Saudi prince’s elevation ends guessing game

Saudi prince’s elevation ends guessing game

By Abeer Allam and Roula Khalaf

Published: March 30 2009 19:23 | Last updated: March 30 2009 19:23

The succession in the kingdom of Saudi Arabia is a popular guessing game but it is one always played quietly. Everyone has an opinion yet few dare express it in public.

So it was hardly surprising that the Saudi press rushed to lavish praise on Prince Naif, the 74-year-old interior minister, when he was elevated late last week to third place in line for the throne. In comment pieces and editorials, in conservative and liberal newspapers, everyone hailed the choice.

Congratulatory advertisements were published, carrying pictures of King Abdullah, the ailing Crown Prince Sultan, who is also defence minister, and Prince Naif, now made second deputy prime minister. Some Saudis published poems praising the “benevolent protector of the state’’ on Facebook, the social networking website.

A dissenting voice, however, came from within the al-Saud royal family. The prince’s half-brother, the outspoken Prince Talal, urged the king not to bypass the allegiance council, established by the 84-year-old king in 2006 to select the next crown prince. It includes 35 family members.

“I call on the royal court to clarify what this nomination means, and to state that it does not mean that [Prince Naif] will become crown prince,” Prince Talal said.

That the succession issue in the world’s largest oil exporter was settled, after the crown prince has been undergoing medical treatment abroad for five months, has brought a sense of relief inside and outside the kingdom. To the disappointment of some, it also clarified that the succession would not pass any time soon to the younger generation in the royal family but would rather remain with the ageing sons of the late King Abdelaziz, the founder of Saudi Arabia.

Having spent the past 30 years at the helm of the interior ministry, Prince Naif is credited with defending the Saudi state during some of its most difficult times. He supervised the ending of a siege in Mecca by extremists in 1979. More recently, his ministry led the campaign to quash al-Qaeda operatives, who were bent on destabilising the House of Saud.

Still, with King Abdullah seen as a reformist keen to steer the kingdom towards more tolerance, curb religious extremism and promote women’s participation in the economy, the choice came as a surprise to some.

Prince Naif is viewed as a conservative. Only days ago he told reporters he saw no need for women to serve in the shoura council, the consultative assembly, or for its mem­bers to be elected, as recommended by a human rights group report last week. His ministry has also been the target of accusations of human rights abuses. The same report echoed complaints from families whose sons have been held without trial on accusations of al-Qaeda membership.

Yet King Abdullah was always likely to act within tradition and turn to another prominent and senior member of the family. Analysts have long warned that much as the west would like it, moving to the next generation would provoke conflict within the family, as each prince promoted his own sons.

“Prince Naif will be the next crown prince because in Saudi Arabia you don’t expect radical changes,’’ one Riyadh-based observer said. “Speculation about other members was simplistic, since decisions here tend to be conservative, to prevent disturbances.’’

The selection takes into consideration the royal family’s interests, the necessity for consensus and the seniority and record of service to the state of the candidate. In this case, there was also a sense of urgency, because of King Abdullah’s health.

With Prince Naif’s position secure, Saudi analysts have been stressing his integrity and experience, with some questioning the conservative reputation attributed to him.

“He pushed for major reforms in security and ins­is­ted on creating a general prosecutor, which was not welcomed by the clergy,’’ said Jamal Khas­hoggi, a reformist columnist and editor of al-Watan newspaper.

Abdelaziz al-Qassim, a political analyst, said: “The question remains: will there be harmony between the policy of the king and Prince Naif’s views? He is seen as more hawkish but maybe, when he is crown prince, he will be different.’’

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Turkey bar on Nato candidate sparks rift

By James Blitz in London and Delphine Strauss in Ankara

Published: March 31 2009 03:00 | Last updated: March 31 2009 03:00

Nato heads of government will this week try to defuse a rift with Recep Tayyip Erdogan, Turkish prime minister, over his government’s opposition to Anders Fogh Rasmussen becoming secretary-general of the 26 member security alliance.

Nato leaders had been hoping to appoint the Danish premier as successor to Jaap de Hoop Scheffer at this weekend’s alliance summit in Strasbourg and Kehl.

Turkey’s objections mean this may be delayed.

Nato diplomats say nearunity has emerged within the alliance that Mr Rasmussen is the best candidate for the post but Turkey has expressed objections because of the row in 2006 over cartoons of the Prophet Mohammad printed in a Danish newspaper.

“There is no consensus yet,” said a senior US official last night. “We certainly will be hoping [for a deal] but I can’t predict if there’s going to be a conclusion or not.” Turkey’s complaint is that Mr Rasmussen refused to apologise for the cartoons, which sparked riots and attacks on Danish embassies in several Muslim states.

