INTERNATIONAL

 

  Apr 18 - 24, 2005

 

1.INTERNATIONAL

2. PAKISTAN

 

US TRADE DEFICIT HITS FRESH HIGH

The US trade deficit has widened to a new high as the world's largest economy consumed record imports of consumer goods and industrial materials.
The US trade gap rose 4.3% to $61bn (32bn; 47bn euros) in February, data published last Tuesday showed, well above market forecasts of a $59bn shortfall.
The deficit up from $58.5bn in January continues to be swollen by America's appetite for imports.

 

 

These rose 1.6% to a record $161.5bn while exports rose 0.1% to $100.5bn.

Textile imports rose sharply after the abolition of global quotas in January, with shipments from China to the US rising 9.8% in February.

The growth fuelled by the ending of decades-old restrictions on the level of textile trade between individual countries will increase pressure on the US government to introduce measures to protect domestic manufacturers.

The US Commerce Department is considering putting temporary curbs on some textile imports from China after US manufacturers expressed concerns about a flood of Chinese goods entering the country.

Although the overall US trade deficit with China fell by 9% in February to $13.9bn, the US government is facing growing calls to rebalance its trading relationship with China.

"You have a situation with China where imports are up by 49.8% from a year ago but at the same time US exports to China barely grew by 1.6%," John Lonski, an economist with Moody's Investors Service, quoted as saying. "That is not going to sit well with the members of the United States Congress."

MIGRANT REMITTANCES 'TOP $100BN'

Migrant workers are sending $100bn home every year in what has become the biggest source of foreign funds for developing countries, the IMF says.

In its World Economic Outlook, the International Monetary Fund said remittances beat foreign investment, aid and exports in magnitude.

Inflows of $100bn for 90 developing countries in 2003 were up 25% on 2002 with a similar rise expected in 2004. But it warned that transaction costs are still too high.

Unlike aid and investment, remittances have stayed high despite downturns in the world economy.

The World Bank in particular believes that the stereotype of money flowing from rich countries to poorer ones is only part of the picture.

"My own belief is that South-South flows are a lot larger than North-South flows," said World Bank economist Dilip Ratha.

Governments in both host and recipient countries needed to do more to ease the flow, which IMF and World Bank staff have previously said is a key source of money for driving growth and development.

A typical deal to send $200 back to relatives in a migrant worker's home country costs between $15 and $26 on average, the IMF said.

Some host countries are taking action. The UK, for example, estimates the cost of sending money from the UK at anything from 2.50 to as much as 40 for a transaction involving 100.

HIGH OIL PRICES TO HIT GROWTH: IMF

Global economic growth is set to slow to 4.3 percent this year, the IMF said last Wednesday as it expressed anxiety over high oil prices and the flagging performances of Europe and Japan.

In its semi-annual World Economic Outlook report, the International Monetary Fund said growth was still "overly dependent" on demand from the United States and China. The world economy is likely to moderate this year from estimated growth of 5.1 percent registered in 2004, the report said.

Next year would see a slight rebound to 4.4 percent, but three main obstacles stand in the way of robust growth: "higher (US) interest rates, high and volatile oil prices and increasing current-account imbalances".

The IMF emphasised that a slowdown in the United States could tip the global economy into recession in the absence of stronger growth in the eurozone and Japan. All regions have to play their part to redress global imbalances, IMF senior economist Raghuram Rajan told a news conference.

The United States, China and most emerging markets have powered ahead, the report said. "In contrast, growth in Europe and Japan has been disappointing, reflecting to different extents faltering exports and weak final domestic demand," it said.

The global economy is also out of kilter owing to the record current-account deficit being run up in the US, the IMF warned. The report said that Americans' insatiable demand for imported goods, combined with the lacklustre demand for US exports in Europe and Japan, have left the global system vulnerable to a shock.

The resulting pressure on the dollar is unwelcome if it results in "further, and possibly disorderly, depreciation" of the world's reserve currency. A sharp rise in US interest rates would also have big knock-on effects. And having recently surpassed $58 a barrel for the first time, the oil market "remains highly vulnerable to shocks, with significant upside risk over the longer term".

ASIAN STATES ASKED TO LIBERALIZE CURRENCIES

EU finance ministers, eager to ease the pain of the euro's strength, stepped up pressure on Asian countries to let their currencies appreciate ahead of an upcoming G7 meeting.

