INTERNATIONAL

 

May 26 -June 01 , 2003 

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF

 

BUSH COMPROMISES ON TAX PLANS

US lawmakers have reached agreement on a package of tax cuts worth $350bn (214bn).

The figure is less than half the sum originally proposed by President George W Bush and the agreement was only reached after a personal intervention by Vice-President Dick Cheney. The tax cut plan is one of the cornerstones of Mr Bush's re-election bid, but has been the subject of bitter debate between Republicans and Democrats and between the House of Representatives and the Senate.

 

 

 

Initially, President Bush proposed a package worth more than $700bn which he said would create jobs and stimulate the economy. Critics have argued that the plan benefits the well-off and does little to help poorer Americans.

Economists have also expressed concern that the tax cuts would swell the government's budget deficit forecast to run to a record $300bn this year and be damaging in the long term. Alan Greenspan, chairman of the Federal Reserve, is one of those who has expressed caution about the habit of running up large deficits.

"Deficits do matter and in any evaluation of a [tax cut] programme, whatever happens to deficits is an intrinsic part of the analysis," Mr Greenspan said last week, testifying before Congress. Mr Bush also had to compromise on another key proposal: the plan to eliminate the tax on share dividends.

The watered-down proposal reduces, but does not eliminate, the top rate of tax on shareholder dividends, while the top rate of capital gains tax will be brought down to 15%.

UK ECONOMY UNDER PRESSURE

The UK economy is still showing signs of weakness in both the retail and manufacturing sector, figures have shown.

Retail sales recorded another small rise in April to give the lowest annual growth rate for nearly four years, according to official figures from the Office for National Statistics (ONS). Meanwhile the latest survey from business group the CBI found no signs of recovery in the manufacturing sector. The CBI also reduced its growth forecast for this year to 2.1% from 2.2%.

Sales volumes grew by 0.3% in April from the previous month, the ONS said. Sales of clothing and footwear were hit particularly hard, falling by 0.5% during April. The sluggish rise gives an annual growth rate of 2.7%, them lowest level since May 1999.

The figures were slightly worse than expected, but analysts said late timing of Easter a crucial period for many stores - may have distorted the picture.

Bank of England governor Sir Edward George said the spending slowdown "appears to be underway". But he added that demand in the economy would be maintained by higher government spending and business investment. The CBI's latest monthly industrial trends survey found 40% of firms reporting orders below normal, and 11% above normal. The balance of minus 29 was the same as last month.

GREENSPAN CAUTIOUS ON ECONOMY

Federal Reserve chairman Alan Greenspan has said it is not yet clear when the US economy will pick up, and has signalled his readiness to tackle deflation.

Mr Greenspan told a congressional panel that the current state of the economy was difficult to gauge, and the outlook for the months ahead was equally unclear.

 

 

"We do not yet have sufficient information on economic activity following the end of hostilities to make a firm judgement about the current underlying strength of the economy," he said. He added that while it was "not unreasonable" to expect stronger economic growth, "the timing and extent of that improvement continue to be uncertain."

The US economy has been bolstered by a stock market rally and increases in productivity since the end of the Iraqi war, but industrial production remains sluggish and unemployment continues to rise.

UK'S BUDGET DEFICIT NOT SO BAD

Chancellor Gordon Brown's budget deficit last year was not as bad as first thought, according to the latest figures.

The Office for National Statistics said the UK's public sector net borrowing in the past financial year was 23.4bn ($29.9bn) rather than the 25.2bn originally estimated.

Even so, economists said they doubted the chancellor would be able to hit his borrowing targets of 27bn this year and 24bn the following year. The new financial year started with figures for April showing a 600m surplus compared with a 1.3bn deficit 12 months earlier.

This was due to an increase in income tax and social security contributions, following the chancellor's tax increases and a slight fall in current public spending.

CHIRAC CALLS FOR EUROZONE RATE CUT

The French president has called for lower eurozone interest rates, in a speech ahead of the G8 summit in France next month.

"Interest rates are low and can continue to fall," President Jacques Chirac said in what is seen as a clear reference to eurozone rates. The European Central Bank (ECB) cut its key interest rate to 2.5% in March but the economic troubles of the 12 single-currency countries have continued to mount. The economies of Germany, Italy and the Netherlands all shrank in the first quarter.

Since the start of the year, the euro has also gained about 11% on the dollar, surging beyond its 1999 launch level to around $1.17. The US central bank, the Federal Reserve, has cut interest rated to 1.25% to kick-start its economy while Treasury Secretary John Snow has softened his stance on the strong dollar policy.

EUROZONE SEEKS GREATER POWERS

The 12 eurozone countries are pushing for the right to take some economic decisions on their own, sidelining the three European Union (EU) members which have not adopted the single currency.

The eurozone governments, led by France and Germany, have asked the European Convention a body set up to draft a new constitution for the EU to consider giving them exclusive voting rights on key economic issues. The move would diminish the influence on European economic policy of the UK, Sweden and Denmark, the three EU nations which remain outside the eurozone. Although the 12 eurozone finance ministers hold regular informal meetings, economic policy issues are currently decided jointly by all 15 EU finance chiefs.

 

 

AUSTRALIAN PM SLAMS 'ABSURD' FAT CATS

Australia's conservative prime minister has told big business to end "absurd" pay deals to executives.