Some western governments defended the publication of the cartoons in the name of freedom of expression.

Turkey says the cartoon affair leaves Mr Rasmussen ill-placed to lead Nato when its biggest challenges are in the Muslim world. It would prefer a candidate with more Atlanticist instincts, such as Peter MacKay, the Canadian defence minister, or Radoslaw Sikorski, Polish foreign minister .

A western diplomat said Nato leaders would talk to Mr Erdogan in the next few days to gauge the strength of Turkey’s objections.

“There will be an opportunity for heads of government to speak directly with Erdogan this week,” the diplomat said. “There will be discussions with him on the margins of the G20 in London and the Nato summit itself. But we are not wholly convinced that Turkey will be compliant.” In Brussels, a Nato diplomat acknowledged that Turkey’s objection was becoming a difficult issue because the appointment of the secretary-general must be unanimously agreed.

“Reports about Turkey’s objections are worrying people,” said the diplomat.

“What alliance governments want to know is whether Turkey is raising fundamental objections which they will die in a ditch over; or whether this is a bargaining chip aimed at getting concessions on issues like the timing of Turkey’s accession to the European Union.” Mr Erdogan said in a televised interview he had spoken with Mr Rasmussen to underline his concerns, adding Turkey was upset that Denmark allowed Roj TV, a Kurdish channel it says is linked to the rebel Kurdistan Workers Party, to broadcast from its territory.

While Turkey is unlikely to veto the appointment outright, it could seek support from more powerful allies.

Sinan Ulgen, head of an Istanbul think-tank, said it could raise the issue when Barack Obama, US president, visits Ankara next week, delaying a nomination until after the Nato summit.

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China and Argentina in currency swap

By Jude Webber in Santiago

Published: March 31 2009 03:00 | Last updated: March 31 2009 03:00

China, which is pushing to end the dominance of the dollar as a worldwide reserve, has agreed a Rmb70bn currency swap with Argentina that will allow it to receive renminbi instead of dollars for its exports to the Latin American country.

Xinhua, the official Chinese news agency, said the deal was signed on Sunday by Zhou Xiaochuan, governor of the People's Bank of China, and Martín Redrado, Argentine central bank president, in Medellín, Colombia, where they are attending a meeting of the Inter-American Development Bank.

An Argentine official confirmed a deal had been discussed and said the fine print was being worked out.

Beijing has signed Rmb650bn ($95bn, €72bn, £67bn) of deals since December with Malaysia, South Korea, Hong Kong, Belarus, Indonesia and, now, Argentina in an attempt to unblock trade financing that has been severely curtailed by the crisis.

Gordon Brown, UK prime minister, told a summit in Chile at the weekend that this week's Group of 20 meeting in London, which both China and Argentina will attend, needed to ensure vast trade credits were unlocked to help get the world economy back on its feet. The World Bank estimates as much as $300bn (€227bn, £210bn) could be needed.

China has suggested replacing the dollar with an enhanced version of the International Monetary Fund's unit of account, the special drawing right or SDR. The dollar's future as the world's reserve currency will be on the G20 agenda.

Economists say the SDR plan is unfeasible for now but see Beijing's currency swap deals as pieces in a -jigsaw designed to promote wider international use of the renminbi, starting with making it more acceptable for trade and aiming at establishing it as a regional reserve currency in Asia, something that would also enhance China's political clout.

The deals underscore China's loss of faith in the dollar amid the fallout from the world financial crisis. The Argentine accord will also boost China's financial presence in Latin America.

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Mexico arranges $40bn line of credit in breakthrough for IMF

By Alan Beattie in Washington

Published: April 1 2009 03:00 | Last updated: April 1 2009 03:00

Mexico said yesterday it was ready to take out a precautionary credit line of up to $40bn from the International Monetary Fund, a significant breakthrough in the fund's drive to remove the stigma attached to its lending.

Felipe Calderón, Mexico's president, told a conference in London that he was prepared to apply for a new easy-access facility unveiled by the IMF last week.

"We are ready," Mr Calderón said. "We have our public finances in order and we're able to take a line of credit of IMF in order to support the reserves of the central bank of $30bn, or even $40bn, even this week."

Mexican equity prices and the peso rose after his -comments, with market -analysts saying that the -official vote of confidence in Mexico's economic management should help to underpin its currency and debt markets.

The IMF has been attempting for about a decade to design an insurance-style lending facility that could be tapped by emerging market countries with sound public finances which are nonetheless hit by financial contagion from elsewhere.

No country has yet applied for the facility for fear of the stigma attached to admitting vulnerability.

The IMF last week unveiled the third version of the programme, this time called the "flexible credit line", which allows select governments to qualify to draw down large amounts of money without specific conditions imposed on their actions after taking the loans.

