INTERNATIONAL

 

Mar 17 -23, 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

WAR MAY COST $95BN TO US

US taxpayers will face a bill of up to $95bn for an Iraqi war and that is assuming the conflict is brief.In its latest number-crunching on the US budget, the Congressional Budget Office (CBO) calculated war costs at $24bn a month although more than half of that has already been spent.

 

 

 

 

The overall direct cost should not exceed $100bn, the government reckons, but analysts have warned that a prolonged conflict or occuption of Iraq could easily end up costing far more.

Combined with the effect of tax cuts, the CBO warned that war spending could turn an $891bn cumulative budget surplus for 2004-2013 into a deficit of $1.82 trillion.

Only two years ago in 2001, the CBO was suggesting a 10-year surplus of as much as $5.6 trillion.

The CBO's estimates, needless to say, diverge wildly from those of the White House itself.

The Office of Management and Budget the President's own number-crunchers sees a first-year deficit of $307bn, $31bn or 9% less than that predicted by the CBO.

That still exceeds the $290bn record deficit run up in 1990 when the current incumbent's father was President.

And the OMB's own ten-year projection is only $80bn less than the CBO's forecast.

Republicans insist that the $1.5 trillion tax cut they are planning, on top of the one passed on a bipartisan basis earlier in the current administration, will kickstart the economy and reinvigorate the tax take.

CHINA'S FACTORIES ENJOY RAPID GROWTH

China has announced record growth in industrial production, up 17.5% in January and February this year compared to the same two months of 2002.

Analysts say the figure is the highest since the mid-1990s.

But with fast-growing exports a vital ingredient in China's economic performance, a possible war in Iraq could cast a shadow over the country's growth prospects.

China's vast industrial machine is churning out mobile phones, television sets, computers and cars at a phenomenal rate.

And whatever doubts there may be about the quality of China's economic data, the country's economic growth is the envy of just about everywhere else in the world, reaching 8% last year.

This year Beijing has predicted slower growth, possibly down to 7%.

The uncertain economic outlook as a possible war looms, is an important unknown.

The incomes of urban Chinese are increasing rapidly.

But the country's domestic market is still too small to absorb the roaring growth in industrial output.

If the country's main export markets such as the United States are plunged into gloom over the next few months, the Chinese economy could be slowed down.

On the bright side, that might help to ease some of the international pressure on Beijing to revalue its currency and stop cheap exports flooding other countries' markets.

But it could also make it harder to create the millions of jobs China needs to absorb laid off state sector workers and farmers seeking to escape rural poverty.

SOUTH AFRICAN TOURISM BOOMS

South Africa is the fastest growing tourist destination in the world, the country's tourism ministry has claimed.

The number of overseas arrivals to South Africa rose by 1.8 million or 20% last year, the ministry said.

This growth defied continuing fears among key European and American customers of longhaul travel, and bad press over South African crime statistics.

The head of South African Tourism, Cheryl Carolus, said that hosting the Cricket World Cup had boosted the sector, and helped showcase some areas less well known than the holiday hotspots of Johannesburg, Cape Town and Durban.

The 2002, the United Nations World Summit on Sustainable Development in Johannesburg also helped promote South Africa as a destination.

 

 

BOOST FOR UK MANUFACTURING

A strong performance from the computer industry has helped to boost the manufacturing sector in the UK.

The latest government figures show that manufacturing output rose by 0.3% over the month in January.

Although output is still 0.3% lower than a year ago, this is the smallest fall for about two years.

The figures are stronger than expected but analysts say it is too soon to suggest that a recession has been avoided.

Key export markets in the US and Europe are still weak, and demand from consumers at home has shown signs of falling.

ITALY POSTS ROBUST GROWTH FIGURE

Italy has bucked the slowdown trend which has seen most EU countries report decreasing economic growth.

The Italian economy grew by 0.4% in the last three months of 2002, compared with 0.3% expansion the quarter before, official statistics have confirmed.

The rise in output came as the three larger European economies - Germany, France and the UK reported slowing activity.

The German economy came to a standstill over the quarter.

Greece saw its economy contract by 0.3%, after enjoying 1.3% expansion in the July to September period.

Italy's official statistics agency, Istat, credited the rise in the country's economic output to healthy spending on fixed investments.

But many observers have doubted Italy will be able to maintain strong growth.

ERDOGAN NAMED AS TURKISH PM

Turkey's ruling party leader Recep Tayyip Erdogan has been named as prime minister last week, after winning a by-election clearing the way for a fresh vote on US troop deployment.

The president asked him to form a government after the resignation of Abdullah Gul, who had held the post since the Justice and Development (AK) Party swept to victory last November.

Mr Erdogan's arrival in the top job is expected to lead to a fresh parliamentary vote on whether to allow the deployment of tens of thousands of US troops in any war against Iraq.

The deployment was narrowly defeated in parliament on March 1.

Once Mr Erdogan has formed his new cabinet, a second parliamentary vote can be expected in the coming days.

The deployment is crucial to US war plans, opening the option of a northern front against Iraq.

CYPRUS PEACE PROCESS COLLAPSES

Marathon peace talks to pave the way for the reunification of Cyprus have collapsed last week, heralding the end of the UN's peace mission there.

UN Secretary General Kofi Annan held talks in a final attempt to reach a deal ahead of a UN deadline.