Luxembourg Prime Minister Jean-Claude Juncker, whose country currently holds the EU's presidency, said EU finance ministers believed an "orderly" appreciation of Asian currencies was "absolutely necessary".

Juncker said he would voice European concerns about exchange rates at a forthcoming meeting in Washington of finance ministers of the Group of Seven (G7) most industrialized countries.

Speaking at a press conference after meeting with eurozone finance ministers, he said they had agreed that he would "repeat verbatim" at the Washington gathering a message he gave in February in London at the last G7 summit.

"In other words, excessive volatility and concern about exchange rates because the current position remains contrary to the objective of robust economic growth," he said.

"We also repeated that exchange rates will not cause undesirable economic imbalances. All important economies would be expected to redress global economic imbalances ... so that if appreciation has to take place, it will be orderly," he said.

"Appreciation of some Asian currencies is more than highly desirable." Past calls for currency appreciation in Asia have fallen on deaf ears, leaving policymakers in the euro zone with the impression that their countries are bearing the brunt of the dollar's weakness because many Asian currencies are either directly or indirectly pegged to the US currency.

OIL TUMBLES AFTER SHARP JUMP IN US INVENTORIES

World oil prices dropped sharply last Wednesday, hit by bigger-than-expected rises in US crude stockpiles, amid forecasts of falling global demand for energy, analysts said.

New York's main contract, light sweet crude for delivery in May, fell $1.16 to $50.70 per barrel in early deals. In London, the price of Brent North Sea crude oil for delivery in May lost $1.06 to $50.80 per barrel.

New York prices have slumped by 13 percent since supply worries pushed them to historic high points of $58.28 on April 4, the same day Brent crude rocketed to a record level $57.65. "The market was shocked by the (inventories) data," Societe Generale analyst Deborah White said.

INDIA, CHINA JOIN HANDS AS STRATEGIC PARTNERS

India and China last week agreed to join hands as strategic partners to shore up peace and prosperity in Asia and beyond, a joint statement signed by the prime ministers of the two countries said.

Celebrating a perceptible bonhomie between visiting Chinese Premier Wen Jiabao and Indian Prime Minister Manmohan Singh, Beijing also formally gave recognition to the Himalayan region of Sikkim as an Indian state.

The two prime ministers exchanged notes on Pakistan, but New Delhi did not raise the standard issue of Beijing's arms supply to Islamabad during the summit talks, Indian Foreign Secretary Shyam Saran told a news conference. "There was no specific discussion on arms supply to Pakistan. The Chinese premier expressed his support for the talks between India and Pakistan," he said.

Mr Saran displayed a map of India presented by the Chinese side in which Sikkim was shown as part of India. A formal recognition of the new status for Sikkim was written into the joint declaration.

ASIAN GIANTS KEEP UP WAR OF WORDS

China and Japan have kept up their war of words over disputed gas reserves and Japan's wartime behaviour.

China said Tokyo's decision to issue drilling rights in a disputed area of the East China Sea was a "serious provocation".

But Japan's Foreign Minister Nobutaka Machimura signalled he would take a tough line in weekend talks in China.

China has seen violent protests over Japanese textbooks which critics say play down Japan's wartime brutality.

The protests were also directed at Tokyo's bid for a permanent UN Security Council seat.

The Chinese government said it had lodged a protest with Japan following Tokyo's announcement that it was starting to review applications to drill for gas in the East China Sea.

Chinese Foreign Ministry spokesman Qin Gang called the decision a "serious provocation to the rights of China and the norm of international relations", according to China's state media.

POVERTY TARGETS 'MAY BE MISSED'

 

 

The World Bank and IMF have called for urgent action to enable the poorest countries to achieve targets known as the Millennium Development Goals.

Ahead of their spring meetings, they have issued a report saying many countries will fail to achieve the hoped-for levels of poverty reduction.

African nations in particular are failing to meet goals, the report says.

Rich nations should do more and poor countries must create a climate for private business to thrive, it adds.

The World Bank and IMF argue that it is possible for most countries to reduce poverty, as well as providing the primary education and improved public health that the goals embody.

Economic growth is central to the effort to achieve the goals and the IMF and bank's vision is one of expansion driven by private business.

