A conflict of commerce in the West Bank

A conflict of commerce in the West Bank

By Tobias Buck in Hebron

Published: May 4 2009 19:51 | Last updated: May 4 2009 19:51

The antiquated looms that dominate the factory floor of the Herbawi textile company make an ear-splitting noise, rattling and hissing as they slowly weave together 3,500 yarns into rolls of black-and-white cotton cloth.

It takes the machines half an hour to produce 1.25 metres of fabric. That is the traditional measure for one keffiyah, the headscarf recognised around the world as the symbol of Palestinian nationalism.

Yasser Herbawi, who founded the factory in the West Bank city of Hebron in 1961, is nearly 80. But he still spends much of the day keeping a beady eye on his looms.

His company, Mr Herbawi says proudly, is the only manufacturer of keffiyahs in the Palestinian territories. It survived the 1967 war, the Israeli occupation, two Palestinian intifadas and countless days of violence. But, over the past decade, the factory has come up against an economic threat far more potent and menacing: the industrial might of China.

“The Chinese are our biggest enemy,” says Azzad Herbawi, who runs the factory with his father. “We sell a dozen scarves to shops for Shk120 ($29, €22, £19), but shop owners and traders can buy a dozen Chinese-made keffiyahs for Shk60, and then sell them for 70 or 80.”

The Herbawis insist that the quality and finish of their headscarves is far superior to the Chinese-made keffiyahs. But with prices so low, the Chinese merchandise is eating away at their market share.

Azzad Herbawi estimates that at least one in two keffiyahs sold in the Palestinian territories today comes from China – a reality that has left its mark on the factory floor. Only seven of the 15 looms are operating, and of the 15 workers employed by them during their monopoly years, only one remains.

China’s rise as an economic superpower has, of course, troubled manufacturers the world over for many years. The Palestinian private sector, however, hobbled by perpetual instability and the restrictions of the Israeli occupation, is more vulnerable than most.

Manufacturers, in Hebron in particular, used to specialise in comparatively simple products such as textiles and shoes – markets where China enjoys an overwhelming advantage.

Jibreel Mousa Natsheh, the secretary-general of Hebron’s chamber of commerce and a shoe manufacturer, says local industry has suffered a steep decline since Chinese imports started arriving more than a decade ago: “In the shoe industry, before the competition from China, we had 15,000 workers making 70,000 pairs of shoes a day. Today, we have only 5,000 workers and they make only 20,000 pairs.”

The industrial decline has implications beyond Hebron. With Israeli-Palestinian peace talks stalled, many are pinning their hopes on boosting the Palestinian economy as a way to stabilise the region. If that policy is to succeed, diplomats and mediators will not only have to tackle the stifling impact of the Israeli occupation, but also the damage inflicted on the local economy by the competition from China.

The Hebron business community has built up close ties with Chinese manufacturers, and the city’s merchants now function as the main importers of Chinese goods into the West Bank

In the local souk, evidence of that damage abounds. Many boxes piled outside traders’ stalls bear Chinese lettering, and the labels dangling from the shirts, shoes and toys on sale reveal that almost all were made in China. Most traders selling keffiyahs admit they stock only Chinese-made headscarves.

Competition from the Far East has also left its mark on the lingerie factory owned by the Shawer brothers. The company specialises in the risqué underwear that Palestinian women traditionally wear on their wedding night. One set typically sells for as much as Shk2,000; a Chinese-made combination can be bought for a quarter of that.

Hamas Shawer, one of the brothers, says Chinese imports are “like a volcano – burning everything in its way”. The company, like so many others, has had to cut back workers and production, and now sells mainly underwear made in China, but labelled with its own brand.

This subtle transformation shows that – to some Hebron entrepreneurs at least – there is a profitable flip-side to the Chinese competition. Over the past years, the Hebron business community has built up close ties with Chinese manufacturers, and the city’s merchants now function as the main importers of Chinese goods into the West Bank.

The chamber of commerce says Hebron traders have opened more than 20 offices in manufacturing centres on China’s east coast, and that at least 5,000 local merchants are active in the China trade.

For Mr Herbawi, his son and their keffiyah factory, however, there is no easy way to beat the Chinese competition. They hope that – once a Palestinian state is established – they will be able to persuade the government to impose higher tariffs on imports.

The keffiyah, after all, says Azzad Herbawi, is “a symbol of national pride – we should be supported by everyone”.

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Bonds Show Lehman Fades in History as Spreads Narrow (Update3)
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By Dakin Campbell

May 4 (Bloomberg) -- From Frankfurt to London to New York to Tokyo, bond traders say the Lehman Brothers Holdings Inc. bankruptcy is fading into history as the cost of credit retreats throughout the Group of Seven industrialized nations.

The shock to financial markets from Lehman’s collapse in September sent the Standard & Poor’s 500 Index to its biggest annual decline since 1938, froze credit markets, drove Goldman Sachs Group Inc. to seek $5 billion from Warren Buffett and sparked a run on Treasuries that caused bill rates to fall below zero for the first time.

Now, the record pace of corporate bond sales, declining money market rates and a drop in mortgage costs all suggest the global economy is on the mend. In the government debt market, yields on 10-year notes exceed those of two-year securities by at least 1 percentage point in all the G-7 nations for the first time since before 1991, according to data compiled by Bloomberg. The so-called yield curve typically steepens when traders anticipate a recovery.

The gap “is likely to get steeper still,” said Paul McCulley, a managing director at Newport Beach, California-based Pacific Investment Management Co., which oversees the world’s biggest bond fund. “When policy stimulation gets traction in the real economy,” investors will begin to anticipate higher yields, he wrote in a May 1 e-mail.

Keeping Rates Low

Central banks show no inclination of raising interest rates until the housing market recovers, restraining short-term bond yields. Federal Reserve policy makers said March 18 that they are prepared to keep benchmark rates “exceptionally low” for “an extended period.” Bank of Canada Governor Mark Carney said he intends to leave the central bank’s main rate at a record low 0.25 percent until the end of June 2010.

At the same time, the flood of money being pumped into the economy by policy makers, including $12.8 trillion in the U.S., will ward off deflation and cause longer-term yields to increase, traders say.

“Inflation threats are increasing the longer you pump cash into the system,” said David Keeble, head of fixed-income strategy in London at Calyon, the investment-banking unit of Credit Agricole SA. Subsequent steepening “will be more of a sell-off from the longer-end of the curve,” he said.

The U.S. Treasury yield curve has widened to 2.22 percentage points from 1.25 percentage points in December. It averaged less than zero in 2006 as traders correctly anticipated that the economy would enter a recession, causing inflation, which erodes the value of fixed-rate securities, to slow.

Steepest Curves

Curves in the U.K. and Italy are near the steepest levels in about 17 years, at 2.47 and 2.40 percentage points, respectively. Canada’s curve is 2.07 points, near the most since 2002.

The shift accelerated as Japan, U.K. and U.S. central bankers cut short-term interest rates to near zero and embraced so-called quantitative easing policies by buying debt assets to keep rates down after exhausting other tools.

Merrill Lynch & Co. indexes show sovereign debt issued by the G-7 has lost 1.07 percent this year, including reinvested interest, amid a surge in government borrowing to finance the rise in spending needed to prop up contracting economies. That compares with a return of 14 percent in 2008 for Treasuries, the best annual performance since gaining 18 percent in 1995, the indexes show.

Deflation Concern

Government coupon securities issued by the G-7 and maturing in five years or less gained 0.52 percent this year, compared with losses of 0.74 percent for securities maturing in five years or more, according to Merrill. Among the 26 largest sovereign debt markets, the U.S., U.K. and Canada lost the most in April, Bloomberg data shows.

Deflation was the concern last year as U.S. bond yields fell to historic lows, the Reuters/Jefferies CRB Index of commodities tumbled 36 percent and U.S. home prices plunged 19 percent, according to the S&P/Case-Shiller index. The consumer price index fell to minus 0.4 percent in March from a year before, the first annualized decline since 1955, the Labor Department said April 15.

The Fed’s preferred measure of inflation, which tracks consumer spending and excludes food and fuel costs, rose at a 1.5 percent annual pace last quarter, the Commerce Department said April 29, approaching the lower end of central bankers’ longer-term forecasts.

