Fears over US sovereign debts unfounded

Fears over US sovereign debts unfounded

By Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ

Published: June 11 2009 18:35 | Last updated: June 11 2009 18:35

Fears of a crisis of confidence in the US sovereign debt market – and a subsequent dollar collapse – are unfounded, says Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ.

He acknowledges that concerns over the scale of US debt supply have been exacerbated by moves from some central banks to diversify out of US fixed income investments and into IMF bonds denominated in special drawing rights.

“However, this shouldn’t mask the reality, which is that foreign official institutions are buying more – not less – dollar denominated assets.”

Mr Halpenny notes the indirect bid at Wednesday’s Treasury auction of 10-year paper, a measure of foreign interest, was a healthy 34.2 per cent. He also says foreign exchange reserves are on the rise across Asia.

“Since the dollar began falling in April, the total increase in FX reserves held by the top eight Asian FX holders, ex-Japan and China, has been $70bn.”

But it is China’s dollar buying that has been most impressive.

“Since the collapse of Lehman Brothers, China has bought $171bn of US T-bills – 58 per cent of the total purchased by foreign official entities. March saw China buy $14.8bn of Treasuries, the second biggest ever monthly total.

“Instead of selling dollars, it appears foreign central banks are upping their holdings, which will ensure that talk of a dollar plunge remains just that.”

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天台座主：高野山を公式訪問　平安時代以降初
歓談後、笑顔で握手を交わす金剛峯寺の松長有慶座主（左）と天台宗の半田孝淳座主＝和歌山県高野町で２００９年６月１５日午後０時２０分、大西岳彦撮影
歓談後、笑顔で握手を交わす金剛峯寺の松長有慶座主（左）と天台宗の半田孝淳座主＝和歌山県高野町で２００９年６月１５日午後０時２０分、大西岳彦撮影

　天台宗（総本山・比叡山延暦寺＝大津市）の半田孝淳座主が１５日、高野山真言宗総本山金剛峯寺（和歌山県高野町）で営まれた「弘法大師降誕会」の法会に参列した。０５年の比叡山開創１２００年法要に当時の資延敏雄・金剛峯寺座主が比叡山を訪れているが、天台座主の公式訪問は平安時代以降初めてという。宗教協力の催しなどを通じ、金剛峯寺の松長有慶座主と半田座主が交流を深めたのがきっかけで実現した。

　高野山内の住職や信者ら約５００人が参列し、大師教会本部大講堂で営まれた法会で、両座主はともに一段高い内陣へ。弘法大師の稚児大師像に甘茶を掛ける作法を行った。その後、天台宗の一行は奥の院の弘法大師御廟（ごびょう）に参拝した。

　高野山真言宗は、通常「宗祖降誕会」と呼ぶ法会を、「宗祖は天台宗にもいる」と配慮して、この日は「弘法大師降誕会」と呼び変えた。両宗祖の空海と最澄は、唐（中国）で密教を学んだよきライバル。晩年は交流が途絶えたとされるが、天台宗務庁は「近世でも天台の僧が高野山で学ぶなど人的交流があると認識している」という。高野山真言宗宗務所は「今後も交流を深めていきたい」と話している。

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Czechs face painful spending cuts, warns PM

By Jan Cienski and Tony Barber in Prague

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

The Czech Republic needs to make hard and painful cuts in spending if it is to rebound swiftly from the economic downturn, Jan Fischer, the prime minister, has warned.

The Czech Republic's finances are on an unsustainable path because of high levels of fixed spending, which unless corrected could hurt the chances of emerging swiftly from the economic downturn and delay entry into the euro, Mr Fischer says in an interview with the Financial Times.

"In the current economic situation we are suffering from a shortage of revenues. The biggest problem in closing the gap is compulsory expenditures, which account for about 80 per cent of the budget, much of that made up of generous social benefits," says Mr Fischer, a non-party technocrat.

"The government has a very limited manoeuvring space when it comes to the budget."

The Czech economy has slowed sharply owing in large part to a slump in exports to western Europe, particularly Germany.

The economy is open, with exports accounting for 70 per cent of gross domestic product. The finance ministry expects a contraction of 2.3 per cent for the year.

Last week Mr Fischer presented a three-year budget outlook that calls for spending cuts in all areas except for social payments and debt financing; the goal is for the shortfall not to exceed 170bn korunas ($8.9bn, €6.4bn, £5.4bn), or 5 per cent of GDP.

However, the finance ministry expects the deficit next year to be 5.1 per cent, compared with 4.5 per cent this year and only 1.5 per cent a year ago.

Revenues are expected to be 84bn korunas lower than foreseen in the budget.

