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 5. TRADE  6. GULF



Feb-25 - Mar- 10, 2002

Singapore admits worst ever recession

Is the worst over for stock markets? Singapore fell into its worst ever recession in 2001.

The economy shrank by 2% during the year, according to new data released by the Ministry of Trade and Industry.

This is the worst performance since independence in 1965 and stands in stark contrast to the robust growth of 10.3% recorded the previous year.

Singapore's economy is driven by exports and has been especially hard hit by the global economic slowdown.

"External demand was the major drag on growth, hit by weaker global economic conditions and persistent electronics slump," the trade ministry said in a statement.

Despite the weak data, there are signs that the worst is over and that a recovery is already on the way.

During the last three months of the year, the economy shrank 6.6% a better performance than had been expected.

And the government is forecasting that things will pick up by the second half of the year, pulling the economy back into positive territory for the year as a whole.

On Wednesday, chairman of the Federal Reserve Alan Greenspan forecast growth of 2.5-3% during 2002 in the US, Singapore's prime export market.

But unemployment which is already at a 15 year high is set to worsen, the government warned.

Minister of State for Manpower Ng Eng Hen has warned the jobless rate may hit 6% before the economy recovers.

The poor performance of 2001 is basically down to the manufacturing sector.

Manufacturing - the engine-room of Singapore's economy contracted by 12% compared to growth of 15% in 2000.

But the latest figures for January ended nine consecutive months of decline in the sector.

Japan economic plan gets short shrift

The Japanese government's keenly-awaited plan to tackle deflation has been dismissed as "clearly insufficient" by the ruling Liberal Democratic Party's top policy researcher.

The government said it would stabilise the financial system and was willing, if necessary, to inject extra capital into the banking system.

But the document offered little in the way of firm detail and served more to confirm that no big steps were being contemplated before April.

Taro Aso, head of the LDP's Policy Research Council, described it as an ineffective stop-gap.

Final day for euro changeover

Two months after it was introduced as a cash currency on 1 January 2002, the euro will finally become the sole legal currency in the 12 countries in the eurozone.

France, Ireland, and the Netherlands have already abandoned their national currencies, while the remaining nine countries will say farewell to their national notes and coins.

Euro notes and coins have already received widespread acceptance by the 300 million citizens of the eurozone, with the vast bulk of transactions taking place using the new notes and coins by the end of the first week of January.

The rapid and smooth transition and the successful logistical operation involving the transfer of billions of euro notes and coins to banks, retail stores, and vending machines is a boost for the European Central Bank (ECB), which masterminded the operation.

And it has given hope to those, like ECB president Wim Duisenberg, who see the euro as a broader symbol of the drive towards greater European economic and political integration.

The fact that fears of many euro sceptics over counterfeiting, price inflation, and the cost and confusion of the changeover were not realised, has also given heart to those who favour membership of the single currency in the three countries that are not members, the United Kingdom, Denmark, and Sweden.

However, the change has not been costless, with banks and stores bearing large one-off costs of converting their cash registers and accounting systems to the new currency.

And consumer groups claimed that some retailers did round prices upwards, with inflation ticking up slightly in January something that could also have been caused by a large amount of illicit cash re-entering the financial system.

German recession confirmed

The German economy is officially in recession, according to official figures which have confirmed two successive quarters of contraction.

Gross domestic product (GDP) shrank 0.3% in the last three months of 2001, following a 0.2% fall between July and September.

The numbers, which were worse than many economists had expected, also showed that in December Germany's economy was 0.1% smaller than it had been in December 2000.

On a seasonally adjusted basis, growth was zero for 2001, the Federal Statistics Office said.

The Statistics Office also said that the budget deficit in 2001 was 2.7% of GDP, up from previous estimates of 2.6% and edging dangerously close to the 3% ceiling imposed by eurozone rules.

US economy shows surprise strength

The US economy grew at a much faster rate than previously thought during the last three months of 2001.

The latest figures show that exceptionally strong consumer spending propelled the economy to grow at an annual rate of 1.4%.

That is a dramatic upward revision from preliminary estimates of 0.2% growth and far exceeds most economist forecasts.

It is the strongest quarterly gain for the year and supports the belief that the US economy has already turned the corner.

While most analysts now agree that the US economy is past the worst, many are unsure as to the depth and speed of the recovery.

The growth of 1.4% during the last quarter is a dramatic change of fortune from the 1.3% contraction suffered during the previous three months.

The strong news has led some analysts to question the caution of Federal Reserve chairman Alan Greenspan.