BLAIR BID TO SECURE LABOUR LEGACY

Tony Blair will ask voters to make Labour's changes last "for all time" as he launches the party's manifesto.

After eight years in power, Mr Blair will say he is fighting his last election as Labour leader but still has fresh ideas on making Britain fairer.

The spotlight will be on which taxes the manifesto says will be untouched.

The Conservatives insist Labour will have to raise taxes to pay for its plans while the Liberal Democrats say the tax system is too unfair.

The Tories are expected to launch a new cinema advertisement to encourage people to vote against Mr Blair's "smirking". The Lib Dems have highlighted plans to make the NHS fairer.

EU 'TO APPROVE' TWO NEW COUNTRIES

The European parliament is expected to approve the admission of Bulgaria and Romania to the European Union.

The decision will pave the way for the signing of an accession treaty later this month. Both countries are set to join the EU in 2007.

But their memberships could be delayed by one year if they fail to make key reforms, such as curbing corruption and reorganising farming.

At last the EU seems within reach for Bulgaria and Romania, which missed the first big wave of expansion into the former Communist bloc last year.

Many European deputies think that Romania a country of 23 million people is still lagging behind.

FED WORRIES GROW ON US INFLATION

Inflation is a growing concern in the US economy and interest rates may have to rise to nullify the threat, the Federal Reserve has indicated.

Minutes from the Fed's monetary policy meeting in March at which it raised rates by 0.25% to 2.75% suggest more concern about inflationary pressures.

Fed policymakers, who voted unanimously for the rise, noted a requirement for a "tightening" of monetary policy.

However, they said they did not think "accelerated" rate rises were needed.

Analysts interpreted the comments as a signal that the Fed believed that the rate of economic growth was healthy and that substantial hikes in interest rates were not on the cards.

DRUG SECTOR HITS SINGAPORE GROWTH

Singapore's economy shrank by an annualised rate of 5.8% in the first quarter of this year, official figures show, after the drugs sector slowed.

The drop in gross domestic product (GDP) was far worse than the markets had been expecting, and the weakest since the Sars crisis of 2003.

The government had already forecast that the pharmaceutical industry would see flat growth in 2005.

The sector has been hit by competition from generic drug producers.

Analysts had expected that Singapore's economy would only decline by an annualised rate of 0.8% during the first quarter, after 7.9% growth in the last three months of 2003.

IMF RATE HIKE PROPOSAL IRKS BD TRADERS

The central bank of Bangladesh and leading trade bodies of the country take diametrically opposite positions on a recent IMF prescription that the country should raise lending rate and tighten money supply to contain inflation.

The International Monetary Fund put forward the prescription of 'contractionary' monetary policy by increasing the lending rate and tightening credit growth. Subsequently, the central bank, Bangladesh Bank, echoed the IMF's position.

In a meeting with the chief executives of state-owned, private and foreign commercial banks, top BB officials suggested that they should increase the lending as well as deposit rates.

IPOD SALES FUEL APPLE PROFIT LEAP

Apple sold more than five million iPod digital music players in the first three months of 2005, helping it to boost quarterly income six-fold.

Buoyant sales of iPods helped the firm raise its net income by 530% to $290m (153m; 224m euros), compared with $46m for the same period last year. Revenues rose 70% to $3.24bn after good growth in all product categories.

CHIRAC LAUNCHES EU YES CAMPAIGN

President Jacques Chirac is set to launch the Yes campaign in France's referendum on the European constitution in a TV debate with 80 young people.

The Yes campaign, which includes most of the country's political elite from left and right, is under pressure.

Two months ago they were well ahead but now the opinion polls give the No campaign a clear lead.

It says the new European Union is too Anglo-Saxon in its commitment to free market economics and open competition.

Those campaigning against the constitution argue that it threatens France's cherished social model.

The No campaigners are also telling voters that voting no in May is the best way to stop Turkey becoming a member of the EU.

LEBANON PM RESIGNS

Lebanon's pro-Syrian prime minister stepped down last Wednesday, abandoning efforts to form a government to lead the country to general elections, but said there was still time to hold the poll next month.

Prime Minister Omar al Karami's resignation seemed to make timely elections more unlikely and deepened the political crisis triggered by the February assassination of former prime minister Rafik al Hariri.

