairs, said on the fringes of a mining conference in Cape Town. “There’s no point digging a diamond out of the ground when you don’t have a client ready to buy it.”
Mr Lussier refused to put a number on the cutbacks.
Some analysts say recent auctions of diamonds – which do not trade on exchanges like other commodities – have seen prices paid for lots falling by as much as 50 per cent. Diamond industry experts have reported that De Beers’ latest sale of rough diamonds in January raised $100m, compared with $600m in January 2008.
Until recently, mining executives had hoped to see some recovery in demand for diamonds later this year, but Mr Lussier’s comments point to a more prolonged downturn.
Chaim Even-Zohar, a consultant and industry veteran, did little to raise the spirits of the executives and investors at the conference by predicting that demand for rough diamonds will fall by between 59 per cent and 63 per cent this year.
The US, which is feeling the brunt of the global recession, normally buys about half of all polished diamonds sold.
Mr Lussier told the Financial Times that exploration would suffer, particularly in the Democratic Republic of Congo. But De Beers would endeavour not to close any of its mines.
The mystique of their product has not made diamond miners immune to the problems affecting almost all commodity producers, with the exception of some gold miners.
Many companies are mothballing mines and curtailing exploration to conserve cash as prices tumble.
Mr Lussier said diamond markets in China and India were growing fast and would match US demand by the end of the next decade.
De Beers has pushed back its results to February 20, to be announced alongside those of its parent, Anglo American.
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Banks crisis forces Germany to break post-war taboos
By Paul Betts
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
For some governments in these desperate times taking control of stricken banks and other troubled companies does not seem to pose a great philosophical problem. The UK, for all its purported attachment to the market economy, has done just that. So have Ireland, the Netherlands and Belgium. France, which so far has only stepped in at Dexia in tandem with the Belgian government, would not think twice. President Nicolas Sarkozy is preparing a €6bn state fund to take stakes in distressed groups. In Germany, however, the issue is provoking much hand wringing and tortured political debate in the coalition government. Understandably so in an election year, given that the very idea of the forced purchase or seizure by the state - not to use the unmentionable word "expropriation" - of private property flies in the face of the country's post-war social market economic model. Indeed, one of the cardinal principles of its post-war economic strategy was to avoid any repeat of the Nazi era's expropriation of Jewish property and the subsequent seizure of private business assets in the former East Germany.
Yet the pressure for Berlin to intervene to bolster its banking system - and one institution in particular, Hypo Real Estate - as well as its car sector - especially the General Motors-owned Opel brand - has been intensifying.
So much so that the government yesterday bit the bullet and approved controversial draft legislation giving it the right to seize private property for the first time in the post-war era.
Berlin, which still needs parliamentary approval for its expropriation bill, stressed this is only a temporary new law that would be used as a measure of last resort. Indeed, the proposed law is due to expire as early as the end of next June.
The lender has received more than €100bn in state guarantees to keep it afloat. But that does not seem to have been enough. Yet before the government can take full control it must under existing rules buy out HRE's large minority shareholder, the US private equity firm JC Flowers. Since the private equity group has lost a bundle on its HRE stake, it has little interest to sell at the bank's depressed market value. Hence the new law.
Although the proposed legislation only involves the banking sector, it could nonetheless set a broader precedent to enable the government to force shareholders in other sectors to sell their stakes or ownership of a company to the state. This could arguably apply to Opel. Local governments as well as the federal government are anxious over GM's so far undisclosed plans for Opel, which employs about 26,000 people in Germany.
They fear plant closures that could involve up to 8,000 jobs. Some are proposing that local governments take minority blocking stakes in Opel in return for state support. After all, there is already a precedent with Volkswagen in spite of all the European Commission's efforts to force Germany to scrap its so-called VW law.
But Opel is not HRE and the two are radically different issues. First what would the government gain by taking control of some of Opel's German plants or indeed all its German activities? Opel is part of GM's broader European assets including Vauxhall that are spread around the UK, Spain and Belgium. Surely any sensible rescue would have to involve the US car group's entire European operations.
Second, to make such a salvage work all the European governments involved would probably have to consider taking part in the venture. That would represent a grand and novel pan-European industrial arrangement. But it is hardly likely to work. The example of EADS and European aerospace co-operation is bound to make Berlin think twice. The cynical conclusion, and one that may have crossed a few minds in Berlin, is that it is clearly easier to expropriate a so-called "locust" than such an entangled enterprise as GM's German and European businesses.
Tilting windmills
It was all set to happen yesterday but Europe's biggest deal of the year so far has again been put on hold. Italy's Enel and its Spanish partner Acciona seemed to have reached a compromise on a €11bn transaction that appeared to be in everybody's interest. For the Italian electricity utility it would have given it 92 per cent control of Spain's leading power group Endesa by buying out its troublesome Spanish partner's 25 per cent stake. For Acciona it would have solved the construction group's debt problems. The deal would also have come as a relief for the Spanish banks, which are Acciona's main backers, by reducing their credit risks.
Unfortunately, all to no avail so far. Acciona decided to push its luck with last-minute new demands for some €3bn worth of guaranteed contracts from Endesa, which Enel was not prepared to concede. The next few days will tell whether Acciona has overplayed its hand.
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Britain urges crackdown on tax havens
By Jean Eaglesham and Alex Barker in London
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Gordon Brown called yesterday for action against tax havens as part of a "grand bargain" on the global economy and regulation that the UK hopes can be agreed when it hosts April's G20 summit of leading industrial nations.
The UK prime minister highlighted the tax issue as one of his aims for the G20 at a press conference in London yesterday. "We want the whole of the world to take action," Mr Brown said. "That will mean action against regulatory and tax havens in parts of the world which have escaped the regulatory attention they need."
A government document setting out Britain's agenda for the G20 yesterday highlighted the need to "ensure consistent regulation in all jurisdictions". The UK believes Barack Obama's election has enhanced the chances of a global agreement for a regulatory crackdown on offshore centres such as Liechtenstein, the Cayman Islands, Jersey and the Isle of Man.
The US president, who launched last year's Stop Tax Haven Abuse Act, has made clear his hostility to perceived "tax scams" in some jurisdictions. Mr Brown said yesterday he was "more confident now having talked to [other] world leaders that we are in a position to take action on this matter". Aides said later that Britain hoped to make substantive progress on the issue at the April summit, rather than necessarily reach a deal.
The prime minister highlighted two areas that dominate Britain's hopes for the London meeting - economic stimulus and reforms to banking regulation. Mr Brown couched the agenda in ambitious rhetorical terms, saying: "We are fashioning for the future a global deal and grand bargain, where each continent . . . acts to deal with what is a global problem."
Mr Brown said action by every part of the world to counter the downturn was needed. "Some may have to do more on interest rates; some may have to do more fiscal stimulus. If we can get that action in place . . . then recovery will be quicker. That's why we're putting a lot of emphasis on our meeting on April 2."
The emphasis on more fiscal stimulus will be seen as reflecting UK government hopes that the G20 will provide political cover for the extra fiscal stimulus expected in the UK budget later in April.
Mr Brown said he hoped the G20 meeting would provide a springboard for global reforms to banking regulation to be implemented in coming months. The prime minister set out priorities for action - greater regulatory cross-border co-operation, involving colleges of supervisors; controls on "shadow banks," such as hedge funds; and reforms to capital requirements.
Early indications from the pre-summit negotiations suggest there is some momentum behind the regulatory proposals. But the degree of progress will depend heavily on the Obama administration's priorities, about which organisers are still uncertain. The biggest test of the general consensus for tighter regulation may be whether the college of supervisors is given a staff or the power to independently "name and shame" countries that fail to meet standards or run unnecessary risks.
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Allegations throw tax haven spotlight on Antigua
By Michael Peel in London
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
The fraud allegations against Sir Allen Stanford have thrown a spotlight on Antigua's regulators and law enforcement agencies at a time when tax havens from Europe to the Caribbean are coming under growing pressure from rich nations.