Countries have to meet a strict set of criteria in order to be eligible for the lending, including sound public finances, low inflation and a stable banking system, and remain eligible for 12 months at a time.

"Upon approval of the new facility, the [IMF] managing director invited strong performing countries that may be affected by the global crisis to use the new FCL as a tool to underscore international confidence," said an IMF spokeswoman.

"We very much welcome President Calderon's positive response."

"The new facility has been designed precisely with countries like Mexico in mind," said Oscar Vela, from the emerging markets research team at Barclays Capital in New York. "With the G20 meeting in London, this is a perfect time for Mexico to take a lead."

Mr Vela said he expected the move to be followed by other emerging economies with good recent policy track records, perhaps including Colombia, Peru and Poland.

Mexico was unlikely actually to have to draw down money from the credit line, he said.

Mexico, along with South Korea, Brazil and Singapore, is also eligible for a currency swap line offered by the US Federal Reserve, which is designed to fulfil a similar goal of boosting market confidence in the recipient country by increasing its access to foreign exchange.

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Outcry over Korean ‘Kiko’ suspensions

By Song Jung-a in Seoul

Published: April 1 2009 17:30 | Last updated: April 1 2009 17:30

The International Swaps and Derivatives Association lashed out on Wednesday over a series of South Korean court rulings that have extracted Korean companies from currency hedging contracts after the companies suffered heavy losses when the currency slid against the dollar.

South Korean companies filed about 160 lawsuits against 13 banks, including Standard Chartered, Citibank and HSBC, seeking to nullify currency derivatives contracts, known as Kiko (kick-in kick-out).

They have complained that the contacts expose them to unlimited downside risks and the banks did not fully brief them of the potential risks.

Court decisions have been made in 11 cases, including four cases where the Seoul Central District Court ruled in favour of the companies, granting them a preliminary injunction due to “changed circumstances”. The court allowed the companies to suspend the Kiko contracts temporarily, pending their final verdict, accusing the banks of failing to protect their clients from potential losses from the contracts.

The ISDA criticised the court for setting “dangerous precedents disrupting the fundamental right to enforceability of contracts” that could dampen foreign investors’ confidence and increase risks in investing in the country.

“ISDA is deeply concerned with the rulings in these lawsuits,” said Keith Noyes, ISDA regional director for Asia Pacific. “The Seoul Central District Court rulings could severely inhibit derivatives activity in Korea and in turn risk upsetting financial stability if these decisions are upheld and banks made wary of entering into financial contracts.”

The growing list of lawsuits is troubling Korean banks, who are already struggling with a foreign currency liquidity crunch, and it could hurt their bottom lines if they are obliged to pay the damages. Four banks – Standard Chartered, Citibank, Korea Exchange Bank and Shinhan Bank – will be hit hardest as they account for 70 per cent of the total Kiko contracts.

Korean exporters rushed to sign Kiko contracts to hedge currency risks as the won continued to strengthen against the dollar until the first half of last year. According to the country's financial regulator, 517 SMEs were holding Kiko contracts and 63 of them were over-hedged at the end of August. They are estimated to have chalked up Won1,700bn ($1.2bn) in losses on the instruments as the currency lost about 30 per cent against the dollar last year.

Kiko contracts allow holders to sell dollars at a fixed exchange rate if the won moves within a certain range set out in the contract but they are obliged to sell dollars below the market rate if the exchange rate moves outside that range.

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China is just sabre-rattling over the dollar

By David Pilling

Published: April 2 2009 03:00 | Last updated: April 2 2009 03:00

A few weeks ago, five Chinese vessels, two of them fishing trawlers, surrounded a US naval ship off Hainan island in the South China Sea. When the US survey ship responded with fire hoses, the Chinese crewmen stripped down to their underwear and - according to some reports - bared their bottoms.

The slightly surreal stand-off, which drew a sharp protest from Washington, was carefully calibrated. It sent a message that Beijing was not prepared to tolerate routine US spying missions in waters it considers its own.

In the more cerebral world of monetary policy, Zhou Xiaochuan, China's central bank governor, has sent a carefully calibrated signal of his own. While he stopped short of baring his bottom, he published a paper, neatly timed to appear just before the Group of 20 developed and emerging nations summit, in which he proposed replacing the dollar with an international reserve currency by expanding the scope and function of special drawing rights, a unit of account used by the International Monetary Fund.

The proposal did not emerge from thin air. Beijing has been vocal about its concerns over the US dollar, which it fears could be debased by wanton printing to rescue a worn-out economy. Wen Jiabao, China's premier, referring to the fact that 70 per cent of China's almost $2,000bn (€1,500bn, £1,400bn) in foreign reserves is held in dollars, said: "To be honest, I am a little bit worried. I request the US to maintain its good credit, to honour its promises and to guarantee the safety of China's assets."

