Mitsui May Seek Overseas Resource Investments After Prices Drop

Mitsui May Seek Overseas Resource Investments After Prices Drop
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By Ichiro Suzuki

April 15 (Bloomberg) -- Mitsui & Co., Japan’s second- largest trading company, may increase overseas investment in new projects to secure raw materials after prices dropped, competing with China and South Korea for resources.

The financial crisis has forced some investment funds to sell off assets, increasing opportunities, said Masami Iijima, who became president of Mitsui on April 1, without elaborating.

Japan is vying with China, the world’s biggest consumer of commodities, and South Korea for resources in expectation that raw materials demand will rebound as economies recover. The Reuters/Jefferies CRB Index of 19 commodities fell 4 percent last quarter adding to a 50 percent drop in the second half of 2008 amid recessions in the U.S., Europe and Japan.

“Falling prices have made it easier for us to consider new investments,” said Iijima, 58, who joined the company in 1974. “We will even invest in projects that may generate a negative cash flow, if the projects warrant our investment 10 years ahead,” he said in an interview yesterday.

Mitsui’s businesses include trading oil, iron ore, aluminum, soybeans, cars and machinery, investing in liquefied natural gas projects, leasing aircraft and chartering marine tankers. The company, established in 1876, is one of the diverse Japanese trading houses whose origins extend back hundreds of years.

‘Severe State’

The current earnings environment was “in a severe state” as metals and energy generated 70 percent of profit, Iijima said.

“Our task is to enhance the non-commodity sector” he said. “The proportion of commodities and non-commodities should be fifty-fifty.”

The contribution of minerals and energy to earnings was 60 percent at larger rival Mitsubishi Corp., 53 percent for Marubeni Corp. and 28 percent for Sumitomo Corp. in the year to March 31, 2008, according to Nomura Securities.

Mitsui on Feb. 3 forecast net income will drop 24 percent from a year earlier to 310 billion yen for the 12 months ended March 31. The company may review its dividend ratio target of 20 percent for the fiscal year started April 1, 2010, Iijima said. “We want to consider again what is the best way for stockholders and the company,” he said.

Energy and commodity prices were rebounding, with copper approaching $5,000 a metric ton and oil gaining to around $50 a barrel, and prices may continue to rise in the mid- to long-term, Iijima said. “The market is comfortable with $70 to $90 crude oil” because new developments such as oil-sand projects would occur at that price, he said.

The global economy will benefit from measures agreed this month by the Group of 20 nations to spur growth and China’s 4 trillion yuan ($585 billion) stimulus package, Iijima said. “The economy will probably hit bottom after July,” he said.

China, the world’s biggest buyer of metals, may spend more than $500 billion on overseas resources investments over the next eight years to secure supplies to drive economic growth, Deloitte Touche Tohmatsu said last month.

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Egypt Bloggers Seek to Bridge Gap Between Islamists, Democrats
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By Daniel Williams

April 14 (Bloomberg) -- Politically speaking, Mustafa Naggar, a member of the Muslim Brotherhood, and Mohammed Sherif, a self-styled revolutionary socialist, should have little to say to each other.

The Brotherhood, the Middle East’s prototype for Islamic- based politics, has long been at odds with those democrats who think religion’s place is in the mosque, not the halls of power.

Still, the two men find common cause in the struggle to end the 27-year reign of Egypt’s president Hosni Mubarak. Promoting their message through blogs -- like hundreds, if not thousands, of other young political activists -- they agree that Mubarak, 80, must go and that Egyptians need to end the historic animosity between Islamists and secular democrats that has bitterly divided Arab politics for a century.

Naggar, 29, and Sherif, 23, became acquainted through their Web sites and describe themselves as newly found friends. Interviewed in cafes on opposite sides of Cairo, they displayed remarkably common sentiments, given their distinct roots.

“We must reach a middle ground,” said Naggar, a dentist. “We need to understand that to achieve democracy is more important than holding on to old ideologies.” His blog is decorated with an olive branch and often features a photo of someone praying.

“We can’t be always antagonistic,” said Sherif, a government computer technician. “I think democracy can respect the beliefs of the people, so long as the beliefs are not imposed.” His blog is adorned with the clenched socialist fist.

No Immediate Threat

The two men don’t represent an immediate threat to Mubarak’s one-party rule or to the appeal of the Brotherhood -- Egypt’s largest opposition force -- and its insistence on setting up a theocracy in the Arab world’s most populous country. Nonetheless, they typify a younger group of Egyptians who challenge the notion that secular democrats and Islamic activists are locked in an immutable struggle.

“It’s important in Egypt that there is such protest activity and that it’s searching for new ideas,” said Hala Mustafa, editor of the political journal Democracy Review. “This is a real development, potentially a new generation that is neither just liberal or Islamist.”

Naggar insists his outreach isn’t just a cat’s paw for an Islamic takeover -- as occurred in Iran when, after the 1979 fall of the Shah, Shiite Islamists under the sway of the late Ayatollah Ruhollah Khomeini overwhelmed secular democrats and other opposition parties.

‘We Have to Cooperate’

“This is not a tactical stand,” he said. “It comes from conviction. We meet non-Islamists everywhere, at work and in civil society. At the end of the day, we have to cooperate with everyone.”

Sherif said he isn’t being naïve. “Of course, there is suspicion on all sides. But why judge an experiment before it really starts?”

Between 1922 and 1952, Islamists and democrats both worked to end British control of Egypt’s finances, civil administration and armed forces. They split over the country’s future, with the Brotherhood, founded in 1928, insisting on an Islamic realm to replace the defunct Ottoman Empire. Since 1952, when Gamal Abdel Nasser overthrew the monarchy in a coup, Egypt’s three military leaders have encouraged that rivalry, playing one side against the other to weaken both.

Naggar and Sherif acknowledge that the chance of short-term change is slim. Efforts to bring democracy to Egypt in recent years have failed: Mubarak never honored his pledges to foster a multiparty electoral system. Small secular parties bickered among themselves and fell short of mobilizing the country’s destitute masses to challenge his rule.

Likely Successor

The next parliamentary elections are scheduled for 2010 and presidential elections for 2011. Regulations in place since 2006 virtually ensure that the ruling National Democratic Party will dominate. Egypt’s press considers Mubarak’s son, Gamal -- a top leader in the NDP -- as the likely successor to his father.

Democratic bloggers have yet to create a cohesive opposition; under emergency laws in force since 1981, it is illegal for more than five people to meet in a political gathering. Nonetheless, the diffuse movement has attracted government repression. Police detained 500 bloggers during the past year for periods ranging from a few hours to four months, Reporters Without Borders, the Paris-based watchdog group, wrote March 19. No one knows the numbers of political bloggers, the report said, “but that is their strength.”

Facebook Group

About 20 percent of Egypt’s 83 million people regularly access the Internet, the group estimated. One political Facebook group, the April 6 Youth Movement -- which has tried and so far failed to organize nationwide strikes -- has more than 76,000 members.

The Brotherhood is monitoring the secular-Islamist contact -- and dismisses it. “They can talk all they want; the Brotherhood will not change,” the group’s supreme guide, Mohammed Akef, said in an interview. Last fall, the Brotherhood banned a member, Abdel Moneim Mahmoud, from active participation because, among other things, he suggested that strict adherence to the Koran shouldn’t be the standard for political action.

With Akef, 80, set to retire next year, several young Brotherhood members recently called for election of a new leader by all Egyptians, not Brotherhood members in the rest of the Arab world and in Europe, as is traditional. In the interview, Akef said the process won’t change.

Civil State

Naggar and Sherif both reject Islamic rule in Egypt. “Better to have a civil state with Islamic references,” Naggar said.

“We have to recognize that Egypt is majority Muslim and increasingly religious,” said Sherif.

They say there is a model that might end the destructive division: Turkish Prime Minister Recep Tayyip Erdogan’s Islamist-rooted Justice and Development Party, which has governed an officially secular state since 2002.

“It has been successful in Turkey and would be even more successful in Egypt,” Sherif said. “The party respects the religion of the people but also responds with laws that the people want.”

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Saab Fails to Land Gripen Orders, Threatening Output (Update2)
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By Sabine Pirone

April 14 (Bloomberg) -- Saab AB, the Swedish maker of the $40 million Gripen jet fighter, may fail to win enough orders to guarantee the plane’s future as the build rate slows and parts-makers halt production.