The tiny island state has faced criticism from fellow financial centres in the region over shortcomings in its system for preventing tainted money from entering its financial institutions and flowing through them.
The Stanford case will increase scrutiny on Antigua at a time when politicians, regulators and investors in rich nations are taking fright at alleged wrongdoing that the financial crisis is revealing in tax havens.
Brian Stuart-Young, chairman and chief executive of the Global Bank of Commerce in Antigua, last week said at a seminar on the prevention of financial crime that money laundering continued to be a problem.
"There's no bank that exists that can say that there is no illicit money in the institution," Mr Stuart-Young told the attendees gathered at the Sandals Grande Antigua resort. "What we can say is that if there are illicit funds, we can find it, we know what to do when we find it and we have the ability to point investigators in the right direction."
International disputes over Antigua's performance on financial transparency and supervision stretch back into the 1990s, where there was a surge in money-laundering and related criminal activities.
In 1999, the US State Department described the country as "one of the most attractive centres in the Caribbean for money launderers".
One year later, the Organisation for Economic Co-operation and Development, the Paris-based club of industrialised and industrialising nations, blacklisted Antigua and 34 other tax havens.
Antigua eventually agreed to some improvements on financial supervision demanded by the OECD but the organisation said the island's performance and that of other territories on the list was still "under review".
Last year, the island's performance on tackling money laundering was criticised by the Caribbean Financial Action Task Force, an inter-governmental group set up to combat international flows of dirty funds.
The task force identified many areas where Antigua did not fully comply with international standards, including requirements for financial institutions to provide regulators with data and to examine the "background and purpose of all complex, unusual large transactions".
The report said the resources of the police and other law enforcement agencies were insufficient for their task, adding that the number of money laundering prosecutions was "remarkably low".
The task force also criticised the island for failing to give professionals such as lawyers and accountants duties to monitor for money laundering and report their suspicions.
One aspect of the Stanford case that has attracted attention is the use of a single local auditing firm to audit the main Stanford International Bank business, instead of one of the international accountants. Auditors are not currently regulated in Antigua.
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Kyrgyzstan parliament votes to shut US air base
BISHKEK, Feb 19 - Kyrgyzstan’s parliament voted overwhelmingly on Thursday to approve a government proposal to close a US air base in the Central Asian nation which is a transit point for US-led fighting in nearby Afghanistan.
The decision was passed by 78 votes to 1 against by the legislature, dominated by the ruling Ak Zhol party.
The closing of Manas, the last remaining US air base in Central Asia, poses a challenge to new US President Barack Obama’s plans to send additional troops to Afghanistan to boost Nato and US military efforts to defeat Taliban insurgents.
It also comes at a time of heightened rivalry between Moscow and Washington for control of Central Asia, a vast former Soviet region still seen by Russia as part of its traditional sphere of interest.
”Once all the procedures are over, an official eviction vote will be sent and after that the United States will be given 180 days to wrap up operations at the air base,” Kadyrbek Sarbayev, foreign minister, told journalists after the vote.
He could not say when President Kurmanbek Bakiyev was expected to sign the approved decision into law, but that should happen within a month.
Bakiyev announced the closure plans this month after accepting more than $2bn in aid and credit from traditional ally Russia. He has accused Washington of refusing to pay more rent for use of the base.
Russia has an air base of its own in Kyrgyzstan, located in Kant, just a few dozen kilometres away from Manas.
The US has been looking at alternative supply lines to landlocked Afghanistan as existing routes via Pakistan have become increasingly vulnerable to militant attacks.
US regional military chief General David Petraeus visited Uzbekistan this week as part of these efforts.
One of the alternative routes, through Russia, Kazakhstan and Uzbekistan, will soon be tested when a first shipment of non-military goods leaves Nato member Latvia for Afghanistan via their territories.
Washington sent troops to Afghanistan after the attacks on the US on September 11, 2001.
Kyrgyzstan’s opposition has criticised Mr Bakiyev for his decision, and accused him of selling out to Russia. Moscow and Kyrgyzstan have denied any connection between the Russian financial package and Mr Bakiyev’s decision.
”This $2bn has been paid in order to convince Kyrgyzstan to close the base,” said Bakyt Beshimov, an opposition politician. ”I am saddened by the fact that Kyrgyzstan’s image has now been so seriously tarnished.”
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Russia opens new energy supply front to Asia
By Catherine Belton in Moscow and Mure Dickie in Tokyo
Published: February 19 2009 02:00 | Last updated: February 19 2009 02:00
Russia launched its $22bn (€17bn, £15bn) liquefied natural gas project on the Pacific island of Sakhalin on Wednesday, opening a big new front to supply energy to Asia and to North America as the Kremlin seeks to diversify energy markets from Europe.
The inauguration of the Sakhalin-2 project comes after years of delays and political wrangling over control of the venture in which Royal Dutch Shell was forced to sell control to Gazprom, Russia’s state-controlled gas monopoly, at the height of the Kremlin’s bid to reassert control over the energy sector in 2006.
Dmitry Medvedev, the Russian president, said the project would be able to supply 5 per cent of global demand for LNG once at full capacity next year. “This strengthens Russia’s position as a major energy market participant,” he said at the opening ceremony in Sakhalin, which was also attended by Taro Aso, the Japanese prime minister.
The project, which will ship 50 145,000-cubic-metre tankers of super-cooled gas this year to Japan, South Korea and potentially to North America, will open a big energy route for Russia, which has built most of its geopolitical clout as an energy supplier.
“This is the first significant outflow of Russian energy to Asia,” said Chris Weafer, chief strategist at Uralsib investment bank in Moscow. “Russia will look to piggy-back that new energy relationship with a closer political relationship.” About 65 per cent of LNG produced at the plant will be shipped to Japan.
The launch of the project ends Europe’s position as the only foreign consumer of Russian gas – all of Russia’s existing gas export pipelines are directed into Europe.
The launch comes a day after Russia signed off on another big push to send energy east, a $25bn oil-for-loans deal with China.
Under the deal, Russia agreed to supply China with 30m tonnes of crude from east Siberia over 20 years in return for loans for Transneft, the state-controlled oil pipeline monopoly, and Rosneft, the state-controlled oil group. The first branch of a pipeline across Siberia to a Pacific hub is expected to be completed this year, with a spur also expected to be built to China.
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Madoff victims emerge at Safra
By Jonathan Wheatley in São Paulo
Published: February 17 2009 13:20 | Last updated: February 18 2009 00:29
Customers of the Safra Group, which includes one of Brazil’s biggest banks and has substantial private banking operations in the US and Europe, have emerged as victims of the Bernard Madoff scandal.
The Financial Times believes that Banco Safra of São Paulo for several years marketed a fund called Zeus Partners Limited, one of many “feeder” funds that channelled money to Bernard Madoff Securities, Mr Madoff’s New York brokerage firm, from investors around the world.
More than two dozen feeder funds held more than $20bn with Mr Madoff, tarnishing the reputation of some of the biggest private banks and hedge fund specialists, as well as Santander, the Spanish bank.
Operators of the feeder funds included some big names in fund management, including Union Bancaire Privée, the Swiss private bank, Tremont, owned by OppenheimerFunds, the US asset manager, and Pioneer Alternative Investments, part of Italian bank Unicredit.
Safra Group denies any involvement with Bernard Madoff Securities.
A Safra spokesperson in New York said Banco Safra in Brazil had no involvement with Mr Madoff’s funds and that none of the Safra banks promoted any Madoff funds, although some Safra-family banks outside Brazil did invest in some Madoff funds if customers requested them to do so.
He added: “The Zeus fund is not a Safra fund.”
But documents obtained by the Financial Times from investors in Brazil include a single-sheet description of the fund headed “Safra Group” and “Zeus Partners Limited” and bearing the Safra Group logo. The FT also obtained an “executive summary” of the fund which lists Banque Jacob Safra (Gibraltar) Limited, part of the Safra Group, as the fund’s custodian.
