INTERNATIONAL

 

June 27 - July 03, 2005

 

1.INTERNATIONAL

2. PAKISTAN

 

BLAIR TELLS EU TO CHANGE OR FAIL

The European Union faces a "crisis in political leadership" and must change to win back public support, Prime Minister Tony Blair has told Euro MPs.
Mr Blair, outlining plans for the UK's six-month EU presidency, argued the EU would fail "on a grand scale" if did not face up to globalisation.
"Only by change will Europe recover its strength, its relevance, its idealism" and therefore public support, he said.
EC president Jose Manuel Barroso said consensus was vital to avoid paralysis.

 

 

Pointing to last week's turbulent talks over the EU budget, Mr Barroso said the union faced a "decisive moment".

The EU presidency would be a test of the UK's historic pragmatism during its presidency, he added.

Last week's summit saw clashes over the UK refusal to give up its 3bn annual refund from the EU budget unless there were reforms to farm subsidies.

Mr Blair said he did not think Europe quite realised the competitive challenge it faced from countries like China and India.

He was met with both heckles and applause when he said he had always been a "passionate pro-European". He insisted he wanted to reinvigorate the EU, not wreck it.

He argued the French and Dutch voters' rejection of the draft European constitution reflected a wide discontent with the EU.

"This is not a time to accuse those who want Europe to change of betraying Europe," he argued.

"Ideals survive through change, they die through inertia in the face of challenge."

Mr Blair denied he had been unwilling to discuss the UK rebate or that he had demanded the Common Agricultural Policy be renegotiated overnight.

JAPAN HIT BY WEAK EXPORT GROWTH

Japan's trade surplus has slumped far faster than expected, as demand for Japanese goods from China subsided and the cost of oil hit home.

At 297bn yen ($2.7bn; 1.5bn), it was down 68.3% in May from a year earlier.

The decline - the fourth in five months - could have worrying

implications for the Japanese economy, traditionally heavily dependent on exports.

But although less was shipped to China, Japan continued to expand its exports to the US.

The subdued export picture, which reinforces recent current account data, means Japan is now relying more on domestic demand than has been the case in the past, economists said.

"The trade balance already hit a peak last year," said Nikko Citigroup's Kiichi Murashima.

"The big picture is that private consumption and investment are supporting growth in Japan."

China and the US are by far the most significant overseas markets for Japanese goods.

Between them they account for more than a third of all exports with China, experiencing an investment-led boom, rapidly growing in importance in recent years.

But the government in Beijing has for the past year been trying to take its economy off the boil.

That, economists said, was hitting demand for machinery and raw materials, while another factor could be anti-Japan protests earlier this year, triggered by a textbook which Chinese activists said refused to acknowledge atrocities committed by Japanese troops during World War II.

SUGAR SECTOR 'MUST REFORM OR DIE'

Subsidies to European sugar farmers are to be cut back by 40% under plans unveiled by the European Commission.

Europe's sugar industry faces a "slow and painful death" without reform, EU agriculture chief Mariann Fischer Boel said, as she unveiled the shake-up.

European farmers who stop growing sugar are to get compensation.

The reforms drew criticism from European farmers and sugar refiners, and a lukewarm response from developing nations opposed to EU farm subsidies.

The reforms were necessary after the World Trade Organization last year ruled EU sugar subsidies were illegal following

complaints from Brazil - the world's biggest sugar exporter - and Asian producers.

"It's a step in the right direction," said Angelo Bressan Filho, the official in charge of Brazil's sugar policies.

The European Commission hopes that member states will approve its plans - which will see subsidies cut by 39% by 2008 before the end of the year. Developing countries who export sugar to Europe should also be eligible for compensation.

The Commission's Ms Boel said:

"There is no alternative to profound reform.

"I am convinced that EU sugar producers have a competitive future but only if we act now and act decisively to prepare them for the challenges ahead."

The EU has guaranteed minimum prices for nearly 40 years as part of the Common Agricultural Policy (CAP) and the reforms are likely to face fierce opposition in several European countries.

To cushion the impact of the changes, the Commission is offering a number of sweeteners.

