July 20 - Aug 04, 2002










US lawmakers have reached an agreement on legislation to reform business practices.

The bill will strengthen controls of the US accounting profession and increase penalties for business executives convicted of fraud.


Democrats and Republicans have resolved their differences to agree on the new laws.

The legislation is being hurried through to tackle the crisis in investor confidence ahead of congressional elections in November.

It is crucial to reassure investors in the trustworthiness of corporate America, with stock markets suffering heavy losses in recent weeks.

The US Senate and House of Representatives have now reached an agreement on the legislation.

And it is now expected to win final approval from Congress later this week.

The White House has already signalled that President George W. Bush will sign the agreement.

Once approved, a Public Company Accounting Oversight Board will be established to oversee auditors of public companies.

Maximum jail sentences for wire and mail fraud will increase to 20 years.

And a new crime on securities fraud will carry a 25 year maximum sentence.

The tightening of controls comes after a series of scandals which include energy giant Enron, accountants Andersen and telecoms firm WorldCom.

The latest stock market falls are due to fears that America's two largest banks deliberately helped Enron dupe investors.

But there is already some discontent about the depth of the reforms.

"People have lost their pensions, their retirement," said Democratic Whip Nancy Pelosi.

"In the name of corporate reform they [the House of Representatives] continue to pursue cosmetic rather than real change."


Japan's exports, the traditional motor of the country's sputtering economy, slipped slightly in June, sparking renewed worries about the fragile recovery.

For the first time in six months, June's figures showed Japan exported less 3.9% less than the month before.

While the figures still showed an 8.9% gain on the same month last year, the fear is that the steadily weakening dollar not to mention the relentless slide of world stock markets and the near-panic about corporate governance in some quarters of the US are combining to torpedo the turnaround from ten years of decline.

A slide in imports of 5.1% year on year is compounding the concern, because it indicates that Japanese consumers are still nowhere near ready to take up the slack if the rest of the world falters.

Japan's trade surplus the excess it exports over what it imports has historically been huge compared to the rest of the world.

The country's breakneck growth from the Second World War till the end of the 1980s was fed by exports, first of steel and other hardware and later by consumer electronics, cars and computers.

And even now on a year-by year basis the trend is for increasing surplus, thanks to last year's dismal showing, with June's figure of 1.3 trillion yen ($11.1bn; 7.1bn) marking a 71.6% rise over the same month in 2001.

But the surge in the yen from below 130 to the dollar to around 115 in the past couple of months is making exports more expensive to overseas customers.

Although the effects so far are marginal, observers say the impact is likely to be felt later in the year, when Japan's current growth an impressive 5.7% if the January-March performance were continued for 12 months will probably evaporate.

""We're probably not going to get any of the bad effects from either the strengthening of the yen or the potential slowdown in overseas growth until the second half of the year," said Lehman Brothers Japan's Matthew Poggi.


Telecom giant WorldCom filed for bankruptcy protection to become the largest US business failure after shenanigans for which CEO John Sidgmore said the company is "very sorry."

WorldCom executives scrambled over the weekend to cover overwhelming debt, Sidgmore said.

The Clinton, Mississippi-based company filed late Sunday for protection under Chapter 11 of the US bankruptcy code, which allows it to continue operating while it works out a plan to pay its debts.

The failure is twice as large as the record-breaking bankruptcy filed by Enron in December. In the bankruptcy petition, WorldCom listed assets of $107 billion as of March 31, against liabilities of $41 billion.

By comparison, Enron listed $63.4 billion in assets when it sought bankruptcy protection, sinking in a morass of accounting scandals.


Analysts are waiting to see how the markets in Europe will react to news from America that the world's largest media group, AOL Time Warner, is to be investigated by the financial regulators.

The Securities and Exchange Commission is examining accounting procedures at the group's internet service provider, America Online.

The news came too late for the American markets where share prices had recorded their second-ever largest gain, buoyed by an agreement on new laws to prevent corruption.

But in Asia shares have gained, though not sharply, as the AOL inquiry weighed on traders' sentiment.

Asia's failure to soar on the back of the Dow Jones index's strength further dampened the cheer ahead of the trading day in the UK and Europe.

News of the Securities and Exchange Commission's investigation into AOL-Time Warner's accounts was formally released only after the US markets had closed.


South Korea's antitrust authority has launched a series of investigations into accusations that the country's six leading conglomerates have been involved in insider trading.

The investigations were launched after the government's Financial Supervisory Service found that 37.6% of the total sales of the country's four leading conglomerates, or chaebols, was made up of internal dealings.

The investigations involve 80 subsidiaries of the top six conglomerates, Samsung, LG, SK, Hyundai Motor, Hyundai Heavy Industries and Hyundai.

South Korea's Fair Trade Commission has asked all of them to hand over information about their internal transactions.


Shares in giant US investment bank JP Morga Chase closed 16% higher after its chief executive spoke out in defence of its role towards collapsed energy firm Enron.