The description of the fund bears several of the hallmarks of Madoff funds, including the now notorious “non-traditional ... split-strike conversion” strategy supposedly employed by Mr Madoff, and almost unbroken monthly gains over five years from early 2002.
One investor in São Paulo who asked not to be identified said he was usually reluctant to buy funds but received “a very hard sell” from his Safra representative. “They said this was a very good fund with an excellent track record and that [Joseph] Safra himself [the head of Safra Group] had put a lot of his own money into it.”
Banco Safra in Brazil did not respond to requests for comment on the Zeus fund and its involvement with Mr Madoff. People familiar with the matter said the fund invested at least $300m on behalf of Safra’s customers.
The CVM, Brazil’s securities commission, is investigating whether institutions in Brazil sold Madoff feeder funds to investors, and whether they were authorised to do so.
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Brazil's schools get a lesson in basics
By Jonathan Wheatley in São Paulo
Published: February 17 2009 02:00 | Last updated: February 17 2009 02:00
The classroom's thin curtains are drawn against the powerful sun as 13 and 14 year olds at the Irmã Gabriela school in Osasco, on the outskirts of São Paulo, rehearse a play they will perform at a parents' meeting.
A girl in a purple wig does a fine imitation of a television chef making feijoada , a traditional black bean and pork stew. Next comes some African dancing. But then things turn sinister.
A lanky boy takes to the floor acting drunk and demands his dinner from a terrified wife. After a row he heads back to the bar, leaving wife and children in tears. Then come scenes of child prostitution and drugs.
Play-acting offers some escape from such harsh realities. But if Brazil's notoriously inadequate public schools are really to offer children a brighter future, they would do well to learn from initiatives being tested at this and other schools in São Paulo.
By some measures, the performance of Brazil's public schools is "horrific", says Maria Helena Guimarães, state education secretary. "Twenty-five per cent of pupils leave secondary education with no command of reading and writing. Forty per cent have no command of basic mathematics."
One problem is funding, skewed by law in favour of higher education. Last year three public universities in São Paulo state with 140,000 students received almost R$5bn ($2.2bn, €1.7bn, £1.5bn) of state funds. The 5m pupils at primary and secondary school shared R$12.3bn between them.
Salaries are low. At Irmã Gabriela, most teachers earn R$1,000 ($439, €340, £304) to R$1,200 a month - comparable to domestic servants. But Ms Guimarães says the biggest obstacles to change are the system's inflexibility.
"Head teachers can motivate their teams, they can encourage parents to participate and create an environment that welcomes and shelters poor children," she says. "But they can't hire or fire. Teachers choose schools, not the other way round."
Almost all of Irmã Gabriela's 1,200 pupils live in the huge favela that covers the valley beyond its walls. Maria de Lourdes Spricide de Oliveira, the head teacher, says persuading parents to take an interest in their children is a priority.
"We go after parents and get them to sign a commitment to make their children come to school," she says.
But it is not just pupils who fail to show up. In 2007, with a teaching body of 100 to 115, the school lost about 650 teaching days to absenteeism.
"Some teachers never miss a day," says Ms de Oliveira. "Others miss one day a week. One teacher like that can destroy the performance of the whole school. You can't fire them because they haven't broken any rules."
That was the situation in 2007. But since last April teachers in São Paulo's state schools have been allowed just six days of medical leave a year. Teachers' attendance direc-tly affects their right to a new annual bonus of up to 2.9 times their monthly wage paid to all members of staff if schools meet performance targets.
Rewarding teachers for their performance is a radical idea in Brazilian public education that is being tried out in São Paulo at the initiative of Ms Guimarães. She has introduced other measures, such as standardised curriculums and on-the-job teacher training, that are commonplace in other countries but have prompted protests in São Paulo.
Ms Guimarães says some initiatives have had quick results. In May to October 2007 teachers took 398,000 days of sick leave. In the same period last year, the number was 60 per cent lower. Other programmes, such as the federal government's Bolsa Família, which makes welfare payments dependent on parents keeping their children in school, have made nationwide attendance in the seven to 14 age group almost universal.
But Alberto Rodriguez, an education specialist at the World Bank, warns that improvements in attendance have led to complacency at national level over the need for further reform.
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Chávez win to reignite '21st century socialism'
By Benedict Mander in Caracas
Published: February 17 2009 02:00 | Last updated: February 17 2009 02:00
Hugo Chávez's solid win in a referendum on Sunday, overturning restrictions on his re-election, could hasten austerity measures such as spending cuts, tax rises and a devaluation.
Economists expect the Venezuelan president to take advantage of his triumph - with 54 per cent voting to abolish term limits - and move more quickly to tackle plunging government revenues caused by a collapse in oil prices.
"Politically strengthened and with more room for manoeuvre, the government will . . . be more willing to slow the pace of spending, increase taxes and devalue the bolivar by 25-35 per cent to bolster revenues and hold back a growing -fiscal deficit," said Patrick Esteruelas from Eurasia Group
In his victory speech late on Sunday, Mr Chávez promised to deepen his socialist project as well as redouble efforts to tackle persistent problems that have dented his popularity, such as violent crime, corruption, inefficiency and bureaucracy.
The president steered clear of the economic announcements that analysts argue are necessary to tackle slowing growth and galloping inflation, but Ali Rodriguez, the finance minister, denied that the austerity measures touted by "neoliberal" economists were on the cards.
"They are used to applying those famous packages that have caused so much pain for the people but they still haven't understood that here we have a government that has a vision that is not only different, but completely contrary to the neoliberal optic," Mr Rodriguez told state media on Sunday.
Mr Rodriguez said the government was waiting to see at what level oil prices would stabilise in order to obtain a clearer picture of revenues this year.
The announcement of a stimulus package is expected soon, although government officials say this will be financed by funds amassed while oil prices were high.
Alex Main, an adviser to the government based in Washington, emphasised that the social programmes that were the foundation of Mr Chávez's support were introduced when oil prices were at similar levels. "While not terribly appetising, the prospect of continued oil revenues at $35 a barrel is not seen as a calamity, especially given the high level of foreign reserves," he said. "This idea that the Chávez government isn't fiscally sound is a big myth."
Mr Chávez's victory will reignite his resolve to bring "21st century socialism" to Venezuela, less than three months after he suffered a serious setback when a resurgent opposition won key urban centres in regional elections.
"The gates to the future have been opened wide," said an emotional Mr Chávez from the balcony of the presidential palace, as a throng of ecstatic followers chanted: "Hey, ho, Chávez won't go." Announcing that he would stand for re-election when his six-year term expired in January 2013, Mr Chávez said a new phase in his revolution from 2009 to 2019 had begun.
The government's win -represented a serious blow to a fragmented opposition which, little more than a year ago, succeeded in blocking Mr Chávez's attempted overhaul of the constitution, including his plans to scrap presidential term limits.
In what was the 15th nationwide vote since he was elected a decade ago, an unusually high 67 per cent of Venezuela's 16.8m voters went to the polls, according to results after 94 per cent of the vote had been counted.
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Chávez triumphant
Published: February 17 2009 21:56 | Last updated: February 17 2009 21:56
Like everything Hugo Chávez does, whether making policy while telling convoluted jokes on his prime time TV show Aló Presidente or sounding off against imperialist lackeys, his referendum scrapping the limits on how long he can remain in power is full of colour and controversy.
The Obama administration, unlike its predecessor that painted Mr Chávez in lurid, almost Iranian colours and backed a failed coup against him in 2002, gave a measured welcome to the “civic spirit” of the plebiscite. The leader of Venezuela’s “Bolivarian revolution” has, after all, won 14 out of 15 popular votes during his decade in power.
There is, moreover, nothing intrinsically sinister about amending a constitution. It is a lot more peaceful than the insurrections and putsches to which Latin America has been habituated. Countries such as Mexico, with its historic taboo on re-election, could do with constitutional reform: it is impossible, for example, to have a functioning parliament whose members are limited to three-year terms.
