INTERNATIONAL

 

May 09 - 15, 2005

 

1.INTERNATIONAL

2. PAKISTAN

 

BLAIR SECURES HISTORIC THIRD TERM

Tony Blair has won an historic third term in government for Labour but with a drastically reduced majority.
Mr Blair pledged to respond "sensibly and wisely" to the result, which the BBC predicts will see his majority cut from 167 in 2001 to 66.
The Conservatives have mounted a strong challenge but their overall share of the vote will be similar to 2001.
The Lib Dems have made big inroads into Labour majorities and look set to end up with an estimated 60 seats.

 

 

Blair said it was clear that "the British people wanted to return a Labour government but with a reduced majority".

He said Labour, which looks set to have won 36% of the vote, had to "focus on the things that matter" such as the NHS, jobs and law and order.

He added: "I know too that Iraq has been a divisive issue in this country but I hope now that we can unite again and look to the future - there and here."

The result writes a new chapter in British political history, with Margaret Thatcher the only other post war prime minister to have won three successive general elections.

Blair is the only Labour leader to have won three elections in a row but his margin of victory is less than half what it was in the Labour landslides of 1997 and 2001 and he has the lowest share of the vote for a ruling party in modern times.

Conservative leader Michael Howard congratulated Blair on Labour's win but said it was time for him to deliver on his promises.

BREAKTHROUGH IN FREE TRADE TALKS

The World Trade Organisation has moved a step closer to freeing up global trade after agreeing a tariff structure for agricultural imports.

Ministers from 30 WTO members gave broad backing to the tariff structure proposed by the European Commission.

It allows tariffs to be converted into a percentage of a goods' price rather than a flat rate of euros per tonne.

The talks, taking place in Paris, aim to push forward the talks in time to reach an agreement by 2006.

"Our proposal has now been accepted by the countries, which have the greatest stake in the agricultural negotiation," EU trade commissioner Peter Mandelson said.

"The road is now clear for rapid and substantial progress of the DDA (Doha development agenda) across the board, including manufactured goods and services."

The US, EU, Australia, Brazil and India agreed on the deal, which was accepted by a larger group of nations including Japan.

However, the 148 WTO member countries must vote on whether they formally accept the compromise when they meet at the organisations Geneva HQ later in the year.

EU Agriculture Commissioner Mariann Fischer Boel hailed the agreement as the first step toward a comprehensive deal on farm goods trade. "We're not finished yet but I think we've given an important push to the negotiations," she said.

Agricultural trade and farming subsidies have long been a sticking point of the talks, with individual countries and groups of nations not always keen to give up the benefits they receive from them.

HIGHER OIL PRICES HIT US GROWTH

The US economy expanded at its slowest pace in two years in the first three months of 2005, official figures show.

Gross domestic product (GDP) grew at an annual rate of 3.1%, as consumers and businesses tightened their belts in the wake of rising energy prices.

The Commerce Department figures were the weakest since the first quarter of 2003, when GDP expanded by just 1.9%.

The weaker-than-expected growth figures knocked more than 1% off the major US stock indexes. The Dow Jones Industrial Average shed 1.2%, the Nasdaq technology stocks index closed 1.3% lower, while the broader S&P 500 index lost 1.1%.

Many analysts had expected a more robust figure of 3.6% for the first three months of 2005, and the data revealed a sharp slowdown since the final quarter of 2004, when GDP grew by 3.8%.

"Investment, which we had hoped would continue to drive overall GDP growth, stalled badly," said Paul Ashworth, an economist with London-based Capital Economics.

Oil prices have hovered at historically high levels in recent months with US light crude topping $56 dollars a barrel before dropping back.

Many analysts now believe higher energy prices could hit US economic growth during the second quarter of 2005.

Nonetheless, economists think the slowdown is not steep enough to deter the US central bank from raising interest rates to curb inflation.

HURDLE CLEARED FOR ITALIAN REFORM

Italian premier Silvio Berlusconi has won a confidence vote in his government and the reforms he wants to push through to spur economic growth.

The Action Plan for Growth was approved in the upper house of parliament but still needs to be ratified by the lower house.

Berlusconi wants to spur growth ahead of the 2006 general election. Italy is struggling to revive growth, which has underperformed the eurozone average in nine of the last 10 years.

Italy has cut its economic growth forecast for this year to 1.2% from a previous target of 2.1%.