‘Not Enough’

The difference between yields on Treasury Inflation Protected Securities, or TIPS, due in 10 years and notes that aren’t indexed to inflation was 1.43 percentage points. The so- called breakeven rate, which reflects traders’ outlook for consumer prices over the life of the debt, was negative 0.08 percent Nov. 20. Among the G-7, U.K. 10-year gilts have the highest breakeven rate at 2.20 percentage points.

President Barack Obama signed a $787 billion, two-year economic stimulus plan in February. Prime Minister Taro Aso of Japan unveiled a 25,400 yen ($255 billion) plan to stimulate growth. Germany, France and Italy have pledged a combined 107 billion euros ($142 billion) and the U.K. has promised 25 billion pounds ($37 billion).

Even with those measures, the global economy will contract 1.3 percent this year, according to the International Monetary Fund. While the Federal Reserve’s Open Market Committee said April 29 that the contraction has slowed and the outlook “improved modestly,” the economy may suffer as job losses and restricted credit inhibit consumer spending.

“The stimulus is not enough,” said Kevin Gaynor, head of economics and interest-rate strategy at Royal Bank of Scotland Group Plc in London. “It’s more about absorbing cyclical damage and bailing out the banking sector rather than starting a path toward economic growth.”

Lending Again

Banks curtailed lending to each other in August 2007, when losses from subprime mortgages left the world’s largest financial institutions with securities and financial contracts they couldn’t value. Markets froze in the wake of New York-based Lehman’s bankruptcy on Sept. 15, as traders speculated that if the 158-year-old firm could fail, so could any company.

Now, lending has resumed. The London interbank offered rate for three-month dollar loans fell to 1.01 percent, the lowest since June 2003.

The TED spread measuring the difference between Libor and Treasury bill rates, which rose as high as 4.64 percentage points on Oct. 10, narrowed to 0.83 percentage point today. The Libor-OIS premium that indicates banks’ reluctance to lend to each other fell to 0.79 percentage point, the lowest level since before Lehman’s collapse, from 3.64 percent on Oct. 10.

Bond Sales

Companies have sold about $477 billion of bonds this year in the U.S., compared with $354 billion during the same period of 2008, according to data compiled by Bloomberg. The extra yield investors demand to buy U.S. corporate debt instead of Treasuries narrowed to 6.4 percentage points on May 1 from 8.96 percentage points on Dec. 15, according to Merrill Lynch’s U.S. Corporate & High Yield Master Index.

Rates on 30-year fixed mortgages averaged 1.76 percentage points more than 10-year Treasuries last week, down from 3.07 points on Dec. 19, the highest level since 1986, according to Bloomberg data.

“There will be a recovery and our view is we want to be ready to play that recovery,” said Michael Atkin, who helps oversee $12 billion in fixed-income assets as head of sovereign research at Putnam Investments in Boston.

Bank Benefits

Steeper yield curves are increasing trading revenue at banks. New York-based Goldman, the most profitable Wall Street firm before it posted its first quarterly loss since going public in 1999, reported net income of $1.81 billion for the first quarter on April 13. A week earlier, San Francisco-based Wells Fargo & Co. posted record earnings.

During the recession of 1991, the U.S. yield curve steepened to as much as 2.19 percent from 0.85 percent even as the economy contracted. Growth resumed in 1992, and the curve peaked at 2.68 percentage points in July of that year. It widened to 2.74 percentage points in 2003, 10 months before Institute for Supply Management’s manufacturing survey posted its highest reading since 1984.

The Fed is likely to keep the yield curve from getting too steep by continuing purchases of Treasuries, according to a May 1 report from Credit Suisse Group AG. The central bank bought $8.5 billion of debt due between 2016 and 2019 today, the largest purchase since it began buying debt as part of its plan to lower borrowing costs including mortgage rates.

Calyon’s Keeble said he will recommend investors move to shorter-maturity debt. An investor buying $100 million of two- year notes betting on a steeper curve will earn $1.2 million if the gap widens by 30 basis points, according to data compiled by Bloomberg. The figure is weighted so the value of a basis point move in either note has an equal dollar impact.

Yield curves “will probably get steeper,” said David Rolley, who helps oversee $106 billion as co-head of global fixed-income in Boston for Loomis Sayles & Co. “Investors will price in the recovery before” central banks raise rates.

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'Worst Of UK Recession Could Now Be Over'

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An index of British companies' optimism shows suggests businesses think the pace of the economic slowdown could be starting to diminish.

Optimism has risen from 89.9 in January to 91.2 in April, research by accountants and business advisors BDO Stoy Hayward found.

But in a separate development, the CBI business group has warned manufacturers are seeing orders and output dwindle at their fastest pace for 20 years.

The BDO index, which measures medium term business confidence, suggests the recession has troughed in both the UK and Eurozone.

In its Eurozone Business Trends report, the organisation found businesses in the UK were also far more confident that deflation could be avoided than their European counterparts.

The UK inflation index, which measures expected inflationary pressures over the next three months, shows concerns about deflation have receded, with a rise from 86.6 in January to 91.5 in April.

In contrast, the index for Eurozone businesses plummeted from 97.1 in January to an all-time low of 88.4 in April, which BDO said showed firms "are now clearly very concerned about the risk of deflation".

In the UK, the official Consumer Prices Index (CPI) measure it is still well above the Government's 2% target.

Figures for March showed it had dropped to 2.9%, having unexpectedly risen the previous month to 3.2%

The Bank of England has slashed interest rates in recent months to a record low of 0.5% and begun a programme of quantitative easing (QE) in which £75bn is being injected into the economy.

In contrast, the European Central Bank (ECB) has cut the cost of borrowing at a more modest rate and has yet to adopt QE.

Both institutions will meet this week to set rates for the month.

Experts predict while the Bank of England will not make a change to its current half of one percent, the European Central Bank will be forced to reduce its rates to a record low of 1%.

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Rubber 'gold rush' sweeps African cocoa fields

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In the village of Cantondougou in western Ivory Coast there are no steaming mugs of hot chocolate or silky seductresses biting into chocolate bars.

Instead there are mud huts with drinking water or electricity.

Cocoa -- long a lifeline for this African nation -- is leaving a bitter taste now among thousands of farmers who have watched commodity prices plummet in recent months and seen little benefit from decades of hard work.

"Cocoa does not allow you to live well," said Enoch Youlepadante, 29, pointing to a dirty stream where women wash clothes, the only source of drinking water for this village of 6,000 people perched on a hillside.

Hamed Ollo Kambou, 30, a local cocoa grower, said: "How can we produce the wealth of this country and not profit from it?"

Hamed recently bought himself a battery-powered radio: "It's our only consolation," he said.

Disgruntled cocoa and coffee farmers in Ivory Coast are now turning to the cultivation of natural rubber -- seen as a far more profitable and reliable crop because it can be collected all year round and is more weather resistant.

Rubber production is set to double in Ivory Coast over the next five years, sector experts say, after a six percent rise in production between 2007 and last year that put the country in seventh place among world rubber producers.

Ivory Coast currently produces around 188,000 tonnes of rubber a year.

"Demand for rubber is always higher than supply, which pushes everyone into rubber cultivation. It's a gold rush," said Roland Ble N'Guessan, who works at one of the west African state's main rubber and latex producers.

San Pedro, a port city some 360 kilometres (224 miles) west of the capital Abidjan, sees hundreds of hectares of surrounding countryside every year converted from cocoa and coffee cultivation to natural rubber plantations.

"Unlike the cocoa tree, which bears fruit twice a year, the rubber tree can be tapped 12 months of the year. It is more resistant to rain, wind and sun," said Pamphile Aboua, a rubber cultivation expert in Ivory Coast.

That makes the crop more attractive to farmers even though one kilogramme of rubber currently earns farmers around 0.45 euros, less than half of the return from a cocoa tree of around 1.06 euros per kilogramme of cocoa.

"You also have to add in the difficulties of preserving the cocoa bean, which makes producers lose a lot of money, whereas you don't have that kind of problem with natural rubber," Aboua said.

Fadel Bi Gosse, 25, a former coffee and cocoa grower who started growing rubber trees three years ago, is confident he has made the right choice.

"I'll live like a public official then," said Bi Gosse, referring to the time in four years when his plantations will start producing rubber.

"With my two hectares, I will have a production of 600 kilogrammes per month, or 275 euros if the price stays the same," he added.