Chavismo, furthermore, channels the frustration of indigenous and mestizo majorities – not just in Venezuela but in Bolivia, Ecuador and, to an extent, in Mexico and Peru – with power and wealth skewed in favour of westernised elites. Any policy must take that into account.
All that said, Mr Chávez makes large claims for his “21st century socialism”. True, he has substantially reduced abject poverty and brought schools and clinics to the masses. But that was with record oil prices, which have now fallen to a quarter of their peak level.
If the history of Latin America tells us anything, moreover, it is that the populism of the caudillo is a dead end, reached all too often after a detour through tyranny.
Mr Chávez, while no choir boy, has restrained his autocratic instincts while giving free rein to his populism. The right comparison with Iran is that he has, in consequence, unleashed galloping inflation, reinforced dependency on oil and cut Venezuela off from foreign investment. But Iran is under sanctions; this is entirely self-inflicted.
The Venezuelan leader will now have to rein in his spending. Yet he needs only to look south to find another way. In Brazil and Chile, centre-left governments under Luiz Inácio Lula da Silva and Michelle Bachelet have hewed to financial orthodoxy. This has allowed them to channel fiscal surpluses into lending and public spending, for example, on Brazil’s Bolsa Família, which makes welfare payments dependent on parents keeping their children in school. In the present crisis, sustainability counts.
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Town sent into reverse by US car crisis
By Bernard Simon
Published: February 18 2009 19:13 | Last updated: February 18 2009 19:13
General Motors employed 25,000 people in Anderson, Indiana in the early 1980s. Today, it employs just one. His job is to maintain and, if possible, sell the buildings and properties that once produced an array of parts for GM cars, but now stand deserted.
Anderson’s experience over the past 25 years is now being echoed in many other communities throughout the US and Canada that have depended on GM and its smaller Detroit-based rivals, Ford Motor and Chrysler.
All three companies – as well as hundreds of parts makers that supply them – are racing to bring their capacity into line with their shrunken market share and the steep dive in US car sales.
The difference between last month’s total light-vehicle sales and those a year earlier is equivalent to the annual output of about 20 assembly plants. GM announced plans on Tuesday to close another five North American plants, adding to four – in Michigan, Wisconsin and Ontario, Canada – already on the block.
Chrysler said it would lay off another 3,000 workers, bringing the total over the past two years to 36,000, or more than 40 per cent of its payroll.
Anderson’s population has shrunk from a peak of 70,000 in 1970 to about 59,000 now. Many of those who remain are retired from GM and Delphi, the parts maker now in bankruptcy protection, that was spun off by the carmaker in 1999.
Some 10,000 pensioners now make up almost the entire membership of the United Auto Workers’ two branches in Anderson. The only active members are a few dozen city workers recruited by the union as part of a drive to diversify beyond the auto industry.
“All the young folks when they graduate move out of town,” says Ken Sager, who was a buyer at Delphi before his job was eliminated last October.
Mr Sager, 61, joined a court challenge earlier this month against Delphi’s proposal to eliminate healthcare and life insurance benefits for 15,000 retired white-collar workers.
The move, if approved by the bankruptcy court, will put another dent in Anderson’s economy. “We’re going to have to make some lifestyle changes,” Mr Sager says.
Delphi acknowledged in a court filing last week that terminating the benefits “will impose real hardship” on the pensioners.
But it said maintaining them “would cost hundreds of millions of dollars . . . and burden [its] reorganised balance sheet with a billion dollars or more of associated liabilities”.
Recognising the hardships “regretfully provides no business justification or legal basis to continue these programmes in the current economic climate”.
For all the devastation of the past 25 years, Anderson has some encouraging lessons for other motor-industry communities following in its wake.
“We met our Waterloo early and now we’re bouncing back,” says Linda Dawson, director of economic development.
Armed with a promise of cheap electricity and the city’s proximity to an interstate highway, Ms Dawson says that “we’ve been very active in marketing our city to foreign nations and in the US”.
Nestlé, the Swiss food group, chose Anderson for a 1m sq ft drinks plant, its biggest in the world, which opened last year.
Several small alternative-energy companies have set up in Anderson. Hi-Tech Machining, whose 10 employees build and repair industrial machinery, paid $425,000 in December for a 22-acre site once occupied by GM.
Even so, the devastation of Anderson’s well-paying auto jobs has left bitter feelings. “I’m not a socialist,” says Robert Hoover, an 86-year-old retired GM worker who is chairman of UAW local 662. “But I do believe that people ought to have an opportunity to have a good life in this country. I feel horrible that my grandkids can’t come up and do as well as I’ve done.”
Ms Dawson has a different perspective. “The day of the high-paid production worker is a thing of the past,” she says. “I think the new middle class is going to have to become more educated and better skilled to hold those wages.”
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Californian dreams turn sour
By Matthew Garrahan in Los Angeles
Published: February 18 2009 02:00 | Last updated: February 18 2009 02:00
In Contra Costa County, a few miles from San Francisco and the millionaires of Silicon Valley, widespread poverty has returned to California.
Buffeted by a housing collapse and a slumping economy, the county of 1m is struggling to cope with a sharp rise in the number of residents seeking welfare assistance.
Applications for food stamps - vouchers for low-income earners that can be used to buy food - have risen 65 per cent in the county in the past year. There has been a similar jump in the number of applications for Medi-Cal, which provides health services for the poor, and other welfare programmes.
Like the rest of the Golden State, Contra Costa is fighting a battle on two fronts.
Demand for welfare assistance is rising as the US recession tightens its grip. But the county's ability to support its residents is being hindered by a spending freeze tied to California's projected $42bn (€32bn, £29bn) budget deficit - the biggest in the US.
The state has slashed funding for social programmes and postponed thousands of infrastructure projects - such as school, hospital or highway developments - worth over $21bn. The projects have been put on ice while legislators try to address the shortfall.
Lawmakers have spent the past four days locked in the state's capitol building in Sacramento to hammer out a budget deal that would raise about $14bn from new taxes and cut spending by a similar amount. A proposal backed by Arnold Schwar- zenegger, California's governor, and state Democrats is one vote shy of being passed.
With the pressure for a new budget mounting, Mr Schwarzenegger yesterday began making good on a promise to cut 10,000 jobs from the state's payroll in an attempt to preserve cash.
In Contra Costa the spending freeze could not have come at a worse moment. "We have had to cut 200 positions and at the same time there has been a huge increase in the number of people seeking help," says Joe Valentine, director of the employment and human services department in the county.
Many of those seeking assistance are unused to the experience, he says. "We call them the 'newly poor'. We had a man come in recently who had been a carpenter for 20 years. He had just been laid off and then lost his house."
California has traditionally been the most prosperous state in the US, but the urgent need to address its budget deficit is exacerbating the impact of the recession on its 36m residents.
The state is in line for a federal bail-out and may receive up to $26bn from the economic stimulus package that passed last week. But the long delay in implementing a new budget has spooked Wall Street and seen California's credit rating cut to the lowest of any US state. This has made it impossible to sell bonds that are supposed to finance billions of dollars of public works projects that have already been approved by voters.
Some of those projects, such as the redevelopment of schools and prisons, have been put on ice until a budget can be agreed.
"We have really slowed down and have probably let go 150 carpenters and labourers," says Terry Street, chief executive of Roebbelen Contracting, a Sacramento-based company that has worked on several public projects.
His company was ordered to stop work on a $20m mental health facility that was close to completion and also had to halt construction of a school east of Sacramento.
Postponing these projects is heaping more misery on California's once-booming construction sector. Unemployment in the state is running at almost 10 per cent but among building workers it is nearer 20 per cent, according to Jim Earp, of the California Alliance for Jobs, which represents contractors and 80,000 workers.