Norway dealt Saab a blow in November with a contract for 48 Lockheed Martin Corp. Joint Strike Fighters after analysts predicted the Gripen would win. The Netherlands selected the JSF as the best candidate to replace 85 older aircraft a month later, and Denmark may also pick the U.S. plane this year.

Work on Gripens for South Africa and Thailand runs out in 2012 and only 26 deliveries remain, pushing output down to 10-12 aircraft a year from about 15 previously. Linkoeping-based Saab is holding out for orders from India and Brazil to rescue the flagship product of an aeronautics unit that contributes 20 percent of sales. Suppliers including Volvo Aero, maker of the plane’s RM12 engine, are already winding down production.

“After South Africa we have no more orders and that’s a fact,” said Fredrik Fryklund, a spokesman for the Volvo AB unit, which gets 7 percent of its revenue from work on the Gripen. “Next year some time we’ll probably deliver the last engine. Maybe another country will like our Gripen with the RM12. Otherwise, the production line will be closed.”

Saab fell 4.9 percent to 62.50 kronor in Stockholm trading, the sharpest drop in five weeks. The stock’s decline compares with a 0.7 percent fall in the Bloomberg World Aerospace and Defense Index of 17 industry leaders not including Saab.

Marketing Plans

The planemaker reiterated after losing the Norwegian contract that it aims to sell 200 more Gripens abroad and is marketing the 1,320 mile-per-hour aircraft to eight potential new customers. Spokesman Lasse Jansson says the production rate has always been flexible and that the company has no supply- chain problem because it only buys parts based on orders.

Norway said it placed the 18 billion-kroner ($2.7 billion) JSF order, worth another 145 billion kroner in maintenance and repair over 30 years, after judging the plane to be 6 billion kroner cheaper than the Gripen and better in all of its main duties. Saab said Dec. 10 that the pricing was faulty and it was “surprised” at the choice, given that Norway had indicated it wanted closer cooperation with neighboring Sweden.

Lockheed’s hand may have been strengthened by Norway’s role as one of eight partner countries helping the U.S. develop the JSF, also called the F-35. Denmark is also involved, as is the Netherlands, with 84 Dutch companies making parts including cables and doors valued at 750 million euros ($1 billion).

Dutch Jobs

Dutch defense ministry spokeswoman Sascha Louwhoff said that while the competition will remain open until a contract is signed next year, the JSF has become important to the industrial base, with the government having invested $800 million. Two demonstrator planes are about to be ordered.

“We’ve invested a lot of money in the JSF program, you cannot wipe that out,” she said. “For the armed forces it’s important that they have the best aircraft. For the Netherlands as a whole it’s also important that we get orders and jobs from it. It’s a two-way approach.”

Danish defense spokesman Henrik Levysohn said the country will also hold an open contest between the Gripen, JSF and Boeing Co. F/A-18 Super Hornet, with a preliminary choice to be made this year. Test aircraft will be commissioned before a contract is signed in 2012.

“The potential is still there, but as they lost in Norway, the likelihood of success in European countries like Denmark and the Netherlands has decreased,” said Stefan Cederberg, an analyst at Enskilda Securities in Stockholm who recommends buying Saab stock.

Supply Chain

While Saab can sustain Gripen production at a reduced level, the company needs contracts now if it’s to safeguard the supplier base, since companies normally provide parts well ahead of manufacturing, said Sandy Morris, an analyst at Royal Bank of Scotland Group Plc in London with a “buy” rating on the stock.

“They need an order in 2009,” Morris said. “Gripen production may not cease this year, but further down the chain, suppliers are likely going to run out of work.”

While Saab may be able to keep production lines moving by doing upgrades, that won’t in itself be enough to retain design capabilities and the supply chain, he said.

The Gripen’s suppliers include aircraft-electronics manufacturers Honeywell International Inc. and Thales SA, Goodyear Tire & Rubber Co., which makes the wheels, Martin-Baker Aircraft Co., an ejector-seat specialist, and Rheinmetall AG, which makes 27 millimeter cannon, as well as dozens of smaller companies, many Swedish.

‘Crunch Time’

Richard Aboulafia, an analyst at Teal Group in Fairfax, Virginia, said deliveries generally need to be running two years ahead to sustain the supply chain.

“If they don’t get orders soon, the production line starts to dry up,” he said. “It is coming down to crunch time. You can be flexible in speeding up or slowing down, but if a line goes cold it’s out of your hands.”

Saab says it has submitted binding responses to tenders from Brazil, Denmark, India, Romania and Switzerland and is also looking at bidding for orders from Bulgaria, Croatia and Greece, as well as the Netherlands. The Gripen made its first flight in 1988 and entered service in 1993. The first export contract was signed by South Africa in 1999.

Imperiled Orders

Awards from India or Brazil -- which may number 126 and 36 aircraft respectively -- are still some way off and any contracts in Eastern Europe have receded by at least five years because of the global financial crisis, Morris said.

Switzerland has delayed selection until December at least and may represent Saab’s best chance of a new Gripen contract, analysts say. Swiss relations with Germany, where the rival Eurofighter Typhoon program is based, have been strained by the countries’ dispute over tax evasion.

Volvo Aero said that while Switzerland is a candidate for planes using the RM12 engine, based on the F404 from Fairfield, Connecticut-based General Electric Co., any contract from India or Brazil would probably be for the Next Generation Gripen with power plants direct from GE.

“We have been preparing for a commercial change in our company for many years,” Volvo spokesman Fryklund said from the unit’s base in Trollhaettan, Sweden. “We have foreseen this, so we are not in trouble.”

Leach International, a supplier of electrical-power distribution assemblies for the Gripen, has already finished shipments, spokesman Jean Emmanuel Metz said by telephone from Strasbourg, France.

While Sweden may provide further upgrades to keep the Gripen line going, Saab may have to drop plans for a new assembly line or close it temporarily, Morris said.

The Gripen has 250 orders, 204 of them from Sweden, which has leased out 14 planes to the Czech Republic and is also upgrading a further 31. South Africa has ordered 26 planes, of which 20 are still to be delivered, and Thailand has contracts for six. Hungary has leased 14 planes which it may buy after 10 years of operation.

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Russia signals intent to borrow abroad

By Catherine Belton in Moscow

Published: April 14 2009 12:36 | Last updated: April 14 2009 20:54

Russia is looking at borrowing funds on international markets for the first time in a decade, as authorities scramble to combat a deepening economic recession.

Costs in the pipeline
Costs in the pipeline: budget deficits are to erode the vast reserves Russia has built up from surging energy prices
The move, revealed on Tuesday by Alexei Kudrin, finance minister, comes as the country seeks ways to plug looming budget deficits and ease the way for heavily indebted companies to raise new funds.

Mr Kudrin said Russia should prepare for budget spending to be cut next year by Rbs1,300bn (€29.3bn) to Rbs9,000bn because of an expected 30 per cent drop in revenue due to low oil prices. The price of oil is barely one-third of what it was when Russia passed its three-year budget last year.

Konstantin Vyshkovsky, a finance ministry official, told reporters on Tuesday that Russia could issue up to $5bn (€3.8bn) in eurobonds with maturities of three to five years next year as part of an effort to help Russian companies – now trying to restructure $420bn of foreign debt – return to international corporate debt markets.

“The important issue here is not so much to receive funds to cover the budget deficit but to create a benchmark for corporate borrowers,” he said.

Russia has not needed to tap international reserves for 10 years as surging oil prices helped it pay down debt and build up vast reserves.

But this year’s budget is set for its first deficit in 10 years – 7.3 per cent of gross domestic product – amid its first recession in a decade.

Russia lost one-third, or $200bn, of its reserves as it battled a run on the rouble at the end of last year. Officials say the remaining $384bn is enough to cover an expected three years of deficits.

However, Mr Kudrin warned on Tuesday that it could take Russia “several years to exit the crisis”, while government forecasts for a drop in GDP of 2.2 per cent this year looked “optimistic”.

The deficits are to be initially funded out of the $121bn “rainy day” fund from windfall oil revenues that forms part of Russia’s $384bn in reserves. But nearly $90bn of that will go towards funding the budget deficit this year. The reserve fund is not likely to cover the budget deficit for 2010, expected to be 5 per cent of GDP, while for 2011 it is set to fall to 3 per cent of GDP.

