INTERNATIONAL

 

Feb 23 - 29 , 2004

 

1.INTERNATIONAL

2. PAKISTAN

3. GULF


RUSSIA 'OVERLY DEPENDENT ON OIL'

Russia may be more dependent on oil sales revenue than originally thought as result of widespread tax evasion, says a World Bank report. The energy sector may account for a quarter of Russia's gross domestic product, says the international body. The State Statistics Committee puts the figure at 9%. By increasing its dependency on oil exports, Russia is now more vulnerable to a sudden drop in oil prices, experts warn. Oil exports shored up by booming energy prices have driven Russia's economy over the past year. "The Russian economy is more exposed to world movements in energy prices than official GDP figures imply," the World Bank said.

 

 

 

 

The Washington-based institution said many firms are reducing their tax liabilities by using trading companies to market their output - a practice known as transfer pricing. A company will sell its production cheaply to a trading subsidiary, which will then sell it on at full market prices. The trading companies pay less tax than the production companies because there has been a so-called transfer of value added and as they are usually registered in domestic tax havens.The World Bank says accounts have been distorted by the exaggeration of the value added by service sector companies.The body said the loss to the budget was difficult to estimate as tax relief obtained by individual trading companies differed from region to region. "If the result of transfer pricing to avoid taxation would be to reduce the effective tax rate on the transferred profits by 10%... the scale of the revenue losses to the budget would already amount to about 2% of GDP," it said.

ARGENTINA RETURNS TO RAPID GROWTH

Argentina's economy set a breakneck pace in 2003 in the first turnaround after four years of contraction, new figures show. The 8.4% growth recorded for the full year follows a 10.9% slump in 2002. The battered state of the economy is the result of soaring debt after the currency, the peso, was pegged to the dollar in the early 1990s. The meltdown following a decision to default on the $140bn public debt in January 2002 put millions out of work. In the year that followed, the country went through four presidents before settling on Nestor Kirchner, the current incumbent, early in 2003. The engine behind the recovery was the agricultural sector, whose exports benefited from a 70% slide in the value of the peso.

GAS DEAL IN BITTER BELARUS ROW

Russia and Belarus have signed an agreement on the temporary resumption of Russian gas supplies to Belarus. Russia had earlier cut off its entire natural gas supply, prompting a fierce reaction from the Belarus president, Alexander Lukashenko. Moscow is giving Belarus a second chance. It has agreed to resume gas supplies, for now, at the previous rate. That should provide Belarus with enough gas to last it at least until the end of the month. But the authorities in the capital, Minsk, are likely to come under heavy pressure from Moscow to accept a new long-term deal on Russia's terms.

DOW SLIPS BACK FROM 32-MONTH HIGH

A day of soaring share prices in the US ended on a low note as caution returned despite healthy corporate profits and good economic news. Earlier, the blue-chip Dow Jones industrial average scaled a 32-month high. European stocks had also leapt, with the UK FTSE 100 at a five-month peak. Dow closed down 0.07%. The Nasdaq Composite index, closely watched for its many tech stocks, had been the first to come off the boil, losing ground early in after the news and finishing down 1.47% at 2,045.96. And the broad S&P 500 index closed down 0.41% at 1,147.04.

EXPORT-LED GROWTH SPURT FOR JAPAN

Japan's economy grew at its fastest rate in 13 years in the last quarter of 2003, helped by a rise in exports to the United States and China. GDP expanded by 1.7% from the previous quarter, while the economy grew by an annualised 7%, exceeding predictions of 4.6%. Overseas buyers were particularly keen on Japanese flat panel televisions, digital cameras and cars. But Japanese prices slumped further in the final quarter last year.

IS CHINA A GOLDMINE OR MINEFIELD?

"China is amazing", says Microsoft boss Bill Gates. "It is capitalism, but at an unprecedented speed." "Amazing" is an understatement. This is an economy on speed. Chinese exports have surged more than 50% to $325bn (171bn) in the five years to 2002. And they are accelerating, currently growing 20% year-on-year. The economy, meanwhile, is expanding at a blistering 9%. No wonder foreign investors want to join the gold rush. Just during the past few days,

Korea's INI Steel Company launched a $500m steel project in the Dalian development zone; France's Saint Gobain invested another $70m in one of its existing glass production lines; Germany's Siemens opened its 40th office in China, to develop high-end software applications in Nanjing, and warned that it could shift thousands of jobs from Europe and America to China; while Finnish paper giant Stora Enso invested $1.6bn in a pulp-paper project in South China.

THAILAND REPORTS BIRD FLU IN CATS

Scientists in Thailand have confirmed the first cases of bird flu in cats. The deadly H5N1 virus was found in at least two domestic cats and a white tiger, veterinarian Teeraphon Sirinauemit announced in Bangkok. The discovery is significant because every time the virus jumps from one species to another, it increases the risk of more cases occurring in humans. So far 22 people have died of bird flu, the most recent cases being a four-year-old Thai boy and a man in Vietnam.

 

 

WAL-MART SALES SOAR

The group said sales were up 12% over the previous year despite a weak showing in the December holiday season. Profits for the world's largest retailer, meanwhile, were up 8% to $2.7bn (1.4bn).

