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 5. TRADE  6. GULF



June 24 - 30, 2002


Europe's finance ministers have cut a deal on France's demands for elbow room on its budget deficit, setting up a possible upbeat message from their summit.

The deal also means the focus will return to asylum, and arguments between member states over the rights and wrongs of a common policy on refugees.

Meetings to settle the squabble over France stretched into the early hours in Seville.

The result was a compromise: while the European Union's 1997 growth and stability pact requires all countries to bring their budgets into balance by 2004, France will be exempt unless growth in both 2003 and 2004 tops 3%.

Given the Eurozone's recent record, that could prove a tall order.

The argument was triggered by an audit, commissioned by France's new right-wing administration, which showed 2002's deficit growing to 2.5% of gross domestic product.

As well as being far in excess of the 1.9%

predictions, the figure is dangerously close to the 3% ceiling built into the pact. And it leaves little space for the tax cuts promised by the incoming government.

France's new finance minister made it clear that his colleagues had accepted France's arguments.

"If we don't have this growth, we will all have to accept to push things back by who knows? a year or two years," Francis Mer told reporters.

Failure to hammer out a deal could have risked undermining the pact, an agreement aimed at taming national deficits so as to contain inflation and reassure financial markets.

Portugal, which looks set to narrowly avoid breaching the 3% deficit limit this year, has signalled that it will join France in pushing for greater flexibility.


Bangladesh plans to sell 49 state-owned companies in the next 12 months to save itself millions of dollars in subsidies.

"Ultimately we would like to privatise almost all public enterprises ... to make the private sector vibrant and productive and the main vehicle for economic development," Enam Ahmed Chowdhury, chairman of the Privatisation Commission told the BBC's World Business Report.

As a result of the sell-off, Mr Chowdhury estimates about 26,000 workers would lose their jobs.

Bangladesh, which is heavily dependent on foreign aid and imports, has been under pressure from foreign donors to speed up privatisations.

The IMF and other lenders provide nearly $1.5bn in annual aid.

The South Asian country spends more than $500m, or over 6.5% of its annual budget, funding around 200 public sector companies.

The government expects to raise about 5bn taka ($86.3m) from the sales, Mr Chowdhury said adding a 4bn taka compensation fund had been set up for the employees made redundant.

But the full amount may not be raised as bidders who pay the full sale cost upfront will be offered discounts of up to 40%.

"Foreign investors are most welcome to invest here and in order to quicken the process of transfer of ownership a rebate of 35% has been provided of the total sales price, and if someone pays in foreign currency they will be given a 40% discount," he said.

Mr Chowdhury claimed about 200 state-owned companies had been pushed into the red by mismanagement and labour disputes.


The real has slumped in recent weeks Brazil's economy suffered a sharp shock on Thursday after was given a pessimistic bill of health by international agencies.

As credit rating agency Moody's cut its outlook on Brazilian government debt to "negative" and Fitch's downgraded its rating as well, stocks tumbled and the currency, the real, slumped in value.

Both agencies noted that the problem was a matter of sentiment: October elections could gift the presidency to a socialist, Lula da Silva, and that they believe could undermine investor confidence in the stability of Brazil's debt.

The government, unsurprisingly, played down the doubts.


The EU trade commissioner Pascal Lamy is flying to Washington for two days of crucial trade talks ahead of the G8 summit of world leaders next week.

Tensions are rising between the world's two biggest trading blocs despite the agreement last year to begin a new round of world trade talks.

The biggest issue is the decision by the US to impose tariffs of up to 30% on a range of European and Asian steel imports.

But the EU and the United States are also at loggerheads over US tax breaks to its companies for foreign sales, and big increases in US farm subsidies.

Mr Lamy will meet key Congressional leaders on Thursday and the US Trade Representative, Robert Zoellick, on Friday.


Exports from Japan have soared a massive 715% during May nearly double the amount expected by forecasters.

The export boom was driven by soaring demand across Asia for Japanese hi-tech products like computer chips and flat screen television sets. Japan's trade surplus the value of its exports minus the amount of goods it imports now stands at 619.2bn yen ($5bn) up from a 344.5bn surplus in April.

It is the fifth month of rising exports, and a sign of the continuing recovery of an economy that until very recently was mired in its deepest recession since World War II.


News of a record US trade deficit has propelled the European single currency to a two-year high against the dollar.

The euro rose from $0.9574 late on Wednesday to $0.9645 on Thursday, its strongest showing since June 2000.

The single European currency's new-found strength stemmed from figures showing that the US current account deficit had mushroomed to a record $112.5bn in the first three months of the year.

The higher current account deficit which shows that more money is leaving the US in the form of foreign investments and spending on imports than is coming in suggests rising demand for foreign currencies, undermining the dollar.


The US financial watchdog is to set up a new body to oversee the accounting industry.

The decision comes after regulatory bodies were heavily criticised for failing to intervene in the Enron/Andersen scandal.