Bankers and analysts said that investors were likely to welcome a new issue of Russian government debt because it was extremely underleveraged compared with other countries, with only $28.4bn in sovereign debt.

“It is hard to say what things will be like in a year. But for a country of its size, Russia has an extremely clean balance sheet with very little external debt on the sovereign side,” said Rory MacFarquhar, of Goldman Sachs in Moscow.

Bankers also said a new offering would help to price the cost of borrowing for Russian companies, which are anxious to restructure some $423bn in outstanding foreign corporate debt.

Investor appetite has been warming towards Russia in recent weeks, with oil prices well above the $41 per barrel level that is factored into the Russian budget.

The country’s RTS stock exchange has risen 50 per cent in the past seven weeks as investors return to emerging markets. But bankers and government officials alike have warned of a likely surge in bad loans.

●Russia’s 7.5 per cent bonds due in 2030 were down half a point at 98.5 on Tuesday, against a strong performance in emerging markets, Anousha Sakoui adds.

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Cutting back financial capitalism is America’s big test

By Martin Wolf

Published: April 14 2009 21:47 | Last updated: April 14 2009 21:47

Is the US Russia? The question seems provocative, if not outrageous. Yet the person asking it is Simon Johnson, former chief economist at the International Monetary Fund and a professor at the Sloan School of Management at the Massachusetts Institute of Technology. In an article in the May issue of the Atlantic Monthly, Prof Johnson compares the hold of the “financial oligarchy” over US policy with that of business elites in emerging countries. Do such comparisons make sense? The answer is Yes, but only up to a point.

“In its depth and suddenness,” argues Prof Johnson, “the US economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets.” The similarity is evident: large inflows of foreign capital; torrid credit growth; excessive leverage; bubbles in asset prices, particularly property; and, finally, asset-price collapses and financial catastrophe.

“But,” adds Prof Johnson, “there’s a deeper and more disturbing similarity: elite business interests – financiers, in the case of the US – played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse.” Moreover, “the great wealth that the financial sector created and concentrated gave bankers enormous political weight.”

Now, argues Prof Johnson, the weight of the financial sector is preventing resolution of the crisis. Banks “do not want to recognise the full extent of their losses, because that would likely expose them as insolvent ... This behaviour is corrosive: unhealthy banks either do not lend (hoarding money to shore up reserves) or they make desperate gambles on high-risk loans and investments that could pay off big, but probably won’t pay off at all. In either case, the economy suffers further, and, as it does, bank assets themselves continue to deteriorate – creating a highly destructive cycle.”

Does such an analysis make sense? This is a question I thought about during my recent three-month stay in New York and visits to Washington, DC, now capital of global finance. They are why Prof Johnson’s analysis is so important.

Unquestionably, we have witnessed a massive rise in the significance of the financial sector. In 2002, the sector generated an astonishing 41 per cent of US domestic corporate profits (see chart). In 2008, US private indebtedness reached 295 per cent of gross domestic product, a record, up from 112 per cent in 1976, while financial sector debt reached 121 per cent of GDP in 2008. Average pay in the sector rose from close to the average for all industries between 1948 and 1982 to 181 per cent of it in 2007.

In recent research, Thomas Philippon of New York University’s Stern School of Business and Ariell Reshef of the University of Virginia conclude that the financial sector was a high-skill, high-wage industry between 1909 and 1933. It then went into relative decline until 1980, whereupon it again started to be a high-skill, high-wage sector.* They conclude that the prime cause was deregulation, which “unleashes creativity and innovation and increases demand for skilled workers”.

Deregulation also generates growth of credit, the raw stuff the financial sector creates and on which it feeds. Transmutation of credit into income is why the profitability of the financial system can be illusory. Equally, the expansion of the financial sector will reverse, at least within the US: credit growth and leverage masked low or even non-existent profitability of much activity, which will disappear, and part of the debt must also be liquidated. The golden age of Wall Street is over: the return of regulation is cause and consequence of this shift.

Yet Prof Johnson makes a stronger point than this. He argues that the refusal of powerful institutions to admit losses – aided and abetted by a government in thrall to the “money-changers” – may make it impossible to escape from the crisis. Moreover, since the US enjoys the privilege of being able to borrow in its own currency it is far easier for it than for mere emerging economies to paper over cracks, turning crisis into long-term economic malaise. So we have witnessed a series of improvisations or “deals” whose underlying aim is to rescue as much of the financial system as possible in as generous a way as policymakers think they can get away with.

I agree with the critique of the policies adopted so far. In the debate on the Financial Times’s economists’ forum on Treasury secretary Tim Geithner’s “public/private investment partnership”, the critics are right: if it works, it is because it is a non-transparent way of transferring taxpayer wealth to banks. But it is unlikely to fill the capital hole that the markets are, at present, ignoring, as Michael Pomerleano argues. Nor am I persuaded that the “stress tests” of bank capital under way will lead to action that fills the capital hole.

Yet do these weaknesses make the US into Russia? No. In many emerging economies corruption is egregious and overt. In the US, influence comes as much from a system of beliefs as from lobbying (although the latter was not absent). What was good for Wall Street was deemed good for the world. The result was a bipartisan programme of ill-designed deregulation for the US and, given its influence, the world.

Moreover, the belief that Wall Street needs to be preserved largely as it is now is mainly a consequence of fear. The view that large and complex financial institutions are too big to fail may be wrong. But it is easy to understand why intelligent policymakers shrink from testing it. At the same time, politicians fear a public backlash against large infusions of public capital. So, like Japan, the US is caught between the elite’s fear of bankruptcy and the public’s loathing of bail-outs. This is a more complex phenomenon than the “quiet coup” Prof Johnson describes.

Yet decisive restructuring is indeed necessary. This is not because returning the economy to the debt-fuelled growth of recent years is either feasible or desirable. But two things must be achieved: first, the core financial institutions must become credibly solvent; and, second, no profit-seeking private institution can remain too big to fail. That is not capitalism, but socialism. That is one of the points on which the right and the left agree. They are right. Bankruptcy – and so losses for unsecured creditors – must be a part of any durable solution. Without that change, the resolution of this crisis can only be the harbinger of the next.

*Wages and Human Capital in the US Financial Industry 1909-2006, January 2009, www.nber.org

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Globaltrans riding Russian rail traffic decline

By Robert Wright, Transport Correspondent

Published: April 15 2009 03:00 | Last updated: April 15 2009 03:00

Traffic volumes for Globaltrans Investment, Russia's largest private rail freight operator, fell sharply in the first two months of the year, the London-listed company warned.

However, the company, whose market is still dominated by OAO Russian Railways, the state rail company, yesterday said its turnover had fallen less sharply than the sector in Russia overall. It remained determined to establish itself as Russia's leading private rail freight operator. The company, which operates in several countries of the former Soviet Union, was also intending to expand further in Kazakhstan.

Globaltrans' freight traffic fell 15.1 per cent in January, against 32.2 per cent for Russia as a whole. The rate for February in tonne-kilometres - the cargo's weight multiplied by the distance travelled - fell 5.9 per cent for Globaltrans and 27.6 per cent for the sector.

The company disclosed the recent trading figures as it announced net profit had increased from $92.7m in 2007 to $97.4m (£65m) in 2008, on turnover up at $661m ($605m). Operating profits rose to $208m ($145m) but the increase fed through less to net profits because finance costs increased to $99.8m ($30m), largely because of foreign exchange losses of $48.2m, against gains of $26.7m in 2007.

The average price per trip rose 32 per cent to $816. The company attributed that partly to a 22 per cent rise in the fees charged by OAO, which form a benchmark for Russia's private operators. Globaltrans also continued to shift to higher-value, higher-yielding cargoes. Average length of a trip by one of its wagons also increased by 6 per cent.

Globaltrans owns a fleet of rail wagons, which it either leases or uses to run trains on customers' behalf. For short distances, it hauls the trains with its own locomotives, while longer-haul locomotives are provided by OAO.

The company's net debt fell to $334m ($513m).

Sergey Maltsev, chief executive, said Globaltrans had been able to diversify its operations and minimise the impact of changing economic conditions.

