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 5. TRADE  6. GULF



Oct 15 - 21, 2001

Sept 11 attacks to cost world economy $350bn

Last month attacks on the United States would siphon $350 billion out of the world's economy this year, impacting the developing countries in South East Asia the hardest, the United Nations said on Wednesday.

A survey of its global outlook for 2001 released by UN Economic and Social Affairs department said that the attacks exacerbated an already gloomy outlook and will reverberate throughout the world for months to come.

The attacks, which came as the world economy was already weakening, will trim world growth this year by a full per centage point, to 1.4 per cent from a previously forecast of 2.4 per cent, said Ian Kinniburg, Director of UN Development of Policy Analysis while introducing the report.

That means a $350 billion shortfall, compared to earlier forecasts, for the $35 trillion world economy, he said. Kinniburg said the world's poor nations would inevitably suffer the most from the slowdown, as wealthy nations are always in a better position to cope with hard times.

"These hiccups have profound effects on growth in the developing countries," he said. He also attributed the sharply changed outlook to the attacks' devastating blow to the financial sector, a general disruption in economic activity, declining consumer and business confidence and the cost of new security measures, which are costly yet contribute nothing to productivity. The growth of world gross product is expected to be only 1.4 per cent for 2001, with only a partial recovery to 2 per cent next year.

"The world economy was already in a state of slowdown," said Kinniburgh. He said the events of September 11 "came at a very unfortunate time." Acknowledging that the full economic repercussions of the September 11 attacks remain unknown, the report assesses the possible consequences by examining a range of factors.

U.S. House panel backs $100 bln tax cut for business

The tax-writing committee of the House of Representatives approved, on a party-line vote, a $100 billion economic stimulus bill that would eliminate the corporate alternative minimum tax, change depreciation rules to encourage business investment and cut the capital gains tax rate.

The House Ways and Means Committee voted 23-14 for the bill, after a daylong debate in which Democrats and Republicans blamed each other for the breakdown of bipartisan negotiations.

Democrats said several provisions, such as a $21 billion international tax break for global financial companies such as Citigroup Inc. and American International Group Inc., won't stimulate the economy quickly.

The bill's sponsor, Republican Chairman Bill Thomas, disagreed, saying the bill is "big enough to make a difference.''

Thomas's bill builds on proposals by President George W. Bush, which aims to boost investment by businesses and individuals while also offering aid for low-income workers.

EU trade chief optimistic about new round

European Union trade chief Pascal Lamy has a vital message for a meeting of World Trade Organization members in Singapore this weekend: start new tariff-slashing negotiations now to stop a slide into global recession.

"Launching a new global trade round is basically good news for the world economy, and the world economy today needs good news," Lamy told before leaving for Singapore to attend the meeting of 18 leading WTO players, including Pakistan.

The weekend encounter, the second time that WTO members have convened for an informal 'mini-ministerial' session in recent months, will strive to prepare the ground for the agency's third ministerial meeting in Doha, Qatar, in mid-November.

Lamy, an avid campaigner for a new trade round ever since the failed WTO meeting in December 1999, insists that prospects for kick-starting new global trade-expanding negotiations in Doha are brighter than in past months, with many developing nations now convinced of the need for new talks.

"I can feel the momentum building up in Geneva and in world capitals," said Lamy. "We have moved to the right side of the mountain." For starters, WTO members had learned some key lessons after Seattle on the need to address the concerns of developing nations, the EU trade chief said. "We now have a process, which is much more transparent involving a large number of countries. There is much more active consultation among members and this is very important because everyone feels on board."

Also, the negotiating "spirit" had now changed, with countries in a less confrontational mood, Lamy underlined. "People are asking each other how can I address your concern rather than adopting a mercantilist approach. We now have an inclusive process where people understand each other better."

"I would like Singapore to continue this process so that we can address our differences in a positive way," he added.

S&P 500 falls, Nasdaq rises

The Standard & Poor's 500 Index fell for the first time in three days as a drop in profits at credit-card company Providian Financial Corp. heightened concern more consumers will default on loans.

The S&P 500 dropped 5.78, or 0.5 per cent, to 1091.65, with declines in eight of its 11 industry groups. For the week, the index rose 1.9 per cent.