Despite the growing popularity of rubber cultivation, the crop remains only Ivory Coast's fifth largest after cocoa, coffee, palm oil and cotton. And experts warn that a rush to grow rubber could lead to food shortages.

"Farmers could forget about food crops like rice or bananas," said N'Guessan. "There could come a time when we have banknotes but nothing to eat."

Meanwhile there seems little prospect of relief to the misery of life in villages like Cantondougou, where there are also no hospitals and no schools.

"We've done a reconnaissance but our budget is very limited," said a local official, who spoke to AFP on condition of anonymity. He urged villagers to be patient: "In 10 years' time it should be alright."

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Obama takes aim at US multinationals

By Edward Luce and Tom Braithwaite in Washington, Vanessa Houlder in London and Francesco Guerrera in New York

Published: May 4 2009 17:10 | Last updated: May 4 2009 21:24

Barack Obama on Monday unveiled a sweeping crackdown on offshore tax avoidance by US companies, in a move likely to affect the way Britain taxes profits earned by UK companies operating abroad.

Mr Obama, who campaigned relentlessly on the issue of closing offshore loopholes, said the steps he announced would raise $210bn (£140bn) over 10 years and “make it easier” for companies to create jobs in Buffalo, New York, rather than in Bangalore, India.

But corporate America reacted with dismay, saying the rules – which would affect multinationals such as General Electric and Procter & Gamble – would put US companies at a disadvantage to foreign rivals.

“It is the wrong idea, at the wrong time for the wrong reasons,” said John Castellani, Business Roundtable president. “It will cripple growth, reduce the competitiveness of US companies overseas and destroy jobs.”

Mr Obama’s move will be studied around the world, however the administration on Monday highlighted Ireland, the Netherlands and Bermuda as examples of how distortionary existing tax policies are, saying the three accounted for more than a third of US foreign profits in 2003.

In London, Chris Sanger, head of tax policy at Ernst & Young, said the US move could have implications for the Treasury’s long-running review of UK anti-avoidance rules relating to foreign income. “From the UK perspective, it may put more pressure on it to see if its new rules are consistent,” Mr Sanger said.

He added the Obama administration’s proposal would put US tax policy at odds with much of the rest of the world, where it is common for profits earned abroad not to be taxed at home.

The steps announced by President Obama would include closing down the “check box” loophole that enables companies to avoid US and foreign taxes by shifting income to subsidiaries based in offshore tax havens.

He cited a Cayman Islands building where more than 18,000 US companies are housed. “Either this is the biggest building in the world or it is the biggest tax scam in the world,” Mr Obama said. “I think the American people know which it is.”

The administration also estimated that US companies paid an effective tax rate of just 2.3 per cent on the $700bn they earned in foreign profits in 2004.

Under Mr Obama’s proposals, which are likely to be included in this year’s budget document, US companies would no longer be able to claim deductions against their tax bill before they had paid taxes on offshore profits. The administration would also close the loophole whereby companies that claim a US tax credit on taxes paid to overseas jurisdictions then inflate and accelerate those credits.

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Mafia link to Sicily wind farms probed

By Guy Dinmore in Palermo, Italy

Published: May 4 2009 19:01 | Last updated: May 5 2009 07:13

Anti-Mafia magistrates in Sicily have opened a sweeping investigation into the wind power sector where local officials, entrepreneurs and crime gangs are suspected of collusion in the construction of lucrative wind farms before their eventual sale to multinational companies.

Italian and EU subsidies for the building of wind farms and the world’s highest guaranteed rates, €180 ($240, £160) per kwh, for the electricity they produce have turned southern Italy into a highly attractive market exploited by organised crime.

Roberto Scarpinato, a veteran anti-Mafia prosecutor in the regional capital Palermo, told the Financial Times that his investigation, which began last week, was focused on the three large provinces of Palermo, Trapani and Agrigento.

An earlier investigation into a case near Trapani in western Sicily resulted in eight arrests in February, leading to accusations of a suspected nexus between a leading Mafia family that offered money and votes in exchange for permits to construct wind farms.

“Operation Wind” revealed Mafia promises to local officials in Mazara del Vallo of money and votes in exchange for help in approving wind farm projects.

The Mafia suspects were alleged to be linked to Matteo Messina “Diabolik” Denaro, a fugitive clan boss on ltaly’s most wanted list.

Prosecutors suspect the hand of the Mafia in fixing permits and building wind farms that are then sold on to Italian and eventually foreign companies.

In an effort to assert its control over the sector, the Mafia is suspected of destroying two wind towers that were in storage in the port of Trapani after their delivery by ship from northern Europe, local officials told the FT.

“It is a refined system of connections to business and politicians. A handful of people control the wind sector. Many companies exist but it is the same people behind them,” said Mr Scarpinato, whose investigations have focused on the evolution of the Mafia into a modern business organisation.

Sicily’s Cosa Nostrais evolving and finding new business opportunities, including the renewable energy sector, by exploiting its historic grip over territory, construction and ability to corrupt local officials.

Several wind farms built by companies suspected of being linked to the Mafia have not functioned for one or two years, in some cases because of shoddy construction. “This is the amazing thing, that developers got public money to build wind farms which did not produce electricity,” the prosecutor said.

The regional governments in Sicily, as well as Calabria and Basilicata on the mainland, have suspended the authorisation of new wind farms in part because of suspected criminal involvement and confusion over the real ownership of the ventures.

Most, if not all, of Sicily’s wind farms began as projects by local developers, some of whom speculated in a secondary market for permits. Once built, the majority were sold on through Italian intermediaries to multinationals. International Power of the UK is the largest wind power operator in Italy. Others include Italy’s Enel and Germany’s Eon through its purchase of part of Endesa of Spain in 2007. France’s EDF also has assets. While the international companies knew the identity of their Sicilian developers, there is no evidence they were aware of Mafia involvement.

Although Italy is lagging badly in meeting its EU 2020 emissions targets, the renewable energy sector is growing strongly and attracting considerable foreign investment. International Power became the single largest operator in 2007 with its purchase of the Maestrale portfolio of mostly Italian wind farms, including five in Sicily, for €1.8bn

Italy ranks fourth in Europe in terms of installed wind power capacity.

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Masked gunmen kill 45 at Turkish wedding

DIYARBAKIR, Turkey, May 5 – Masked gunmen armed with assault rifles and grenades attacked a wedding party in mainly Kurdish southeast Turkey, killing at least 45 people including many women and children, authorities said.

The attack on Monday evening was one of the worst involving civilians in European Union candidate Turkey’s modern history. Interior minister Besir Atalay said initial evidence did not point to involvement of the separatist Kurdistan Workers party (PKK).

Television broadcasters said there had been a blood feud between two families in the small village in recent years.

The deputy governor of the province of Mardin, Ahmet Ferhat Ozen, told Reuters by telephone the assailants stormed a house in Bilge village near Sultankoy, some 20km (12 miles) from Mardin, hurling grenades and opening fire on wedding guests.

”There were a few people, they broke into the house and started spraying the place with bullets, hitting both men and women, their faces were covered with masks,” said a 20-year-old female eyewitness, who declined to be named.

She said there were some 200 people at the wedding party.

The assailants escaped from the isolated region of Turkey on the border with Syria before soldiers surrounded the village and cut off road access. Pursuit of the attackers was being hindered by a sandstorm, authorities said.

Local media said the families of both the bride and the groom included members of the Village Guard, a heavily armed state-backed militia set up to combat Kurdish separatist guerrillas and provide intelligence in southeast Turkey.

The fate of the bride and the groom was unknown.

State-run news agency Anatolian reported the daughter of the village chief, called a muhtar, was being married when the attack, which lasted 15 minutes, occurred.

Mr Atalay did not mention the PKK, who seek an ethnic Kurdish homeland in the southeast, but indicated his remarks meant they were not involved.

”Evidence so far shows it was not the work of a terrorist group, but the prosecutor is working on the case and should have a clearer idea soon of what happened,” he told reporters when asked it the PKK was behind the attack.

Mr Atalay briefed prime minister Tayyip Erdogan on the attack. He said 45 people had died and six more people were injured.

Mr Atalay, with Justice minister Sadullah Ergin and Mardin parliamentarians, was planning to visit the village on Tuesday.

The village head of Bilge, Hamit Celebi, and 10 family members were among the dead, Anatolian said.