WORLD GRAIN OUTPUT SEEN FALLING BY 2.8 PER CENT

World-wide cereal output is expected to decline 2.8 per cent this year from record levels in 2004 in response to decreases in the United States and Europe, the UN Food and Agriculture Organization said .

The agency also foresaw a 1.3 per cent fall in world grain trade in the 2005-2006 marketing season to 230 million tons in the face of lower demand for wheat.

The FAO in the latest edition of its Food Outlook publication said prospects for global grain production remained "favourable," according to a statement . The expected output of 1.996 billion tons would be just 2.8 per cent below record levels achieved in 2004.

"The bulk of the decrease is expected in coarse grains production in the United States and Europe, where yields are expected to return closer to average after record levels last year," the FAO said in Food Outlook.

It added that African output could fall for the second straight year reflecting drought in the north that would offset a slight increase expected in sub-Saharan Africa.

For all developing countries the report forecast a "marginal increase in the 2005 aggregate cereal output, mostly on account of better prospects in parts of Asia."

Production is predicted to rise "only marginally" in low-income food deficit countries in 2005.

While world cereal use is seen as rising only 0.3 per cent this year, "if production forecasts hold, world cereal output would not meet next year's projected needs without dipping into global stocks."

CHINA'S ECONOMY GROWING ABOVE 9 PER CENT: ZHOU

China's economy is still growing at more than 9 per cent annually, the central bank governor said , but he added conditions for beating down inflation had improved.

China grew at a breakneck pace of 9.5 per cent in 2004, and analysts expect a relatively modest slowdown this year to just under 9 per cent. Gross domestic product (GDP) was 9.4 per cent higher than a year earlier in the first quarter of 2005.

The economy is still growing at over nine per cent, Zhou Xiaochuan, Governor of the People's Bank of China, said ahead of a meeting of Asian central bank governors on the Indonesian island of Bali.

He said China wanted to achieve 1.8 per cent inflation in 2005 and that conditions for meeting those aims were better this year, although he added that the country must keep reining in surging investment.

This year, the economic situation is better. In the scope of things, we are trying to reach 1.8 per cent inflation, Zhou said.

BROWN PLEDGES TAX CREDIT OVERHAUL

 

 

Chancellor Gordon Brown has pledged to overhaul the tax credit system following stinging criticism in two major reports.

Mr Brown told a TV channel that he wanted to ensure the IT system "works better" and that tax credit forms were "clearer".

However, the chancellor ruled out the blanket writing-off of tax credit overpayments.

He said that he had "to balance the needs of the country... with the needs of individual families".

But in cases where HM Revenue & Customs (HMRC) was to blame for a tax credit overpayment then debts would be written off, the chancellor added.

Where tax credit overpayment has occurred the chancellor said he wanted to "sort out the difficulties far more quickly than we've been able to do".

CALL FOR AFRICA-WIDE G8 DEBT DEAL

Six African leaders meeting in the Nigerian capital, Abuja, have called for rich countries to cancel all of Africa's debts at the G8 summit.

The G8 group of leading industrial nations will focus on development in Africa when it meets on 6-8 July.

Two weeks ago, finance ministers agreed to full debt relief for 18 countries, including 15 poor African countries.

The presidents of Nigeria, Ghana, Rwanda and South Africa are among those who took part in last week's meeting.

The G8 finance ministers also said they were prepared to renegotiate the debts of Nigeria, which alone are almost as large as those of all the other countries who have received debt relief.

The African leaders said in a communique that they commended the recent decision of the G8 finance ministers to cancel the debt of 18, mostly African nations, as "progress" and called "for steps to be taken to include all African countries".

INDIA CLINCHES $12BN STEEL DEAL

South Korean steelmaker Posco is to build a plant in the Indian state of Orissa which will be the Asian nation's biggest direct foreign investment.

Posco will invest up to $12bn (6.5bn) in the steel plant over 15 years, creating about 48,000 jobs locally.

The deal also grants Posco a 30-year mining lease to extract local iron ore to supply the steel plant.

It has however prompted protests by opposition parties, who say it will exhaust iron ore deposits in 20 years.

"The project is going to change the face of Orissa," said Orissa's Chief Minister Naveen Pattnaik.