The Dow Jones Industrial Average shed 66.29, or 0.7 per cent, to 9344.16. It gained 2.5 per cent this week.

The Nasdaq advanced 1.93, or 0.1 per cent, to 1703.40, bringing its gain this week to 6.1 per cent.

Each of the benchmark indexes has risen in the past three weeks, the first time that's happened in more than a year. With the gains, the Nasdaq has climbed 0.5 per cent above its level prior to the Sept. 11 terrorist attacks.

The S&P 500 has fallen 0.1 per cent below its pre-attack close, and the Dow has declined 2.7 per cent lower than it was on Sept. 10.

Uzbekistan, US reach agreement on bases

The United States and Uzbekistan on Friday said they had reached a formal counter-terrorism agreement that will allow US troops and warplanes to use Uzbek airspace and military bases.

The announcement of the pact, which also pledges "urgent" security talks if Uzbekistan faces direct threats, came as the Taliban said it had deployed thousands of troops to its border with the former Soviet republic. In a joint statement released simultaneously in Washington and Tashkent, the United States and Uzbekistan said they had committed themselves "to eliminate international terrorism and its infrastructure".

"For these purposes, the Republic of Uzbekistan has agreed to provide the use of its airspace and necessary military and civilian infrastructure of one of its airports, which would be used in the first instance for humanitarian purpose," the statement said.

The statement said the formal agreement had been reached on Oct 7, the same day the United States and Britain launched airstrikes against Afghanistan. Uzbekistan last week agreed to fully cooperate in the US-led war during a visit there by US Defence Secretary Donald Rumsfeld.

The State Department said the counter-terrorism agreement announced on Friday was separate from the verbal deal reached between Rumsfeld and Uzbek President Islam Karimov. "Our two governments have decided to establish a qualitatively new relationship based on a long-term commitment to advance security and regional stability," the statement said.

"This includes the need to consult on an urgent basis about appropriate steps to address the situation in the event of a direct threat to the security or territorial integrity of the Republic of Uzbekistan," it said.

A State Department official said the agreement should not be regarded as a mutual defence pact or formal treaty but was intended to cement counter-terrorism cooperation. After Rumsfeld's visit, Uzbekistan, which shares a 137-kilometre border with Afghanistan, opened a military base to the United States and an advance party of 1,000 US combat troops deployed there at the weekend.

Dollar higher against yen

The dollar shed earlier gains in afternoon trading on Wednesday after facing strong resistance around the 120.70-yen level, dealers said. The greenback traded at 120.47-49 in Tokyo Wednesday against 120.12 yen in New York and 120.10-13 yen in Tokyo late Tuesday.

Earlier in the day, the dollar climbed steadily to a high of 120.58 yen. In the morning hours, those who had sold the dollar bought back the currency because it hadn't fallen that much (despite the US-led strikes in Afghanistan), said Kazuhiro Kaneko, foreign exchange dealer at Mizuho Trust Bank.

In the afternoon the (dollar) tried 120.70 yen, but it faced massive sell orders around that level and was unable to break through the resistance, he said. Investors then turned sellers pushing the dollar down against the yen, Kaneko said, adding it was likely to remain in its current range for the time being. However Asahi Bank trader Nobuaki Tani said the US currency would continue to suffer the negative impact of last month's terrorist attacks in the US.

3 Americans win Nobel Economics Prize

Three Americans won the Nobel Economics Prize for advances in ways to analyse markets that can be applied to both developing and advanced economies.

George A Akerlof, 61, of the University of California at Berkeley, A Michael Spence, 58, of Stanford University and Joseph E Stiglitz, 58, of Columbia University will share the 10 million kronor (943,000 dollar) award.

They were cited "for their analyses of markets with asymmetric information," referring to the fact that some market players have better information than others.

Annan, UN share Nobel Peace Prize

The United Nations and Secretary-General Kofi Annan won the centenary Nobel Peace Prize on Friday for working for "a better organized and more peaceful world" in tackling challenges from poverty to terrorism.

"The Norwegian Nobel Committee wishes in its centenary year to proclaim that the only negotiable route to global peace and cooperation goes by way of the United Nations," committee leader Gunnar Berge said. The first Nobel Prize was awarded in 1901.