INDIA AND US IN 'OPEN SKIES' DEAL

India and the United States have signed an agreement increasing the number of flights between the two countries.

The new "open skies" policy replaces a decades-old agreement which restricts flights, the destinations they can fly to and air fares.

The new agreement is expected to lead to lower air fares between India and the United States.

BRAKES SLAMMED ON HARLEY GROWTH

Harley-Davidson, the iconic US motorbike manufacturer, has lowered 2005 profit forecasts and is reducing shipments because of slowing demand.

Poor sales in the US have prompted Harley to reduce its expectations for the year, despite reporting a strong performance in the first quarter.

It is downgrading profit forecasts to between 5% and 8% growth from its previous guidance of more than 10%.

PROTESTS BATTER UKRAINE'S ECONOMY

Ukraine saw growth in its economy halve in the months following the country's disputed presidential elections.

Gross domestic product (GDP) rose by 5.4% between January and March, compared with a 10.8% rise at the same time in 2004, official figures showed.

Much of Ukraine ground to a halt during last year's political crisis, which eventually saw pro-Western opposition leader Vickor Yushchenko win power. Thousands of people joined protests during the so-called Orange Revolution.

UK JOBLESS TOTAL ON THE UP AGAIN

The number of jobless people in the UK has risen, according to the latest set of official figures.

In the three months from December to February the government's preferred ILO measure of unemployment rose by 29,000 to 1.43 million, a rate of 4.8%.

The number of people out of work and claiming unemployment benefit rose by 11,000 to 828,700 in March.

Meanwhile, average earnings rose by 4.7% in the year to February, up from the previous month's level of 4.4%.

DONORS PRESSURE KENYA OVER GRAFT

International donors have taken a tough line with Kenya on aid, demanding fresh reforms to root out corruption.

At the end of a two-day World Bank-led meeting in Nairobi, officials made no funding pledges and called on Kenya to commitment itself to reforms.

Donor nations have expressed alarm at increased reports of high-level corruption in the country.

However, World Bank representative Makhtar Diop said he was optimistic an action plan on graft could succeed.

ROVER SUPPLIERS RECEIVE PAYOUTS

The task force set up to help suppliers of MG Rover, the car company which is in administration, has made its first payouts to suppliers.

So far, 63,000 has been paid to six companies, saving 234 workers from being laid off.

The government has said a total of 40m will be made available to support businesses who supplied Rover.

Suppliers who rely on MG Rover for 15% or more of their total business are eligible for help.

LABS TOLD TO DESTROY DEADLY VIRUS

The US government has told more than 3,700 laboratories in 18 countries to destroy potentially lethal influenza samples sent out in testing kits.

The samples are of "Asian flu", which killed more than one million people in 1957 but disappeared by 1968.

Klaus Stohr of the World Health Organization (WHO) told the BBC that people born after 1968 did not have antibodies against the virus.

"If the virus gets loose, it can easily cause an influenza epidemic," he said.

"If this virus were to infect one person, it would spread very rapidly."

AIG BOSS GAVE WIFE $2BN IN SHARES

The ex-boss of US insurance giant AIG, Maurice Greenberg, gave his wife more than $2bn (1.2bn) of his shares in the company days before stepping down.

The stock transfer was recorded in a document filed with the US Securities and Exchange Commission (SEC).

The US regulator is investigating alleged fraud in a suspect deal between American International Group and reinsurance firm General Re.

Mr Greenberg quit as chief executive of AIG in the wake of the scandal.

TESCO PROFITS BREAK THROUGH 2BN

Supermarket giant Tesco has become the first UK retailer to unveil annual profits of more than 2bn. The UK's biggest supermarket chain posted underlying pre-tax profits of 2.03bn ($3.83bn), up 20.5% on 2004.

INVESTORS APPROVE HUGE STEEL DEAL

Shareholders of three of the world's largest steelmakers have agreed a merger which will create a business with combined sales of $31.5bn.

The deal, uniting Dutch firms Ispat and LNM and US business International Steel Group, was spearheaded by Indian-born steel tycoon Lakshmi Mittal.

The Mittal family will own 88% of the newly created Mittal Steel, which will employ 165,000 workers. The firm said it would look to expand its interests in China and India.