Ambulances rushed the injured to Mardin, the main city in the area, and local residents were called to the hospital to donate blood. More than a dozen bodies, mainly women and children, had already been brought to the hospital.

Local rivalry spilling into deadly feuds is not unheard of in southeast Turkey, although it is rare for the death toll to be so high. The scale of the latest attack would be of deep concern to the government, which is attempting to defuse tensions in the southeast born of separatist conflict.

The Turkish newspaper Hurriyet said on its website that the attack took place in mid-evening and that four unidentified gunmen had been involved in the attack and then escaped.

There are some 57,000 state-sponsored village guards throughout Turkey’s southeast. They are part of a controversial policy established in 1985 to set up a paramilitary force to protect villages against PKK attacks, patrol the rugged mountains and help fight the separatists.

But their right to carry arms, to inform on suspected separatist activities and to kill in the name of the state has made them a force within the region, while critics say they use their status to settle family scores and take land.

The separatist PKK took up arms against the Turkish state in 1984. Some 40,000 people have been killed in the conflict.

The PKK has been significantly weakened over the past two years by a military offensive inside Turkey and across in northern Iraq. The military suffered a setback last month when the PKK attacked a military convoy, killing nine soldiers.

Security in the southeast is seen as key to improving stability in Turkey and reducing tensions with northern Iraq.

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UAE aims to ease plight of foreign workers

By Simeon Kerr

Published: May 4 2009 17:36 | Last updated: May 4 2009 17:36

As the United Arab Emirates launched its first labour and human rights conference in co-operation with the United Nations, Saqr Ghobash, the minister of labour, last week announced a raft of measures that aim to tighten compliance with existing regulations.

“The UAE has the political will to meet its requirements,” he said. “We do not imagine we are perfect – we know there are challenges but we are tackling them in terms of legislation and execution of those laws.”

The treatment of workers during the petrodollar and credit-fuelled construction boom has become a growing irritant for Dubai. Campaigners say the city is a magnet for the trafficking of construction, domestic and sex workers.

The issue has not gone away during the continuing property crash as workers lose their jobs, return home empty-handed and often in debt. Moreover, while some projects are stalled in Dubai, Abu Dhabi remains a hive of activity. In spite of a drive to improve workers’ accommodation in the capital, Human Rights Watch, the campaigning group, is set to issue a report this month highlighting labour abuses there.

Mr Ghobash said his ministry would broaden its efforts to monitor the timely payment of workers via bank transfer by extending the service to money exchanges. These are preferred by many workers over banks for repatriating salaries to families, largely in south Asia.

The government also pledged to introduce new housing standards for labour accommodation and to prosecute companies that failed to meet standards.

That measure was a direct response to a recent BBC documentary, which used secretly filmed footage to highlight the filthy conditions in which many Dubai construction workers live.

Analysts, however, say that deep-rooted reform is the only way to solve the routine abuse of workers’ rights, which often begins in their home countries with unscrupulous labour agents. The plight of workers can be worsened by private-sector sponsorship once they take up residence in countries such as the UAE.

Some critics even argue that the state could take over much of the procedure of importing labour into the Gulf, thereby minimising potential for abuse on both sides of the migration process.

“The legal umbrella governing the entry of manual labour into the UAE, as in other parts of the Gulf, is outmoded and based on an economic model which should go under review because of the global financial crisis,” says one labour analyst, who declines to be identified given the sensitivity of the matter.

Because half of the UAE’s construction projects are on ice, companies have been sending workers home on unpaid leave, waiting for the market to recover. Smaller contractors have folded, leaving workers stranded without money and travel documents. Some have slipped into the city as illegal migrants, others have remained at their camps, says the Indian consulate.

The peak of the financial crisis, as measured by requests from abandoned Indian labourers, came in February when the number of pleas for emergency travel documents leapt to 2,432, a 12-fold increase over 2008. By April, this had eased as the number of labourers being hired began to recover – even though new recruitment remains down 60 per cent on last year.

“Approvals for new recruitment fell drastically in February, but there are now some signs of recovery,” says Venu Rajamony, India’s consul-general in Dubai.

The government has kicked into touch several proposals from human rights activists and campaigners, such as introducing a minimum wage, collective bargaining or allowing construction workers to form unions. The authorities repeat the mantra that, with a native population dwarfed by foreigners, any compromise on unionisation could pose security problems.

The UAE and Saudi Arabia are the last two Arab states blocking the right to association and collective bargaining, according to the International Labour Organisation, which has made these rights two of its eight core conventions.

Even longstanding government diktats are going unenforced. Two years ago, the UAE government explicitly told companies to stop withholding workers’ passports as leverage against flight.

But companies continue to hold passports illegally and some even point to the legal loopholes prevalent in the UAE, where insurers will decline to cover workers or a site if the company fails to hold on to passports.

Critics say that it is not just the treatment of overseas workers that needs to change. The UAE private sector has prospered on unfettered access to cheap labour from the subcontinent, they point out, while the government has subsidised that economic benefit by providing well-paid public sector jobs to its citizens.

Saleh Marzouki, representative of the UAE Professionals’ Co-ordinating Committee, has called for the introduction of a minimum wage and a sea-change in nationals’ attitude towards work.

“We need to change the culture in our society so that if people don’t leave the house for work it is shameful,” he says.

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ＦＸ規制、健全化か介入か　証拠金倍率に上限方針

　金融庁が個人投資家に普及している「外国為替証拠金取引（ＦＸ）」の規制を強める方針を示したことで、関係者に波紋が広がっている。最も懸念が強いのが、投資家が預けたお金（証拠金）で何倍の取引ができるかを示す証拠金倍率の上限規制。高倍率取引が主力の業者が公的な“介入”に反発しているほか、個人投資家の批判も強い。金融庁は市場健全化のために必要と説明するが、規制で市場が冷え込むことへの懸念も出ている。

　「とても経営を続けられない」。金融庁が証拠金倍率20―30倍以上の取引の規制を検討していると知った東京都内のある業者の担当者は憤りを隠さない。最大で数百倍の高倍率取引ができることを目玉に顧客を集めているからだ。「業者側の言い分も聞かず、当局のやり方はあまりに一方的」と不満を漏らす。 (12:09)

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屋内で農作物安定生産、植物工場に補助　経産・農水省

　経済産業省と農林水産省は屋内で農作物を生産する「植物工場」の建設費の半額を補助する新制度を導入する。割高な工場の建設費が普及の足かせになっているため、新制度で民間企業の参入を促し、工場数を３年間で３倍の150カ所に増やしたい考えだ。

　「植物工場」は温度や湿度を制御しながら、発光ダイオード（ＬＥＤ）などの光源で農作物を栽培する施設。天候や季節に左右されにくいため、農作物の安定生産を見込めるほか、農薬を減らせる利点もある。(07:00)

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既存オフィスの賃貸料、東京で４年ぶり下落　上期日経調査

　景気悪化を映して、オフィスビル賃貸料が大幅に下落し始めた。日本経済新聞社のオフィスビル賃貸料調査（上期、４月中旬実施）によると、東京の築後１年以上の既存ビルの賃貸料（募集ベース）が４年ぶりに下落した。テナントとして入居する企業は業績の一段の悪化を見越してオフィスの縮小や賃料の引き下げ要請の動きを強めている。

　賃料の水準を指数にしたオフィスビル賃貸料指数（1985年２月＝100）は、東京で既存ビルが143.34と前年同期比29.22ポイント下落した。 30ポイント近い急激な下落幅は96年以来、13年ぶり。昨年下期の調査では築後１年未満の新築が６年ぶりに下落したが、今回調査で既存ビルに値下がりが広がってきたことが鮮明となった。東京の新築は19.79ポイント下がり149.12。大阪では新築が118.66と33.16ポイント下がった。 (11:31)

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事業系ゴミ、本格削減へ警察ＯＢ指導員　有料ゴミ袋も検討　 (1/2ページ)
2009.5.5 02:09

　全国の政令市でゴミ処理量が最多の大阪市が、企業や店舗の事業系ゴミを削減するため、警察ＯＢを廃棄物規制担当指導員に委嘱、排出事業者に直接指導する制度を今年度からスタートすることが４日、分かった。事業系ゴミを対象にした有料ゴミ袋の導入も目指しており、３カ年で事業系ゴミの約５％にあたる５万３０００トンを減らす方針という。ゴミ袋の価格は今後の検討課題といい、負担を求められる事業者側の理解が得られるかが導入に向けた焦点になりそうだ。