MICROSOFT TARGETS SOURCE PIRATES

Microsoft is taking steps to stop its leaked Windows source code spreading widely on the Internet. It is using the messaging systems in file-swapping networks to alert people sharing the code that what they are doing is illegal.

QANTAS HAS AN UNEXPECTED PROFIT

Qantas has reported a surprise profit for the first half of its financial year as currency gains cut fuel costs and domestic demand rose. Profit in the six months ending 31 December rose 1.5% to 358m Australian dollars (150m). Analysts had been expecting a drop.

GERMAN COMPANY CIRCLES UK AIRPORT

Europe's largest travel group, TUI, has said it intends to buy the UK's West Midlands airport. The German group, which owns travel firm Thomson, said it expected to spend less than 10m euros (6.7m) on the regional airport, near Coventry. TUI said its new no-frills airline Thomson Fly would begin operations at West Midlands from 31 March.

MORTGAGE LENDING DIPS IN JANUARY

Mortgage lending for house purchases slipped to a seven-month low in January, according to the Council of Mortgage Lenders (CML). January, usually a quiet month for house moves, saw lending of 10bn for purchases, lower than in December. Remortgaging increased to 9.4bn in January from 9.2bn in December, despite two increases in interest rates since November.

US MANUFACTURING OUTPUT INCREASES

The US manufacturing sector recovery is continuing, new data from the Federal Reserve has shown. Its monthly gauge of production at American factories, mines and utilities rose a sharp 0.8% in January, up on December's flat figure. In a separate report, Fed subsidiary the Federal Reserve Bank of New York said conditions for manufacturers were the best for more than two years. Factories across the US increased production by 0.3% in January. US mines extracted an extra 0.1% and utilities ramped up production by 5.2% to provide heating during January's cold weather.

UK INFLATION RATE CREEPS HIGHER

Inflation in Britain crept higher in January, but still remained well below the Bank of England's 2.0% target. The government's preferred consumer prices index (CPI) went up by 0.1 of a percentage point to 1.4% last month

CHINA BOOSTS BHP BILLITON PROFIT

Profit at BHP Billiton, the world's largest mining company, has doubled in the second quarter, driven by surging Chinese demand and rising metal prices. The company also said it was seeing a pick up in demand in the US and Europe. Profit was $821m (434.2m) in the three months ending December 31, compared with $359 a year earlier.

BANK VOTE UNANIMOUS ON RATE RISE

All nine members of the Bank of England's Monetary Policy Committee (MPC) voted to raise UK interest rates, minutes from their latest meeting show. Members agreed earlier this month that prospects for the global and domestic economy had improved and were likely to fuel future inflationary pressures.The MPC thought that a rise, the second in three months, was needed to ensure inflation would hit its 2.0% target. The cost of borrowing was raised by a quarter-point in February to 4%.

 

 

DOLLAR RALLIES AFTER HITTING LOWS

The US dollar revived in late New York trading after dropping to a new record low against the euro and also slipping against other world currencies last week. One euro rose above $1.29 for the first time in its five-year history, before dropping back in US trading to $1.268. The UK pound also traded at $1.914 a fresh 11-year high, before dropping down 1% on the day to $1.8841. The dollar has fallen in recent months, hitting European exporters.

SOUTH AFRICA IN PRO-JOBS BUDGET

South African finance minister Trevor Manuel has pledged a spending boost aimed at reducing unemployment. Outlining his 2004/05 budget, Mr Manuel announced a 20 billion rand (1.6bn) public works programme designed to create a million jobs over five years. He also allocated an extra 2.1bn rand to fund the roll-out of anti-Aids drugs over the next three years. The new spending plans come two months ahead of a general election pencilled in for 14 April. Mr Manuel said he expected South Africa's budget deficit for 2004/05 to come in at 3.1% of gross domestic product, down from an earlier forecast of 3.2%, but up from a projected 2.6% this year.

DONORS UNHAPPY WITH SRI LANKA

Countries which pledged aid for Sri Lanka's peace process have said that they are disappointed by the failure of the nation's leaders to work together. President Chandrika Kumaratunga has ordered fresh general elections in the country following a prolonged power struggle with Prime Minister Ranil Wickramasinghe.

INDIA EYES RECORD FARMING OUTPUTS

India has forecast record farm outputs, partly as a result of an excellent monsoon. Grain exports are expected to rise while vegetable oil imports are likely to drop, officials have said. "After the disastrous drought of 2002, there was an astonishing recovery in 2003," said R.C.A. Jain, agriculture secretary. The government recently predicted that India's economy will grow by more than 8% in 2003/04.

BROWN CALLS FOR ANTI-POVERTY WAR

UK Chancellor Gordon Brown has warned that the developed world is failing in its promises to reduce global poverty and sickness. At a conference in London, he called on governments to give an extra 50bn ($94bn;74bn euros) in aid per year. Countries must open their markets to competition more quickly, cut protectionism and write off larger amounts of Third World debt, he said. The presidents of Brazil and the World Bank and singer Bono backed his stance.

UK'S SMALL MANUFACTURERS 'END SLIDE'

Confidence among smaller manufacturing firms has risen for the first time in almost two years, the CBI has found. But its report says they were not enjoying as much of an economic turnaround as bigger companies. Orders over the past three months for small firms were said to be flat, but this ended a three-year decline. The findings come after data showed UK manufacturing output fell for the second month running in December, casting doubts on a sector recovery.