Beijing has simultaneously been taking cautious steps to make its currency more internationally relevant. This week, Mr Zhou signed a Rmb70bn ($10bn, €7.7bn, £7.1bn) currency swap deal with Argentina, designed to allow the Latin American nation to settle some trade bills in renminbi. It followed swaps with six other nations.

There is substance to Mr Zhou's proposals. Arthur Kroeber of Dragonomics, a research company in China, argues that Beijing is staking out a responsible position whereby it seeks a multilateral alternative monitored by a multilateral body. It does not want to challenge the dollar but is serving notice that the world should diversify from overdependence on one currency.

China, which is being asked to stump up more money for the IMF, would also like to ensure that it is not bankrolling a has-been institution. If it funds the IMF, it would like something in return.

Yet neither is the proposal entirely what it seems. Like the naval skirmish, there is an element of bravado. Beijing is signalling that US hegemony, while it cannot yet be seriously challenged, cannot last forever. The idea of questioning the dollar's pre-eminence has received backing from other nations with agendas of their own. Russia has proposed something similar. Hugo Chávez, South America's gringo-basher-in-chief, supports Beijing's stance and suggests that a new supra-currency be backed by oil reserves, his own included.

That there is an element of theatre to Beijing's proposal can be deduced, first, from the fact that few people, not even Mr Zhou, can really expect the SDR to play the role of über-currency. To be credible, the issuing institution, the IMF, would have to run a central bank.

Second, it is clear that China's currency ought to play a bigger international role. But the main obstacle to that is not in Washington. If China's currency were fully convertible, other countries would doubtless already be holding a small, but respectable, proportion of their foreign reserves in renminbi, as they do with the euro and the yen. Mr Zhou's remarks offer the faintest hint that Beijing may consider convertibility marginally sooner than many have been assuming. But fears of capital outflows and wild, export-damaging swings in the renminbi mean that is still likely to be years away.

Third, Beijing's nightmares of a sudden fall in the dollar depleting its foreign reserves are overdone. It is true the government has been heavily criticised for ill-timed purchases of equity stakes in western banks. But China's holdings of US Treasuries are not an investment. Unless Beijing is seriously considering selling down its US assets, a fall in the dollar would produce purely theoretical losses.

That leads to the final point. Mr Zhou's paper distracts from the fundamental point that China would not have huge dollar holdings if it had not pursued specific policies - namely export-led growth predicated on a competitive renminbi.

Shortly after his paper on the end of the dollar, Mr Zhou published his thoughts on high savings rates, the flip side of US borrowing. China resents suggestions that its "excess savings" are linked to excess spending elsewhere. In his paper, Mr Zhou argues that, contrary to mechanistic arguments that savings rates can be influenced by policy, the Chinese propensity to save has cultural roots, specifically a Confucianism that "values thrift, self-discipline . . . and anti-extravagancy".

Such deep-seated habits are, by definition, hard to change. The message is clear. It is America that must budge.

The writer is the FT's Asia editor

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Costa Rica insists China oil contract is valid

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The government's decision "is clear and definitive: we will tell the Comptroller's Office that we insist on ratifying the contract," said the minister of the presidency, Rodrigo Arias on Wednesday.

"The urgency of this enormous investment for this country is well known," Arias said.

The national Comptroller's Office in March said that an agreement signed in late 2008 for the Costa Rican Oil Refinery (RECOPE) to form a joint venture with the China National Petroleum Corporation (CNPC) was not valid.

The Comptroller's Office -- an independent bureau that monitors government actions to make sure they are within the law -- said the Costa Rican-Chinese joint venture would violate the RECOPE's legal monopoly on oil refining and distribution.

The project can proceed only if legislators changed the law, the Office said.

The one billion-plus dollar refinery was to be built in the town of Moin, on the Caribbean coast, and would dramatically increase the country's current refining capacity.

Arias said that the Comptroller's Office probably did not weigh all the elements when they took their decision.

The refinery would generate between 1,000 and 1,500 direct jobs, and some 5,000 more jobs indirectly in the Caribbean province of Limon, Arias said.

"This investment will save the country between 200 and 300 million dollars on its oil bill, now that the price of oil is low, and if it goes up the size of the saving will be a lot higher," Arias added.

"The country cannot waste an investment like this simply because there is a doubt over whether it is legally presented in a proper fashion or not," Arias added.

He said that a team of lawyers would study the contract in order to make a new presentation to the Comptroller's Office.

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Germany, Switzerland vow to bury tax haven hachet

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"We want to put the irritations of the past behind us," said Germany's Foreign Minister Frank-Walter Steinmeier in Berlin after a meeting with his Swiss counterpart, Micheline Calmy-Rey.