　ゴミ減量を将来ビジョンの目玉にかかげる平松邦夫市長のもと、市は平成１９年度で１４７・６万トンだった事業系と家庭系のゴミ処理量を２３年度までに１３０万トンに減らす方針をすでに打ちだしている。

　このゴミ削減計画の達成には、事業系ゴミの減量が不可欠。通常の自治体では「３割が事業系、７割が家庭系ゴミ」（市環境局担当者）とされるが、企業や店舗数が計約２０万にも上る市では事業系の割合が６割を占め、１９年度には９４万トンの事業系ゴミが排出された。

　市では事業系ゴミについて、収集運搬の許可業者が排出事業所から回収し、焼却工場に持ち込む方式を取っており、これまではゴミの排出事業者への直接指導まで手が回らなかった。しかし、２０年１月に無料の透明ゴミ袋を事業系、家庭系ゴミ双方で導入したために全体のゴミ量が減少傾向にあり、この機会をとらえて事業系ゴミの抜本的な削減策を講じることにした。

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【正論】東大教授・西垣通　メガ銀行は人知で制御可能か　
2009.5.5 02:50
このニュースのトピックス：正論

　≪未曾有の大プロジェクト≫

　三菱東京ＵＦＪ銀行のオンライン・システムが昨年１２月に完全統合され、５カ月が過ぎた。旧東京三菱銀行と旧ＵＦＪ銀行が合併したのは２００６年１月で、この時にはとりあえず、両行の既存の勘定系システムを並存させ、それらを相互接続しただけだった。つまり、両行店舗のどのＡＴＭ（現金自動預払機）からどちらの勘定系システムにもアクセスできるようにしたわけだが、当然インターフェース（接続装置・回路）の細かい相違は残っていた。しかし今回の完全統合で、共通勘定系システムが完成し、すべての店舗で同一のサービスを提供できるようになったという。

　経営統合が発表された２００４年から足かけ５年を要したことになる。完全統合までの道のりは大変きびしいものだったようだ。当初予定されていた０５年秋の合併が３カ月延期されたのも、相互接続のための技術的困難のせいだったと聞く。システム完全統合も一昨年完了のはずだったが、１年延びたのである。予算的にも、当初１５００億円と見込んだ統合費用が３３００億円までふくらんだ。まさに未曾有の規模のシステム統合プロジェクトといえる。

　中途段階で細かいミスもかなり見つかったというし、サービス共通化の過程でユーザーが戸惑ったという話も耳にした。だが、これだけのプロジェクトを大過なくやりとげた担当技術陣に心から拍手をおくりたい。世間にはちょっとしたＡＴＭ機能の不具合を大声で責めたてる人がいるが、いったいリアルタイムで動作している巨大システム同士を統合するという仕事がどれほど技術的に困難なものか分かっているのだろうか。

　≪筆者も経験した複雑処理≫

　７年前、みずほ銀行の統合システムが稼働を開始した際、ＡＴＭ障害が発生して大騒ぎになった。いっせいに怠慢を責める声があがる中で、私は担当技術陣の苦労に同情を禁じ得なかった。その時に痛感したのは、世間がコンピューターの利便性ばかり求め、その危険性や脆弱（ぜいじゃく）性をまったく理解していない、ということである。

　かつて私はメーカーのエンジニアとして銀行オンライン・システムの開発に携わった経験がある。２０年以上前のことで、処理も今ほど複雑ではなかったし、目的は機能向上のための単体システム改変で、異なるシステム同士の統合ではなかった。だが、膨大なプログラムの途方もない複雑さ精妙さに驚いたことは記憶に生々しい。

　勘定系のオンライン処理は素人目には単純に見える。基本は口座への入金（足し算）と出金（引き算）それに利子計算にすぎない。だが、一つの口座への入出金処理が複数のＡＴＭから同時におこなわれると計算ミスが生じるので、これを防ぐため一時的に口座に「鍵」をかけなくてはならない。一つの処理が複数の鍵をかけることもあり、処理効率を落とさずに膨大な数の鍵を管理するのはかなり厄介だ。

　さらに、通信回線や記憶装置やコンピューターがいつ故障しても口座の残高データが決して狂わないように保証しなくてはならず、幾重もの込み入った防御策が必要となる。残高データが喪失しないためには複数のコピーを持てばよいような気がするが、そうすると全コピーを正確に一括更新しない限り、計算ミスの恐れがある。あげていけば際限がないが、ともかく恐ろしく複雑な処理なのだ。

　単体でも複雑怪奇なのに、設計思想の異なる複数のシステム同士を、論理矛盾なく、しかも最小限の稼働停止期間のあいだに統合接続するとなれば、どれほど大変な作業になるかは想像にあまる。

　≪望ましい未来システムは≫

　望ましいのはシンプルで保守も統合もしやすい未来システムだ。だが、業界内で一致した簡素化・標準化の動きがあるようには思えない。むしろ銀行間のサービス競争で、システムは今後ますます機能をふやし、巨大化していくだろう。そして恐らく、昨今のサブプライムローン騒動のような混乱にともなう金融機関の再編とシステム統合は、これからも無くなることはないだろう。その費用や工数が天文学的値にのぼっていくことはまず間違いない。

　いやそれどころか、統合プロジェクト計画が実現不可能となり、合併そのものが頓挫する恐れもある。巨大なソフトウエアというのはいわば魔物が隠れている密林のようなものだ。単体の保守維持さえ容易ではないが、短期間でこれらを統合再編しようとすれば、どんな結果になるか誰にも予測できない。致命的なミスによって経済活動が崩壊する事態さえ考えられる。そういう危険について、そろそろ真剣に考えるべき時が来ているのではないか。

　そんな警告の意味もかねて、筆者はこのたび小説『コズミック・マインド』を岩波書店から上梓（じょうし）した。われわれの欲望と記憶が人知を超えた巨大なコンピューター・システムと絡み合うとき、思いがけない人間のドラマがうまれてくるのである。（にしがき　とおる）

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子供の人口、28年連続減　４月時点、1714万人

　「こどもの日」にちなんで総務省が４日公表した推計人口によると、４月１日現在の子供（15歳未満）の数は昨年に比べ、11万人少ない1714万人だった。28年連続の減少で、過去最少を更新した。総人口に占める割合も昨年比で0.1ポイント低下。13.4％と35年連続で下回り、過去最低だった。

　男女別の子供の数は、男子が878万人、女子が835万人。３歳ごとの年齢層別では、中学生（12―14歳）の360万人が最も多く、３―５歳が323万人と最少だった。

　都道府県別で見た子供の割合（2008年10月1日現在）は沖縄県が17.9％と最高。滋賀県（15.1％）、愛知県（14.7％）が続いた。最も低いのは秋田県の11.5％。07年と比べると、東京都だけ割合が0.1ポイント上昇した。他の46道府県は横ばいか低下で、少子化は全国的な傾向となっている。(04日　19:48)

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提訴：中国人元実習生、賃金搾取で賠償求める　小渕元首相のおい相手に

　賃金を中間搾取されたとして、中国人の元技能実習生の男性が７日、受け入れ団体「日中経済産業協同組合」（東京都渋谷区）と組合理事長で故小渕恵三元首相のおい、小渕成康（まさやす）さん（４２）を相手に約２１５万円の賠償を求め東京地裁に提訴する。組合の仲介により金属加工会社で就労した２年余り、研修手当や賃金をピンはねされたと主張している。元実習生の弁護士によると、把握しているだけで被害者は約５０人、被害総額は３０００万円に達するという。

　提訴するのは０４年１１月～０７年２月に群馬県桐生市の金属加工会社で研修・実習した中国籍の倪文利さん（２６）。

　倪さん側の出口裕規弁護士によると、研修期間の０４年１１月８日～０５年１１月７日、月額約５万円の研修手当が支払われるはずが約３万円しか支給されず、技能実習期間の０５年１１月８日～０７年２月１１日にも月額約１１万５０００円と定めた賃金が月２万～２万５０００円程度しかなかった。

