Daily Press Cuttings

Friday 2nd February 2001

Yesterday's Guardian (1st Feb): George Monbiot in his column notes that "alongside such threats to civilisation as the World Development Movement, Jubilee Plus, Friends of the Earth and the human rights lawyer, Louise Christian, my presence has become a "security risk" which major venues around the country have been asked to forestall". The reference is to a series of meetings "Globalise Resistance" which began in Glasgow and "brings together liberal and radical critics of globalisation…It involves no rallies, no demonstrations, no riots; it is simply a series of conferences. Yet almost everywhere we're going, people have called for the tour to be restricted or banned".

Yesterday (1st Feb) World Bank press service reports. During an interview with Dagens Nyheter former World Bank Chief Economist Joseph Stiglitz is quoted as saying "Take for instance the debt reductions. While a program for debt reduction existed for many years, not many countries had manage to qualify for its benefits. In the last year, because of all the popular protests and campaigns, a large number of countries have finally benefited from real reductions. This would never have happened without the protests. Some changes have none-the-less taken place within the World Bank in the last years triggered by the popular criticisms of the last years", notes Stiglitz." Eventually, the IMF too will have to reform."

The news comes as financier George Soros says in an interview with the Far Eastern Economic Review that rather than undermining the World Bank or downsizing them, actually the Bank needs to be strengthened. And instead of strengthening just the lending operations, there ought to be greater use of transfer mechanisms. For instance, fighting AIDS with loans is not the right way to fight it because you can't really repay the money. It should be in the form of grants.

Argentina: Hard times have caused more than 10% of the Argentinean population to fall from the middle into severe financial distress, economists say. Borrowing costs are still too high and credit too scarce to stimulate the economy. In 1991, the government introduced its vaunted "convertibility policy" as well as a series of free-market reforms. Under the policy, Argentina pegged its pesos to the dollar, guaranteeing that pesos could be exchanged for dollars at a 1-to-1 rate. Initially, the policy spurred an economic boom. Later in the decade, as the dollar strengthened and countries in Asia, Europe and elsewhere in Latin America devalued their currencies, the policy became as much an albatross as an anchor. Many Argentine businesses sagged under the weight of the overpriced peso, which hurt their exports. To show international markets that Argentina had the fiscal discipline to defend its currency peg, President Fernando de la Rua, who took office in 1999, made cuts in social-entitlement programs. The ensuing political crisis panicked investors, drove interest rates higher and forced Mr de la Rua to seek help from the IMF to keep Argentina from defaulting on its foreign debts.

Uzbekistan: Uzbekistan cut off natural gas supplies to Kyrgyzstan, causing blackouts and heating shortages in the capital Bishkek. The head of the Kyrgyzgaz state gas utility blamed broken equipment; others speculated it was due to Kyrgyzstan's gas debt to Uzbekistan.

Peru: Newmont Mining Corp is continuing its mining operation in Minera Yanacocha in Peru, which has some of the lowest gold extraction costs anywhere. Yanacocha accounted for about 20% of the company's world-wide gold production last year. In June last year there was a mercury spill which sickened children and contaminated homes. The company was fined just $500,000 by Peru's government. Mr Murdy, Newmont's chief executive said that "no matter who leads the next administration in Peru, there is nobody down there advocating any kind of major change in their economic policy."

Asia: Asia Pulp & Paper Co., one of the biggest emerging markets borrowers, had approached debt-restructuring experts at US investment bank Credit Suisse First Boston to work on the restructuring of a major portion of APP's $9bn-$10bn in debts, said people familiar with the situation. A substantial portion of these debts are due for repayment over the next one-to-three years, while one analyst estimates that the group has interest payments of around $800m to $1bn a year.

US: Halliburton Co, the US oil-services giant until recently headed by Vice President Richard Cheney, has opened an office in Teheran and operated in Iran in possible violation of US sanctions. Mr Cheney's spokesman said that "the vice president is no longer head of Halliburton and has severed all ties to the company". Mr Cheney was an outspoken critic of US sanctions policy.

Deregulation in the US and shift in telecommunication increases volatility. Utility funds are losing their allure as defensive instruments as deregulation of the power industry makes these stocks more growth-oriented and less reliant on the appeal of steady dividends.

South Africa: A new South Africa project to provide free AIDS medication to some HIV-positive pregnant women has given activists hope the government is abandoning its controversial approach to the disease and beginning to fight the threat in earnest.