The government is desperate to avoid a repeat performance, and to restore investor trust in corporate America.

Energy giant Enron collapsed late last year after admitting that it had vastly overstated its results for five years.

Andersen, the auditor in charge of approving Enron's accounts, was heavily criticised for failing to flag up irregularities in the energy firm's books.


Uruguay has allowed its national currency, the peso, to float freely in an effort to make its exports more competitive.

The Uruguayan economy ministry said on Thursday that it had abandoned exchange rate controls which kept the peso's fluctuations against the dollar within a 12% band.

The currency fell 11.9% to 19.5 pesos per dollar shortly after the controls were scrapped.

The tiny south American republic has been hit hard by the devaluation of the Argentine peso earlier this year, which has made competing Argentine exports cheaper for international buyers.

The country's close economic ties with crisis-torn Argentina have put the wider Uruguayan economy under severe pressure.

Uruguayan consumer spending has nosedived, and its banks have been hit by a run on deposits.


The British shopping boom has stalled, in a sign of the challenges still facing the UK economy.

Retail sales slid 0.6% last month, the Office for National Statistics said.

The fall, which was larger than analysts had expected, reflected poorer sales by clothing and shoe stores, the ONS report showed.

And it comes as a series of reports have signalled caution over the strength of the UK economic revival, with the Royal Institution of Chartered Surveyors on Thursday suggesting that the first signs of a slowdown in the property market are appearing.

The data will ease pressure on the Bank of England to raise interest rates to counter the risk of inflation.


Ugandan President Yoweri Museveni has said that a controversial dam project will go ahead in spite of financial difficulties and criticism about its impact on the environment.

President Museveni said that the Bujagali dam, which would be East Africa's largest private construction project at $550 million, would be built, whether it was paid for by the World Bank or Uganda itself, in remarks reported by the Ugandan daily New Vision.

On Tuesday, the World Bank postponed a decision to approve $250 million in political risk guarantees.


Nigeria's government is under attack again for its lack of financial transparency.

The upper house of parliament has launched an investigation into the country's public spending under President Olusegun Obasanjo.

A recent report by a parliamentary committee says there has been a "virtual slide into financial anarchy".


The UK continued to grant arms export licences to India and Pakistan despite escalating tensions between the two nuclear powers.

It emerged on Wednesday that even as British nationals were told to leave the two countries because the situation was getting increasingly dangerous, the government was granting licences for military planes and weapons.


Argentina's economy shrank 16% during the first three months of this year, plunging the country ever deeper into a recession that has now lasted for three-and-a-half years.

According to government figures this is the highest drop since statistics began.

There was a 6% fall in economic activity in this quarter, compared with the last three months of 2001.


The government was warned two years before the foot-and-mouth crisis that its vets could be overwhelmed by rapid spread of the disease, says a powerful watchdog.

Progress was made on many of those problems, says the National Audit Office (NAO), but action on other key concerns was delayed because other "high priority work" had to be done.

The watchdog argues not enough was done to prepare for the unprecedented scale of last year's foot-and-mouth outbreak the total cost of which it puts at over 8bn.

The report comes as initial results of an investigation into a suspected new case of foot-and-mouth in the Midlands are due to be released.

The Department of Environment, Food and Rural Affairs says the findings show the government did much right in its handling of the crisis but that there are lessons to be learned.


Exploration of a recently discovered North Sea oilfield has revealed it is significantly bigger than was first thought.

The Buzzard field is now being hailed as one of the biggest finds in 25 years after revised forecasts suggested it may contain more than one billion barrels of oil.

Figures released in January suggest the field, 125 kilometres north east of Aberdeen, could yield around 400 million barrels 25% more than was forecast when it was discovered.

The operator Pan Canadian, which is now called En Cana, is to start planning for the field's development with support from the Department of Trade Industry.


The West African country of Mauritania has had $1.1bn (740m) of debt wiped clean from its slate.

The debt relief was granted after Mauritania satisfied the criteria of the International Monetary Fund (IMF) and the World Bank under a new scheme aimed at helping the world's poorest and most heavily indebted countries.


The Prime Minister has publicly defended his government's controversial tax on pension funds.

At question time in the House of Commons, Mr Blair backed the 5bn a year tax which was introduced by the Chancellor, Gordon Brown, in 1997.

The Conservative leader, Iain Duncan Smith, challenged the Prime Minister to defend his comments that the pensions tax was justified because "of the buoyancy of the stock market".


The disputed presidential contest in Madagascar is continuing to have a profound effect on the economy of the African island state.

It had been hoped that the political situation would improve if the incumbent president, Marc Ravalomanana, included allies of his arch rival Didier Ratsiraka in a government of national unity.

But a reshuffle on Tuesday failed to result in ministerial appointments for any of Mr Ratsiraka's allies.

Already political uncertainty has seen foreign investment dry up and many businesses have been forced to close.