INTERNATIONAL

 

Sept  08 - 14 , 2003

 

1.INTERNATIONAL

2. INDUSTRY

3. FINANCE

4. POLICY

5. TRADE

6. GULF


NEW TRADE DEAL COULD ALLEVIATE POVERTY DRASTICALLY

A trade deal intended to address key concerns of developing nations could raise incomes around the world, spur global growth and reduce poverty in a big way by 2015, according to a new World Bank report issued last week. The report will be launched on the eve of a meeting of the world's trade ministers in Cancun, which will review progress on WTO negotiations on the Doha Development Agenda. The report called 'Global Economic Prospects (GEP) 2004: Realising the

 

 

 

Development Promise of the Doha Agenda' presents a detailed overview of the world economy, and the near-term outlook. It also offers a rigorous analysis of global trade issues.

Officially, the Cancun meetings are an interim stocktaking for the negotiations, which are scheduled for completion by January 1, 2005. However, the meetings occur at a time when the global economy and international trade are languishing. As the report notes, the trade talks are stalled over disagreements on issues of particular importance to developing countries, such as agriculture, tariff reductions on manufactures, special treatment for developing countries, and drug patents in poor countries.

Progress in Cancun could bolster investor confidence, and create momentum towards a more significant WTO agreement that would spur trade.The latest GEP projects a growth of 1.5 per cent in 2003 in the industrialised world, well below potential. It foresees better performance next year, as industrial countries' growth rises to 2.5 per cent. Developing countries are somewhat more buoyant than industrial countries, growing at 4 per cent in 2003, and, if the recovery stays on track, will grow at 4.9 per cent in 2004. World trade is projected to grow by 4.6 per cent, slightly more than last year, but still less than half the rate in 2000.

FDI INFLOW INTO US PLUNGES BY $114B

With the exception of tiny Luxembourg, China emerged the favoured destination of foreign direct investment (FDI), according to the latest report from United Nations Conference on Trade and Development (UNCTAD).This is the first time that a developing nation has emerged at the top of the FDI destinations. Luxembourg took in $126 billion, which is attributed to the heavy M&A (for mergers and acquisitions) activity during the first quarter of 2002.

In contrast, FDI into US dropped a whopping $114 billion during the period to $30 billion. France was in third spot with $52 billion and Germany $38 billion. UK came in with $25 billion.The overall picture is also far from rosy total FDI dropped from $1.4 trillion to just over $651 million in 2003.

In fact, 108 countries sports drop in FDI activity out of 195. eighty-two of 150 developing countries and 16 of 26 developed nations were hurt by lower capital coming in.

Given these projections, the eventual 2003 figures would more or less be flat vis-a-vis 2002. But there could be an upturn in 2004, again helped by the prospect of increased cross-border M & A plays. A lot will depend on individual sectors, and tourism and telecom may be the ones to watch out for.As for the immediate past, the report finds that the number of M&As fell from a high of 7,894 instances to 4,493 in 2003. More tellingly, their average value dropped from $145 million in 2000 to $82 million last year.

On West Asia, the report contends: "Despite the recent efforts of some countries in this sub-region to relax FDI restrictions, flows continue to be low, with geo-polictical tensions being a major factor."Some countries have large oil reserves with low extraction costs, which help attract FDI to oil and gas activities."

US TALKS TOUGH ON ASIAN CURRENCIES

The US has started to raise the temperature of discussions about the strength of the dollar against a number of Asian currencies, but a key meeting of finance ministers in Thailand has ducked any response. The latest meeting of the 21-country Asia Pacific Economic Co-operation (Apec) group, was expected to be dominated by the value of China's currency, the yuan, which has been pegged at 8.30 to the dollar for a decade.

Chinese ministers, however, stayed well away from the limelight, offering only to loosen controls on companies' rights to own foreign currencies. Too fast a move away from the peg, they hinted, would spell disaster for an economy already breeding uncomfortably high unemployment.

 

 

EURO INTEREST RATES STAY AT 2%

The cost of borrowing in the 12-nation eurozone has been left unchanged for the third month in a row. The European Central Bank has kept interest rates at 2% following a half-point cut in June.

The Bank of England has left interest rates on hold at 3.5% for a second month in a row.

The plentiful supply of cheap money and signs of recovery mean the ECB sees little need for further stimulus, analysts say. The unanimity of expectations among observers meant the euro budged no more than a fraction of a cent in the wake of the announcement, trading at $1.0818 right after the decision compared with about $1.0820 before.

FRANCE ADMITS HUGE DEFICIT BREACH

France has admitted that its budget deficit this year will be 4% of gross domestic product a level way above Brussels rules on fiscal discipline. This would be the second year in succession that France has exceeded the 3% deficit ceiling, and adds to the growing list of eurozone countries to have broken the rules. The French Government has been particularly vocal in its calls for looser eurozone budget rules, as it is hoping to cut taxes to stimulate its flagging economy.

Others argue, conversely, that fiscal discipline is necessary in order to shore up market confidence in the euro. Paris says it has been caught out by a slowing economy, which has trimmed tax revenues, while demanding action to kick-start growth. The government says it is trying to position the country to take advantage of the next economic recovery.

S KOREA THROTTLES BACK ON DEBT

South Koreans are borrowing less in the wake of government changes to lending rules. The fall, registered by the central bank in the three months to June, is the first in four years, after a credit glut which has seen personal debt soar to record levels.

Credit by financial instutitions dropped 252.5bn won ($215m; 137m) in the second quarter after a rise of 279.5bn won between the end of December and the end of March, according to the Bank of Korea. "Growth in household loans slowed notably from the previous quarter, while sales on credit saw a big fall amid sluggish consumption," the bank said in a statement.