UK: The foreign secretary Robin Cook was embroiled in a fresh row over arms sales yesterday after giving the go-ahead for a $3.5m contract to supply artillery spare parts to a north African war zone. The contract is to restore 30 105mm guns of the Moroccan army, which has been involved in a 26-year-old dispute with Western Sahara. In August 1998 ministers decided that such a contract could be in breach of the European code of conduct on arms sales, which forbids sales to countries that could use them for aggressive territorial gain. Morocco occupied part of Western Sahara in 1975 and has been engaged in conflict with Polisario guerrillas fighting for independence. The UN is policing a ceasefire. In June 1999, the Foreign Office said, ministers changed their mind and granted the licence. A spokeswoman said that they had done so after advice from the UN that the refurbishment of guns was within the terms of ceasefire arrangements.

Asia: Piracy rose by 56% last year to 469 incidents, of which 119 were reported in Indonesian water. "The aftereffects of the financial crisis was definitely a factor in the rise of piracy in south-east Asia," said David Tan, executive director of the Singapore Shipping Association. The global liberalisation of trade has also had some influence, by reducing the demand for some black-market goods, Capt Abhyankar said. Because smuggling has become less profitable, the crime syndicates which used to control the waterways jealously have moved on, allowing petty criminals to flourish. Some countries like Singapore, Malaysia and Indonesia have no laws governing piracy.

Thursday 1st February 2001

UK: Clare Short, international development secretary, will today warn that President Bush faces strong pressures not to abandon the UN in its role of resolving the world's conflicts. "Member states cannot skirt their responsibility to provide the UN with the political support and operational tools which it needs to do the job we give it. That begins with paying the dues of the organization" she is expected to say in a speech in New York. Ms Short's speech will come less than a week before Robin Cook travels to Washington where he will meet, among others, Condolezza Rice, Mr Bush's national security adviser. Condolezza wrote that a Republican administration's foreign policy will "proceed from the firm ground of the national interest, not from the interest of an illusory international community".

Poland: Poland's mammoth Hutakatowice is near bankruptcy. Built in 1976 the country's largest steel company produces low value-added long products and employs 7000 workers.

UK: Corus, the Anglo-Dutch steel group, will today announced plans to axe more than 5,000 British jobs.

Economic outlook/UK: Samuel Brittan, in his article "Britain's post-election choices" suggests that the Chancellor introduce a series of phased increases in the starting point of the higher 40% income tax rate. The number of higher-rate taxpayers has risen from fewer than 800,000 in 1980 to 2.7m today with the threshold having fallen to just over 150% of average earnings.

Morocco: Vivendi, the French utilities and telecommunications conglomerate is expected to boost internet content available to Moroccans and to develop Moroccan-specific material to attract subscribers in a country where television and radio are limited to two stations each. The company has already said that it will use Morocco as a base for the development of Terra Arabe, an internet portal for the Arab world. Morocco's per capita GDP is only $1,250 and 19% of the population live in "absolute poverty" of less than $1 per person per day, according to development officials. But the telecoms business, and in particular mobile telephony, is providing a profitable business in North Africa.

Commodities/Bananas: Prices have remained weak in bananas, which the article says is due to higher global supply and some lesser demand in key markets such as Europe, while cost have soared. As a result, Dole Food, the world's largest fruit and vegetable group, has posted a fourth-quarter loss in excess of Wall Street expectations.

US: The Federal Reserve yesterday moved aggressively to halt the US economy's slide by cutting short-term interest rates by half a percentage point for the second time in a month.

The US economy in the fourth quarter grew at the slowest pace in more than five years as business investment - a hallmark of the postwar record decade of uninterrupted growth - faltered for the first time in more than eight years, Commerce Department figures showed yesterday. The department also reported the sharpest rise in monthly sales of new homes - fuelled by falling mortgage rates. The New York-based Jerome Levy Institute and Charles McMillion, an independent economist in the Washington area, see high levels of corporate and consumer debt damping any future recovery.

Angola: Angola has appointed Crown Agents to manage its customs and excise department for five years, the UK-based development assistance company said yesterday. Officials in Angola described the move as part of a programme of economic reform adopted in order to qualify for IMF assistance. Mello Xavier, a member of Angola's parliament and businessman, recently criticised the possibility of foreigners managing Angolan customs. "Perhaps …foreigners will run our ministries one day", he said. But President Jose Eduardo dos Santos, battered by recent publicity linking him to corruption scandals in France and elsewhere, promised this week to forge ahead with opening up national accounts to unprecedented scrutiny by the IMF, which had estimated that at one point in the 1990s, 40% of all government spending was off-budget.