Speaking before Congress on Wednesday, Mr Greenspan warned that "an array of influences" would moderate the speed of recovery.

But he did concede that even a subdued recovery would be a "truly remarkable performance" given the stock market slump and the 11 September attacks.

A growth rate of 1.4% also means that another interest rate cut is more unlikely.

The Fed slashed interest rates 11 times last year, but kept rates on hold last month because of the glimmer of a recovery.

The surprise strength is largely due to the fact that Americans kept on spending money, despite the psychological impact of 11 September and the tide of job cuts.

Hopes rise for IMF Argentina loan

The International Monetary Fund (IMF) has said it will visit Buenos Aires next week to resume talks about unlocking billions of dollars of lending to the debt ridden nation.

The news came the day after the government and the provinces agreed a key tax-sharing deal seen as crucial to gain support from the Fund.

"We have been waiting for that sign, that invitation from the authorities," the Fund's spokesman Tom Dawson said in response to Economy Minister Jorge Remes Lenicov's expressed hope that the talks would start next week.

Japan's telecom star comes West

Shares in Japan's number one mobile phone operator will begin trading for the first time in London and New York on Friday.

NTT DoCoMo, who has enjoyed huge success in Japan, is trying to raise its international profile.

The mobile operator is one of Japan's biggest success stories of recent years and is now aiming to create a global brand.

NTT DoCoMo's Japanese triumph has rested on its i-mode mobile internet technology, which allows users to download data such as texts and pictures.

More than 30 million people or 25% of the Japanese population are hooked into the i-mode.

French unemployment stabilises

French unemployment was steady in January compared with the previous month, the labour ministry said on Thursday.

After rising steadily for eight months, the headline rate of unemployment in January stayed unchanged at 9%, with slightly fewer than 2.5 million people out of work.


Fiat: Italy's biggest private industrial group made a net loss of 791m euros (485m; $686m).

RBS: Royal Bank of Scotland said on Thursday that pre-tax profits for 2001 came in at 4.3bn ($6bn), up by nearly a third from 3.3bn the year before.

Nestle: Swiss Nestle, the maker of Nescafe coffee, Perrier water and numerous chocolate bars reported net profits of 6.7bn Swiss francs (2.8bn; $3.9bn) in 2001, a 16% rise over the previous year.

Asbestos: UK insurance group Royal & Sun Alliance said operating profits for 2001 fell to just 16m ($22.4m), from 462m the year before.

Heineken: Heineken, the world's third-largest brewer, has posted a 15% rise in profits for 2001. Net profits before one-off items rose to 715m euros (436m; $623m) from 621m euros the previous year.

TerraLycos: Spain's TerraLycos has posted a fourth-quarter loss of 42m euros (25.6m; $36.5m), almost 60% less than in the same period of 2000 and 17% down from the third quarter.

Cameroon telecom firm sold

In the latest bout of telecoms privatisation in Africa, Cameroon's state phone company has been sold off.

According to the Reuters news agency, a controlling 51% stake in Camtel is now owned by a consortium of two Tunisian operators, Tunisie Telecoms and Sotetel themselves state-owned.

Cameroon's government is hoping that outside control will spur additional investment into a system which, like the phone network in a number of African countries, has stagnated.

China admits economic data 'unreliable'

The NBS has admitted persistent discrepancies China's official statistics agency has cast doubt over the credibility of most its economic data, as it again confirmed the economy grew by 7.3% in 2001.

An internal report by the National Bureau of Statistics (NBS) uncovered endemic falsification of data, with about 62,000 breaches of Chinese statistics law between May and October last year.

Public unhappy with pension policy

The government's policy on state pensions is out of step with public opinion, according to a new survey.

The majority of people in the UK believe that they will be impoverished in their retirement, and more than half say that the state pension should be adequate to cover disposable income on top of basic living costs.

The survey by MORI for Age Concern says that only about half of people below state retirement age are saving for their old age.

UK economy stalls

Revised government statistics have shown that the UK economy stagnated during the final three months of last year, casting doubts over forecasts of an imminent economic recovery.

The Office for National Statistics said on Wednesday that the UK's gross domestic product between October and December 2001 was unchanged from the previous three-month period, reversing its earlier 0.2% growth estimate.

The economy expanded by just 1.7% compared with the same period one year earlier, down from ONS' initial 1.9% estimate.

Zimbabwe investment dries up

Land seizures have helped drive investment away Zimbabwe's recent political and economic problems have turned off the tap of foreign investment, the country's central bank has admitted.

In 2001 Zimbabwe attracted just $5.4m of direct investment, the Reserve Bank of Zimbabwe said.