At the same time, it also raised its debt and deficit forecasts.

Analysts at Standard & Poor's claim the outlook for growth is poor as a result of "obstacles in the areas of physical and institutional infrastructure, regional inequalities, and structural rigidities, especially in the labour market".

The state of the economy has rocked Berlusconi's standing in the opinion polls.

Last month, he was forced to resign and form a new government following a defeat in the local elections. Berlusconi argues that his plan will spur growth at no extra cost to the state.

This latest action plan proposes welfare reform and cuts in red tape.

Many of the proposed measures are aimed at small businesses which have been struggling in the face of fierce competition from Asia and Eastern Europe.

As well as tax incentives for small business, the proposals will streamline bankruptcy laws, make it easier to start a business, crack down on counterfeiters and also offer incentives for company mergers.

'$100M GAP' IN US IRAQ SPENDING

US civilian authorities in Iraq have been unable to account properly for nearly $100m (53m) earmarked for rebuilding, US financial auditors say.

Two audits found signs of potential fraud regarding the money, which includes oil revenue and assets seized from Saddam Hussein's government.

A third questioned the use of almost $18bn in US taxpayers' money for reconstruction projects in Iraq.

The audits found "no assurance that fraud, waste and abuse did not occur".

Distribution of the funds was first the responsibility of the US-led Coalition Provisional Authority, and later of an organisation managed by the US embassy in Iraq.

It was subjected to examination by the US Special Inspector General for Iraqi Reconstruction (Sigir).

FOREIGNERS RUSH FOR SAUDI PAPERS

Thousands of foreign residents in Saudi Arabia have been queuing to apply for Saudi citizenship.

A recently passed law allows those who have lived in the country for 10 years to be naturalised.

Large crowds built up outside government offices in several Saudi cities as people scrambled to get hold of forms to apply for citizenship.

In some places, the forms ran out early, prompting applicants to try to buy original or photocopied documents.

For many, coming to Saudi Arabia was a chance to find better-paid work than they could get at home in south Asia or west Africa.

But some categories of jobs are now being closed to non-Saudis as the government tries to reduce its dependence on its six-million-strong expatriate workforce and bring more Saudis into employment.

BANKS PUT $1.6BN BEHIND LAOS DAM

Global banks have agreed loans worth $1.6bn (842m) to build a controversial hydro-electric dam in Laos, one of the world's poorest countries.

Disputes over whether the giant dam on the Nam Theun river should be built have been raging for 10 years.

Environmental groups object that the dam will destroy farm land, and disrupt fish stocks.

The banks' decision turns on the cash flow to build the power project, which is backed by the World Bank.

It agreed to $1bn-worth of loan guarantees last month, thereby throwing the switch for commercial funding to flow into the project, which is 35% owned by Electricite de France.

The dam is the biggest-ever foreign investment in Laos, a desperately poor country in the Mekong River valley whose people rely heavily on the river system for food and transport.

Electricity from the dam will be sold to neighbouring Thailand and produce revenues for Laos of nearly $2bn a year for 25 years, said the Nam Theun 2 Power Company (NTPC).

BRAZIL'S REAL HITS 35-MONTH HIGH

The Brazilian real has risen to its highest level against the US dollar for almost three years.

The high of 2.491 per dollar reached last Tuesday follows a period of steady gains for the currency.

Brazil's central bank, which had been pursuing a policy of real weakness, recently stopped its intervention, amid fears about rising inflation.

Analysts say the bank is likely to stay on the sidelines, as the stronger real is not seen as a threat to exports.

President Luiz Inacio Lula da Silva said on Monday that the stronger real was not damaging export sales.

The real hit 2.491 per dollar in trade on before falling back to trade at 2.4889.

"A very important psychological barrier has been broken," said Miriam Tavares, head of currencies at the AGK brokerage in Sao Paulo.

UK PENSION 'NEAR LOWEST IN WEST'

Britain's state pension is one of the lowest among the richest nations, a report by the Organisation for Economic Co-operation and Development claims.

In a comparison of pensions in OECD countries, Britain's state pension ranks 26th out of 30 in the percentage of average post-tax salary it pays out.

A Briton on average pay of 22,000 could expect their pension to be less than 48% of their post-tax earnings.

The average pay-out from other advanced nations is 69% of average post-tax pay.

Luxembourg came top in terms of the proportion of post-tax pay its citizens could expect to receive from their state pension.