The shares rose 15 cents to close at $2.05.

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Gazprom faces fines threat over gas blast

By Isabel Gorst in Moscow

Published: April 14 2009 16:06 | Last updated: April 14 2009 16:06

A gas dispute between Turkmenistan and Russia escalated this week as the central Asian country threatened to claim damages from Gazprom for causing an explosion on a pipeline that has halted its lucrative gas exports to Russia.

The accident, exposing the extent of Turkmenistan’s dependence on Russian gas export routes, could help promote Europe’s campaign to import Turkmen gas through a planned pipeline across the Caspian Sea, bypassing Russia.

It also highlights Turkmenistan’s vulnerability to the global economic crisis, which has reduced Russian gas demand.

Turkmenistan accused Gazprom of triggering the blast by unexpectedly reducing its intake of gas from the main export pipeline linking central Asia with Russia.

Gurbanguly Berdymukhamedov, the president of Turkmenistan, told a government meeting on Monday he would order an international investigation of the accident unless Gazprom accepted the blame.

“If Gazprom is guilty, let they take upon themselves all losses and expenses inflicted on our country by the accident,” he said.

Gazprom refused on Tuesday to comment about the threat of fines, but said Turkmenistan was responsible for repairing pipelines on its own territory.

Foreign governments have courted Turkmenistan for gas supplies since Mr Berdymukhamedov became president in 2007 and pledged to open up the country to the outside world.

Mr Berdymukhamedov last year sanctioned the construction by a Chinese oil company of a pipeline to China that will end Russia’s stranglehold over Turkmen gas exports from 2010.

He has also held frequent talks with European backers of the the planned Nabucco project to transport Caspian and central Asian gas west across the south Caucasus and Turkey, reducing Europe’s reliance on Russian gas.

Gazprom agreed last year to pay central Asian producers European prices for gas in an attempt to block competition for supplies it needed to compensate for declining output at its Siberian fields.

But the urgency of the race for central Asian gas has evaporated as the economic contraction in Russia depresses energy demand, forcing Gazprom to cut production.

Europe is also consuming less gas and has sharply reduced Russian imports while waiting for gas prices, which lag behind world oil prices by six months, to fall.

“The global economic crisis has turned the Eurasian gas business on its head in the past six months,” said Jonathan Stern, the head of gas research at the Oxford Institute of Energy Studies.

“Why on earth would Gazprom buy expensive central Asian gas when it is shutting in its own production?”

Mr Berdymukhamedov visited Moscow last month for talks aimed at finalising plans launched in 2007 to build a new pipeline to carry additional central Asian gas to Russia, but left empty-handed.

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Professions ‘ever more dominated by wealthy’

By Jean Eaglesham, Chief Political Correspondent

Published: April 14 2009 19:17 | Last updated: April 14 2009 19:17

Employers were urged to end the nepotism and networking that restrict access to top jobs in professions such as the law, media and the City, after an official report on Tuesday warned that the professional classes had become even more dominated by the wealthy in the past two decades.

Alan Milburn, the former cabinet minister appointed by Gordon Brown to advise on social mobility, cited a Cabinet Office report published on Tuesday as “shocking” evidence the professions had “become more, not less, socially exclusive” with access governed by “who you know, not what you know”.

The report suggested that privately educated people took the lion’s share of jobs in some professions, despite accounting for only 7 per cent of the population. Three-quarters of judges, 70 per cent of finance directors and 45 per cent of top civil servants went to independent schools, for example.

The middle- and upper-class domination has increased in recent decades, the report suggests. For example, lawyers born in 1970 grew up in families with an income 64 per cent above the national average, compared with a gap of 43 per cent for lawyers born in 1958. For top journalists, the trend is even more marked, with the 1970 generation coming from families with incomes 42 per cent above the national average, as against a 6 per cent gap for those born in 1958.

Class-based differences in aspiration, as well as educational attainment, affect recruitment patterns for the professions, the report suggests. More than four out of 10 – 41 per cent – of young people from the AB socioeconomic groups aspire to be a professional, against only 13 per cent of young DEs.

Recommendations to try to help address this class imbalance will be made by the panel chaired by Mr Milburn in July. But he told the Financial Times on Tuesday that employers’ use of internships would be a central focus of the final report.

“Too many internships come about as a consequence not of open competition but closed contacts. That is not appropriate,” Mr Milburn said. “Internships are an integral part of the career ladder and ... the same processes need to apply to the recruitment of internships as to mainstream paid employees.”

The report is potentially embarrassing for Mr Brown, given the importance Labour has attached to increasing social mobility. But Mr Milburn said much of the data stemmed from before Labour won power. “Since 1997 there’s been a huge effort to break the link between family background and educational attainment,” he said. “Some of that is working.”

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米不良資産購入基金の資金、日本から1000億円　米運用大手

　米政府が民間投資家と共同で金融機関の不良資産を買い取る計画に、日本の資金が投入される見通しとなった。米大手資産運用会社、ブラックロックが日本の機関投資家から約10億ドル（約1000億円）をメドに資金を集めて「官民投資基金」に出資する。ローレンス・フィンク会長兼最高経営責任者（ＣＥＯ）が 14日、日本経済新聞記者と会見し明らかにした。

　「官民投資基金」はガイトナー米財務長官が打ち出したオバマ政権下での米金融安定化策の柱。住宅価格の下落を受けて値下がりしているローン債権と証券化商品を買い取ることで金融機関のバランスシートから切り離し、金融機関への信頼回復をめざしている。(07:02)

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投資顧問通じた対日直接投資、手続き簡略に　６月から

　財務省は14日、海外から日本への直接投資を促進するため、投資の際に必要な届け出・報告の手続きを簡略にすると発表した。投資顧問会社を通じた日本株取引などについて、顧客ごとにわけて報告する仕組みを改め、投資顧問が一括して手続きをすれば済むようにする。必要な政令改正などを経て、6月をメドに実施する。

　外国人投資家からの聞き取り調査で「手続きが煩雑」などと批判が出ていた。外国人が報告書を簡単に作成できるように、投資の際に提出が必要な大量保有報告書と報告事項をそろえる。事後報告の期限も「投資から15日以内」としていたのを「翌月の15日まで」と改め、1カ月分の取引をまとめて報告できるように見直す。月内に説明会を開き、見直し内容を説明する。(01:30)

----------------------------
化学、国際提携で生き残り　高機能分野、新興国市場狙う

　三菱ケミカルホールディングス傘下の三菱化学は14日、中国の石油化学最大手、中国石油化工（シノペック、北京市）と中国事業で包括提携したと正式に発表した。シノペックが低コストで調達した原料を使い、高機能樹脂などを中国で合弁生産する。日中最大手が手を組み、新興国市場で攻勢をかける。アジアや中東で大型プラントが立ち上がる「2010年問題」に直面する化学業界は、国際提携で生き残りを競う時代に突入する。

　同日午後、三菱ケミカルホールディングスの小林喜光社長とシノペックの王天普総裁が都内で提携文書に調印した。三菱化学はシノペックに技術供与したうえで、まず10年春から中国で安価な石化原料をもとにポリカーボネート樹脂を量産する。同樹脂は自動車部品やＤＶＤ基板材料になる代表的な高機能製品だ。

　ほかの具体的な提携事業として、電子材料や次世代型の太陽電池の共同開発など機能材料分野で5―10品目を選定する。合弁生産や技術供与など提携の形は今後詰める。(07:02)

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放送番組のネット配信ルール作り前進　業界団体、５月にも新機構

　インターネットを通じたテレビ番組の配信を拡大するため、著作権を持つ番組出演者らによるルール作りが前進し始めた。「日本音楽事業者協会（音事協）」など芸能３団体は5月にも、新たな機構を設立。著作権料収入の配分方法などを決めたうえで、2010年春にも新機構がネット事業会社からの配信許可申請を一元的に処理する仕組みを導入する。実現すれば、映像のネット流通に追い風になる。

　芸能プロダクションなどを組織する主力団体、音事協と「音楽制作者連盟」、俳優らで組織する「日本芸能実演家団体協議会」の３団体が立ち上げるのは「映像コンテンツ権利処理機構（仮称）」。所属するタレントらが出演するテレビ番組のネット配信で、許可申請を受け付ける統一窓口となる予定だ。(07: 02)