In contrast, 1998 the best year on record produced investments totalling $436m.

"Resource flows to Zimbabwe a critical component of investment finance have been declining over the past five years, reflecting an unfavourable domestic macro-economic climate," the RBZ said.

South African gold output falls sharply

South African production of gold slipped by more than 8% in 2001, the Chamber of Mines of South Africa has reported.

Gold output slipped to 393,254 kilogrammes its lowest level since 1953 from 427,981 kg in 2000.

"The decline in production is attributed to an 8.4% fall in the average grade to 4.13 grammes per tonne, and the exhaustion of ore in certain older mine shafts," said the Chamber's chief economist, Roger Baxter.

Swiss bank quits Turkish dam project

Environmentalists oppose the controversial dam scheme Switzerland's largest bank, UBS, has pulled out of a troubled dam project in Turkey, saying it was concerned about its social and environmental impact.

Environmental groups have strongly criticised the Ilisu dam project in the south-east of the country, arguing that the scheme would displace tens of thousands of people and flood historic towns.

EBay pulls out of Japan

The site will close on 31 March and 17 jobs will be cut US online auctioneer eBay has accepted that it had failed to gain a foothold in Japan, and has decided to retreat from the market.

EBay's Japanese language site would be closed, the company said, and customers directed to its US based auction operations.

Fruits of success for banana trader

Bananas account for 50% of Fyffe's business Europe's biggest fruit company, Fyffes, has enjoyed a good turnaround in its performance.

The Irish company, one of the world's big players in the banana trade, has revealed that its pre-tax profits for last year increased 103% to 63.5m euros ($55m).

Fyffes has seen its business benefit from settlement of the long running banana trade row between the EU and the US.

US companies had said that the EU was giving favourable treatment to former colonies.

Fyffes chairman, Neil McCann, said the company had produced a significantly improved performance in 2001 and revealed that it was looking at acquisitions for the future.

HBOS hit by share issue

Shares in HBOS have fallen by more than 6%, after the UK's fifth largest bank said it was raising 1.4bn from the stock market to fund further growth.

Traders were spooked by the issuance of up to 150 million new shares, or 4.8% of its existing share capital.

The stock fell even though the bank said strong performance by its insurance and investment business lifted its pre-tax profits for 2001 by 3% to more than 3bn when online banking costs and exceptional items, in line with analysts' expectations.

Ghana gets debt relief

The International Monetary Fund (IMF) and World Bank have agreed to support a debt-relief package for Ghana.

The poverty-stricken West African country will get $893m from the two organisations, which will partly cover Ghana's debt-service obligations to international financial institutions.

The World Bank package, totalling $781m, will be delivered over 20 years, and will cover two-thirds of the country's debt-service obligations.

The IMF will provide $112m over the next eight years.

Other creditors are expected to provide the rest of the $3.7bn debt relief package.

The funds made available by the debt relief are to be used for financing education and health programmes and improving infrastructure in rural areas.

NEC to switch PC plant to China

Japanese electronics giant NEC is to switch production of personal computers to China to save money.

"We plan to manufacture and assemble 70% of PCs sold in Japan in China," from 10% at present, a company spokesman said.

NEC has faced big losses in its chip-making businesses and last year entered a tie up with Hitachi to save money.

It already makes PC parts in China and Taiwan but most of the assembly work is currently done in Japan.

"It is much cheaper to produce in China", the NEC spokesman said.

NEC posted a net loss of 155bn yen (800m; $1.2bn) for the final three months of 2001.

California enjoys biotech boom

Silicon Valley's hi-tech industry may be languishing in the doldrums, but the seeds of the next boom have already been planted.

Many industry observers believe that biotechnology will lead the next revolution, transforming the way drugs are developed and leading to fundamental breakthroughs in medical treatment and research.

The most bullish study comes from the California Healthcare Institute and PricewaterhouseCoopers, which says that the thriving biotech cluster in South San Francisco is still expanding operations and adding new employees and facilities.

According to the report's author, Tracy Lefteroff, the region's biotech industry is worth $4.1bn. It employs more than 225,000 people and is expected to grow significantly over the next two years as new pharmaceuticals and medical technologies move from the lab to the patient.

Greenspan cautious on US recovery (CAPTION)

When Alan Greenspan speaks, everyone listens Alan Greenspan, the chairman of the US central bank, has said that there are signs of recovery in the US economy, but it would be too early to say how strong it was going to be.

Mr Greenspan said that "increasing signs have emerged that some of the forces that have been restraining the economy over the past year are starting to diminish."