"Apart from revenues for the state government, it will generate hugely-needed employment opportunities," he said.

The Posco plant will be in the port city of Paradip.

It is expected to employ about 13,000 people directly, and to create jobs for 35,000 more in the east Indian state.

'REVALUING OF YUAN IN CHINA'S INTEREST'

The captains of US economic policy have strongly warned lawmakers clamouring for China to be punished over its currency regime not to retreat to a dangerous "protectionism".

US Treasury Secretary John Snow and Federal Reserve chief Alan Greenspan reaffirmed their belief that it is in Beijing's own economic interest to revalue its currency against the dollar.

But Greenspan was frank in rejecting talk that a yuan revaluation would be a panacea for US industries struggling to fend off fierce competition from lower-cost rivals.

There is "no credible evidence" that it would bring back hundreds of thousands of lost manufacturing jobs, the Fed chairman told a special Senate finance committee hearing on US-China economic relations.

The yuan has been tied to the US dollar for the past decade at around 8.28. That rate, according to the view in Washington, makes Chinese goods far cheaper overseas to the detriment of foreign rivals.

EUROPEAN GOLD PRICES LOWER

Gold eased in Europe last week as the market digested this week's run to a three-month high at $441 per ounce, with dealers confident that prices would attack fresh peaks in coming days.

Spot gold stood at $437.30/ 438.00 per troy ounce from $438.50/439.25 in New York .

Currency fundamentals were not supportive, with the euro falling against the dollar as European rate cut speculation came back into focus following a dovish report from the Bank of England. The currency was last at $1.2141.

BD'S PER CAPITA DEBT INCREASES 21 TIMES

Bangladesh's share of loan in external resources swelled to 67.2 per cent in 2003-04 from 11.8 per cent in 1972-73, while the percentage of grant declined to 33.8 per cent from 89 per cent.

This was revealed in a report -- Flow of external resources into Bangladesh -- prepared in the first week of June by the country's Economic Relations Division.

Since the country's independence in 1971 to June 30, 2004, a total amount of about $41.77 billion of foreign aid was disbursed, of which 46.2 per cent was grants and 53.8 per cent was loans, the report says.

UK FIRM TO INVEST IN BD COAL MINE

London-based Asia Energy Corp said on Saturday it plans to invest $1.4 billion over the next three decades in a coal mine in northern Bangladesh. "Our drillings have established that the Phulbari coal field in northern Bangladesh has resources of 522 million tons of high-quality coal," Brian Mooney, Asia Energy's head of corporate affairs, told.

CHINESE TEXTILES TRADE PICKS UP

Many Chinese textiles exporters have enjoyed better business since the country agreed with the European Union a week ago to limit sales, state media reported , attributing the rise to the removal of uncertainty.

"Over the past week, our orders have recovered quickly," Li Lingmin, vice-president of the China National Textiles Import and Export Corp., said. "The price is also on the rise. The gloomy days are now gone."

China agreed this month to limit annual growth in exports of various categories of textiles to the European Union to between 8 and 12.5 per cent.

Xinhua said many firms it had contacted had reported better sales and access to credit, often a problem in China, since the deal was concluded.

ALCOA AXES THOUSANDS TO CUT COSTS

Alcoa, the world's largest producer of aluminium, has announced it is to axe 5% of its global workforce.

The US group said 6,500 staff would go over the next year as part of a cost-cutting drive, following 1,800 redundancies earlier this year.

Alcoa said the restructuring would result in costs of $245m to $275m, but would lead to annual savings of $195m.

CHINA OIL FIRM IN UNOCAL BID WAR

China's biggest offshore oil and gas producer has opened a bidding war for Unocal, the ninth-biggest US oil firm.

China National Offshore Oil Corporation (CNOOC) has bid $18.5bn (9.8bn) in cash for Unocal, which has large production operations in Asia.

It is the biggest takeover offer by a Chinese firm and comes a day after Haier's bid for Hoover maker Maytag.

Unocal has said it will consider the bid but remains committed to an agreed $18bn merger with Chevron.