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良品計画、「無印良品」の海外出店を半減　今期20店に

　雑貨店「無印良品」を運営する良品計画は2010年2月期に海外40店を出店する計画を20店に縮小する。消費の冷え込みが激しい米国の出店を凍結し、欧州では半減させる。需要増が期待できるアジアに重点を置き投資回収を目指す。

　米国では10年2月期に5店程度を出す計画だったが、今期は出店を見送る。欧州は英国を中心に出店を見合わせ、当初計画の約10店のうち半数を先送りする。欧米に比べ競合が少ないアジアは6月にインドネシアに進出するなど計画通り15店程度を出店する。(07:02)

--------------------------------
ゼロゼロ物件訴訟が和解　東京地裁、内容は非公表
2009.4.15 14:17
このニュースのトピックス：民事訴訟

　敷金、礼金なしで部屋を借りられる「ゼロゼロ物件」の借り主９人が家賃支払いが数日遅れただけで、家財を処分されるなどしたとして、不動産会社スマイルサービス（東京）に慰謝料などを求めた訴訟は１５日、東京地裁（松並重雄裁判長）で和解が成立した。和解の内容は明らかにされなかった。

　借り主側の弁護団は同日、都内で記者会見し「和解条項により、内容は公表できないが、満足できる結果だ。被害はスマイル社だけではなく、制度改革や法規制が必要だ」と述べた。

　スマイル社側は取材に応じなかった。

---------------------------
漁協補償費の監査請求棄却　香川・東かがわ市監査委
2009.4.15 11:07

　香川県東かがわ市の漁港埋め立て地への企業誘致に伴い、市が地元漁協に補償費を支払ったのは違法な公金支出だとして、市民団体が約２５００万円の返還を求めた住民監査請求で、市監査委員は１５日までに請求を棄却した。

　市は昨年、土地の無償使用の権利を持つ東讃漁協に、約２５００万円の権利消滅補償費と約２０００万円の水産振興費を支払うことを決めた。補償費のほか、水産振興費の一部も既に支払った。

　市民団体は「法的根拠のない公金支出」と主張。監査委員は「違法性がなく、請求に理由がない」として退けた。

----------------------------
家賃滞納１～２か月で追い出し、元賃借人が賠償提訴

　東京都内の賃貸アパートに入居していた男性２人が、「１～２か月の家賃滞納で荷物を撤去され、強引に部屋を追い出された」として、不動産会社「シンエイエステート」（東京都立川市）など４社に慰謝料など計約４７０万円の損害賠償を求める訴訟を１５日、東京地裁に起こした。

　強引な追い出し行為は、敷金・礼金が必要ない「ゼロゼロ物件」で問題化したが、原告弁護団は「ゼロゼロ物件以外でも被害が起きており、対策が必要」と話している。

　訴えたのは、昭島市のアパートに住んでいた内田昭弘さん（６７）と、杉並区に住んでいた大学生（２５）。

　訴状によると、内田さんは、昨年１１月分と１２月分の家賃（月４万９７００円）を滞納したところ、１２月上旬に不動産会社側に部屋の鍵が解錠できない状態にされ、同下旬に家財道具をすべて撤去された。大学生も、今年２月分の家賃７万７０００円の一部を滞納し、遅れて残額を支払ったが、３月中旬に荷物を撤去されたという。撤去された荷物のうち大学生のパソコンは返還されていないという。

　都内で記者会見した内田さんは「自分と同じような被害が今後、起きないように提訴に踏み切った」と話した。原告弁護団によると、１６日に大阪や兵庫でも同様の追い出し行為を巡って提訴する予定という。

　シンエイエステートの話「訴状の内容を見てから適切に対応したい」

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Looking back at Washington, Baghdad wants to revive cooperation with Moscow
00:34 | 10/ 04/ 2009

Print version

MOSCOW. (RIA Novosti commentator Andrei Murtazin) - The first official visit of Iraqi Prime Minister Nouri al-Maliki to Moscow is not likely to be easy but it may become a breakthrough. The goal of the visit is to discuss economic and military cooperation with the Russian leaders.

On April 10, he will meet President Dmitry Medvedev and his Russian counterpart Vladimir Putin for talks on a broad range of issues. The Iraqi Government's official spokesman Ali ad-Dabbag reported that during this visit the prime minister will be accompanied by foreign, defense, and electric power industry ministers, as well as a delegation of the national oil ministry.

After the talks, on April 11, al-Maliki will hold a RIA Novosti-organized news conference in the President Hotel.

The overthrow of the Saddam Hussein regime in April 2003 set the beginning of Iraq's new history and new relations with Russia. It is no secret that many Russian politicians and political scientists from the Old Guards, especially from the communist and liberal democratic parties, vigorously opposed the new Iraqi leaders, calling them George W. Bush's puppets. As distinct from them, the Kremlin did not stick labels but expressed its desire to cooperate with the new Iraqi authorities. Receiving in the Kremlin head of the Temporary Governing Council of Iraq Abdel-Aziz al-Hakim in December 2003, President Vladimir Putin promised him to write off 80% of Iraq's ten billion debt and carried out his promise.

The debt was written off in 2006, but in response Moscow did not get the preferences it had expected. This became clear during the visit of Iraqi oil minister Hussein al-Shahristani in August 2007. After the talks with Minister of Industry and Energy Viktor Khristenko, he declared that the decision to write off the debt would not be linked with other issues, and that Russian companies, including LUKoil, will not have any preferences in Iraq, but will take part in investment contests on a common ground.

In March 1977, LUKoil signed an agreement with the Iraqi government to develop the Western Kurna-2 deposit, but in 2002 Saddam Hussein unilaterally severed the contract, referring to Russia's failure to abide by its commitments. The new Iraqi authorities declared their refusal to recognize the agreements signed under Saddam Hussein. They specified that the deposit's future will be decided by a tender, in which Russian companies can take part on a par with others.

During his visit to Moscow, the Iraqi oil minister met LUKoil President Vagit Alekperov but the results of the meeting were not made public.

The Iraqi prime minister is not going to Moscow empty-handed. As RIA Novosti was told by a source in the Iraqi government, Al-Maliki will bring proposals on cooperation in trade and the economy, and also in the military sphere. "It is not ruled out that a revision of the contracts signed by Russian companies under the previous regime will be the result of the Iraqi prime minister's talks in Moscow," he said.

Incidentally, Russian specialists worked in Iraq during the war of 2003, and are still working there now, for instance power engineers at the Dora and Yusifiya electric power stations near Baghdad.

Military cooperation is a special issue. Under Saddam Hussein, the Iraqi army was armed with Soviet weapons by 80%. Iraq was supplied with Soviet weapons up to 1991 when the troops of the international coalition launched their Desert Storm Operation in response to Iraq's occupation of Kuwait. After this war, Russia joined UN sanctions, which included an embargo on military supplies to Iraq.

Today, the Iraqi army and police are being taught by American and British instructors but Iraqi soldiers and officers are much more confident with the Kalashnikov rifle than the American M-16 rifle. They have been taught to handle Russian (Soviet) weapons. Baghdad may ask Moscow to equip its army with new Russian military hardware. It is very interested in new aircraft, tanks, and air defense weapons. In addition to this, Iraq wants to train its military specialists in Russia as it used to do before.

However, there are no reasons to be too tempted by the prospects of cooperation with Baghdad. As distinct from Saddam's Iraq, where the Soviet Union and Russia had very strong positions, today's Iraq is giving priority to U.S. and other Western companies. Therefore, in building new relations with Russia, the al-Maliki government will always look back at Washington. The only question is to what extent.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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USA loses its world's supremacy
15.04.2009 Source: Pravda.Ru URL: http://english.pravda.ru/world/americas/107409-USA_supremacy-0

The release of Richard Phillips, the captain of the pirated Maersk Alabama, has become the best Easter gift for his family. It became another reason for all Americans and President Barack Obama to demonstrate their power to the whole world.

However, the return of the captain and his crew does not mean that America keeps its leadership in the world. Quite on the contrary, it shows that the USA has been losing it.

US troops are deployed in 153 out of 192 countries recognized by the United Nations, The Guardian wrote. The White House still spends too much on defense. The US Air Force and the US Navy do not wish to part to their nuclear warheads even now, 20 years after the collapse of the Soviet Union.