US AND EU TO PROBE CHINA TEXTILES

The US government has accepted a request from the US textile industry to investigate the sharp increase in imports of textiles from China.

The European Union, too, has confirmed the launch of its long-expected inquiry into nine types of China-made clothing.

But the EU's trade commissioner made a plea for Westerners to avoid protectionist thinking.

 

 

Concern has risen over the level of Chinese textile imports since a system of trade quotas ended in January.

The US Commerce Secretary has promised a swift, fair inquiry into seven types of Chinese textile items.

"We want to do it quickly and we want to do it right," said Commerce Secretary Carlos Gutierrez.

The decision means the US now has two probes underway into Chinese textile exports. The first one was launched earlier in the month.

A spokeswoman for China's Commerce Ministry said merely that China's views on the trade dispute were already well known.

IRAQ MAY TRIPLE OIL OUTPUT BY 2012

Once foreign energy companies return to Iraq after it is safe for their workers, the country should be able to triple its crude oil production to 6 million barrels per day, Iraq's former oil minister said last Friday.

Iraq's current oil output is about 1.8 million bpd, down sharply from a sustained 2.5 million bpd just before the US-led war began in spring 2003. Issam Chalabi, who served as Iraq's oil minister from 1987 to 1990, said Iraq's oil output should reach 6 million bpd by 2012, but only with the help of foreign investment after the country becomes more secure.

Iraq is trying to boost production and bring in the needed billions in oil revenue to help rebuild the country, but insurgents keeping blowing up pipelines and other oil facilities.

SAUDI MONEY SUPPLY GROWS 5PC

Extended high oil prices over the first quarter of the year have resulted in Saudi Arabia's money supply (M3) growing by five percent in the first quarter of this year to SR506.6 billion ($135.1bn), the central bank statistics showed, extending last year's sharp rise. M3 grew 3.46 percent in March after a slight fall of 0.47pc in February and a 1.99 percent rise in January, the daily Arab News said quoting figures posted on the website of Saudi Arabian Monetary Agency (SAMA).

But the first quarter figures also suggested that the trend of steep money supply growth is continuing into 2005. Last year the Saudi money supply grew by 17.2pc the highest level since the last oil boom a quarter century ago as revenues flowed into the world's biggest crude exporter. High levels of liquidity in the kingdom have helped drive the Saudi stock index higher for a third successive year.

The SAMA's first quarter balance sheet also showed the central bank's foreign assets grew 10.7pc in the first three months of the year to SR363.4 billion.

SHELL FORGES LIBYAN GAS DEAL

Shell has agreed a major gas exploration and development deal with Libya and its state oil company.

The deal could eventually see Shell producing more than 100 million barrels of oil equivalent from the country.

Anglo-Dutch firm Shell will spend $105m-$450m (55.5m-238m) on upgrading a Libyan gas plant and $187m on exploration.

The deal is seen as key for Shell, as it tries to rebuild investor trust after overstating its reserves.

The deal announced follows an initial agreement in 2004 to forge a long-term partnership with Libya.

As part of this latest deal, Shell has gained the right to explore for gas in five blocks covering 20,000 square kilometres at the heart of Libya's major oil and gas producing Sirte Basin.

PROFITS TRIPLE AT ANIMATOR PIXAR

Profits at US animation studio Pixar have tripled driven by DVD sales of its hit superhero movie The Incredibles.

Net income in the first three months of 2005 surged to $81.9m (43m) compared with $26.7m a year earlier. Sales rose to $161.2m from $53.8m a year ago.

GM AND FORD DOWNGRADED TO JUNK

Standard & Poor's (S&P) has cut the debt ratings of US carmakers General Motors and Ford to 'junk' status.

The US credit rating agency said its decision reflected tough global competition in the market and slower sales of both firms' leading vehicles.

The downgrades, affecting debt worth about $290bn (152bn), are the largest cuts to junk in a single day. A junk status rating suggests that a company is more likely to default on its debt.

RANDGOLD SHARES UP AS PROFIT DOWN

Gold mining group Randgold has posted a fall in profits as gold concentrations at its Morila mine in Mali, its only producing pit, fell.

Quarter-on-quarter net profit fell to $12.12m (6.37m) in the period to the end of March, from $15.4m previously.