There are also doubts about the state's ability to continue providing welfare assistance. In Los Angeles County, home to some 10m people, there was a near 25 per cent jump in applications for homeless assistance between June and September last year.
"My members got into this business because they wanted to help people," says Cathy Senderling-McDonald, of the County Welfare Directors Association of California. "So many families need help . . but there is a big gap between what we can offer them and what they need."
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Russia’s population number in 2008 reduces by 121,400 people
19.02.2009, 10.57
MOSCOW, February 19 (Itar-Tass) -- The number of Russia’s constant population reduced in 2008 by 121,400 people, or by 0.085 percent, and at January 1, 2009 amounted to 141.9 million people, PRIME-TASS reports with reference to the Federal State Statistics Service (Rosstat).
A total of 1,717,500 people were born and 2,081,000 people died in Russia in 2008, or 107,400 and 0.6 thousand people more accordingly in comparison with the indices of 2007.
The natural decrease, calculated as a difference between the number of the dead and the born, amounted to 363,500 people against 470,300 people in 2008.
The number of marriages reduced by 83,800 and amounted to 1,178,300, and the number of divorces increased by 17,500 - - to 703,400.
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Russia and China have initialled an agreement on construction of a branch of oil pipeline
17.02.2009, 15.17
MOSCOW, February 17 (Itar-Tass) - Russia and China have initialled an agreement on construction of a branch of the East Siberia-Pacific Ocean oil pipeline towards China.
The pipeline that will run from the Russian town of Skovorodino in the Far-Eastern Amur region to China's northeast city of Daqing is expected to put through 30 million tons of crude oil annually upon the completion of all construction works.
Also, the two sides signed an agreement under which the China Development Bank will issue a loan of 25 billion U.S. dollars to the Russian oil producing company Rosneft and to the operator of the national oil pipeline system, Transneft, Prime-Tass economic news agency said.
More specifically, Rosneft is entitled to getting 15 billion U.S. dollars and Transneft, 10 billion, a source in the latter company told Prime-Tass.
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Statistics: Russia’s trade surplus up 37.3% on year in 2008
MOSCOW, Feb 19 (Prime-Tass) -- Russia’s trade surplus rose 37.3% on the year to U.S. $179.792 billion in 2008, the Federal State Statistics Service said in a report obtained by Prime-Tass Thursday.
Russia's exports rose 33.1% on the year to $471.763 billion, while imports rose 30.6% on the year to $291.971 billion in the period.
Exports to countries outside the Commonwealth of Independent States (CIS) increased 33.3% on the year to $400.691 billion in the period, while exports to CIS countries rose 32% on the year to $71.072 billion.
Imports from non-CIS countries rose 32.1% on the year to $253.135 billion in the period, while imports from CIS countries rose 22.2% on the year to $38.836 billion.
Meanwhile, the Federal Customs Service said earlier that Russia’s trade surplus had risen 32.2% on the year to $201.2 billion in 2008.
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Unemployment in Russia hits 6.1 mln - statistics body
09:59 | 19/ 02/ 2009
MOSCOW, February 19 (RIA Novosti) - The total number of unemployed people in Russia grew to 6.1 million in January, up 5.2% on December, while only 1.7 million were officially registered as jobless, the state statistics body said on Thursday.
Russia, which is heavily dependent on oil and gas exports, has been hard hit by the current financial crisis, which has dampened worldwide demand and sent energy prices down. Businesses, struggling to repay their loans, have been closing down or laying off employees en masse.
"State employment agencies have registered 1.7 million people, and 1.4 million of them are receiving unemployment benefits," Rosstat said.
However, according to figures calculated to International Labor Organization (ILO) standards, 6.1 million people, or 8.1% of Russia's workforce, were jobless as of late January, Rosstat said.
In December 2008, 5.8 million people, or 7.7% of "the economically active population," were unemployed, according to ILO standards.
Analysts expect unemployment in Russia to grow as the global economic crisis continues. The country's Social Development and Health Ministry earlier said official unemployment figures could reach at least 2.2 million this year.
President Dmitry Medvedev sacked four regional leaders on Monday in a move experts said was punishment for their poor performances as well as a warning to others.
In a televised interview on Sunday, Medvedev said some of the regional governors were "inept and inefficient," and not "responsible enough in dealing with unemployment" amid the ongoing crisis.
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Russian consortium to bid for giant Mongolian coal field - paper
14:26 | 18/ 02/ 2009
MOSCOW, February 18 (RIA Novosti) - A Russian consortium comprising En+ Group, Severstal and Renova submitted investment proposals to the Mongolian government last month to develop one of the world's largest coal mines, a business paper said on Wednesday.
According to Vedomosti, the consortium's intention to develop the Tavan Tolgoi coal field in the Gobi Desert, with estimated reserves of 6.5 billion metric tons of coking coal, was confirmed by an executive of the Severstal steelmaker while a representative of the Renova asset management group declined to comment.
A representative of En+ Group owned by Russian billionaire Oleg Deripaska told the paper that the Mongolian side viewed positively the consortium's proposals.
At the same time, the Mongolian government has yet to determine its project requirements and it is not yet clear whether it will issue a license for the entire mine or for separate sections, the paper said.
In any case, competition is going to be tough as major global companies, such as Vale, Rio Tinto, BHP Billiton, Xstrata and China's Shenhua Energy are also keen to take part in the tender, the paper reported.
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Ukraine desperately begs for help kneeling in front of the whole world
18.02.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/ussr/107124-ukraine-0
Top officials of world’s biggest financial structures have become frequent guests in Ukraine lately. They assigned a great amount of money to the country, but it seems that the efforts were wasted. International creditors will most likely turn their back to Ukraine as Viktor Yushchenko and Yulia Tymoshenko continue to fight with each other.
Thomas Mirov, the head of the European Bank for Reconstruction and Development, is finishing his three-day visit to Kiev. The EBRD has given Ukraine a $135-million-dollar loan to cure the effects of the Chernobyl nuclear disaster. The bank has already assigned $4.1 billion to Ukraine.
The government of Yulia Tymoshenko is desperately seeking the funds to live up to the nearest elections at all costs. Tymoshenko still manages to stay afloat in Ukraine, but she finds herself in rather confusing situations on the international level.
For example, let’s take her recent meeting with the ambassadors of the Group of Eight, the IMF, the World Bank and the European Committee. The Ukrainian prime minister urged the officials to give Ukraine loans in the total amount of five billion dollars to replenish the budget deficit. Tymoshenko added that she had sent letters containing adequate requests to a number of countries, particularly to the USA, Russia, Japan, China, the EU and Saudi Arabia.
The news became a surprise to many of the diplomats present. Austrian Vice Chancellor and Finance Minister Josef Proell set out his sympathies to Ukraine ’s aspiration to receive loans not only from the IMF, but from separate countries too. The official stressed out that the IMF played the decisive role in such affairs.
International financial organizations found themselves in a very uncomfortable situation. The World Bank, for example, does not deal with the issues of budget deficit funding – it is a prerogative of the International Monetary Fund.
The credit assistance of the International Monetary Fund is based on very tough conditions. The targeted use of the funds is the most important one of them. Ukraine received the first tranche - $4.5 billion – in November and spent it all in just several weeks. The nation’s economy did not have a vestige of recovery. Roman Zhukovsky, an official spokesman for Yushchenko’s team said that the IMF asked Kiev to cut the budget deficit to one percent of the GDP in 2009. The index in the parliament-approved budget makes up three percent, which was too optimistic, local analysts acknowledge.
A second tranche from the IMF will not solve the deficit of the Ukrainian budget no matter how the situation unfolds further. Tymoshenko stated only several weeks ago she was conducting financial assistance talks with six countries, including Russia. Ukraine’s President Viktor Yushchenko harshly criticized her for that.
“It is very hard morally and psychologically to comment on the making of the secret Molotov-Ribbentrop Pact, when it goes about Russia’s five-billion loan to Ukraine,” he said.