"To be really stringent and conservative is going to be hard, it's going to be painful," says Mr Fischer, the former head of the Czech statistical agency who was selected as a consensus candidate for prime minister by the two leading parties after the unexpected fall of the centre-right Civic Democratic party government of Mirek Topolanek in March.

"If we allow the increase of our deficit, and our deficit goes to 7 per cent or even more, that would be really irresponsible, and this could . . . at least complicate our exit from the economic crisis," he says. Mr Fischer's government will present a budget in September, and final approval is likely after early parliamentary elections in October.

"I'm telling the politicians very clearly, it is up to you to begin the debate into the nature of expenditures, because from the long-term perspective this is not the way to go," says Mr Fischer. "This is a message to the politicians who will later administer the country."

The cuts being proposed by the non-partisan government are unlikely to be popular, but will probably stick after the elections because the new administration would be loath to let spending spin out of control, says Kamil Janacek, chief economist at Komercni Banka, a subsidiary of France's Société Générale.

"Both the big parties are prepared to let this interim government do the dirty work, which is to prepare a very austere budget," he says. Even keeping the deficit under 5 per cent of GDP is likely to mean the date of Czech entry into the eurozone will go back, admits Mr Fischer, the first realistic date being after 2015.

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Troubled Saudi group seeks talks with creditors

By Andrew England in Abu Dhabi and Patrick Jenkins in,London

Published: June 13 2009 03:00 | Last updated: June 13 2009 03:00

The troubled Saudi group owned by Maan al-Sanea is seeking talks with creditors in the UK and the Middle East as early as next week as it looks to restructure its debt.

In a letter sent to banks this week, Saad Group acknowledged the seriousness of the position of its companies and that some accounts have been frozen, bankers said.

An executive at one bank that had received the letter in the UK said meetings were now being arranged for next week. "We are 95 per cent sure that all creditors got this letter," he said.

The group's problems emerged after the Saudi central bank froze the personal accounts of Mr Sanea, who is one of the kingdom's most powerful businessmen. Bankers say the group, which had assets of $30.6bn at the end of 2008 according to rating agencies, has exposure to dozens of regional and international banks. Some western banks have already started closing credit lines.

This week, Citigroup and Credit Suisse placed at least 20m of Mr Sanea's 32m shares in Berkeley, the UK housebuilder, while shares he owns in 3i infrastructure have also been sold.

Mr Sanea, who set up Saad Group in the 1980s, also bought about 3 per cent of HSBC two years ago, but his holding in the bank has slipped to less than 2 per cent since the beginning of the year.

The proposed creditor meeting in London relates to Saad Investments Company Ltd (SICL), a Cayman Islands-based entity owned by Mr Sanea that had assets of $9bn at the end of 2008. Similar meetings are proposed in Saudi Arabia for creditors of Saad Trading Contracting and Financial Services (STCFS), which had assets of $14bn at the end of 2008, as well as in Bahrain, where Saad Group owns Awal Bank.

A regional banker, who has seen the letter issued by Saad Group, said that at least the company was providing statements to banks.

Amid concerns about regional banks' exposure to the group, the United Arab Emirates' central bank issued a circular this week telling financial companies: "You may set off your exposure against available assets in their names subject to your legal documentation."

The rare action related to Mr Sanea, STCFS and entities owned by another powerful Saudi family, Algosaibi Trading Services Ltd and Ahmad Hamad Algosaibi and Brothers (AHAB). The central bank memo, seen by the Financial Times, also ordered banks "not to allow any new facilities of the captioned groups till further instructions".

The region has a reputation for a lack of transparency and both Moody's and Standard & Poor's have withdrawn their ratings from Saad Group in part because of insufficient information.

"There's always a lot of gossip and rumours about the nature of his (Mr Sanea's) business, it was never clear where was the source of his funds," says another regional banker.

People who know Mr Sanea trace his rise to connections to the Algosaibi family, regarded as one of the most respected, merchant families in the kingdom. The family-controlled company, AHAB, is itself in talks with creditors as it seeks to restructure its debt. Mr Sanea worked for the family and married the daughter of Abdelaziz Algosaibi, one of AHAB's founders. But Saad Group has said there are no business ties with AHAB, "except on an arms' length commercial basis".

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Focus on image excises a fondness for tax havens

By Vanessa Houlder

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

Achange of address often sends a message. For the handful of multinationals leaving offshore tax centres, the message is that they do not want to be associated with them, however reputable they may be.

When Accenture, the consulting group, announced plans last month to move its domicile from Bermuda to Dublin, the company said fears of a US government crackdown that could lead to higher taxes and compromise its ability to win public sector contracts, were among the reasons. Its regulatory statement said: "Continued criticism of and negative publicity regarding companies that are incorporated in countries that do not have tax treaties with the US, including Bermuda, could adversely affect us."