TIME WARNER BUOYED BY CABLE UNIT

Time Warner, the world's largest media firm, has reported a small rise in profits as growth at its cable business offset a slide at America Online (AOL).

Net income was $963m (505m) compared with $961m a year earlier in the first quarter. Sales added 3% to $10.5bn.

SWISS BANKS SEE DISCREET PROFITS

Profits at Switzerland's top banks have risen in the first three months of 2005 on the back of soaring demand for private banking.

Net profits at UBS were 2.6bn Swiss francs ($2.2bn; 1.15bn), while Credit Suisse made 1.9bn francs.

BASELL SELL-OFF EXCLUDES IRANIANS

Oil giant Shell and chemicals firm BASF are to sell their joint plastics making venture Basell to a group of investors for 4.4bn euros ($5.7bn; 3bn).

News of the deal comes a day after Iran's National Petrochemical Company said US political pressure had excluded it from buying the Dutch firm.

The US State Department had raised concerns over a possible Iranian deal.

Basell will now be sold to US-based investors Access Industries and The Chatterjee Group.

SLOWDOWN HITS US FACTORY GROWTH

US industrial production growth fell to its lowest level since July 2003, in April, after an easing of new orders and a fall in job hiring, figures show.

The Institute for Supply Management (ISM) index fell to 53.3 in April, from 55.2 the previous month.

The index held above 50 for the 23rd straight month, which ISM said meant the longest growth period since 1989.

CONSUMER SPENDING BOOST FOR US

US consumer spending and personal incomes rose by a better-than-expected amount in March, official figures show.

Spending increased by 0.6% in the month, while incomes rose by 0.5%, the US Commerce Department reported.

The figures beat Wall Street forecasts, but came a day after data showed the US economy grew at its slowest rate in two years during the first quarter of 2005.

FOREIGN LABOUR ROW OVER BIGGER EU

The first anniversary of an additional 10 countries joining the EU has sparked debate over immigration.

More than 130,000 people from eastern Europe applied to work in the UK after their countries joined the EU in 2004.

The Recruitment and Employment Confederation (REC) says industries including hospitality, childcare and health are reliant on these workers.

But the group Migration Watch UK said bringing labour in from overseas would be "self-defeating".

OIL GIANT ADMITS NIGERIA AID WOES GIANT US OIL FIRM

ChevronTexaco is to change the way it distributes aid in Nigeria amid fears the present system is stoking conflict.

Its review of its Nigerian aid programme found it was proving "inadequate, expensive and divisive".

It found that handing funding directly to communities near oil installations was fuelling local tensions and creating opportunities for corruption. Over the past decade, the firm has donated $129m (69m) in aid in Nigeria.

EUROTUNNEL SEES 2004 SALES SLIDE

Eurotunnel, the operator of the Channel tunnel, has reported a drop in 2004 car and truck revenues as it faces strong competition from ferry firms.

Revenue at its core shuttle unit fell 7% to 285m ($543m) from 2003.

Chairman Jacques Gounon said the firm had failed to react sufficiently to "major evolutions in the cross-Channel market in the past few years".

EURO RATE MARKS 24 MONTHS AT 2%

The European Central Bank (ECB) has decided to keep the cost of borrowing unchanged at 2%.

The decision means the 12-nation eurozone's key interest rate has now been set at 2% for two years.

During that time, the rate in the UK has climbed from 3.5% to 4.75%, while the US has raised rates from 1% to 3%.

The most recent US rise, driven by inflation fears, came last Tuesday despite concerns about fragile economic growth concerns which the ECB shares.

Consumer and business confidence in Europe remains gloomy, and ECB president Jean-Claude Trichet told a news conference after the decision was announced that recent economic indicators had suggested more short-term weakness ahead.

US FED OPTS TO RAISE RATES TO 3%

The US Federal Reserve has decided to raise its benchmark interest rate by a quarter of a percentage point to 3%.

Analysts had widely predicted the rise as the Fed had been caught between a sudden economic slowdown and heightened worries about inflation. The increase was the eighth time the Fed has tweaked rates since June.

OUTPUT FALL HITS ANGLOGOLD PROFIT

The world's second-largest gold producer, AngloGold Ashanti, has blamed a rise in costs for a sharp fall in first-quarter profits.

For the three months to 31 March, the South African firm made a pre-tax profit of 68m rand ($11m; 6m).