　倪さん名義の口座には金属加工会社から毎月、ほぼ契約通りの額が振り込まれていた。しかし通帳と印鑑を組合が保管しており、倪さんはお金を引き出せなかった。本来の支給額との差額約１７６万円に慰謝料などを加えた計約２１５万円の賠償を求める。

　小渕理事長は故小渕元首相の兄の長男で、小渕優子少子化担当相のいとこ。実習生の賃金約１２００万円を着服したとして労働基準法違反（中間搾取）で在宅起訴され、宇都宮地裁足利支部で０８年１２月、懲役１年、執行猶予３年を言い渡され、確定した。

　出口弁護士は「他の被害者を募り、追加提訴したい」と話す。一方、取材に対し、小渕理事長は４日現在回答していない。【銭場裕司】

＝＝＝＝＝＝＝＝＝＝＝＝＝＝

　■ことば
　◇外国人研修・技能実習制度

　１年の研修後、実習生として２年間労働できる。研修生は労働者ではなく研修手当が支給され、実習生は労働者として賃金が支払われる。０７年の研修生は約１０万２０００人。０８年、不当な時間外労働など「不正行為」が認定された企業・団体は４５２と過去最多だった。

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If China loses faith the dollar will collapse

By Andy Xie

Published: May 4 2009 19:28 | Last updated: May 4 2009 19:28

Emerging economies such as China and Russia are calling for alternatives to the dollar as a reserve currency. The trigger is the Federal Reserve’s liberal policy of expanding the money supply to prop up America’s banking system and its over-indebted households. Because the magnitude of the bad assets within the banking system and the excess leverage of its households are potentially huge, the Fed may be forced into printing dollars massively, which would eventually trigger high inflation or even hyper-inflation and cause great damage to countries that hold dollar assets in their foreign exchange reserves.

The chatter over alternatives to the dollar mainly reflects the unhappiness with US monetary policy among the emerging economies that have amassed nearly $10,000bn (€7,552bn, £6,721bn) in foreign exchange reserves, mostly in dollar assets. Any other country with America’s problems would need the Paris Club of creditor nations to negotiate with its lenders on its monetary and fiscal policies to protect their interests. But the US situation is unique: it borrows in its own currency, and the dollar is the world’s dominant reserve currency. The US can disregard its creditors’ concerns for the time being without worrying about a dollar collapse.

The faith of the Chinese in America’s power and responsibility, and the petrodollar holdings of the gulf countries that depend on US military protection, are the twin props for the dollar’s global status. Ethnic Chinese, including those in the mainland, Hong Kong, Taiwan and overseas, may account for half of the foreign holdings of dollar assets. You have to check the asset allocations of wealthy ethnic Chinese to understand the dollar’s unique status.

The Chinese love affair with the dollar began in the 1940s when it held its value while the Chinese currency depreciated massively. Memory is long when it comes to currency credibility. The Chinese renminbi remains a closed currency and is not yet a credible vehicle for wealth storage. Also, wealthy ethnic Chinese tend to send their children to the US for education. They treat the dollar as their primary currency.

The US could repair its balance sheet through asset sales and fiscal transfers instead of just printing money. The $2,000bn fiscal deficit, for example, could have gone to over-indebted households for paying down debts rather than on dubious spending to prop up the economy. When property and stock prices decline sufficiently, foreign demand, especially from ethnic Chinese, will come in volume. The country’s vast and unexplored natural resource holdings could be auctioned off. Americans may view these ideas as unthinkable. It is hard to imagine that a superpower needs to sell the family silver to stay solvent. Hence, printing money seems a less painful way out.

The global environment is extremely negative for savers. The prices of property and shares, though having declined substantially, are not good value yet and may decline further. Interest rates are near zero. The Fed is printing money, which will eventually inflate away the value of dollar holdings. Other currencies are not safe havens either. As the Fed expands the money supply, it puts pressure on other currencies to appreciate. This will force other central banks to expand their own money supplies to depress their currencies. Hence, major currencies may take turns devaluing. The end result is inflation and negative real interest rates everywhere. Central banks are punishing savers to redeem the sins of debtors and speculators. Unfortunately, ethnic Chinese are the biggest savers.

Diluting Chinese savings to bail out America’s failing banks and bankrupt households, though highly beneficial to the US national interest in the short term, will destroy the dollar’s global status. Ethnic Chinese demand for the dollar has been waning already. China’s bulging foreign exchange reserves reflect the lack of private demand for dollars, which was driven by the renminbi’s appreciation. Though this was speculative in nature, it shows the renminbi’s rising credibility and its potential to replace the dollar as the main vehicle of wealth storage for ethnic Chinese.

America’s policy is pushing China towards developing an alternative financial system. For the past two decades China’s entry into the global economy rested on making cheap labour available to multi-nationals and pegging the renminbi to the dollar. The dollar peg allowed China to leverage the US financial system for its international needs, while domestic finance remained state-controlled to redistribute prosperity from the coast to interior provinces. This dual approach has worked remarkably well. China could have its cake and eat it too. Of course, the global credit bubble was what allowed China’s dual approach to be effective; its inefficiency was masked by bubble-generated global demand.

China is aware that it must become independent from the dollar at some point. Its recent decision to turn Shanghai into a financial centre by 2020 reflects China’s anxiety over relying on the dollar system. The year 2020 seems remote, and the US will not pay attention to something so distant. However, if global stagflation takes hold, as I expect it to, it will force China to accelerate its reforms to float its currency and create a single, independent and market-based financial system. When that happens, the dollar will collapse.

The writer is an independent economist based in Shanghai and former chief economist for Asia Pacific at Morgan Stanley

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Short View: China’s victory sign

By John Authers, Investment editor

Published: May 4 2009 18:17 | Last updated: May 4 2009 18:17

Markets think they can see a victory sign coming from China. They believe China has somehow executed a “V-shaped” recovery from its slowdown – and that this justifies buying stocks elsewhere.

Monday’s CLSA purchasing managers index for China, like the official survey last week, showed a sharp rise to bring Chinese manufacturing back into expansion mode. This is the fifth gain in succession and the first reading showing an expansion in nine months. On a graph, it is a perfect V-shape. The post-Lehman recovery dates from the Chinese government’s stimulus package in November.

New orders rose after eight months of falls, mostly due to domestic demand. Foreign orders dropped, but by the lowest amount in eight months.

Data from other countries suggest that they are beginning to export again. South Korea, for which China is a vital trading partner, has seen exports rise for three months in a row. April’s exports were up 44 per cent from a horrific low in January. Monday brought news that exports from Brazil, a supplier of commodities to China, were all rising.

All of this has had a dramatic effect on stocks. Since they reached their nadir last autumn, Brazil’s Bovespa index has risen 82.9 per cent, South Korea’s Kospi is up 71.7 per cent, and the Shanghai Composite itself is up 50.2 per cent.

Does this make sense? China’s recovery from what looked like the risk of outright contraction only months ago is so swift as to prompt analysts to question the data. China’s emphasis on government spending, rather than getting consumers to stop saving, does not help deal with longer-term global imbalances.

But stocks at one point priced in a headlong fall into the abyss. That fall does seem to have been averted. Emerging market shares fell far more than in developed markets. So there is justification for a rebound.

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India and China data fuel rise in optimism

By James Lamont in New Delhi, Kathrin Hille in Beijing and Kevin Brown in Hong Kong

Published: May 4 2009 17:33 | Last updated: May 4 2009 17:33

India’s manufacturing sector grew in April for the first time in five months, spurring hopes of an end to falling growth estimates and contracting exports.

Meanwhile, the purchasing managers’ index for Chinese manufacturing published by CLSA, the Hong Kong-based brokerage, rose to 50.1 in April from 44.8 a month earlier, signalling an expansion in factory output for the first time in nine months.

Asian stock markets jumped sharply following the news. Hong Kong’s benchmark Hang Seng index rose 5.5 per cent to close above 16,000 for the first time in seven months, while the Bombay Stock Exchange’s Sensex index rose 6.2 per cent to 12,113, climbing above 12,000 points for the first time since early October.

Shares in Shanghai rose 3.3 per cent, reaching a nine-month closing high.

Signs of “green shoots” in India came in the form of an ABN-Amro Bank purchasing managers’ index based on a survey of 500 companies. The index rose to 53.3 in April from 49.5 a month earlier, buoyed by higher demand for goods from Indian factories and stock building.