It will be eight years this autumn since the US incursion in Afghanistan and six years since their invasion of Iraq. It is longer than the time when US troops participated in WWI and WWII.

US troops had to face the guerrilla warfare in Iraq and Afghanistan, and they are still unable to overcome it. The guerrillas enjoy the support of the local population in the two war-torn countries.

The usual tactics – the bombing of villages – does not bring any results. Now the USA can launch the anti-piracy operation off the Somali coast. The need of this operation demonstrates the uselessness of the US-led struggle against international terrorism.

Any great world power could conquer Somali with the use of only several battalions within several weeks only, which is unachievable now, because Somali as a state stopped its existence 20 years ago. No one is capable of establishing law and order there.

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Unemployment in Russia reaches alarming level
15.04.2009 Source: URL: http://english.pravda.ru/russia/economics/107407-Unemployment_Russia-0

The number of officially registered jobless in Russia has reached 2.2 million, President Dmitry Medvedev said at a meeting with experts at the Institute of Modern Development.

Employment issues and struggle with unemployment was in focus.

“The situation in this sphere is not a simple one, and not only in our country, but the world over, and this is very alarming,” Medvedev said. “The parameters of registered unemployment we had expected toward the end of the year are already here. Nearly 2.2 million jobless have been registered and the real unemployment is growing at a high pace.”

According to the methodology of the International Labor Organization, joblessness over the past six months has been up by 3 percentage points to 8.5 percent of the economically active population, ITAR-TASS reports.

Fears that unemployment and falling living standards could trigger social unrest in the country, which has seen a decade of resurgence on the back of a strong economic boom, is the worst nightmare for the Kremlin at a time of global crisis.

Yevgeny Gontmakher, one of the institute's leading experts, shocked the public last November by publishing a scenario of how mounting social problems could trigger chaos in the country.

"Either we start modernizing Russia at once from economy to politics or we plunge into a crisis from which there is no way out within the existing constitution," he wrote in the report.

Russia, which accumulated over $500 billion in reserves during the boom, is investing heavily to keep afloat key enterprises and help ease jobless figures.

But during a conversation with Medvedev on Tuesday at an event open to the media, Gontmakher sounded more optimistic, Reuters reports.

"We are not facing the problem of unemployment now," he said. "We need to talk about how to handle employment issues when we emerge from the crisis."

The head of the institute, Igor Yurgens, said the situation was under control.

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森田知事を市民告発　「自民所属なのに無所属名乗った」

2009年4月15日21時5分

　千葉県の森田健作知事が当選した知事選をめぐり、市民らでつくる「森田健作氏を告発する会」（井村弘子代表）が１５日、森田知事を千葉地検に刑事告発した。自民党に所属しながら「無所属」で選挙活動をしたことは公職選挙法違反（虚偽事項の公表）の疑いがあると主張。告発で「選挙が公正に行われたかを問いたい」と話している。

　同会はあわせて、０５、０６年に献金が禁じられていた外国人や外国法人の持ち株比率が５０％を超える企業から寄付を受けていたことが政治資金規正法違反にあたるとしている。

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日本文芸家協会がグーグルに抗議声明　「日本の著作権者と出版各社を大混乱に巻き込んだ」
2009.4.15 20:52

　米インターネット検索大手「グーグル」の書籍全文検索をめぐり、米国内での著作権訴訟和解合意が日本の作家らにも影響するとされる問題で、日本文芸家協会は１５日、「日本の著作権者と出版各社を大混乱に巻き込んだ」などとして、米グーグル社に対し、抗議声明を発表した。

　グーグルは書籍の全文をデジタル化し、ネット上で閲覧できるシステムを構築。著作権を侵害しているとして米国の出版社などが提訴していたが、昨年１０月、（１）無断でデジタル化した書籍に対して解決金を支払う（２）今年１月５日以前に刊行された書籍などをデータベース化し、商用使用できる－などの内容で和解案に合意した。

　日本文芸家協会の声明文は、和解案が重大な内容であるにもかかわらず、日本での通知が一部新聞などに広告を１回掲載しただけだったことを指摘。「信じられないほどの日本の著作権者に対する軽視。相談窓口も設けられていない」などと、同社の姿勢を批判した。

　同協会では、「全世界の著作権者を米国の法律・手続きで拘束することは極めて不当」と反対の立場を示しているが、著作権者の利益を考慮して和解案には応じる方針。その上で、作品データの削除を要求するよう会員らに薦めている。グーグル書籍検索で表示される会員ら約４３００人に、アンケートを送付。その結果を受けて今後、グーグル側と交渉を進める。

　一方、日本ペンクラブも同日、定例理事会で、グーグルに対して声明を出す方針を決めた。近く内容を発表するという。

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首都圏のマンション発売、３月は46％減　契約率は回復

　不動産経済研究所（東京・新宿）が15日発表した3月の首都圏マンション発売戸数は、前年同月比46.2％減の2390戸だった。前年を下回るのは19 カ月連続。一方、売れ行きを示す「契約率」は78.3％となり、前年同月に比べて13.1ポイント上昇した。マンション各社が在庫の圧縮を優先し、新規供給を絞り込んだため、契約率が上昇したとみられる。4月に繰り越した販売在庫は8846戸と、前月より973戸減少した。4月の新規発売戸数は2300戸を見込んでいる。

　同時に発表した2008年度の首都圏のマンション発売戸数は30.9％減の4万166戸となり、3年連続で前年を下回った。契約率は64.1％と2.2ポイント低下。販売在庫数は8846戸で07年度の1万825戸と比べ大幅に減少した。(16:51)

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韓国もロケット打ち上げへ　７月、人工衛星を搭載

2009年4月15日21時24分

　【ソウル＝牧野愛博】韓国は７月末、同国初の人工衛星搭載ロケット「ＫＳＬＶ―１（ローマ数字）」を南西部の羅老宇宙センターから打ち上げる。１５日から同センターで最終段階の試験が始まった。

　北朝鮮は５日のミサイル発射で人工衛星の軌道投入に失敗しており、「ＫＳＬＶ―１」打ち上げが成功すれば韓国は北朝鮮を抜いて、１０カ国目の「自前ロケットによる人工衛星打ち上げ国」となる。

　「ＫＳＬＶ―１」は全長約３３メートルの２段式ロケット。ブースター（推進装置）の１段目をロシアと共同開発し、２段目は韓国が独自に開発した。

　北朝鮮が９８年に長距離弾道ミサイル「テポドン１」を発射したことを受け、韓国は０５年までの「ＫＳＬＶ―１」打ち上げを目指してきたが、計画は難航した。

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Italy has no immediate tax haven amnesty plan -PM
04.09.09, 11:20 AM EDT

ROME, April 9 (Reuters) - Italy has no immediate plans to introduce a new amnesty encouraging people holding funds in foreign tax havens to declare them, Prime Minister Silvio Berlusconi said on Thursday.

'It's not something we have discussed,' Berlusconi told reporters after a cabinet meeting. 'This possibility stems from the G20, but it still hasn't taken on enough substance to make us consider an amnesty for the moment.'
Article Controls

A government source told Reuters on Wednesday the centre-right administration was working on a new amnesty along the lines of one already used by Berlusconi's previous government between 2001 and 2006.

'We are still looking into it (but) ... there will be an amnesty,' the source said.

Bank sources estimate that Italians have about 600 billion euros ($794.3 billion) parked in foreign tax havens.

The scheme launched by Economy Minister Giulio Tremonti when he held the post in 2001 regularised about 50 billion euros.

That plan, which was conducted in two phases, involved paying a one-off tax first set at 4 percent, then 2.5 percent. The media talks about a 10 percent tax for the new programme, which is linked to an international drive against tax havens.

Switzerland and other main offshore centres agreed to relax their bank secrecy rules last month and help foreign governments chase tax evaders, after pressure from the G20 group of industrialised and developing nations.

Bringing hidden funds back into the economy can provide a welcome cash injection as a credit crunch smothers growth in many countries.

Washington has a programme to offer non-punitive tax deals to people hiding money in foreign bank accounts and is pressuring leading Swiss bank UBS ( UBS - news - people ) to disclose thousands of U.S. clients' names as part of a tax fraud probe.

