Oct  13 - 19 , 2003









Singapore's economy expanded during the third quarter of 2003 at its fastest rate for six years, fuelled by strong output from its export-oriented factories. Gross domestic product in the territory was up 15% in the three months to end-September, the first time it has hit such a pace since the pan-Asian financial crisis of 1997-98. But economists said the rebound would have been stronger, if not for the effect of the deadly Sars virus, which hit confidence and output across Asia. And some warned that the continuing recovery looked fragile, depending largely on Singapore's ability to run a skilful monetary policy. Singapore's Government insists that the recovery is sustainable, and would last through until at least the end of the year.




















But market reaction was muted, with many analysts doubting that the territory had truly turned the corner. "The outlook is maybe a little bit more downbeat than had been rumoured," said Simon Flint of Bank of America. Some forecasts had tipped growth as high as 20%, based on evidence that Singaporean exporters especially in the hi-tech sector are recovering sharply from the global market slump of the past two years. Much now depends on government policy, especially the value of the Singapore dollar. The Monetary Authority of Singapore allowed the dollar to fall slightly within its prescribed exchange-rate limits in July, and aims to keep the currency low in order to help exporters. Overall, the 15% growth does not translate into sizzling year-on-year figures: even government projections still tip GDP to rise by only 1% in 2003 as a whole. But any full-year growth will be welcome news after a poor performance earlier in 2003. Thanks to Sars, which hit Singapore disproportionately hard, GDP shrank by 11% during the three months to end-June.


India, China and Japan are backing plans to extend the free-trade area agreed by 10 South-East Asian nations.Of the three regional economic powerhouses, China agreed to a framework free trade deal with the Association of South-East Asian Nations (Asean) in 2002. Now as the Asean summit wraps up last week in Bali Indonesia, India and Japan are negotiating their own versions to cut back on both tariffs and other barriers to trade.

And China extended its own involvement by signing up to Asean's 1976 Treaty of Amity and Co-operation on same occasion, which calls for dialogue-based solutions to both political and economic disputes.Under the deals signed by China and Asean, a vast free-trade area of 1.7 billion people is envisaged by 2010.Adding India and Japan to the grouping would expand it to cover almost half the world's population."It's going to be a vibrant market and India wants to be a part of it," Indian industrialist Jamshed Godrej told BBC World Business Report.

Asean leaders have already committed in the Bali Concord II signed recently to convert their free-trade area into a full-blown economic community by 2020.Unsurprisingly, the agendas of the various players differ. For Asean, which includes nations as diverse as tiny trading economy Singapore, shunned dictatorship Burma and regional giant Indonesia, it is vital to get Asia's three powerhouses on side rather than in opposition.For India, Asean is playing an increasingly important economic role, with trade up 25% in the past year to about $12.5bn.India is also keen to make more of a mark on the world stage, and is willing to cut tariffs fast to achieve that aim, as Prime Minister Atal Behari Vajpayee explained to business leaders.




Despite the current weakness of its economy, Germany has not lost out on its share of exports in the world market, according to Chancellor Gerhard Schroeder."We were the only country in the world in the last 12 years to have done a transformation of one part of the country from a command economy to a market-led one," said the Chancellor during a media briefing last week.

"This has seen us spend four per cent of our GDP every year on this transformation. This has been one of the root causes of our current weakness, and we are working to change that. Despite this, we have not lost out on our share of the world market."Schroeder also opened Siemens' new 52,255 square foot facility at Dubai Internet City, which makes it the single largest tenant at the free zone. It will house the company's business units in the lower Gulf besides being the regional headquarters for the tele-communications businesses throughout the Middle East.


The dollar has once again fallen sharply, as investors convinced themselves that Washington was happy to allow it to weaken. In Tokyo, the dollar fell below 109 yen, only recovering slightly from earlier after the Bank of Japan reportedly intervened on Oct 10. The dollar has lost almost 10% of its value against the yen over the last couple of months, mainly thanks to a fresh influx of investment into Japan's apparently resurgent economy. Japan, heavily reliant on exports, is displeased at the trend, and had hoped to hold the dollar above the 110-yen mark. But the US, although officially clinging to a strong dollar, is believed to be increasingly inclined to let it slide in order to help mend its widening current-account deficit.


The UK's trade deficit widened in August as exports to the EU slumped to their lowest level since June 1999. The global goods trade deficit rose to 3.6bn ($5.9bn), up from a downwardly-revised 3.0bn, the Office for National Statistics (ONS) reported. Overall, exports dropped 5.2% while imports fell only 1.3%, the ONS said. The deficit with the EU widened to 2.0bn from 1.3bn the month before, raising fresh concerns about growth in the moribund eurozone economy. It had been hoped that the drop in the pound's value against the euro in the first half of this year would boost British exports by making them cheaper in EU markets.


Shares in some of Japan's biggest companies slumped last week as the yen climbed to its strongest level against the US dollar for three years.The big names under pressure from the dollar's seemingly relentless slide which pushes up the prices of Japanese goods sold overseas include car giants Honda and Nissan, both down about 6%.