It goes without saying that it would be a lot more pleasant for Ukraine to become financially dependent on Europe or the United States. However, Europe’s developed countries are having a hard time because of the economic crisis. The USA showed a token of understanding only when it became known that Kiev’s request about the urgent financial assistance was pending in Moscow. An official spokesman for the US State Department said that Obama’s administration would consider Ukraine’s request if such an inquiry had been made.
Ukraine is desperately seeking help. Standard & Poor’s agency said describing the condition of the nation’s banking system that the country was suffering an economic shock.
Aleksei Kovalev
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USA to expand military presence in Central Asia to show more pressure on Russia and China
18.02.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/americas/107121-usa_central_asia-0
Kyrgyzstan has made another step to cancel the Manas airbase lease agreement with the United States. The International Affairs Committee of the Kyrgyz parliament approved the adequate decision February 17. The parliament of the former Soviet republic is expected to give the issue its final consideration February 19.
An official spokesman for the International Affairs Committee, Kabai Karabekov, stated that the session of the ruling party of Kyrgyzstan would become the last instance to ratify the document. In addition, the committee was also ready to consider the denunciation of the agreement with other eleven members of the anti-terrorist coalition.
Kyrgyz President Kurmanbek Bakiyev announced his decision to close the airbase on the territory of the republic in the beginning of February. The parliament will have to say the last word on the matter. Three committees – the international, the constitutional and the defense committee, as well as all three factions of the Kyrgyz parliament - will have to bring down their conclusions. The defense committee has already made a positive decision on the matter.
The US air base opened in Kyrgyzstan in 2001 under the UN mandate to support the coalition-run anti-terrorist operation in Afghanistan. Over a thousand US servicemen and war planes are currently deployed at the base.
The US administration has made a number of attempts recently to expand its military presence in the republic. About 30,000 military men were supposed to be deployed in Manas because the situation in Afghanistan was worsening, US officials claimed.
There is every reason to believe that the Americans are ready to swap Manas for any other base in Central Asia. David Petraeus, chief of the U.S. military's Central Command, arrived in Uzbekistan to sound out an opportunity to organize a US airbase on the territory of this republic. Another Asian country, Tajikistan, does not mind a US airbase on its territory either.
The USA does not hurry to leave the region and intends to settle down there for a very long time. Afghanistan is not relevant here at all. Central Asia is very rich with crude and natural gas, which, as Washington believes, could reach Europe bypassing Russia.
As for Kyrgyzstan, the country borders on Russia and China, which makes it a very good platform to show more pressure on both Russia and China. The USA will do its best to stay in Kyrgyzstan even if the national parliament decides to close the airbase.
Ivan Shmelev
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Great Depression arrives in Ukraine
19.02.2009 Source: URL: http://english.pravda.ru/business/finance/107126-Great_Depression_Ukraine-0
By Edward Hugh
Paul Krugman has recently said the absolutely right thing: the Great Depression may now reasonably be considered to have arrived in Ukraine. Ukraine 's GDP declined 20 percent year-on-year in January according to Valeriy Lytvytsky, chief advisor to the chairman of the National Bank of Ukraine.
"The decline in GDP in January was about 20 percent according to my reckoning. It's the biggest drop ever. It's a bad start," he said. According to Lytvytsky the construction and industry sectors have been the hardest hit by the economic crisis.
The Statistics Office doesn't produce detailed information on the month by month movements in GDP, but using the raw data they do provide, I have calculated the monthly growth rates, and have produced the chart below, which gives a pretty clear idea of what has been happening.
Industrial output fell in January for the sixth month in a row, with a 16.1 percent decline between January and December 2008. This was the biggest decrease since January 1994, when there was an 18.6 percent drop. Industrial production in January was 34.1 percent down on January 2008. The year-on-year decline in construction also increased ten-fold, hitting 57.6 percent, Lytvytsky said.