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OECD renews attack on Switzerland's banking secrecy

* Heather Stewart
* guardian.co.uk, Friday 10 April 2009 17.56 BST

Switzerland has become embroiled in a war of words with the Paris-based ­Organisation for Economic Co-operation and Development, after it was singled out as a tax haven at the G20 summit.

Angel Gurría, director-general of the club of wealthy nations, today released a letter to the Swiss president, Hans-Rudolf Merz, defending the OECD against allegations that it had failed to warn Switzerland that it could be caught up in the global crackdown.

Leaders at the G20 meeting threatened to take action against "noncompliant" jurisdictions that refuse to make tax information available to authorities.

Switzerland responded furiously, with finance ministry officials expressing outrage that they had not been involved in drawing up the list of noncompliant countries.

Yesterday, Gurría struck back, saying in his letter: "Some Swiss officials have characterised the OECD as not having been fair to the Swiss government on the issue of international co-operation on tax matters. I would like to share with you some facts that prove the inaccuracy of such statements."

He said: "Switzerland does not yet have a single agreement on the exchange of tax information that conforms to the OECD standard."

Gurría points out that he raised the issue at the Davos summit in January, with Doris Leuthard, its federal councillor, warning her that, "Switzerland would be better served by making a pre-emptive move."

A series of once notorious tax havens have discovered an enthusiasm for openness in recent weeks, in response to intense political pressure.

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OECD hits back at Switzerland in tax haven row

4 days ago

PARIS (AFP) — The OECD, representing leading nations in a global drive against tax havens, hit back hard on Friday at Switzerland for accusing it of unfair treatment.

The head of the Organisation for Economic Cooperation and Development, Angel Gurria, referred in a letter to Swiss President Hans-Rudolf Merz to the "inaccuracy" of charges of unfair treatment made by Swiss officials.

Switzerland has expressed its disapproval of being targeted as a tax haven by refusing to authorise a budget contribution to the OECD.

"There are no 'black lists' and the OECD did not include or 'threaten to include' Switzerland on any black list," Gurria wrote, according to a statement made available by the OECD.

"We only shared the criteria that have been approved by our committees and the jurisdictions that were adopting or not the OECD standard," he said.

"As you know very well, Switzerland does not yet have a single agreement on the exchange of tax information that conforms to the OECD standard."

This appeared to refer to a decision by Switzerland last month to ease its banking secrecy framework in the face of intense international pressure for cooperation on tackling tax evasion and other illicit transactions.

Switzerland said it would enter into bilateral agreements on the exchange of information.

Gurria acknowledged that these decisions "were difficult," adding that "they were courageous and correct" and enabled the country "to benefit fully from its role in the global economy."

Gurria said the OECD had acted in good faith and that the information it had provided to the Group of 20 top developed and developing countries was factual "and implied no judgement on the part of the OECD."

In the letter dated April 2, Gurria recounted requests to the OECD from the G20 nations to provide details of which countries were meeting OECD standards on exchanging information for tax purposes.

He stressed that he had made several attempts to involve Switzerland.

The OECD represents 30 leading industrialised nations and Gurria wrote that back in November, when Switzerland stayed away from a meeting attended by 11 other countries: "I informed your authorities that the international environment regarding the exchange of information for tax purposes was visibly hardening."

In January, the OECD again reminded Switzerland that "time was running out" and that it should act by itself "rather than being forced to do so."

Gurria said he himself had warned Swiss officials that "the OECD standard was now moving towards 'defensive actions', meaning sanctions."

He had explained that criteria under discussion for years "were simply taking a political dimension, given the tightening budgetary positions of many countries, caused by the crisis."

The tax haven issue has become a hot topic as many countries press for a wider regulatory crackdown to curb abuses they believe played a role in bringing about the worst global slump since the 1930s.

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Save the tax havens – we need them
Eamonn Butler

What is it about tax havens that makes the G20 leaders so keen to crack down on them? Outrage against all those Russian mafia bosses secretly laundering their prostitution and protection racket money through Luxembourg or disgust at Third World dictators being able to siphon millions of their people’s money into numbered Swiss bank accounts in case they need to make a quick exit one day?

Or is it just envy – the feeling of unfairness that billionaires can sip cocktails on their yachts off Bermuda, paying nothing in tax, while poorer mortals like us have to work and slave?

It’s probably a combination of all three, because G20 politicians have hated tax havens for so long that they’ve started to believe their own spin on the subject. But the business of tax havens is actually far more prosaic than any of these rather exotic images. And the real reason why our leaders hate them is that they simply can’t stand the competition.

If you want to pay less tax – as about five billion of the world’s population doubtless do – you have two options. You can evade taxes, concealing your income from the authorities, which is, of course, illegal. Or you can avoid taxes, which is perfectly legal. You might simply claim the full deductions allowed by the tax authorities or maybe move your money into a place where taxes are lower.

It’s avoiders, not evaders, who are the tax havens’ staple customers. The image of drug money being washed through the Cayman Islands is the stuff of thrillers rather than reality. Criminals generally launder money at home because it’s far riskier to move it across borders. The bread and butter of tax havens is people like you or me, who put their modest life savings into a respected investment company in the Isle of Man. And we do it because that way our savings don’t get clobbered for capital gains tax every time our account manager decides to sell one batch of shares and buy another.

Few honest people have qualms against clamping down on criminals. But despite all the Godfather-style spin, it’s actually the rest of us whom the politicians want to clamp down on. They figure – correctly – that if we remain at liberty to put our money in the Virgin Islands or some other place where taxes are lower, we are likely to do just that. And our ability to escape puts limits on just how much they can tax us.

This explains why even Gordon Brown is calling for curbs on tax havens, despite the fact that many of them, including the Channel Islands, are British dependencies. Other countries want even tougher sanctions.

It’s pure financial protectionism. The G20 leaders signed a communiqué praising free trade and deploring anticompetitive barriers in goods and services. That’s because leaders don’t make goods and services. But they do make taxes and are really keen to keep out the competition in that sector. They don’t mind us shopping around the world for the cheapest goods, but they certainly do mind us shopping around for the cheapest taxes.

They have only themselves to blame. It’s not just that governments seem unable to rein in their bureaucracies and keep their costs under control. It’s that they have made taxes so complicated. The last time I looked, the UK tax code ran to 9,973 pages, and that was back in 2007. Complexity inevitably creates loopholes – which lean, nimble tax havens are delighted to help people exploit.

Many countries have lower taxes on foreigners who invest there. That’s because they figure their own residents are largely captive. But they know that international investors can put their money anywhere in the world, so countries have to make themselves attractive in order to pull them in. When you have two different tax rates for the same thing, however, you must expect trouble. And you get it. What happens is that domestic investors simply send their money to a tax haven, then send it back again as if it were “foreign” investment and pocket the difference in the rates.

You can’t blame the tax havens for this kind of wheeze. The root cause is high and complicated taxes. The surest way for the G20 to get rid of tax havens would be to cut and simplify their own taxes – to take on the competition directly.

Until they do, that competition serves a useful purpose for the public. It does make politicians think twice about adding to tax rates or complexity. In particular it limits the burden they can put on savings and investment – the engine of economic growth.

If tax havens boast some of the highest living standards on the planet, that’s got very little to do with money laundering. It’s because low taxes encourage enterprise, stimulate growth and promote personal freedom, too. Rather than trying to kill tax havens, wouldn’t the world be better if our politicians instead sought to beat them at their own game?

Eamonn Butler is director of the Adam Smith Institute. His book, The Rotten State of Britain, is published this month

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Tax haven calls monarch to account

Published Date: 12 April 2009
By John Tagliabue in Luxembourg

WEDGED into 999 square miles, between Germany, Belgium and France, Luxembourg is normally viewed as a picturesque, peaceful country which enjoys liberal banking laws and is overseen by an amiable grand duke.

But this is an era of momentous change, and even tiny Luxembourg cannot escape the tides. The banking laws are under threat and even Grand Duke Henri himself is facing attack.

Grand Duke Henri of Luxembourg is the last grand duke anywhere in the world. Yet he has helped to stir up the furore that threatens to curtail his ducal powers.

"The title is historic," the 53-year-old said, receiving a visitor in the castle of Berg, a faux Gothic residence that his great-grandfather built of reinforced concrete before the First World War. "But, of course, we are now a constitutional monarchy."