Iconic electronics names such as Canon and Nikon also suffered as the benchmark Nikkei 225 index slid 2.57% by the close of trading to 10,542.20 points.The selling, which Japanese officials blamed on "speculation", was triggered as the yen strengthened above 110 to the dollar, reaching levels last seen in November 2000.




The outgoing prime minister of the mainly Muslim state of Malaysia has made a strong call for peace and tolerance in the Islamic world. Dr Mahathir Mohamad told BBC News Online: violence had "achieved nothing", for example, for the Palestinians. But he also accused the West of treating all Muslims as "terrorists".Dr Mahathir, 78, is due to retire at the end of October after 22 years in office, making him Asia's longest-serving elected leader. The Malaysian premier was responding to callers and emails from all over the world in an interactive interview he gave to the BBC's Talking Point programme at his office in Kuala Lumpur last week. He appealed to Muslims worldwide to go back to the "original, true teachings of Islam" and embrace values such as "peace, friendship, brotherhood, and tolerance of people".


Japanese Prime Minister Junichiro Koizumi has dissolved the lower house of parliament and called an early general election set for 9 November. The move was expected after Mr Koizumi, who enjoys a high popularity rating, won a leadership battle within his party last month. The Liberal Democratic Party (LDP) and its allies have a majority of four in the 480-seat lower chamber. Having won 233 seats last time, their aim will be an overall majority. Mr Koizumi had to call an election by June 2004.


UK interest rates have been left unchanged at 3.5% following the Bank of England's latest rate-setting meeting last week. The move was widely expected despite recent signs that growth in the economy is starting to pick up. Talk of a possible rate rise this month was quashed earlier this week following the release of surprisingly weak manufacturing data. Experts say the Bank will want to wait for more concrete evidence of a turnaround before it raises rates, which are currently at a 48-year low.


US shares have risen to a high not seen since May 2002 as investors reacted positively to financial results from companies including Genentech and Yahoo last week. An unexpectedly big drop in weekly jobless claims also boosted expectations that an economic recovery was in the works. "It's one of the big issues that's been holding this market back, so as you see that dissipate, you'll see days like this," said Owen Fitzpatrick, chief of the US equity group at Deutsche Bank Private Wealth Management. The Dow Jones index of leading US shares was up 115 points, or 1.2%, at 9,746. Yahoo shares surged $2.44, or 6.29%, to $41.23 after it said third quarter profits had more than doubled.


Internet giant Yahoo has more than doubled its profits thanks to its strategy of making more money from fee-based services.The firm made $65.3m (39.3m) between July and September, beating analyst forecasts and far outshadowing the $28.9m made in the same three months a year earlier.


German unemployment eased slightly last month, according to the latest official figuresThe Federal Labour Office said the seasonally adjusted jobless total fell by 14,000 in September to about 4.4 million.The unadjusted total fell by 107,000 from August to 4.2 million.


Debt-ridden French conglomerate Vivendi has completed a deal to sell its US entertainment empire to media giant NBC.Under the agreement, NBC will pay about $3.8bn (2.3bn; 3bn euros) in cash for Vivendi's entertainment arm.Vivendi will pick up about $3.3bn of this, while the remainder will be divided between other investors in its US entertainment arm.NBC will also take on $1.7bn Vivendi's debt.




The European Commission has declared France to be in breach of European Union (EU) budget rules after the country missed a deadline to bring its finances back in line.The Commission will now draw up a list of recommendations for bringing France's public finances under control.

The recommendations will be discussed by EU finance ministers when they hold their next monthly meeting on November 4.France could in theory be fined billions of euros for breaching the rules, designed to ensure the stability of Europe's single currency.But that is unlikely to happen.It will be up to finance ministers from the rest of Europe to decide precisely what action should be taken. And they are likely to give France a sympathetic hearing when they rule in November.


Hong Kong's struggling economy has received a welcome boost from the latest retail sales figures.The data showed spending on shopping rose by 1.2% in August compared with a year ago, the first increase since January.Hong Kong's retail sector was hit hard by the outbreak of the deadly Sars virus in March which emptied shops, streets and restaurants.


China's Premier Wen Jiabao has insisted that China will not be railroaded into revaluing its currency by pressure from its trading partners.China's policy of keeping the yuan pegged at roughly 8.28 to the US dollar was "based on market demand and supply and is in line with China's reality," he said.

It showed "a high sense of responsibility towards the international community," said Chinese premier while speaking in Bali ahead of a summit of the Association of South East Asian Nations (Asean).China has come under increasing pressure from the United States and other developed countries to let the yuan appreciate, or take the more drastic step of allowing it to float freely.


US companies hired more people than they fired in September for the first time since January.The figures confounded gloomy expectations that the employment drought would continue.The news went down well on Wall Street, where traders had been braced for bad news.The Dow Jones Industrial Average gained more than 140 points at one stage, although enthusiasm waned towards the end of the session and it closed 84.51, or 0.9%, higher at 9,572.