Such moves are a sign of how far tax has become a reputational issue for big business. "This perception thing is becoming more and more important," says Patrick Stevens, a tax partner at Ernst & Young, the professional services firm. "There are a lot of business people who are hugely more bothered about it than they were 12 months ago."

The election of President Barack Obama, who has repeatedly slammed the widespread use of tax havens by US businesses as "the biggest tax scam in the world", has had a powerful influence on perceptions.

So too have the negative headlines about bonuses and corporate malfeasance associated with the credit crunch, which have made many companies more sensitive about their image.

The recession has also stiffened the resolve of tax authorities. Pravin Gordhan, South Africa's finance minister, recently described aggressive avoidance as a "cancer", saying corporate social responsibility was taking on "a new meaning".

"If we want governments to take on the role of guarantor of last resort, which is what they have done, they require the fiscal capability to be able to do so," he said.

Even within the business world, there is a view that some companies have been overstepping the mark. Chris Spooner, a senior executive at HSBC, has long criticised the artificial approach to tax adopted by some companies, particularly in banking. "It doesn't make sense," he says. "It's a red rag to a bull [for the tax authorities] and it ruins the world for the rest of us."

One response from governments is to foster a climate of self-restraint. Reuven Avi-Yonah, an international tax specialist at the University of Michigan, says cultural attitudes towards tax are hugely important in securing voluntary compliance. "The US is far more successful in collecting the taxes due than countries like Italy . . . which do not see a patriotic duty in paying taxes," he says.

More generally, corporate attitudes to tax have shifted in line with broader business trends. Until the 1990s, companies saw paying taxes as part of their "general responsibility to society". But that changed, says Prof Avi-Yonah, as "shareholder profit maximisation [became] the sole legitimate goal of corporate activity".

One obvious problem of aggressive tax avoidance, he adds, is that governments are left with insufficient revenues to spend on

the infrastructure that businesses need. Another consequence is that it creates a higher risk of challenge by revenue authorities, as well as a general souring of the relationship between business and government.

Public disapproval is also important, particularly for household brands. This factor may be growing in importance as some pressure groups, politicians and unions are spoiling for a fight over tax avoidance. Tax, they argue, should be at the heart of the social contract between business and the rest of society.

Still, according to Judith Freedman of the Oxford University Centre for Business Taxation, a moral climate is only part of the answer. She advocates using a legal concept, "a general anti-avoidance rule" to tackle the issue.

"There is a subtle change in the way companies are concerned about reputation," she says, "but I am not sure it will solve the problem.

"Of course, companies should pay their fair share of tax. But there is no other norm to set that level other than the law."

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New York broker moves to sell Iraqi securities

By Anuj Gangahar in New York

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

The rebuilding of Iraq's capital markets is set for a boost as Auerbach Grayson, a New York-based brokerage, becomes the first international company to sell Iraqi securities since the 2003 invasion.

Auerbach Grayson has signed an agreement with Rabee Securities, a Baghdad brokerage, through which it will provide research, trade execution and intelligence on companies traded on the Iraq Stock Exchange to US institutional investors.

Rabee is run by Shwan Ibrahim Taha, a former senior fund manager with Templeton Asset Management who also once ran a hedge fund for George Soros.

The deal comes five years after the Iraq Stock Exchange reopened, initially in a restaurant, after its predecessor, the Baghdad Stock Exchange, was dissolved and subsequently occupied by squatters following the invasion of Iraq by US and Allied forces.

Currently, the combined market capitalisation of the 94 companies listed on the Iraq Stock Exchange is $3bn and the average trading volume is about $10m per week.

The ISE, using its OMX system, developed by the Nasdaq OMX group, plans to be fully electronic by the end of this month. The banking sector comprises 60 per cent of the exchange's market capitalisation. Weekly trading volumes have tripled in the past year.

Auerbach Grayson specialises solely in the sale of foreign securities. David Grayson, co-founder, said that, in spite of the poor global economy in recent times, many clients have been coming back into "frontier markets" that have yet to achieve "emerging market" status.

"Iraq is in the headlines so often in a negative light that the perception is that it is not possible to do business there. But there are many investors who will perceive Iraq as very interesting.

"There will be cheaply valued companies and the economy will grow at a faster rate that other markets," he said.

The ISE's progress towards electronic trading potentially makes it more attractive to large institutions.

Mr Taha said there were several misconceptions about doing business in Iraq. "Actually the laws with respect to capital markets are liberal compared to the countries nearby," he said. "But the problems have been logistics and security."

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Serco wins £245m Dubai airports deal

By David Fickling

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

Support services group Serco has won a 10-year, £245m contract to provide air traffic control at Dubai's airports. The emirate is attempting to transform itself into the world's biggest airport hub.