GO-AHEAD FOR BALKAN OIL PIPELINE

Plans to build a trans-Balkan oil pipeline from the Black Sea to the Mediterranean have been approved by Russia, Bulgaria and Greece.

The 285km (178-mile) pipeline will go overland from Bulgaria's Black Sea port of Bourgas to the northern Greek town of Alexandroupolis on the Aegean.

The aim of the pipeline is to allow Russian crude exports to sidestep the congested Bosphorus Strait. Separate ships will instead unload at Bourgas and fill up at Alexandroupolis.

GERMAN UNEMPLOYMENT

German unemployment hit a post-war high in March after cold weather deterred many firms from hiring workers.

The number of people out of work increased by 92,000 to 4.97 million, according to seasonally adjusted figures from the Federal Labour Office.

That pushed Germany's jobless rate to 12%, compared with about 5% in the UK and the US.

The non-seasonally adjusted figure stayed above the 5 million level, falling by 41,000 to 5.176 million.

LABOUR ATTACK TORY ECONOMIC PLAN

Conservative plans for the economy have come under fire from both Labour and the Lib Dems as Tory Oliver Letwin insisted his proposals did add up.

Labour unveiled a dossier claiming the Tory figures were an "incoherent mess".

But the Tories retaliated with their own document saying they had already refuted all the claims. They accused Tony Blair of "losing the plot".

The Lib Dems, whose leader Charles Kennedy is celebrating becoming a father, focused on their own tax plans.

MICROSOFT IN $150M GATEWAY PAYOUT

Microsoft is to pay PC maker Gateway $150m (79.4m) over four years to settle an anti-trust case.

Shares of both firms rose in New York, after they agreed to work together to develop and market Gateway products.

Microsoft will set aside more than $700m from first quarter earnings to cover costs arising from the case.

That includes $123m of payments to Gateway, $41m in payments to Burst.com, and $550m for a reserve fund to finance future anti-trust claims.

CHINA PHONE FIRMS WIN INDIA DEALS

Two of China's largest telecoms firms have announced multi-million dollar contracts to supply equipment to India.

ZTE has won an order worth $208m (110m) to provide 500,000 broadband lines to India's Atlas Interactive.

And Huawei Technologies has secured a three-year $70m deal to supply network equipment for both fixed line and mobile services to HFCL Infotel.

ROVER'S PHOENIX FOUR PLEDGE 49M

The "Phoenix Four", who own MG Rover's parent, Phoenix Venture Holdings, have pledged 49m ($92.6m) in assets to help keep the troubled firm going.

Rover's administrators, PricewaterhouseCoopers (PwC), said they had a letter committing the 49m.

GERMANY IN HUGE RUSSIAN GAS DEAL

German and Russian companies have signed natural gas and rail equipment deals worth billions of dollars.

Russia's gas giant Gazprom and Germany's Wintershall part of BASF will develop a west Siberian gas field and invest in a Baltic Sea pipeline.

Construction of the $2bn pipeline (1.05bn; 1.54bn euros) is due to start later this year. Germany's Siemens signed a deal with Russia's railways to build high-speed trains for Russian intercity services.

UK HOUSE PRICE JITTERS CONTINUE

UK house prices fell 0.5% in February, according to figures from the Office of the Deputy Prime Minister (ODPM).

The decline which saw the average UK house price fall from 180,465 in January to 179,491 was smaller than a 1% fall in the same period last year.

EU HOPES OVER AIRCRAFT AID ROW

The EU has said it believes there is still time to strike a deal with the US over the level of state aid given to aircraft makers Airbus and Boeing.

European negotiators are keen to avert a possible economic showdown at the World Trade Organisation (WTO).

Both sides have missed an 11 April deadline to reach an accord on cutting support to Airbus and Boeing.

The EU and US accuse each other of boosting their industries with illegal state subsidies.

INDIA EXPORTS HIT RECORD LEVELS

India's exports reached record levels in the last fiscal year as its economy continued to boom.

Figures showed exports rose 24% to $80bn (42.7bn) in the year to March but soaring oil imports meant India still ran up a trade deficit of $25bn.

The country imports more than 70% of its oil needs and while demand has increased, so has the price of crude.

Economists say a global downturn would have an impact on exports this year, with a 15% rise being forecast.