INDIAN CALL CENTRE 'FRAUD' PROBE

Police are investigating reports an Indian call centre worker sold the bank account details of 1,000 UK customers to an undercover reporter.

The Sun claims one of its journalists bought personal details including passwords, addresses and passport data from a Delhi IT worker for 4.25 each.

City of London Police is investigating after receiving files from the paper.

FRANCE STARTS GAZ DE FRANCE SALE

France has started the partial privatisation of Gaz de France in what is set to be one of 2005's biggest share flotations.

A 22% stake in Europe's third-largest gas company is being put up for sale to raise about 4bn euros (2.7bn; $4.9bn).

Unions have opposed the sell off, one of three planned in the energy industry over the next 12 months, and there were a number of protests last week.

France is pressing ahead as it needs cash to cut its rising budget deficit.

It has already clashed with the European Union over the size of its spending shortfall, which must be kept under 3% of annual gross domestic product.

 

SUGAR FIRMS SOUR ON SUBSIDY CUT

Europe's largest sugar businesses have warned that profits will fall if subsidies are cut.

Firms in Germany, France, Denmark and the UK said a 40% cut in the guaranteed minimum price for white sugar would hit profits and may lead to job losses.

Shares in UK sugar refiner Tate & Lyle fell 2% after it said that subsidy cuts would hit profits by 165m in 2007-09.

EU MAKES COKE THROW OPEN FRIDGES

Coca-Cola has formally agreed to change its sales practices in Europe after an EU investigation found that its business methods stifled competition.

Agreements with shops and bars to stock Coke drinks exclusively will now end as will its practice of giving stores rebates for hitting sales targets.

The European Commission said the legally binding agreement would give consumers more choice of fizzy drinks. The deal, first outlined in October, followed a six-year competition probe.

CHINESE BANK SHARES JUMP ON DEBUT

Shares in China's Bank of Communications surged 14% on their first day of trading in Hong Kong.

The bank, known as BoCom, is China's first to list in a foreign market and investors have been reassured by global giant HSBC buying a 20% stake.

BoCom had earlier raised $1.9bn (1.04bn) in a share sale that was 25-times oversubscribed and the second biggest in the world this year.

Last week, the company's shares rose 35 Hong Kong cents to HK$2.85.

China is overhauling its banking industry, which is weighed down by huge amounts of bad loans to inefficient state-backed companies.

ONLINE BROKERS SEAL $2.9BN MERGER

Online share trading service Ameritrade is likely to buy rival TD Waterhouse USA for $2.9bn (1.6bn), in a move that is like to spark sector consolidation.

Online share trading firms have seen business decline since the dotcom crash in mid-2000.

The merged firm will have 5.9 million account holders, executing 239,000 trades a day.

TD Waterhouse is being sold by Toronto-Dominion bank, which will keep a 32% shareholding in the merged firm.

SONY PROMISES STRATEGIC SHAKE-UP

Sony has promised to unveil a new strategy by September, to repair the damage done in recent years to its iconic consumer electronics brand.

At an annual shareholder meeting in Tokyo, managers acknowledged there had been strategic mistakes.

But new chief executive Sir Howard Stringer also said the firm had spread itself too thinly, and needed to focus on core strengths. The firm's shares have halved in value over the past five years.

EU BLASTS PORTUGAL OVER DEFICIT

Portugal has been ordered to cut its budget deficit to fall in line with European Union (EU) rules.

The ruling makes Portugal the second EU country to face a formal complaint over budget shortfalls since the rules were relaxed earlier this year.

Several countries, notably France and Germany, have repeatedly breached the deficit limit - 3% of GDP - set out in the EU's Stability and Growth Pact.

But to date none has faced the ultimate sanction of huge fines. Italy was similarly criticised earlier in June.

PROSPECTS RISE OF CUT IN UK RATES

The prospect of an early cut in UK interest rates has been raised by the latest set of minutes from the Bank of England's rate-setting body.

Two of the Monetary Policy Committee (MPC) - Bank chief economist Charles Bean and Marian Bell - voted for a cut.

However, they were outvoted by the other seven members who elected to keep rates on hold at 4.75%.

The seven argued that further evidence of a consumer slowdown was needed before any rate cuts were made.