LOCKHEED WINS $1.1BN TURKEY DEAL

US defence firm Lockheed Martin has won a $1.1bn (848m) contract to upgrade Turkey's fleet of F-16 fighter jets.

The firm also reported strong quarterly profit and sales growth.

Work on the 117 planes owned by Turkey is expected to start in July and should be finished by 2012. Turkey wants to continue using the planes until 2040.

The agreement may signal an easing of the tensions between Turkey and the US that surfaced over Iraq and were stoked by an official state visit to Syria.

EA PROFITS SLIDE AS GAMERS WAIT

Game giant Electronic Arts (EA) has seen profits fall 91% ahead of new consoles due out later this year.

The firm said net profits for the three months to March were $8m (4.2m), down from $90m the previous year, with profits for the full year dropping 13%.

BRUSSELS OFFERS FIRST KOSOVO LOAN

The European Union's long-term lending arm has set a precedent by agreeing to lend money to Kosovo, despite its unresolved international status.

Although no loans have yet been agreed, the European Investment Bank made clear its intentions at a signing ceremony.

The move may encourage other banks to lend Kosovo money, helping spur growth.

The Balkan province has been run by the UN since the 1998-99 war, leaving it unable to qualify for loans from global institutions such as the World Bank.

UK AID CUT PRESSURES UGANDA

The UK government has cancelled 5m ($10m) of funding to Uganda, because it feels not enough has been done to establish fair multi-party politics.

About half of Uganda's entire budget comes from donor funding.

Political parties have for years been severely restricted and some opposition groups have urged donors to cut aid.

Multi-party elections are expected to return next year, but some say the government is not doing enough to ensure a smooth transition.

INDIA RAISES RATES ON PRICE FEARS

India's central bank has unexpectedly raised short-term interest rates, amid fears that rising oil prices could fuel a rise in inflation.

The Reserve Bank of India (RBI) lifted its benchmark borrowing rate by a quarter of a percentage point to 5%, the second increase in six months.

India has one of the world's fastest growing economies and imports three quarters of the crude oil it uses.

EU AND US HOPES OVER AIRCRAFT ROW

The US and EU trade commissioners, Rob Portman and Peter Mandelson, say they hope to use talks, and not legal means, to solve the Airbus and Boeing row.

The two sides are in a trade dispute over how much alleged state aid each is giving to help its aircraft makers.

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

Mandelson and Portman met at an OECD meeting in Paris and agreed to work for a "negotiated solution".

THINK TANK WARNING OVER UK RATES

A leading think tank warned last Friday that UK interest rates may have to rise to curb inflation.

The National Institute of Economic and Social Research (NIESR) said that without a rise, it may be hard to keep inflation below the 2% target.

It said the golden rule of borrowing only to invest could be breached, possibly leading to higher taxes.

It forecast that the economy will grow by 2.7% in 2005, rather than the 3-3.5% predicted by Chancellor Gordon Brown.

JAPAN FOR FLEXIBLE EXCHANGE RATES IN ASIA

Japan favours more flexible exchange rates in Asia but understands that China may have its own reasons for not relaxing controls on its currency, Japan's Finance Minister Sadakazu Tanigaki said last Thursday. Speaking on the sidelines of the Asian Development Bank (ADB) conference in Istanbul, Tanigaki said "it would be desirable to see a more flexible exchange rate regime," among developing ADB member countries, including China.

"The flexible exchange rate can be one of the factors contributing to correcting the imbalances," in the world economy, Tanigaki said, adding that "in overall terms, it is desirable to see further flexibility in the exchange rate regime."

But "China has its own challenges to tackle," he added. "There are issues on the financial front, issues on regional disparity, so perhaps China is having its own difficulty in trying to address its own agenda," Tanigaki said.

He said relaxing exchange rate controls is "a delicate decision on the part of China we hope China can make an important decision soon."

SINGAPORE ECONOMY

Singapore's manufacturing sector, the main pillar of the economy, is more upbeat about business conditions in the next six months compared with the March quarter, a government survey showed. However, price competition from overseas rivals is expected to limit export orders, and global political and economic conditions should impact on the local business environment, the EDB survey said.

ASIAN GROWTH

Economic integration among Asian countries will be one of the key priorities of the Asian Development Bank in order to speed up economic growth in the region, the ADB's new president Haruhiko Kuroda said last Monday. Kuroda, who will make his first speech to the ADB board as president, said "economic integration is a key strategic element of economic development of the region."