But he admitted defeat after 15 hours of talks. Even an offer to extend the deadline failed, when Turkish Cypriot leader Rauf Denktash said there was no immediate prospect of further discussions.

AMERICAN OUT OF S&P 500

With war perhaps only days away, the outlook for the US airline industry darkened still further as the parent of American Airlines, AMR Corp, was ejected from one of the US's key stock market indices.

Standard & Poor's, which runs the S&P 500 index of 500 leading US firms, said it will drop AMR after the stock's 90% plunge in the past year.

US FIRMS VIE TO REBUILD IRAQ

Five companies have been invited to bid for contracts to put Iraq's infrastructure back together after a decade of sanctions and the expected US-led war.

Among the five is a subsidiary of Halliburton, the oil and construction giant run by US Vice President Dick Cheney for five years till 2000.

The US Agency for International Development (USAID) told the newsmen that the five were part of a "limited selection process" intended to speed up contracting given the "urgent nature or the unique nature of the work".

 

 

IMF HEAD CAUTIOUSLY OPTIMISTIC

The head of the International Monetary Fund has said the global economy will grow faster than last year.

Horst Koehler, managing director of the IMF, said last week the global economy this year would exceed last year's 3% growth level.

But he also said rich nations may have to cut interest rates to speed up a recovery.

Although economic growth this year would outperform last year's, it would still be below the 3.7% global growth rate the IMF forecast last September.

"The world is facing great uncertainty at present", Mr Koehler told an audience at the Bank of Spain in Madrid.

SOUTH KOREAN FIRM ADMITS $1.2BN ACCOUNTS ERROR

A probe into one of South Korea's top five business groups has uncovered $1.2bn (750m) in accounting irregularities.

SK Global, part of the SK Group empire, hide 1.18 trillion won of bank obligations, and understated its net loss by 122.6bn won, said prosecutors, indicting boss Chey Tae-won and nine other executives.

Prosecutors' findings, based on 2001 accounts, were confirmed by SK Global, whose shares plunged by 15% after the prosecutors' report was released.

"We are notifying [investors] that the discovery of 1.5 trillion won in accounting irregularities by prosecutors is true," the firm said.

TOKYO SHARES SET NEW 20-YEAR LOW

Japanese shares have set a new 20-year low, as government promises of intervention failed to steady the nerves of investors worried about war against Iraq.

The benchmark Nikkei share index lost 2.2% to close below 8,000 points for the first time in more than two decades last week.

The fall came despite a further government reassurances that was poised to prop up shares.

"Depending on the developments in the stock market, we may have to take effective countermeasures without delay," government spokesman Yasuo Fukuda said.

STRONG EURO HITS VW PROFITS

Shares in Volkswagen, Europe's biggest car maker, have fallen sharply after it warned of lower profits this year.

The German car giant blamed weak consumer demand and the strength of the euro for the warning that 2003 operating profits would fall short of last year's 4.76bn euros ($5.24bn; 3.3bn)

"Given present exchange rates ... and in the event that the market situation in Western Europe and the US does not improve, we will not be able to match the 2002 operating profit," chief executive Bernd Pischetsrieder said last week.

EAST AFRICA PLANS CABLE LINK

Telecom executives from East Africa have been meeting to discuss the possibility of connecting countries in the region by an undersea fibre optic cable.

At present African states pay about $400m (250m) a year to have international calls to other African countries routed via Europe.

"Africa has better connection to Europe and America than within the continent," Telkom Kenya managing director Augustine Cheserem told the meeting in Nairobi last week.

GE PENSION FUND LOSES $5BN

The world's second most valuable company lost more than $5bn in 2002 as the stock market meltdown hammered its pension funds.

The loss at General Electric Corp is almost double the $2.88bn recorded the year before, and amounts to more than a third of the company's overall $15.1bn profits.

RECORD LOSS FOR DEUTSCHE TELEKOM

Deutsche Telekom, Germany's dominant telephone company, has reported Europe's biggest ever annual corporate loss.

For 2002 the company posted a net loss of 24.6bn euros (16.9bn; $27.1bn) but reported that business had improved in the fourth quarter.

 

 

KENYA NEEDS $800M OF AID

Kenya's Finance Minister David Mwiraria has said he needs more than $800m of aid to fund this year's budget after state coffers were left almost bankrupt by the former government of Daniel Arap Moi.

The National Rainbow Coalition, led by Mwai Kibaki, swept into power in elections at the end of last year promising to change the way Kenya is run.

SERVICE SECTOR CONFIDENCE SLUMP

Britain's once-buoyant service sector has been hit by a collapse in business confidence, according to a CBI survey.

Hotels and restaurants were worst affected, with confidence at its lowest since the September 11 terror attacks.

Fears over a war in Iraq and a fall in consumer confidence led to an unexpected drop in the volume and the value of business in the three months to the end of February.

WAR DRUMS SINK WALL STREET

The war-drums drove US shares deep into the doldrums last week, as the spotlight fell on worries about the fragile state of the debt-laden US economy.

At the close, the Dow Jones industrial average was 2.2% or 171.85 points lower at 7,568.18. The broader S&P 500 index dropped 2.6% or 21.41 points to 807.48, while the technology-heavy Nasdaq Composite fell 2.1% or 26.92 points to 1,278.37.