ROYALS COST BRITAIN 37M A YEAR

The Royal Family cost Britons 36.7m last year, equivalent to 61p per taxpayer, figures show.

Buckingham Palace said the figure, which excludes security costs, was at its lowest since 2001 and had fallen 2.3% in real terms since 2003-4.

Alan Reid, Keeper of the Privy Purse, said the royals gave "value for money".

The travel bill rose from 4.7m to 5m after Prince Andrew's overseas trips for UK Trade & Investment were transferred to the Queen's accounts.

SCOTLAND TO 'NARROW GROWTH GAP'

Scotland is set to narrow its growth gap with the rest of the UK this year helped by an unexpected rise in inward migration, a new study argues.

According to Ernst & Young, the Scottish economy is set to outperform the UK as a whole in 2005 after a disappointing performance last year.

Scotland's economic prospects, under threat from a falling population, were boosted by a rise in migration in 2004.

Newcomers were attracted by cheaper housing and good job prospects.

The difference between Scotland's economic output and that of the rest of the UK is expected to fall from 1.2% last year to 0.7% in 2005.

CALL FOR SWEEPING RUSSIA REFORMS

Russia must transform its lumbering bureaucracy and stamp out corruption if it is to function as an effective state, an OECD report has warned.

The Paris-based economic club said Russian administrative "weakness" was leaving too much power in the hands of government officials.

The OECD called on Russia to end heavy-handed state intervention in the economy and refocus its market reforms. The strongly-worded report comes ahead of July's G8 summit in Gleneagles.

UK MORTGAGE LENDING SEES PICK-UP

Mortgage lending picked up slightly in May, according to the British Bankers' Association (BBA) and Council of Mortgage Lenders (CML).

The CML said gross mortgage lending reached 22.4bn in May, up 3% on the month before but down 7% on a year ago.

The BBA said mortgage lending rose by 4.3bn in May, up 300m on April.

The BBA figures also showed an increase of 117m in credit-card lending during May, reversing the surprise 40m net repayment of card debt in April.

OIL PRICE HITS $60

Crude oil prices hit a record $60 a barrel for the second day on Friday last, amid concerns that strong demand will continue over the coming months.

US light sweet crude briefly touched the $60 mark, before dipping back to trade 39 cents higher at $59.81.

A report showing that China imported 8.2% more oil in May than in the same month a year ago underpinned prices.

Supplies will be tight as other booming economies also glug crude and the peak US summer season starts, analysts said.

"The big message this week was that demand is still staying strong in the face of high oil prices," said Tony Nunan of Mitsubishi Corp.

US BANK AGREES TO PARMALAT PAYOUT

Morgan Stanley has agreed a 155m euros ($186.5m, 102.7m) settlement with collapsed Italian dairy group Parmalat relating to a 2003 bond deal.

The payout "settles all existing and potential actions and claims, including compensation of damages," the two said.

It is the first settlement between the Italian firm and international banks, which it says helped it raise billions despite knowing it was near to failure. Parmalat collapsed in 2003 when it emerged it had debts of 14.3bn euros.

US URGED TO BE PATIENT OVER CHINA

US Federal Reserve chairman Alan Greenspan and Treasury Secretary John Snow have warned against hitting China with trade sanctions.

During testimony to the Senate Finance Committee, the two key policymakers said that sanctions would be a mistake and may put the US economy at risk.

The comments come amid accusations that China is manipulating its currency, the yuan, to keep it low and boost exports.

Calls have increased within the US for the administration to take action.

US policymakers are considering legislation that would slap tariffs of as much as 27.5% on many Chinese products should Beijing not take steps to realign its currency.

China has held the yuan at close to 8.28 per dollar for the best part of a decade, refusing to allow it to appreciate even as the country's economy has boomed.

DIESEL 'COULD BREACH 1 A LITRE'

The cost of diesel could breach the 1 a litre level this year, the Petrol Retailers Association has warned.

The warning came as it said petrol prices were set to rise by 2p within days, pushing unleaded to a new record 87p a litre on average.

Record crude prices near $60-a-barrel and a lack of refinery capacity were to blame for the increase, the group said.