"At the start of last year there was one sector in recession - construction. All the rest were in positive territory. Now only one economic sector is growing - agriculture - with growth of 0.5 percent, within the margin of error. All the other basic industries, which account for about 80 percent of GDP, are contracting."
Unfortunately this may well be the last month for which I can do this kind of calculation and comparison, since the State Statistics Committee will not be publishing monthly GDP results (as in the past), starting this January and (ironically) as a result of the move to harmonize Ukraine's methodology with international-standard, quarterly reporting. I say ironically, since in this case we will be trading short term insight for longer term precision. However, the office will continue publishing monthly results for individual economic sectors like agriculture, industry, construction and transportation, so we may well be able to invent some kind of "proxy," just to keep an eye on what is happening in more or less real time.
Click here to read the full text of the article
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海外投資受け入れに課題 ＷＴＯ対日審査
世界貿易機関（ＷＴＯ）は18日、日本の貿易政策に関する審査報告を発表した。政府が英投資ファンドのＪパワー（電源開発）株の買い増しを中止させたことなどを例示し、海外からの投資受け入れ姿勢に課題があるとの見方を示した。農業分野も「労働生産性は国内平均の4分の1以下」と改革の遅れを指摘。一方、「日本は世界的な金融危機後も保護貿易措置を導入しなかった」とし、自由貿易体制を堅持する姿勢は評価した。
ＷＴＯは対日貿易政策審査を2年に1度実施している。今回の報告を基に18、20日の両日に審査会を開き、加盟各国から意見を聴取する。
海外投資に関しては「特に投資の受け入れが経済協力開発機構（ＯＥＣＤ）諸国の中では低水準にとどまっている」と問題視した。海外勢が日本の電力事業への投資を希望しているにもかかわらず、英ファンドのＪパワー株の買い増しに「政府が戦後初めて安全保障などの理由で反対勧告を出した」と指摘した。審査会でも政府規制の明確化を求める意見が出る可能性がある。(07:01)
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年金給付水準50％維持、５年に１度の財政検証見通し
政府が5年に1度実施する公的年金の財政検証で、現役世代の手取り収入に対する厚生年金の給付水準（所得代替率）が将来にわたり50％台を確保できる見通しとなることが18日わかった。長期の予想運用利回りは現行（3.2％）より高い水準（4％強）を見込むが、足元の急激な株安などで年金積立金は目減りしているため、2004年の年金制度改革の際の想定よりも給付抑制を強める内容となる。
検証結果は厚生労働省が月内にも公表する。政府は04年の年金改革で、保険料を17年度まで段階的に引き上げて上限で固定する一方、所得代替率は将来も50％を下回らないと約束。23年度まで給付抑制を続けても、50.2％が下限となると試算した。(07:01)
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「証券差金決済」 金融庁が顧客保護策を導入
個人投資家の間で急速に普及している「証券ＣＦＤ（差金決済取引）」と呼ばれるハイリスク・ハイリターンな金融商品を規制するため、金融庁は顧客資産の保護策を導入する方針を固めた。取扱業者に、顧客から預かった証拠金を会社の資産と分別管理するよう義務付ける。「第2の外為証拠金取引（ＦＸ）」に育つ可能性があり、早急に手当てしておく必要があると判断した。
金融庁は19日、自民党の金融関連の会合で、ＣＦＤ規制を含めた金融商品取引法の改正案を説明する。年度内に国会に提出し、年内施行を目指す。(07:01)
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三菱商事、インドネシアのニッケル開発に参画
三菱商事は19日、インドネシアのハルマヘラ島で進んでいるニッケル鉱床の開発プロジェクトに参加すると発表した。金属大手の仏エラメットから、その完全子会社で鉱床の開発を進めるストランド（シンガポール）の株式を取得することで合意した。三菱商事は株式の代金などとしてエラメットに約1億4500万ドル（約130億円）を支払い、ストランドの発行済み株式の33.4％を取得する。
ストランドが子会社を通じて開発する「ウェダベイ」は世界有数の未開発ニッケル鉱床で、およそ500万トン相当のニッケルがあると推測されている。三菱商事はステンレスの原料であるニッケルの需要は堅調に推移すると見ており、権益の確保に努める。開発事業の詳細は今後エラメットなどと詰める。
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１月の百貨店売上高、9.1％減 11カ月連続前年割れ
日本百貨店協会が19日発表した1月の全国百貨店売上高（既存店ベース）は、前年同月比9.1％減の6131億円だった。前年割れは11カ月連続。衣料品や高額品の低迷が続き、初売りやバーゲンセールも不発に終わった。同協会は「今年上期（1―6月）は7―8％の前年割れを覚悟しなければならない」（飯岡瀬一専務理事）とみている。
1月の減少率は昨年12月の9.4から0.3ポイント改善したものの、1月としては1965年に現在の方法で統計を始めて以来最悪となった。婦人服が 12.8％減と3カ月連続で2ケタ落ち込み、衣料品全体でも11.9％減った。高額商品の美術・宝飾・貴金属は19.1％減と、4カ月連続で2ケタのマイナス。食料品は菓子や物産展などの売り上げが伸び0.7％増と、2カ月ぶりにプラスに転じた。(19:32)
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海外への出張・旅行に向くスーツ 三陽商会が日航と共同開発
三陽商会は19日、日本航空と共同で海外への出張や旅行に向くスーツを開発し「ポール・スチュアート」ブランドで20日に発売すると発表した。航空機内で着たりスーツケースにしまったりしてもしわが付きにくい生地を使用し、内ポケットに逆さにしてもパスポートが落ちにくいなどの工夫をした。30―40代のビジネスマンを主な購入層と見込む。
ボタンの数や素材の違いなどで５つのタイプの「グローバルスーツ」を発売する。いずれもしわが付きにくく、付いても元に戻る性能が良い生地を使用した。航空券を取り出しやすい内ポケットと、パスポートなどが飛び出すのを防ぐため、口の上にも袋がある内ポケットを付けた。日航社員に海外出張の際に試着してもらい、意見を反映した。価格は8万2950―9万7650円。(15:03)
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北方領土問題「次回までに答えを」 首相、ロ大統領に要請
麻生太郎首相は19日午前の衆院予算委員会で、ロシアのメドベージェフ大統領との首脳会談で北方領土交渉の加速で一致したことに関連し「次回までにきちんとした帰属問題の答えを示してもらいたい」と要請した事実を明らかにした。首相は4月にロンドンで開く2回目の緊急首脳会合（金融サミット）の機会に次回の日ロ首脳会談を開く方向で合意している。
首相は「四島の帰属が一番の問題。これが最終的に解決しない限り、他が解決しない」と述べ、四島の帰属問題を解決して平和条約を締結する方針を堅持する考えも示した。新党大地の鈴木宗男氏への答弁。
18日の日ロ首脳会談では北方領土問題について「独創的で型にはまらないアプローチ」で解決を目指す方針を確認。鈴木氏は「政策転換ではないかという感情が地元にはある」と指摘した。(12:44)
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北方領土：「面積等分の分割案」に関心 小泉元首相
【モスクワ大前仁】ロシア訪問中の小泉純一郎元首相が北方領土問題に関して、日露両国が四島の面積を等分に分割する提案へ関心を示した。元首相は「両国が妥当だと思える線でなければ、（領土問題は）まとまらない」などと発言し、今後、「四島返還」に固執しない立場から領土問題の進展を目指す考えを鮮明にしている。
小泉元首相は１７日にモスクワで開かれたロシア有識者との非公開セミナーに出席。ワレーリー・ズボフ下院議員（第２与党・公正ロシア）が北方四島の全島の面積を折半する案を説明したところ、「大変に興味深い」と語ったという。小泉氏は翌１８日の会見でも、この提案の詳しい説明は避けながら、「領土問題の解決と平和条約を結ぶためには、（提案は）一歩進まなければいけないとの考え方から出ている」と提案に一定の評価を与えた。
小泉氏はまた、日本が四島返還を要求し続ける限り、ロシア側は譲歩しないとの認識を示した上で、「究極の目標（平和条約の締結）に到達するために何が必要なのか考えたい」と述べた。
ズボフ議員は毎日新聞の取材に対し、自らの提案の理由について▽領土問題が日露の経済交流のネックとなっている▽両国が四島の主権を主張している現状を打破する必要がある－－と語った。
両国は１８日に露サハリン州で開いた首脳会談で、「独創的なアプローチ」により問題解決を目指すことを確認。小泉氏が「四島返還」に固執しない解決方法に言及したことで、日本国内の論議を刺激する可能性もある。
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ホームレス支援施設、元派遣急増でパンク寸前
家や仕事を失った人々の最終的な“駆け込み寺”になるホームレス自立支援施設への入居者が昨年末から急増している。景気悪化で失業した元派遣労働者らが流れ込み、多くの施設がほぼ満室の状態に。企業の決算期にあたる3月末には、契約切れとなる派遣労働者が殺到する可能性もあり、担当者らは「支援したいが対応しきれない」と危機感を募らせている。