The reading is the highest since October and reflects a steady rise in orders since the global economic downturn undermined the index at the end of last year.

The PMI figures will bring relief to India’s industrialists after the country’s exports fell 33 per cent in March to $11.5bn (€8.6bn, £7.7bn). Gems and jewellery, pharmaceuticals and the auto industry have been some of the industries most affected by the global slowdown.

ChartBut while the concerns about merchandise trade have deepened, some analysts detect an improving outlook for India’s services sector.

“Trade in certain services is weathering the crisis much better than goods trade,” said Aaditya Mattoo, at the World Bank in Washington.

“Trade in crisis-affected financial services and goods-related transport services has indeed shrunk. But trade in business, professional and technical services – which account for nearly a quarter of India's exports – is weathering the current crisis much better than goods trade.”

He said that a “relatively positive outlook” was supported by expectations that employment in the export-oriented IT and business process outsourcing services would grow by about 5 per cent, or 100,000 jobs, this year.

Signs of greater optimism were also reflected in the Federation of Indian Chambers of Commerce and Industry’s business confidence survey for the quarter to the end of March. The proportion of companies saying that performance had weakened over the past six months fell from 81 per cent in the previous quarter to 55 per cent in the period under review.

‘Trade in business, professional and technical services is weathering the current crisis much better than goods trade’
Aaditya Mattoo, World Bank

The closely watched CLSA survey confirmed evidence from the China Federation of Logistics and Purchasing last week that the official index had risen to 53.5, its second consecutive positive reading.

The output and new orders components showed particularly strong growth in the CLSA index, in which a reading above 50 indicates an increase.

“China’s government has been extremely successful in stimulating investment,” said Eric Fishwick, head of economic research at CLSA.

He cautioned that the export orders index, which had seen a sharp rebound, was set to soften again, but said there were hopes that stronger domestic demand, driven by government spending, would make up for that.

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German state controls 41% of HRE

By James Wilson in Frankfurt

Published: May 5 2009 09:47 | Last updated: May 5 2009 09:47

Germany’s government said on Tuesday it had control of 41 per cent of Hypo Real Estate as losses mounted at the stricken bank in the first quarter.

The property lender on Tuesday revealed a net loss of €382m for the first three months of the year. The core capital ratio for the bank – which is being propped up by government guarantees pending its nationalisation – was just 3.5 per cent, below regulatory norms.

The country’s bank rescue fund will reveal on Thursday whether its offer to buy shares from investors has given it majority control of HRE. By Monday evening – hours before a midnight deadline to accept the state’s €1.39 a share offer – more than 32 per cent of shares had been tendered.

Together with the state’s stake of 8.65 per cent bought last month, it means Berlin holds almost 41 per cent of HRE shares.

JC Flowers, the private equity firm that is HRE’s biggest investor, is resisting Berlin’s plans and will not tender most of its stake of about 15 per cent.

An extraordinary shareholder meeting in June is likely to be the last chance for the government to gain control before resorting to a controversial compensated expropriation of HRE shares. JC Flowers is likely to mount a legal challenge to an expropriation, which can be used as a last resort under laws approved last month to allow for the emergency stabilisation of the banking system.

HRE almost collapsed last year because of a liquidity crisis at Depfa, its Ireland-based subsidiary. The government – which says the failure of the bank would pose a systemic risk to the financial system – will inject billions of euros of capital after it gains full control of the bank.

In the first quarter, HRE made an operating loss of €80m in spite of generally better conditions for banks. Its operating losses in 2008 amounted to €585m.

However Axel Wieandt, the chief executive drafted in last year to try to restructure the bank, said there was “good progress”, with HRE even writing €600m of new property financing in the first quarter.

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EDF eyes sale of UK electricity business

By Peggy Hollinger in Paris

Published: May 4 2009 03:00 | Last updated: May 4 2009 03:00

EDF, France's state-controlled utility, is weighing the benefits of selling its regulated electricity distribution business in the UK as it seeks disposals to help it cut the debt built up after a year of costly foreign acquisitions.

The question of whether EDF, which will spearhead Britain's nuclear revival after its recent €15bn takeover of British Energy, should sell the country's largest distribution network was raised at a recent board meeting.

No decision has been made. However, the reflection is part of a wider strategic review of the nuclear power operator's industrial future as it faces unprecedented investment requirements in France and abroad.

People close to EDF's board said management was considering whether to focus purely on power generation internationally.

The recent acquisitions of British Energy and 50 per cent of the nuclear assets of US partner Constellation for $4.5bn (£3bn) have strained group finances. EDF is already planning €5bn in disposals. Net debt was almost €25bn last year, nudging the record €27bn from 2002, and compared with equity of €23.1bn.

EDF has said it wants to build 10 new reactors, the first of which is already 20 per cent over budget at €4bn. Though it will be able to share costs with partners (rival GDF Suez will have a third of France's second so-called EPR reactor), returns take years to materialise. "They are having a real internal debate," said a person close to the group. "It is driven by capital constraints because they have bitten off more than they can chew."

Politically it would be easier for EDF to consider selling UK distribution as this might allay concerns at home that its international expansion could harm French investment. But EDF's UK management is opposed to selling the network, which transports power to 7.8m homes and businesses in the south-east and east of England.

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Georgia accuses Russia of coup plot

By Isabel Gorst in Moscow

Published: May 5 2009 09:53 | Last updated: May 5 2009 11:56

Georgia accused the Kremlin on Tuesday of backing a planned military coup aimed at bringing the former Soviet country back under the Russian yoke.

Mikheil Saakashvili, president, said Georgia’s national unity was at stake after a mutiny erupted at a military base outside Tbilisi on Tuesday. He said a rebellion at the Mukhrovani base had not yet been brought under control and called on the rebel leaders to give themselves up.

“This is a threat to national security and to every Georgian citizen and we regard it as a very serious incident,” he said in a televised address. He said the mutiny was intended to disrupt a European Union meeting at which Georgia was to be offered membership of the bloc’s Eastern Partnership later this week.

The commanders of several tank battalions declared an uprising at dawn following a swoop by law enforcers on the base on Monday night.

Shota Utiashvili, an interior ministry spokesman, said it appeared that the planned uprising had been “co-ordinated with Russia,” and timed to coincide with the launch of Nato military exercises in Georgia strongly opposed by the Kremlin.

“At minimum [the plan was] aimed at halting the Nato military exercises in Georgia and at maximum a full-scale military uprising in the country,” he said.

Mr Saakashvili, Moscow’s bete noire, said the rebels had “connections with special forces in a specific country known to us”.

“I am asking and demanding from our northern neighbour to refrain from provocations,” he said in a clear reference to Russia.

Last August Russia and Georgia fought a five-day war in which Moscow crushed a Georgian assault on the pro-Russian enclave of South Ossetia, also damping Nato’s appetite for admitting Georgia as a member. Russia is also keen to regain control of transit routes for Caspian oil and gas exports that run through Georgia and bypass Russia.

David Sikharulidze, the Georgian defence minister, said earlier he hoped the uprising would end soon and that the government was “in negotiations” with the rebels – who had not made any specific demands.

Video footage obtained by Georgian law enforcers appeared to show Gia Gvaladze. the former head of the Georgian special Delta security services, plotting the overthrow of the government. “In the event of a successful coup, Russia will once again be united with Russia,” he said.

The Georgian opposition postponed action on Tuesday to block roads leading to Tbilisi earlier planned as part of a month-long rolling protest against the government.

Gia Karkarashvili, a former Georgian minister of defence, alleged that the government had fabricated evidence of the coup.

“Georgia is today in the hands of sick people who write scenarios themselves, act in them and then shoot films and show them to scare society,” he said.

Eka Tkeshelashvili, head of the Georgian security council, said Russian opposition to the Nato military exercises was a “political overreaction”. She said the government was “very concerned” about the risk of a Russian provocation during the Nato exercises that could provoke unrest in Georgia.

Russia has built up its military presence in Georgia’s breakaway regions of South Ossetia and Abkhazia since the start of opposition protests last month and last week signed an agreement allowing it to take control of the region’s de facto borders with Georgia.

Dmitry Medvedev, the Russian president, said on Friday that the decision to go ahead with the exercises was wrong and dangerous.

”I want to specifically stress that responsibility for possible negative consequences of these decisions will fully rest on the shoulders of those who made them and carry them out,” he said.