"We remain neighbours and partners," Calmy-Rey said for her part, adding she had informed Steinmeier of Switzerland's decision to ease its bank secrecy laws to avoid the G20 blacklist.

"We are serious. When we say we are going to do something, we do it ... we are not a tax haven," she added.

Switzerland and Luxembourg among several other countries have recently said they will change their banking laws and step up international cooperation on tax issues to avoid being placed on the dreaded G20 blacklist.

Earlier Wednesday, the United States and Gibraltar said they had signed a tax information exchange accord, the first of its kind for the tiny British territory which has emerged as a major offshore finance centre at Spain's southern tip.

The tax haven issue threatened to become a major diplomatic standoff between Germany and Switzerland following very strident criticism of Switzerland's cherished banking secrecy laws from German officials.

Finance Minister Peer Steinbrueck in particular ruffled feathers when he used a Wild West analogy interpreted in Switzerland as likening them to "Indians."

This led to one Swiss MP saying that Steinbrueck "reminds me of the old generation of Germans, who 60 years ago went through the streets with leather coats, boots and armbands," a Nazi analogy that caused outrage in Germany.

"After several weeks of arguing, we must now get back to normal neighbourly relations," Steinmeier said on Wednesday.

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Why tax havens make such great scapegoats

By Jonathan Guthrie

Published: April 2 2009 03:00 | Last updated: April 2 2009 03:00

Monaco is not to everyone's taste. The actor Jack Nicholson described it as "Alcatraz for the rich". The tax haven on the French Riviera lost its appeal for me when I could not buy a takeaway sandwich there. Trudging along the main drag in blistering heat, I encountered limo dealers, yacht brokers and private banks. But no snack bars. Delirious with hunger, I blundered out of Monaco, into France and then back again. Eventually I capitulated and ordered a sandwich in the restaurant of a swanky hotel. Half an hour later, a waiter with the mournfully distinguished bearing of a deposed archduke brought the snack to my table. This cost me €40 and made me late for an appointment.

Of course, I was chasing the wrong dream - to wit, affordable egg and cress on granary bread. Had I wanted to shelter a few millions from the prying eyes of Hector the Tax Inspector, I could have done so easily. But even the principality of the Grimaldis is now succumbing to the campaign against banking secrecy catalysed by Barack Obama, the US president. One outcome likely from the Group of 20 summit in London is a communiqué under which a slew of tax havens will agree to help foreign tax snoops investigate suspected evaders. Monaco is expected to be among them.

"Since the G20 summit in Washington [last year], there has been more progress on tax havens in three months than in 30 years," reports Jeffrey Owens of the Organisation for Economic Co-operation and Development in Paris. Forgive him if he sounds a little smug. Mr Owens runs the evasion-busting Centre for Tax Policy and Administration. The threat of a G20 blacklisting concentrated minds wonderfully. One by one, bastions of banking secrecy such as Switzerland, Liechtenstein and Singapore have sought to make terms with the OECD. Cold shivers are now running down the spines of wealthy tax evaders.

In the years after the liberalisation of capital movements in the 1980s, big economies turned a blind eye to tax havens. It was a way to let wealth creators pay tax at mates' rates. Thanks to high transaction costs, sophisticated tax wheezes were the preserve of rich individuals and companies. Gordon Brown schmoozed businessmen who used Monaco pieds-à-terre to keep their tax down. High taxes were for the little people.

The credit crunch has changed the mood music. With tax revenues falling, the governments of big economies such as the US and UK want their cut of income that was previously spirited offshore. Tax havens are part of the infrastructure of a discredited form of international finance but nothing implicates them directly in the banking crisis. They make great scapegoats, nevertheless. The fur-coat-and-no-knickers vibe that lures some plutocrats appals the renascent left.

Principled capitalists too should support Mr Obama and Mr Brown's clampdown on tax evasion via tax havens. Capitalism has not failed, as hysterical G20 protesters claim. It is as intrinsic to western society as ever. But public tolerance of conspicuous wealth creation depends on rich individuals and companies paying tax proportionate to their gains. If you are very wealthy you may object to the level at which elected politicians set taxes - everyone else does. However, that should trigger political engagement, rather than stashing the cash in some Ruritanian bolthole or on a Caribbean treasure island.

Tactically, the moral high ground is the best place from which to resist politicians eager to extend a mission against evasion into a war on legitimate avoidance. Richard Murphy of the Tax Justice Network, a campaigning group, says that agreements from tax havens to provide data on suspected evaders are just a first step. Next, governments will automatically exchange information on their citizens' financial affairs.