"One thing you've got to do is stop entering into absurdly generous payout arrangements in the first place," Prime Minister John Howard said.. "You want to keep the capitalist system free of too much government regulation, well you've got to deliver," he said. His comments came after public condemnation of a payout of 4m ($6.6m) plus 600,000 pension to BHP Billiton's former chief executive Brian Gilbertson for just six months work, before being ousted.

GAMECUBE 'MAY DIE OUT'

Nintendo must find a strategy to try and stop its GameCube from dying out, an analyst has warned, after the games maker reported poor results.

The Japanese firm missed its sales target for GameCube and saw its profits drop by 37% in the year to March. The demise of GameCube is seen as a direct result of competition from Sony's PlayStation 2 and Microsoft's Xbox. Just 9.55 million Nintendo GameCubes were sold during the last financial year, far below the 51.2 million PlayStation 2 consoles shipped worldwide.

NIGERIAN BANK FRAUD UP 40%

Nigeria's banks have seen almost $10m disappear through employee fraud in 2002, a rise of more than 40% on the year before, a survey by the country's banking regulator has found.

The total amount stolen was 1.29bn naira, up from 906.3m in 2001, the Nigerian Deposit Insurance Corporation reported. Ten times that amount 12.91bn naira was recorded in attempted fraud, up from 11.24bn for a rise of 15%.

WORMS DIG FIRM OUT OF DEBT

A cash-strapped Indian agriculture firm has used 10 tonnes of earthworms to pay back a 65,000 loan.

The struggling company, Uttar Pradesh Agro (UPA), took out the loan a year ago and was supposed to repay it this month with 10% interest. But, having run into financial difficulties with its business in agricultural appliances, it has been forced instead to hand over a lump sum of earthworms, according to a source at the Cow Protection Agency. The worms are being valued at 500 rupees (6.5; $11) a kilogramme and will be used for the growing process of vermiculture, when worms are fed cow manure to produce fertiliser.

BRAZIL SPLIT OVER SKY-HIGH RATES

Brazil's central bank is getting a new chief of economic policy, as the old incumbent bowed out just a day after a controversial interest rate decision.

Despite loud mutterings from members of the Workers' Party government of President Luis Inacio Lula da Silva, the bank decided to keep rates at a sky-high 26.5%, to try to tame Brazil's 12% inflation.

 

 

UK FIRMS VIE FOR IRAQ CONTRACTS

British companies are to learn of opportunities to take part in the reconstruction of Iraq.

Around 250 companies are due to attend a meeting in London hosted by the US Embassy and US construction company Bechtel.

Bechtel was chosen by the American Agency for International Development as the prime contractor to rebuild Iraq's shattered infrastructure after the war, in a deal that could be worth up to $680 million (416m) over 18 months.

MAD COW CASE SCARES BEEF TRADE

Canada's multi-billion-dollar beef industry is on the verge of a full-blown crisis after a case of BSE, or mad cow disease, was found in a single cow in the western province of Alberta. BSE has been linked to Creutzfeldt-Jakob Disease (CJD), a disease that causes paralysis and death in humans.

SARS AND WAR HIT KOREAN ECONOMY

South Korea's economy has shrunk for the first time in two years as SARS and the war on Iraq took their toll on the economy. The Bank of Korea said seasonally adjusted gross domestic product fell 0.4% in the first quarter compared with 2% growth in the previous quarter ending in December.

UK RETAIL SALES SLOW TO A CRAWL

UK retail sales recorded another small rise in April to give the lowest annual growth rate for nearly four years, according to the latest set of official figures.

Sales volumes grew by 0.3% in April from the previous month, the Office for National Statistics (ONS) said.

VIETNAM PLANS CHOP FOR COFFEE CROP

Vietnam, the world's second-largest coffee exporter, plans to destroy one-fifth of its coffee plantations in an attempt to lift prices.

Doan Trieu Nhan, chairman of the Vietnam Coffee and Cocoa Association, said the government wanted to cut the 500,000 hectares under cultivation by 20% by 2005.

 

 

ZIMBABWE ECONOMY WOES SPREAD

The implosion of the Zimbabwean economy has cost the South African economy $1.9bn (1.2bn) and up to 30,000 new jobs over the past three years, new research has suggested.

Economist Mike Schussler said that the crisis in Zimbabwe had lopped 0.4 percentage points off South Africa's economic growth each year, thus reducing its ability to create new jobs.

MM02 MAKES 10.2BN LOSS

The mobile phone company MM02 has announced a huge loss after paying too much for third-generation licences at the height of the telecoms boom.

The company has re-valued its assets and decided to write down their value by 9.6bn ($15.8bn) and that has pushed MM02 10.2bn into the red. Most of the loss about 5.9bn is caused by the fact that licences for the next generation of mobile phones are worth far less than when they were bought three years ago.

UK'S BUDGET DEFICIT NOT SO BAD

Chancellor Gordon Brown's budget deficit last year was not as bad as first thought, according to the latest figures.

The Office for National Statistics said the UK's public sector net borrowing in the past financial year was 23.4bn ($29.9bn) rather than the 25.2bn originally estimated. Even so, economists said they doubted the chancellor would be able to hit his borrowing targets of 27bn this year and 24bn the following year.

FRANCE ESCAPES RECESSION

The French economy managed to grow slightly by 0.3% in the first three months of the year.

The news means that the eurozone's second largest economy has escaped recession after it shrank in the final three months of 2002. A recession is usually defined as two consecutive quarters of decline. "The rise is good news and might be a sign that the economy can rebound by the end of the year," said Jean-Louis Mourier, an economist at Aurel Leven. The economy is predicted to grow by 1.2% during 2003.