Dubai Airport is already the world's 11th-busiest cargo airport and 20th-biggest in terms of passengers carried. Maktoum Airport, a new facility under construction in the desert south-east of the city, is projected to become the world's busiest when it is completed in 2017, with a capacity of 160m passengers. Atlanta, the world's busiest passenger hub, has a capacity of 90m passengers.

There have been fears that Maktoum would be abandoned after the tightening of credit caused a sharp downturn in Dubai's construction sector last autumn. But Dubai Airports says the first terminal at the site, with a capacity of 7m-9m passengers, is on schedule to open next June, though details of the remaining facilities are still being finalised.

The contract, to be announced today, will cover radar services in and around the airport and will give Serco a role in designing the layout of Dubai's airspace routes.

Serco's background is in radar services - the group grew from a 1987 management buy-out of the Radio Corporation of America's UK arm, which has held contracts for the maintenance of RAF Fylingdales' ballistic missile early warning station in north Yorkshire for almost 50 years.

It also provides air traffic control services in Bahrain, where RCA UK signed its first contract in 1947, in Abu Dhabi, and in the smaller emirates of Sharjah and Ras al Khaimah.

Serco's most ambitious attempt to expand into air traffic control fell apart in 2001 after it lost a tender to be the minority partner in the UK's part-privatised National Air Traffic Services, following heavy campaigning by unions. The company wrote off £10.2m spent preparing the bid, which went to a consortium of BAA and UK airlines.

The group has signed £1bn worth of new contracts since the stat of the year and been appointed preferred bidder for a further £750m.

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「第２の西松事件」か…郵便制度悪用事件に民主警戒

　郵便制度悪用事件で大阪地検特捜部は１５日午前、東京・霞が関の厚生労働省と、同省雇用均等・児童家庭局長の村木厚子容疑者（５３）＝虚偽有印公文書作成・同行使容疑で逮捕＝の埼玉県和光市の自宅マンションを家宅捜索した。同省への捜索は２度目。同事件では、民主党議員の名前も浮上しており、民主党は「第２の西松事件に発展するのでは」と警戒している。

　村木容疑者は、同省障害保健福祉部企画課長だった２００４年６月、障害者団体「凛（りん）の会」（現・白山会）が、割引制度の適用条件を満たしていないのに、部下の同課係長、上村勉容疑者（３９）に企画課長の公印を押した虚偽の証明書を作成させた疑いが持たれている。

　捜査関係者によると、村木容疑者の上司だった当時の障害保健福祉部長（５７）は、虚偽の証明書発行について、任意聴取に「０４年２月ごろ、国会議員から電話で頼まれた」と証言しており、特捜部は「政治案件」として組織的に便宜が図られていたとみて経緯を調べる。

　特捜部はまた、「凛の会」代表の倉沢邦夫（７３）＝郵便法違反罪で起訴＝、同会発起人の河野克史（６８）両容疑者を同容疑で再逮捕した。

　関係者によると、上村容疑者はこれまでの調べに証明書の偽造を認めたうえで、「村木容疑者に手渡した」といい、虚偽の証明書を郵便事業会社（日本郵便）に提出した倉沢容疑者も「村木容疑者から証明書を受け取った」と供述している。

　村木容疑者は「全く知らない」と否認しているという。

　倉沢容疑者は、かつて民主党の石井一副代表の私設秘書を務めていたうえ、白山会会長側は同党の牧義夫衆院議員側に２４万円を献金していた。

　このため、民主党幹部は「民主党議員が関係者として実名で報道されているのは知っている。常識的には、特捜部も総選挙前には（政界ルートに）動かないだろう。ただ、西松事件の前科がある。ここまで内閣支持率が下落すると、政権維持のために禁じ手に踏み込む可能性もゼロとはいえないかもしれない」と警戒している。

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高遠さんにイラク住民「お帰りなさい」　拘束から５年、初訪問
2009.6.12 17:57

　２００４年４月にイラク武装勢力に拘束された北海道千歳市のボランティア、高遠菜穂子さん（３９）が事件後初めて５年ぶりにイラクを訪れ、帰国した。「知られていない虐殺現場がいっぱいあった。現状を伝えたい」と話す。

　高遠さんは今年４月、ジャーナリスト２人と中部ファルージャなどで病院や避難民地区を９日間訪問。「事件を思い出して緊張し、初めは車から外に出られなかった」が、住民は「お帰りなさい」と迎えてくれたという。避難民は郊外のバラックやテントで生活。地域間で支援に差があり設備や医師が不足する病院や、世界不況で寄付が少ないと嘆く支援者も。「医師の研修や避難民支援などできることを続けたい」

　事件後は「バッシングがつらかった」。帰国後に体調を崩したが、ヨルダンを拠点に医療品などの物資を送るなど活動。「死者の無念を伝えなくては」と各地で報告会を開いている。