Thus far and no farther. The UK government's nastily authoritarian streak has been apparent in its push to make each Briton pay, in the words of Mr Brown "the right amount of tax". A draft banking code on tax havens implies that tax inspectors will deduce the figure from their understanding of the spirit of the law rather than its letter. That would make them the masters of taxpayers rather than their servants. The Sheriff of Nottingham would have thoroughly approved. John Whiting of PwC, the professional services company. does not. He says: "It would be like a court convicting you of speeding, not because you exceeded 70mph, but because a policeman said you were going too fast."

The government is pushing this "principles-based" approach even though ministers' own principles are under question. One thinks of Jacqui Smith, the home secretary, claiming her constituency home as a second residence and furnishing it from the public purse. Adhering to the letter of the rules rather than their spirit is apparently fine if you are an MP.

In any case, clamping down on tax havens may not raise the revenues of big economies by very much. According to a study by Revenue and Customs, evasion involving offshore bank accounts probably costs the UK £900m to £1.5bn a year. Mr Murphy offers a meatier estimate of £18.5bn. But either way, onshore avoidance is much more significant. Accountants on your local high street may, if asked nicely, help you dodge tax as adeptly as any high toned Monegasque private banker. And your local high street, to its greater credit, also sells takeaway sandwiches.

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Gold mine dispute seen as test case for Indonesia

By John Aglionby, Andrew Hill and Paul Betts

Published: April 1 2009 18:55 | Last updated: April 1 2009 18:55

Around Indonesia in 180 Days would be a suitable title for the latest foreign investor soap opera to emerge from south-east Asia’s largest economy. That is how long international arbitrators have given Newmont Mining of the US and Sumitomo of Japan to divest 17 per cent of a subsidiary that owns a major gold mine on the remote island of Sumbawa.

After years of largely ignoring Indonesia, global miners are considering it again since a new mining law was passed in December. Critical regulations that will implement the legislation are still awaited, but the handling of the Newmont Nusa Tenggara share divestment will also sway investors.

With legislative elections taking place next week and a presidential election in July, there is a possibility that this two-year-old dispute between the companies and the government could become a political football; there were highly charged exchanges over the issue last year.

Several key government officials have changed since, but the dispute is being monitored closely as an indication of how Jakarta plans to deal with foreign investors. If opaque political and business interests are allowed to meddle, it will send a signal that Indonesia is not really open to foreign business. Jakarta can avoid that risk by being openly transparent and professional in the resolution of this dispute.

Setting a precedent

Sir Tom McKillop, ex-chairman of Royal Bank of Scotland, won’t get many thanks for doing the honourable thing and retiring as a non-executive director at BP.

It looks as though it sets a precedent for other ex-directors of the bank, such as Bob Scott, still chairman of Yell, the directories group, and Janis Kong and Sir Steve Robson, who hold non-executive roles at, respectively, Kingfisher, the retailer, and Xstrata, the miner. BP’s board can’t be too happy, either. That’s not just because Sir Tom was, in chairman Peter Sutherland’s words, an “outstanding director”, but because his departure is a reminder that
Mr Sutherland (also a former RBS director) and his deputy Sir Ian Prosser are both overdue for replacement.

Sir Tom faced specific obstacles to continuing as a director of BP. As chairman of RBS – a pharmaceuticals expert overseeing a global bank – he shoulders a large part of the blame for not keeping Sir Fred Goodwin, the former chief executive, on a tight leash. Sir Tom is still embroiled in an awkward spat with Lord Myners, the City minister, over who said what to whom about Sir Fred’s politically embarrassing pension entitlement. And the fact that he and Mr Sutherland sat together on the RBS and BP boards is precisely the kind of cosy boardroom linkage that can give corporate governance a bad name.

But still, Sir Tom took the right decision. To assume that non-executive directors’ work at different companies should be judged in isolation makes no sense, particularly as the clients – institutional shareholders – are often the same.

Musical chairs

UBS and Credit Suisse, the two giants of Swiss banking, have long been the best of enemies. It was rare, virtually unheard of, for a UBS banker to switch sides to Credit Suisse and vice-versa.

In recent years, however, this tradition has been steadily eroded – at least at lower management levels. Last year, perhaps as a result of the mounting problems at UBS, the tempo intensified in the Swiss game of musical chairs, with two senior UBS executives moving to Credit Suisse.

First to go was Paul Arni, former UBS head of private banking for Switzerland, to take charge of Credit Suisse’s Zurich region. A week later, Hans-Ulrich Meister, a UBS veteran who headed its Swiss business banking division, was put in charge of Credit Suisse’s domestic banking activities.

The irony is that Mr Meister replaced Ulrich Körner at Credit Suisse, who was appointed Wednesday the new UBS chief operating officer by Oswald Grübel, the bank’s chief executive. Mr Grübel is a former Credit Suisse chief executive recently dragged out of retirement to try to sort out the mess at UBS.