EU: The European Commission warned yesterday that the gulf between rich and poor in the EU would widen after enlargement unless member states radically restructured the system of regional aid. The sums for regional aid have been fixed for 2000-2006 but Michel Barnier, the regional affairs commissioner, gave a strong hint to the parliament that funding would have to rise. The Commission estimated that in 2006, with the union enlarged to 21 members, financial support for poorer regions would run at 0.45& of GDP or about £28.5bn a year.

Russia: The newspaper, Nezavisimaya Gazeta, has predicted a big government reshuffle that could involve not only government ministers but also top figures in the presidential administration, the central bank and some big state-backed companies.

Russia: A team of IMF officials on Wednesday began two weeks of talks with Russian officials aimed at determining whether Russia should get more loan assistance. Russia wants an agreement on a new loan from the IMF. Analysts say it isn't so much the IMF loan that Russia needs, but the stamp of approval an IMF agreement would bring. With an agreement in hand, Russia could then open talks with the Paris Club of creditors for easier terms paying back $38.7bn in Soviet-era debt, $3.5bn of which is due this year. The Paris Club creditors never offer any debt relief except on the basis of an IMF program. The IMF says that the most Russia can hope for is a precautionary agreement. That means a loan would be approved, but couldn't actually be tapped unless the economic situation worsens significantly.

Japan: Revived anxiety about the health of Japan's banking industry is raising an old spectre: the Japan Premium -a surcharge Japanese banks have been forced to pay on their borrowings during times of financial-system stress. Although the amounts are still very small, market watchers say international lenders are once again uneasy enough about the strength of Japanese banks that they are charging them more than they charge non-Japanese banks to borrow money.

Africa: Mr Jim Peron, executive director of the Institute of Liberal Values in Johannesburg, comments on the European intervention in Africa through aid. He says that Europe's policy of good intentions towards its former colonies has yielded disastrous results. "One problem is the incompetence of aid", he says. "Europe must cease funding bad governments and bad policies; it must get out of the way of local African efforts toward self-improvement; and it must apply the same moral, political and economic standards to African governments that it applies elsewhere". Lord Peter Bauer says that foreign aid "non only centralizes economic control in the hands of the government," but it "enables the recipient government to camouflage the ill-effects of its statist policies, thereby reducing pressure on the government to maintain an environment favorable to private enterprise."

US: Companies turn to funding alternative as US faces credit crunch. Bankers call it "asset-based financing". In many ways, it is the corporate equivalent of a home-equity loan. The company's most-valued assets are pledges for a corporate loan. Pledging the company's assets as a collateral for a loan better protects the lender in case of default.

OECD: Feeling that they will be unable to continue funding schools, hospitals and their police, the industrialised countries represented by the Organisation of Economic Cooperation and Development (OECD) have threatened sanctions against offshore financial centers. This will happen unless they make a public commitment to lift the veil of secrecy over their banking systems by the end of July and then implement reforms by the end of 2005. Companies and rich individuals who have benefited from high quality public services in high tax countries have sought to reduce their tax liability by paying their taxes in low tax jurisdictions, i.e. tax havens, who exist solely to attract capital from non-residents and have no real economic value.

GM Food: The strength of the genetically modified food lobby has increased in George Bush's new cabinet. His appointed secretaries of defence, health and agriculture, the attorney general and the chairman of the House of Representatives agriculture committee all have links with the GM global leader, Monsanto, or the wider industry. A spokesman from Christian Aid expressed the fear that under the undue influence of the biotechnology industry, the new government will place even greater pressure on poor countries to introduce the technology, to the detriment of poor farmers and consumers who may further lose control of their food security.

Lockerbie: Apparently, Britain is keen to end the economic measures against Libya as soon as possible. However, a new UN resolution would be needed to end the sanctions and the US, it is feared, may use its veto as a member of the Security Council to block this.

The Independent

Lockerbie: Robert Fisk casts doubt over the verdict of the Scottish Court. According to his article "Will there be sighs of relief that Libya is getting all the blame?" diplomatic correspondents in London and Washington initially fingered the Iranians; Ahmed Jibril's Popular Front for the Liberation of Palestine-General Command (PFLP), and the Syrians. Iranians had an airbus shot down by the USS Vincennes 5 months before the Lockerbie disaster and therefore had a strong motive for seeking revenge. But scarcely 2 years later, Saddam Hussein invaded Kuwait and the diplomatic reporters suddenly no longer believed in the Syrian-PFLP-Iran connection. Jibril faded from the screen, Iran was an enemy of Iraq and Syrian support was needed to prop up the West's coalition of forces in the Gulf; so now it is Libya that was behind Lockerbie.