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Torture video hits UAE nuclear deal

By Daniel Dombey in Washington and Andrew England in Abu Dhabi

Published: May 4 2009 20:05 | Last updated: May 4 2009 20:05

Torture allegations against a member the United Arab Emirates’ ruling family threaten to complicate a nuclear deal between the US and the Gulf state.

The Obama administration had been expected to send the civil nuclear deal to Congress in recent weeks. However, it already faced some US resistance because of the UAE’s role as a regional entrepôt and previous incidents in which US products that cannot legally be exported to Iran reached the Islamic republic via the UAE.

The emergence two weeks ago of a video showing a man alleged to be Sheikh Issa bin Zayed al-Nahyan – a half-brother of the UAE’s president – torturing an Afghan now deepens the problem of implementing the deal, which the two houses of Congress could block by passing a joint motion of disapproval.

The video – first broadcast by ABC – has been widely circulated to members of Congress and been condemned by Democrats and Republicans.

The allegations were made by Bassam Nabulsi, a US citizen and former business associate of the sheikh, who is suing him in the US over a separate business deal.

James McGovern, a Democratic Congressman, has already written to Hillary Clinton, secretary of state, asking the administration to “express the outrage of our nation” over the torture scenes. Mr McGovern also called for a “temporary hold ... on transfers of technology, including nuclear, to the UAE” until the matter was resolved.

‘There is much to be done before [the] UAE can be considered a model partner for a nuclear co-operation agreement with the US’
Ileana Ros-Lehtinen, House foreign affairs committee

Although legislative rules make it hard for Congress to block a deal if the administration is determined to push it through, the domestic debate on torture in the US has meant the allegations have surfaced at a sensitive time.

“You don’t want to look like you’re so agitated about waterboarding and then insensitive to this,” said one Congressional aide.

Congressional aides say the video has hardened resistance to the deal while not yet creating an overwhelming groundswell of opposition to it.

Ileana Ros-Lehtinen, the ranking Republican on the House foreign affairs committee, said she was “greatly disturbed” by the alleged torture, adding: “There is much to be done before [the] UAE can be considered a model partner for a nuclear co-operation agreement with the US.”

Last week, authorities in Abu Dhabi, the UAE’s capital, said they would conduct a “comprehensive review” of the incident.

Sheikh Issa has held no government office, but the incident has embarrassed officials in Abu Dhabi as they seek to transform the emirate into a model international city.

US administration officials insist the issues surrounding the nuclear agreement and the video are separate. They add the Obama team had placed the accord under review – like other foreign policy issues – before the video was circulated.

The agreement, which was negotiated by the Bush administration and signed by Condoleezza Rice, the former secretary of state, days before leaving office, is at the heart of US efforts to deter Middle East countries from developing wholly indigenous nuclear programmes.

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Arranged marriages thriving in Syria


Marriage-brokering services becoming increasing popular for men from Gulf, low-income Syrian women.


DAMASCUS - Abu Jamal sees himself to be a modern day matchmaker – for profit.

Abu Jamal, 40, who declined to give his real name, operates an unlicensed business which facilitates marriages between young Syrian women and much older men who travel from the Gulf states in search of foreign brides.

He said that the first marriage he helped to arrange was between Samira, a 22-year-old woman from the Damascus countryside, and a Saudi Arabian man almost 50 years her senior.

Samira’s parents came to him with a picture of their daughter and asked him to find her a wealthy husband, he said.

“[Then] a young man from Saudi Arabia came to me and said he wanted to find a fourth wife for his 73-year-old father,” said Abu Jamal.

“For 200 US dollars, I agreed to look for a girl who would suit him. The son liked Samira’s picture, and a week later, he and his father had filled out all of the necessary paperwork and performed a marriage ceremony so they could take the new bride home with them immediately.”

Marriage-brokering services are becoming increasing popular both for men from the Gulf as well as for low-income Syrian women, who hope that paying someone to find them a spouse will lift them out of a life of poverty, according to Abu Jamal.

Last year, the Saudi Arabian interior ministry announced that it had issued more than 6,600 permits for Saudis seeking to marry foreign women. The ministry pointed out that most of the applications for marriage licenses were from men seeking to wed Syrian women.

The procedure is straightforward, said Abu Jamal.

“The groom comes to my office in Damascus and we sit with the family of the girl he has picked out from my pictures,” he explained.

He added that during the meeting, the bride’s family will ask the groom about his religious beliefs and observe his manners and demeanour.

“Then an attorney, who is a Sharia law studies graduate, signs the contract. The next day, we register the contract in court and send it to the embassy of the groom’s country of origin to be processed.”

Arranging marriages can be a lucrative line of work.

Faris Suleiman al-Miqdad, who has a reputation as one of Syria’s leading matchmakers, said that every year, he marries about 50 Syrian women to Gulf men, mainly Saudis. He takes a commission from the groom of about 1,500 to 5,000 Saudi riyals or about 300 to 1,300 US dollars.

Al-Miqdad, from the Dara province in southern Syria, said he receives calls from Gulf men and notes down their description and qualifications. He then provides them with the details of some young women, although without showing them pictures, in order to “protect the honour of these girls”.

“I will typically pick ten homes for a potential groom to visit in different provinces,” he said, adding that he tends to find marriageable women in rural rather than urban areas, including the countryside around Dara, Damascus, Homs, Hamat, and Aleppo.

Al-Miqdad said his motivation was “to eliminate irreligious practices such as adultery and spinsterhood”.

In Syria, there is stigma attached to women who stay single.

Roughly 25 per cent of Syrian women are unmarried, according to the national statistical agency.

Wisal, a 29-year-old dentist in Damascus, said she married a Saudi doctor whom she met through a matchmaker to avoid this stigma.

“I am past the normal marrying age in my country,” she said.

She said matchmaking offices provided a valuable service for women.

“I think they make things easier for girls in Syria. They discourage them from having irreligious relationships,” said Wisal.

Like Abu Jamal, Ahmed al-Barqawi, a philosophy and sociology professor at Damascus university, said poverty was another factor motivating families who agree to find foreign grooms for their daughters.

“With our economy the way it is now, I think many young women are looking for a way to leave the country and find financial security elsewhere.

“Marrying a Gulf man and moving to his country is an easy way to make this happen,” he said.

However, he also pointed out that marriages brokered by matchmakers are not always meant to last.

Al-Barqawi explained that some were only temporary arrangements, in which the bride received a sum of money in return for spending time with the man.

In Syria, it is relatively easy to get a divorce.

“The phenomenon [of temporary marriages] often reaches a peak during the summer months, when men from Gulf states travel to Syria on holidays,” said Al-Barqawi.

While many consider these short-term marriage arrangements to be immoral and contrary to the precepts of Islam, the matchmakers who facilitate them argue that having a sexual relationship outside marriage is far worse.

Meanwhile, others warn that Syrian brides are sometimes duped into thinking that they are entering into a permanent marriage when the man has other intentions.

Damascus-based analyst Dr Mohamed Hussein pointed to the experience of 19-year-old Wafa, who grew up in the Damascus countryside and experienced firsthand the downsides of a brief marriage.

“Her Saudi ex-husband married her for two months during his summer vacation in Syria through a matchmaking office,” said Hussein. “He then divorced her, leaving her pregnant and with very few options.”

Hussein called for regulations to be introduced to protect Syrian women.

“There should be a law banning Syrian women from marrying Gulf men without specific preconditions,” he said.

Damascus-based attorney Kinda al-Shammat said that match-making services were not held liable for arranging such marriages, because they can usually produce a marriage certificate to show that the procedure was legal.

He said that there would be too much opposition to any initiative to introduce licensing procedures – both from the authorities, and from matchmaking services themselves.

“The government doesn’t want to officially condone matchmaking [by establishing licensing procedures] because of these cases of short-term marriages, which would be akin to state-sponsored prostitution,” he said.

“And matchmakers don’t want to be licensed for the same reason – a fear they could be held legally responsible for such arrangements.”

Yet Al-Shammat said that something should be done to prevent women being exploited in such arrangements.

“There needs to be a campaign to raise awareness in schools, universities, public places and poor neighborhoods to warn against the dangers of this kind of marriage,” he said.

“Otherwise, women will be tricked into entering relations with men under the pretext of marriage, while these so-called matchmakers… cash in.”


First Published 2009-04-16