WFP does not have enough funds

The World Food Programme (WFP) does not have nearly enough aid in place in Afghanistan to feed the seven million people it fears are in dire need of help, the organization's number two said on Thursday.

WFP deputy executive director Jean-Jacques Graisse told reporters at the Foreign Correspondents Club that the organization was far from "the level we will have to reach"."Our present capacities indicate we can move 15,000 to 20,000 metric tons in the immediate future," he said. "But to meet the necessities it would mean distributing over 50,000 metric tons mostly inside Afghanistan, because with winter coming people will go hungry and cold," he said. "They will need to get food."

Graisse, a Belgian, added the WFP had initially envisaged providing enough aid for six million people inside Afghanistan this winter, as well as a further 1.5 million refugees who could flood into Pakistan and Iran.

NY cotton futures mixed

NY cotton futures closed mixed on Thursday in mostly spread activity as players completed adjusting their positions in front of a pair of USDA reports on Friday.

It's just a little bit of pre-report positioning, John Flanagan, president of brokers Flanagan Trading Corp. in North Carolina, said. December cotton slipped 0.15 cent to close at 32.17 cents a lb, trading between 32.10 and 32.80 cents.

March shed 0.16 cent to finish at 33.72 cents. Distant months were 0.05 cent softer to 0.10 cent firmer. Brokers said the bulk of activity was largely made up of spreads, with only small amounts of speculative interest and trade pressure seen in the market.

The vast majority of activity has been spreads, said Joe Carney, analyst for brokers STA Trading Services in Memphis, Tennessee. Locals ran out the door going into the close after failing to carve out any headway north, dealers said. Analysts said some market operators were looking to the release of the monthly USDA production report and the weekly USDA export sales data, all of which are being released on Friday.

V S Naipaul wins Nobel prize for literature

SIR Vidia Naipaul, who failed to make the shortlist for next week's Booker prize, won a far bigger laurel: the Nobel prize for literature, worth 650,000. He joins a pantheon that includes Sartre, Beckett, Kipling, Steinbeck and Solzhenitsyn. The last British winner was William Golding in 1983.

Ashikaga Bank expects affirmative votes from govt

Ashikaga Bank believes the government would not attempt to challenge its management even if it obtains voting rights at shareholders' meetings, the president of the regional bank said in a recent interview.

''Our restructuring program is going smoothly, which naturally makes me believe that the government would cast affirmative votes (to proposals submitted by the management),'' Shin Iizuka told Kyodo News.

In August, the Tochigi Prefecture-based bank warned it is likely to suspend payment of dividends on preferred stocks held by the government the first such decision by any Japanese bank receiving government capital injections for the current fiscal year ending next March 31.

Ex-Tokyo Shogin head spent 250 mil. yen on stocks

The former chief of the failed credit union Tokyo Shogin spent about 250 million yen purchasing stocks under the direction of the head of a group of companies receiving many loans from the credit union, sources close to the case said Saturday.

Kim Song Jun, 52, had been receiving advice from Masuo Taneda, 64, on stocks favored by speculators.

Both men are involved in breach of trust and embezzlement cases related to the failed credit union that mainly served pro-Seoul Koreans residents in Japan.

Kim spent about 250 million yen since March 1999 on such stocks using money funneled from the accounts of Tokyo Shogin.

Xenophobia grips Europe

The hateful phrase "Avenge USA - kill a Muslim now" might appeal only to a few extremists in the north of England, where it was spray painted near a mosque shortly after the attacks on New York and Washington. But, in the wake of the September 11 tragedy, the graffiti illustrates a swelling mood of xenophobia in Europe and beyond, claim immigrant groups and activists.

And, although governments say they are doing their best to curb such sentiment, the steps some are taking to tighten their immigration policies are not helping, the activists complain.

"In the name of fighting 'international terrorism,' governments have rushed to introduce Draconian new measures that threaten the human rights of their own citizens, immigrants, and refugees," Amnesty International said in a report last week. But government officials say these efforts aren't driven by xenophobia. They are simply enforcing existing laws in order to ensure public safety.

Intense strikes rock Afghanistan (Picture International

The Taliban stronghold of Kandahar came under its most intense attack yet on Thursday morning, triggering panic among civilians, a CNN source reported.