Mr Grübel’s move to UBS is by far the most spectacular example of how things are changing in the Swiss banking industry. He clearly intends to bring a new broom to UBS and seems to have little hesitation to recruit some of his veteran Credit Suisse lieutenants to assist him in this task.

Whether he will be able to attract other Credit Suisse bankers to jump ship is another question. Swapping a good job at Credit Suisse to join the beleaguered UBS seems pretty risky, especially since UBS is hardly in a position to splash out with the sort of politically incorrect money necessary to lure talent. The tempo is likely to become more adagio than allegro in the Credit Suisse-UBS musical chairs.

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Russia’s region of Sakhalin included in program of visa-free human exchanges with China

01.04.2009, 07.28





YUZHNO-SAKHALINSK, April 1 (Itar-Tass) – Russia’s Far-Eastern insular region of Sakhalin has been included in the program of visa-free human exchanges with China, Natalya Ivanova, a spokeswoman for the regional committee for international, foreign trade and inter-regional relations told a news conference Wednesday.

As of April 15, residents of the Sakhalin region will have an opportunity to make trips to China for periods of up to fourteen days without obtaining visas, she said.

Previously, the program embraced the Khabarovsk and Primorsky /Maritime/ territories, the Jewish autonomous region, and the Amur region.

Visa-free traveling will enable the people living in Sakhalin and on the Kurile Islands to make tours of China at best possible prices, as they have had to apply for visas to Chinese consular services in Vladivostok and Khabarovsk so far.

Now they will not have to apply for any special formalities apart from obtaining regular foreign travel passports, Ivanova said.

Chinese citizens will also enjoy an opportunity to visit Sakhalin for periods of up to fourteen days using simpler documental formalities, she said.

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Saudi Arabia will play its part in a global recovery

By John Sfakianakis

Published: April 2 2009 03:00 | Last updated: April 2 2009 03:00

As the world's leaders meet in London to seek ideas and funds in order to prevent a systemic collapse of the global economy, many eyes have turned to Saudi Arabia as an obvious source of cash.

The kingdom's contribution to rescuing the global financial system has been far from negligible. It is investing more than $70bn to bring its oil production capacity to 12.5m barrels a day by the end of this year.

More than 40 per cent of the new total capacity will remain unused so that global consumers can tap into it at a later stage. Saudi Arabia's current control of production capacity makes Tehran and Moscow, to name but two, completely dependent on its adjustments.

Saudi Arabia has used its status as the world's swing producer benignly. Its leaders have understood for decades that their interests are intertwined with the prosperity of the world economy and that excessive prices and the accompanying volatility are counter to the kingdom's long-term interests.

Saudi Arabia has helped maintain moderation within Opec, which has resulted in lower gasoline prices around the world. Lower pricing at petrol pumps is perhaps the most effective way in which the kingdom can aid recovery. Compared to the record highs of last year, lower petrol prices are currently adding an extra $200 of extra per capita income on a monthly basis.

Also, by maintaining an oil-price floor at about $40 per barrel, Saudi Arabia is ensuring that the economies of the rest of the Gulf Co-operation Council run roughly balanced budgets and thereby act as engines for the global economy.

This year the kingdom announced a sharply expansionary budget to maintain domestic demand. Its $400bn worth of infrastructure projects earmarked for the next five years should also be viewed as a direct stimulus to the global economy. These long-term projects will help maintain an expatriate workforce in Saudi Arabia rather than prompt the kind of exodus we are seeing in some other GCC states.

The nation's defence procurement programme also continues to provide jobs and revenues for many western companies. At least $220bn is likely to be recycled abroad in the form of imports, contracts or labour transfers. According to official data, over the past six years Saudi Arabia has imported more than $335bn worth of goods. We estimate that since 2003, more than $100bn has been officially and unofficially remitted by expatriate workers.

So what will Saudi officials be pushing for in London? First and foremost, the kingdom will fight against protectionism and unilateralism. Having joined the World Trade Organisation, Saudi officials understand that trade barriers need to be flattened so that the wheels of the world's economy can keep turning.

"We should not have policies of beggar thy neighbour," as one minister put it to me ahead of the meeting.

The kingdom wants better financial regulation and believes that progress in mitigating the excesses of the global financial system cannot be addressed without more oversight. But it does not want control to curb competition.

Saudi officials are also likely to support the arguments of Germany and France, who have argued for stronger regulation of hedge funds and derivatives - although they recognise that these instruments cannot be driven out of existence. Many Saudi businesses have been hurt by their exposure to these vehicles and instruments. In contrast, we should view the conservative policies of the Saudi Arabian Monetary Agency in regulating local financial institutions as a policy to be emulated.

The kingdom is also likely to oppose those countries proposing a "green" recovery or a low-carbon agenda. The world cannot afford to choose the colour of its recovery.