簡易宿泊所が立ち並ぶ「労働者の街」横浜・寿町の一角にあるホームレス自立支援施設「はまかぜ」。「行ってきます」。入居者は守衛に自分の名札を示して外出を告げ、1人、また1人と職探しに出かけていく。入居者の男性（62）は「ここ1カ月で30代くらいの若者が増えた。仕事を探そうにも年だし、体の具合も悪い。働き盛りが相手ではぼやぼやしていられない」とこぼす。(16:00)
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文科省出身の参事官、東京・品川の公立中校長に
東京都教育委員会は19日、文部科学省の浅田和伸・内閣官房内閣参事官（47）が今年4月に品川区立大崎中学校の校長に着任すると発表した。同省によると、現職幹部職員が退職して公立学校の校長に着任するのは全国初という。
浅田参事官は1985年入省。文科相秘書官や専門教育課長などを務めた。品川区教委によると、浅田参事官は「教育行政に携わってきた者として、現場で実務を手掛けたい」などと区側に打診していた。(14:52)
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文科省キャリア官僚が校長に…東京・品川の公立中学校
文部科学省のキャリア官僚が、初めて公立中学校の校長に就任することが１９日、決まった。東京都教育委員会が発表した。
就任するのは、内閣官房に内閣参事官として出向している浅田和伸氏（４７）で、４月から品川区立大崎中の校長になる。
浅田氏は東大教養学部卒で、１９８５年入省。同省大臣秘書官や高等教育局専門教育課長などを務めたが、「独自の教材開発などの取り組みに共感していた品川区の教育現場で働きたい」と同区教委に相談していた。
浅田氏は「国の教育行政にかかわってきた経験を生かし、現場の力を最大限に引き出す学校経営を目指したい」と話し、同省は「浅田氏は再び文科省に戻ることもできるが、今回は本人の希望に基づく異例の人事」としている。
都内では、公立校長として、リクルート社出身で杉並区立和田中校長を務めた藤原和博氏（５３）ら９人の民間人が採用されているが、官僚出身者の登用は初。
（2009年2月19日21時16分 読売新聞）
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イチロー日米格差問題…マリナーズで「利己的」悪評価
ダル「僕らはついていくだけ」
ＷＢＣ日本代表を圧倒的なリーダーシップでけん引するマリナーズのイチロー外野手（３５）。自他ともに認める日本の大黒柱だが、９年目のシーズンを迎えるマリナーズでは、「利己的でチームをかえりみない選手」と正反対の評価を受ける場面が近年目立ち始めている。どうしてこんな格差が生まれるのか。
「イチローさんはリーダー。僕らはついていくだけ」とダルビッシュ。２００６年の第１回ＷＢＣで、ヒーロー的なイメージが定着したイチローは、日米で築き上げた実績をもとに、リーダーとしての地位は揺るぎないものになっている。
ところが、マリナーズでは、クラブハウス内やメディアからの評価は日本での印象とかなり違っている。今年メッツに移籍した元同僚の抑えエース右腕、ＪＪプッツはマリナーズのロッカールーム内を暴露するように、地元紙シアトルタイムスのインタビュー（１５日付）に答えている。
「本当の意味でチームプレーをしていない選手がいた。とても頑固だ。みんな誰のことを話しているかわかるだろ。そのとおりさ。完全な衝突がある。頑固なんだ。（チームが勝てるかは）全選手を公平に扱うか、それとも今までやってきたように、誰かを特別扱いするかによるよ」
プッツは誰とは具体名を挙げていないが、同紙はイチローのことだと指摘。イチローはチームから特別扱いを受けており、自己の記録を最優先にプレーしていることから、チーム内の軋轢（あつれき）は絶えないとしている。
さらにプッツは、「２００安打８年連続とか通算打率とかは文句のつけようがない。彼にはもっとできることがある。職業意識や毎日の練習はすごい。しかし…」とも発言している。
この反イチロー発言は大反響を呼び、１６日にはアリゾナ州のキャンプ地で、マリナーズのワカマツ新監督が終息コメントを出す騒ぎに。「選手には実績によって階層がある。しかし平等に近い環境をつくりたい」と話した。
イチローはチームナンバーワンのスター選手であることは日本代表と変わらないのに、同様の報道は初めてではない。昨年も腹を立てたチーム内の選手が、イチローを襲撃しようと計画を立てた騒動が報じられた。「チーム再建にイチローが邪魔になる」と唱えるコラムニストもいた。
日米のチーム内での人望の差に驚くばかりだが、イチローの持つ孤高さと言葉の壁が生み出すねたみや誤解から生まれている可能性もある。ただ、何千本もの安打を打っても、日本人は米国ではリーダーになれない宿命だとしたら寂しいが。
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中田英寿：「チャリティーの概念変えたい」 サッカー財団の活動説明
元サッカー日本代表の中田英寿さんが１９日、東京・銀座で行われた「ブルガリ ブリリアント・ドリーム・アワード（ＢＤＡ）２００９」の授賞式後のイベントに出席。中田さんはサッカーを中心とした地域振興やチャリティーイベントなどを行う財団法人「ＴＡＫＥ ＡＣＴＩＯＮ ＦＯＵＮＤＡＴＩＯＮ」を設立したばかり。グレーのクラシカルなスーツ姿でさっそうと登場。「チャリティーの概念を変えたい。関わることによってベネフィット（利益）が得られるのが（本当の）チャリティーだと思う。参加することで誰もがプラスになるという仕組みを作りたい」と意気込みを語った。
財団は、引退したＪリーガーによるチーム「ＴＡＫＥ ＡＣＴＩＯＮ ＦＣ」を結成し、全国各地のイベントに無償で派遣。地方の活性化やサッカーの普及などへの貢献を目指すという。中田さんは「Ｊリーグのチームとやっても負けないくらいのチームが作りたい」と夢を膨らませ、「サッカーの試合以外にもいろいろ考えているので、期待して欲しい」と力強く語っていた。
「ブリリアント・ドリーム・アワード」は未来を担う若い世代に「夢・希望・心の温かさ」を伝えることをコンセプトに、イタリアの宝飾ブランド「ブルガリ」が、夢にまい進し、それを実現した人物を表彰するもの。１１回目となる今回はモデルの杏さんが受賞し、特別賞にはジャズミュージシャンの渡辺貞夫さんが選ばれた。中田さんは、第１回のＢＤＡを受賞、昨年の第１０回でも特別賞を受賞していることからイベントに登場、ブルガリが同財団に協力することも発表された。
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自工会：車用鋼材の種類、１割削減で鉄鋼連盟と合意
日本自動車工業会（自工会）は１９日、自動車用鋼材の種類を１割削減することで日本鉄鋼連盟と合意したと発表した。鉄鋼メーカーの生産性向上に協力し、昨年高騰した鋼材価格の引き下げにつなげる狙い。両団体が鋼材の種類削減で合意するのは１３年ぶり。
現在１７４種類ある自動車用鋼材のうち、生産効率の低い１９種類の生産をやめ、他の鋼材で代用する。自動車各社は自動車のモデルチェンジに合わせて使用鋼材を変えるため、種類の削減には数年かかる見通し。１回当たりの発注量を多くすることでも合意した。
自動車用鋼材価格は今年度、原料の鉄鉱石の値上がりなどで前年度比約３割上昇し、自工会は昨年４月、価格抑制に向けた協議を鉄鋼連盟に申し入れていた。自動車と鉄鋼各社は今回の合意を踏まえ、来年度用の鋼材価格の交渉を近く本格化させる見通し。
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スイス製のチョコ・チーズ安くなる 関税引き下げ合意
2009年2月19日
中曽根外相とスイスのドリス・ロイタード経済相は１９日、貿易額の９９％以上の品目の関税を１０年以内に撤廃することを盛り込んだ経済連携協定（ＥＰＡ）に署名した。今秋の発効をめざす。日本のＥＰＡ署名は１１件目で、欧米諸国とは初めて。
日本・スイス間の輸出入額は９５５０億円（０７年）で、日本の貿易額全体の０．６％。現在、スイスは日本からの輸入品の７８％、日本はスイスからの輸入品の２０％にそれぞれ関税を掛けている。ＥＰＡが発効すれば、それぞれの輸入額の９９％が無税となる。
スイスは、乗用車１台あたり１万数千円の関税を即時撤廃するほか、テレビやビデオを含むすべての鉱工業品にかかる関税をなくす。日本は、医薬品の原材料などの関税を撤廃。スイスから輸入の多い腕時計は現在も無税だ。
農林水産品では、スイスが清酒やみそなどの関税を撤廃。日本は、チョコレートにかかる１０％の関税を８％に引き下げるほか、「エメンタール」など高級ナチュラルチーズについても約３０％の関税を段階的に約１５％に引き下げる。日本がチョコレートやチーズの関税を引き下げるのは初めてという。
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富豪日本一はユニクロ・柳井氏…米経済誌フォーブス
【シンガポール＝実森出】米経済誌フォーブスは１９日、２００９年の「日本の富豪４０人」を発表した。
それによると、カジュアル衣料専門店「ユニクロ」を展開するファーストリテイリングの柳井正会長兼社長の資産額が６１億ドル（約５７００億円）となり、初めて首位となった。
柳井氏はユニクロの好業績で昨年より資産を１４億ドル増やした。
昨年首位の山内溥(ひろし)・任天堂相談役は４５億ドルで３位に甘んじた。２位はパチンコ機メーカー三共の毒島邦雄(ぶすじまくにお)名誉会長で５２億ドルだった。
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次世代資源「メタンハイドレート」、水底から連続回収成功 清水建など
清水建設や北海道大学などはロシアの研究機関と共同で、次世代のエネルギー資源として期待されるメタンハイドレートを水底から連続回収する実験に世界で初めて成功した。米国や中国など世界各国が商業生産に向けて技術開発を競っている。日本も2018年ごろの商業化を目指しており、清水建設は4年以内をめどに今回の採掘技術を実用化する。
メタンハイドレートは、メタンガスが高圧・低温の海底下や凍土の下にシャーベット状に固まったもの。日本近海だけでも国内で年間に消費する天然ガスの 90年分が存在するとされる。水深1000―1500メートルの海底に豊富で、商業化には採掘技術の開発が鍵を握る。(07:00)
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中国紙、１面で中川財務相辞任を報道
１８日付の中国各紙は中川昭一財務相の辞任について「麻生政権に深刻な打撃」などと大きく報道、第一財経日報など中川氏の写真を１面に掲載した新聞もあった。
新京報は、記者会見でのもうろうとした様子など写真４枚を掲載、「政界では酒好きで有名だった」などと詳細に報じた。
第一財経日報は、東京発の記事で自民党内の批判などを伝えた上で「日本は金融危機にあって伝統的な集団主義の精神を発揮できずに足の引っ張りあいをし、衰退の兆候を示している」と分析した。（共同）
［2009年2月18日12時41分］
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