Henri's role here has become a matter of debate among the 486,000 citizens of this prosperous sliver of a country. "A large part of the population has an attitude you'd call, in religion, agnostic," said Frank Engel, 33, secretary-general of the Christian Social People's Party, the largest bloc in parliament.

Such is the discomfort with the grand duke's prerogatives and powers that major constitutional reform is afoot, which its promoters hope to have in place by next year. "It is a step towards bringing the constitution in tune with reality," said Michel Pauly, a historian at the University of Luxembourg, founded in 2003. "And to rid the constitution of the remains of absolute rule."

Henri, who resides in Berg, an hour's drive north of the capital, which has the same name as the country, is surrounded by courtiers who appear at times as disorganised as they are numerous; he exercises ceremonies of state in a 17th-century palace that was once the town hall in the centre of Luxembourg city.

People speak a German dialect, incomprehensible to outsiders. Yet Henri also speaks German, English and some Spanish, and the language of his court is French.

These days, Henri may dress in civilian clothes and venture forth from his castle, accompanied at times by his five children, to jog through the mountains. But for centuries, Luxembourg was the plaything of conquerors, falling under the sway of Burgundy, then Austria, Spain, France and the Netherlands. They wanted its great citadel, perched on and dug into sheer stone cliffs above an oxbow in the Alzette River.

The discussion of the constitution comes at a disquieting time for Luxembourgers. Once a land of farmers and steelworkers (iron ore was discovered here in the 19th century), roughly half its economy is now based on financial services. For decades, the industry has thrived on strict bank secrecy laws; almost every bank you have ever heard of has an office on the six-block-long Boulevard Royal.

But those have now come under attack by financial powers which agreed at this month's meeting of the Group of 20 to take more action against tax havens. The financial crisis has also shaken the foundations of the economy. Last year, for the first time the government was forced to stave off the collapse of several local banks, to the tune of more than £2bn.

With the industry in dire straits and facing the threat of being blacklisted by international financial organisations, Luxembourg last month took the unprecedented step of joining other tax havens, such as Switzerland and Liechtenstein, in relaxing bank secrecy to provide more cooperation against tax cheats.

Bankers try to put the best face on it. "I cannot completely exclude that one or another of our customers will leave, but you have to look forward," said Fernand Grulms, 48, chief executive of Luxembourg for Finance, a business promotion agency. "Those are not the customers on whom you could build a future." Still, he acknowledged that private banking accounted for 20% of the nation's business.

The debate around Henri, a wealthy man with manorial residences throughout Luxembourg, began after he ascended the throne in 2000, when he announced his intention to sell off a vast forest known as the Grunewald, upsetting most Luxembourgers, who considered it part of the national patrimony. Then, in 2006, there was further popular unrest when Henri announced his intention to sell the jewels of his mother, the Grand Duchess Josephine-Charlotte, in auction at Sotheby's. In the end, he backed down, selling neither.

But the move that most shook the crown came late last year when parliament passed a bill allowing euthanasia, making Luxembourg the third European nation to do so, after Belgium and the Netherlands. (Switzerland, which allows assisted suicide, does not technically permit euthanasia, which is a mercy killing by a doctor.) Henri refused to sign it. Speculation had it that Henri's Catholicism prevented him from doing so. But there was puzzlement: in 1978, his father, Grand Duke Jean, signed into law an abortion bill, despite his Catholicism.

In a blitz session of parliament, the constitution was changed, making Henri's signature unnecessary. But calls arose for a broader reform of the constitution, to bring the grand duke's role more in line with that of other European monarchs. If the changes are enacted, gone will be many of his executive powers, including his role as commander in chief of Luxembourg's army, with its 800 soldiers, though he is a graduate of the British military academy, Sandhurst. After national elections in June, the legislation is expected to move quickly through parliament.

The grand duke's subjects appear divided over his future role. Pascale Goedert, a schoolteacher in her 30s, recalled how Henri's grandmother, Grand Duchess Charlotte, kept Luxembourgers united while in exile in London during the Second World War. "Now there is no war, so he has no function," Goedert said.

Roland Streber, 50, a consultant, was more accepting. "We will keep him if he behaves nicely," he said, adding that in rejecting the euthanasia bill Henri had made a "huge mistake".

But Henri insists his role is vital to Luxembourg. "In a globalising world, people need an image representing the country, a force for integration," he said.

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Swiss may block bank secrecy treaty
Lita Epstein
Apr 14th 2009 at 11:30AM

The Swiss don't like being told what to do, and even though some of their key products -- cheese, Cartier watches and chocolates -- could face trade sanctions, the Swiss may vote to block new tax treaties. A key case hanging in the balance is the U.S. tax evasion case involving the opening of 52,000 Swiss bank accounts on deposit at UBS (UBS).

To avoid being blacklisted by the G20, Switzerland joined Luxembourg, Austria, Liechtenstein, Monaco, Andorra and Singapore in signing an Organisation of Economic Cooperation and Development treaty to share tax information. These countries joined a "grey list" of countries that agreed to implement tax standards but have not yet done so. If these standards are implemented, the banks in these countries would have to change their banking secrecy laws. And people who use these tax havens to avoid tax in their own countries by stashing their money in secret accounts would no longer be able to do so.

The Swiss can challenge the new treaty by getting 50,000 signatures on a petition to call for a referendum on the ballot and use that referendum to reject the tax treaty. The Swiss Bankers Association conducted a survey about the protection of privacy on financial matters and found that 78 percent of Swiss citizens support preserving bank-client confidentiality. The Association said in its press release on the study, "The banks continue to be regarded as solid and trustworthy, and once again are perceived to be the most important sector of industry in Switzerland."

Swiss president Hans-Rudolf Merz told the British newspaper the Guardian that Switzerland was "not a tax haven" and called the OECD grey list regrettable. David McNair, Christian Aid adviser told the Guardian, "the burden of proof required for poor countries to obtain information on tax dodgers is incredibly onerous. We urgently need a system open to all countries, for the automatic exchange of tax information."

Angel Gurria, OECD secretary general, insists that the new treaty does not open secrecy laws and allow governments to go on a fishing expedition for tax evaders. He told the Guardian, "A country can still refuse to give information if it believes that the receiving country would not respect confidentiality. The goal is not to have names plastered on the front pages of newspapers, the aim is to make people pay the taxes they should pay."

If countries refuse to abide by the new G20 rules they will be blacklisted. If blacklisted, sanctions could include extra audits of those who use tax havens and curbs on tax deductions claimed by businesses who use the banks as tax havens in blacklisted territories. Gurria said the sanctions will be decided by individual governments and not imposed by the OECD.

For years, U.S. citizens have evaded billions of dollars in taxes. Now that the U.S. and many other countries are facing a downturn in tax revenues, tax havens have become a crucial target for finding new revenues. Getting people to pay the taxes they owe by allowing information exchange between taxing authorities and foreign banks will provide more funds for the bailout. Why should some people be allowed to avoid paying their fair share of bailout costs just because they use a foreign bank?

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Japan talks with Swiss likely to cover bank secrecy
Wed Apr 15, 2009 2:23am EDT

TOKYO, April 15 (Reuters) - Japan is to step up exchanges of tax information with Switzerland, which is under pressure to disclose names of individuals suspected of tax evasion in other countries.

Japanese officials said banking secrecy will likely be included in talks to revise a bilateral tax treaty, which started last November.

The Group of 20 nations pledged at a meeting in early April to crack down on jurisdictions that fail to cooperate in cross-border tax evasion and urged countries to sign up to global rules on sharing tax information.

Pressure by the G20 prompted the Alpine tax haven and other offshore financial centres to sign up for tax cooperation standards set up by the Paris-based Organisation for Economic Cooperation and Development ahead of the G20 summit. [ID:nLP16594]

But after the G20 meeting Switzerland decided to veto part of the OECD's budget in a dispute over its banking secrecy.

A high-profile tax fraud investigation involving Switzerland's largest bank UBS (UBSN.VX)(UBS.N) has forced Berne to hand over confidential bank client data to Washington.

Japan currently has bilateral tax treaties with 56 countries aimed at preventing tax evasion, avoiding double taxation, and encouraging mutual investment.