JP Morgan and Citigroup have been accused by US congressional investigators of helping disgraced energy firm Enron, and at least ten other companies, hide billions in debt.

Both banks' shares had lost almost a fifth of their value after a Congressional hearing on Monday.

JP Morgan chief executive William Harrison said his bank did not knowingly help Enron hide debt.

"We acted properly and with integrity in all the Enron matters," he said, criticising a "political media frenzy that is quite extraordinary".

He said all his bank's dealings with Enron had been fully entered into JP Morgan's own accounts, which complied with audit rules.


The US top shares index, the Dow Jones, has surged by nearly 500 points or 6.5% its biggest one day gain in almost 15 years.

And preliminary figures suggest that the US stock markets had their busiest ever day of trading.

The strong rise of US share prices dragged European indexes higher at the end of their trading day, and sparked renewed hopes of a market recovery.

Germany's Dax, which had lost more than 6% earlier in the day, had dragged itself back into positive territory by late afternoon trade, before closing 3.3% higher.

The FTSE, which had been over 200 points lower during the day, closed 81 lower at 3,777.


Pharmaceuticals giant GlaxoSmithKline (GSK) said on Wednesday that pre-tax profits for the three months to late June rose 7% on the year to 1.8bn, in line with analysts' forecasts.


Siemens said it made net profits of 725m euros ($719m; 458m) in the three months to 30 June. This contrasts with a loss of 705m euros in the same period of last year.


Argentina's fragile banking system has dominated the agenda at meetings between an International Monetary Fund (IMF) delegation, the Argentine government and financiers.

The IMF has appointed a group of four top international bankers to act as middlemen in its talks with the South American country.

"They are experienced and will certainly help Argentina find a solution to its financial problems," said the Argentine president's chief of staff, Alfredo Atanasof, ahead of their meeting with his boss.

Argentina hopes to unlock $9.5bn ($6bn) of IMF funds which have been frozen since it the country defaulted on huge international loans in December.


The World Bank has welcomed the plan of Madagascar's new president to cut corruption by giving government ministers a ten-fold wage rise.

"The government can afford the increase the president has announced, the impact on the budget is not that huge," Hafez Ghanem, the World Bank's country director, told the BBC's World Business Report.

"If a minister is being pay $300 per month, the incentive for dishonesty is very high," he said.

Ministers are now expected to earn as much as $3,500 per month, almost 10 times more than they were paid under the previous administration.


Thousands of skilled young South Africans are continuing to emigrate in search of a better life, draining the country of much-needed economic resources.

Up to 100,000 people are believed to have left South Africa over the last three years, and 70% of skilled South Africans still in the country say they are considering emigrating, despite government calls for them to stay and help their country.

Most give fear of crime as the reason behind their decision to go, but the Aids epidemic and unemployment are also cited in a recent study carried out by the University of South Africa (Unisa).

South Africa is only one of the many countries in Africa affected by brain drain, which has deprived the continent of a third of its skilled professionals in recent decades, strangling growth.


Bangladesh has accused the International Monetary Fund (IMF) of pressuring it to float its currency on the foreign exchange market.

Finance Minister M. Saifur Rahman told reporters on Tuesday that Bangladesh might allow its currency, the taka, to float freely in mid-November if the country's reserves reach more than $2bn.

"We cannot allow a free floating currency at the moment when the (foreign currency) reserves are low," Mr Rahman said.

Ministry officials later confirmed that Bangladesh was under pressure from the IMF to float its exchange rate.

In February, the IMF refused Bangladesh an emergency loan when reserves dipped below $1bn unless it cut public spending and closed down loss-making state-run industries.

Mr Rahman said the country's current foreign exchange reserves of about $1.6bn were too low to float the currency.


Drinks group Diageo has confirmed it will sell its Burger King chain of fast-food outlets to a US consortium.

The fast-food chain is being sold for $2.26bn to a group made up of US venture capitalist firms Texas Pacific and Bain Capital, together with private equity group Goldman Sachs Capital Partners.


Investors have rushed to buy shares in Bank of China's Hong Kong operations, and then to sell them again, pushing them 4.7% below the offer price on their first day of trading.

Small investors, who got the shares at a discount, rushed to cash in, making a quick profit in the toughest market conditions for years, traders said.


Operating profits soared to almost 52bn yen (284m; $447m) from just 3bn yen a year earlier while net profits doubled to almost 60bn yen.


Parents in China are encouraging their children to play the stock market during school summer holidays, the official Shanghai Evening Post has reported.

Some parents believe trading stocks teaches their children skills, gets them used to taking risks and introduces them to the world of finance, the paper says.


South African Airlines (SAA) has returned to profits during one of the toughest years for the global airline industry.

SAA posted profits of 553m rand ($99.8m; 34.4m) for the 12 months to 31 March 2002, compared with a loss of 998m rand in the previous financial year.