Finally, in representing the GCC states, Saudi will look to defend the interests of sovereign wealth funds that have played a significant role in maintaining financial stability and confidence so far. Many SWFs from the GCC have invested in financial institutions whose shares have plummeted.

The kingdom, whose central bank is now the world's largest holder of foreign assets, is likely to be keen to maintain access to global markets.

John Sfakianakis is chief economist at Saudi Arabia's SABB Bank

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Liechtenstein 'nears tax accord with Britain'

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AFP

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Liechtenstein said Thursday it was confident that it would quickly reach an accord with Britain to exchange information against tax cheats, following first formal talks between the two parties. Skip related content
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"On the basis of yesterday's positive and pragmatic talks, I am confident that a swift conclusion of our negotiations is possible," said Prince Nikolaus of Liechtenstein, who headed the principality's delegation in a meeting with British officials in Bern.

Liechtenstein added in a statement that the issues raised during the meeting included the "development of a bilateral solution that makes a voluntary declaration of British taxpayers in Liechtenstein possible and attractive for the individual client."

The principality announced in March that it would ease banking secrecy and begin negotiations with countries on agreements to exchange tax information, in a bid to clamp down on tax evasion and fraud.

Britain and Germany were then cited as the first countries with which it would begin these negotiations.

Liechtenstein had also called for an amnesty under which foreign taxpayers hiding funds in the country's banks could repatriate their money to their home states.

The Alpine principality has been on an OECD blacklist of uncooperative countries on taxation for several years.

Its recent decision to ease secrecy follows international pressure in the run-up to the Group of 20 summit, which is discussing possible action against tax havens.

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US and Gibraltar agree to share tax information

• Tim Geithner signs deal to help US enforce tax laws
• G20 expected to crack down on tax avoidance

* Julia Kollewe
* guardian.co.uk, Wednesday 1 April 2009 13.34 BST

The clampdown on tax havens around the world gathered pace today when the US government and Gibraltar announced an agreement to exchange information on tax matters.

The deal is the first of its kind for Gibraltar, and will give the US access to information it needs to enforce its tax laws – including potential civil and criminal matters.

The agreement was signed by US treasury secretary Tim Geithner and Gibraltar chief minister Peter Caruana in London ahead of tomorrow's G20 summit, where world leaders are expected to pledge a crackdown on tax avoidance.

Geithner said: "The president's budget makes a commitment to reduce international tax avoidance. As part of this commitment, the treasury department is embarking on an ambitious effort to deal with offshore compliance as evidenced by today's agreement with Gibraltar."

He added: "I will continue to demand transparency from countries on behalf of American taxpayers. I look forward to Gibraltar's cooperation with the United States and to this agreement serving as an example for other financial centres around the world."

Assuming the agreement takes effect this year, it will allow both countries to access each other's criminal tax information relating to any tax year, and civil tax information relating to tax years beginning after 2008.

The chief minister of Gibraltar, Peter Caruana, said: "We are delighted that our first agreement of this kind is with the United States. Gibraltar is committed to the OECD standard and the offer of such an agreement is open to other countries. Properly regulated exchange of information has become increasingly important. We look forward to cooperating with the United States under this agreement. As part of the European Union, Gibraltar already complies with EU standards of financial regulation and exchange of information."

The news came as the head of the UK's Revenue & Customs flew to Switzerland last night to negotiate a deal that the Treasury hopes will force British companies to stop using bank accounts in Liechtenstein to avoid paying tax.

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Swiss to give Britain bank papers in bribery case
Associated Press, 03.30.09, 06:29 AM EDT

Swiss authorities will provide bank account details to Britain in a multimillion dollar Nigeria bribery case involving a subsidiary of Halliburton Co., court rulings said Monday.

The documents are the same as those already given to France and the United States in the case going back to the 1990s and involving bribes for contracts to build liquefied natural gas facilities in Nigeria.

The Federal Criminal Court withheld the names of the individuals and companies which is standard Swiss practice, but it was clear that it was the same case as that pursued by France and the United States.

The rulings rejected appeals from at least one British citizen and a number of firms in Liechtenstein, Gibraltar, Panama and the Bahamas that sought to block the release of the documents.

The Briton is suspected of having paid bribes of $133.5 million between 1995 and 2004 to Nigerian officials on behalf of a consortium of French, Japanese, Italian and American firms for a contract worth over $6 billion.

In February a former Halliburton subsidiary - Kellogg, Brown & Root LLC - pleaded guilty to bribery charges in Houston and agreed to pay fines of more than $400 million.

KBR, a major engineering and construction services company, was split in 2007 from Halliburton, the oil services company headed by Dick Cheney before his two terms as U.S. vice president.