POLICE CHECK SEIZED '$6BN BONDS'

Police are examining bonds with a face value of nearly $7bn seized during an operation against Colombian drug traffickers to see if they are genuine. Officers are also thought to have picked up 55,000 ecstasy tablets, 15kg of amphetamines and 7m of cars, jewellery, property and cash in a painstaking investigation.

ZURICH INSURANCE GETS OUT OF FRANCE

Swiss insurance firm Zurich Financial Services is to sell up its consumer operations in France in favour of concentrating on insuring businesses. The group embarked on a massive expansion programme in the late 1990s which cost it dearly, leading to a $3.4bn loss in 2002 and more than 4,000 job cuts.

 

 

GERMAN JOBLESS RATE FLATTENS

German unemployment has flattened out, boosting hopes that the government attempts to reform the labour market might be having an effect. The raw figure showed a fall from 4.35 million to 4.31 million, giving an overall jobless rate of 10.4% of the working-age population.

NBC WINS VIVENDI BATTLE

The creation of a new global media giant has drawn closer after Vivendi Universal said it intended to merge its entertainment business with General Electric's television network NBC.

FRENCH PM PLEDGES TAX CUTS

France will cut its income tax rate by three percentage points in next year's budget, Prime Minister Jean-Pierre Raffarin has said in a press interview. The move is intended to boost France's sluggish economy and comes despite calls from the European Union for the country to cut its budget deficit.

US MUTUAL FUNDS UNDER ATTACK

New York attorney general Eliot Spitzer has said his office has found evidence of illegal trading by mutual funds which leaves their shareholders out of pocket. Mr Spitzer said he had reached a $40m settlement with a hedge fund over allegations of illegal trading, and the firm would also assist with an ongoing inquiry into the trades.

UK ONLINE BANKING BOOMS

The numbers of consumers using Internet banking services has more than doubled in the past two years. The survey from payment services group BACS concluded that the number of Internet banking users had increased from 3.5 million to 7.8 million from 2000 to the end of last year.

Unsurprisingly, the number of people paying bills or transferring money over the Internet or telephone has also risen dramatically. During 2002, 7.2 million people paid bills or transferred funds in this way, 44% more than in 2001.

OIL FIRM FLEES SUDAN

Austria's OMV has bowed to pressure from human rights groups and pulled out of Sudan.

OMV is Austria's largest industrial group and is the third Western oil firm to pull out of the war-torn country within a year.

TOYOTA WINS ON US CAR SALES

Japanese carmaker Toyota has overtaken Chrysler as the third biggest selling car marque in the US. The figures for vehicle sales in August totalling 1.63 million units show more cars left the showrooms than during any month this year.

General Motors kept its top spot on just a 0.7% fall in sales from last August, but sales of Ford, the second most popular make, slumped 13% over the year. Next in line is Toyota, up 11.4% on August 2002, with Chrysler limping in fourth on a fall of 6.4%.

 

 

AUSTRALIAN ECONOMY GRINDS TO A HALT

Australia's economy has ground to a halt, recording just 0.1% growth between April and June.

That is the weakest level in more than two years, and was caused by a sharp drop in exports and a slump in tourism.

Treasurer Peter Costello blamed the stagnation on the war, the drought and the deadly Sars virus. But he was still upbeat about the months ahead, and continues to predict 3% growth for the Australian economy during the year as a whole.

VIETNAM ECONOMIC REFORMER DIES

Nguyen Xuan Oanh, a Harvard-educated economist and former deputy prime minister in the American-backed Southern Vietnam government, died at home, according to government officials. He was 82.He helped draft Vietnam's landmark doi moi economic reform package in the mid-1980s, which sought to turn Vietnam's centrally planned economy into one that was market-based but with socialist influences, and that later would embrace private enterprise.

EU SHARE LAW FACES KEY VOTE

Members of the European Parliament (MEPs) will vote on controversial European Union (EU) proposals which could make share trading prohibitively expensive for small investors.

The draft laws, aimed at protecting consumers from making ill-advised investment decisions, would oblige private investors to seek professional advice every time they buy or sell shares.

UK HOUSING MARKET 'ROBUST'

Despite increasing speculation about its long-term fortunes, the UK housing market is showing signs of renewed strength, new figures indicate. The latest data from the Halifax, the UK's largest lender, showed house prices in August grew by 1.3% the same rate reported in July. The bank said low unemployment and the end of the war in Iraq boosted confidence in the market, with estate agents reporting more interest from buyers.

US FACTORIES CONTINUE RECOVERY

The US manufacturing sector is showing further signs of recovery, according to the latest snapshot of the sector. The Institute for Supply Management (ISM) said its manufacturing index rose to 54.7 last month, up from 51.8 in July.

A figure above 50 indicates expansion and August's figure is the highest reading since December 2002. Despite the pick-up in activity, the ISM showed the sector was still shedding jobs with the employment index falling to 45.9 from 46.1 in July.

 

 

SRI LANKA HOPES FOR TOURIST BOOST

Sri Lanka is planning a massive boost in its tourist accommodation to cope with what is proving to be a surge in business thanks to the 18-month ceasefire with the Tamil Tiger rebels. The influx of up to 10,000 visitors from the UK later this year for a series of cricket Test Matches could also put a strain on the avaiable accommodation, the government believes. The 14,000 or so available rooms are not sufficient, Tourism Minister Gamini Lokuge told reporters.

UK FACTORY REBOUND CONTINUES

British factory output rose at its fastest pace in 15 months in August, figures have shown. The Chartered Institute of Purchasing and Supply's (CIPS) manufacturing index for August climbed by more than expected to 51.9, up from 51.1 the previous month. Any reading above 50 on the index indicates expansion, while a score below 50 denotes contraction.