Daily Press Cuttings

Friday 6th April 2001

Indonesia: Under fire over debt-workout deals that allegedly favoured politically connected companies, Indonesia has adopted new IMF inspired guidelines for its critical corporate restructuring efforts. After months of discussions with the IMF – which has held up a key $400m loan to the country, partly because of the corporate debt issue – the Indonesian Bank Restructuring Agency said this week that it aimed to settle about $40bn owed to IBRA by companies that foundered during Asia’s 1997-98 financial crisis. However, a recent revision of Indonesia’s largest and most controversial debt accord – a $2.7bn restructuring plan for the Texmaco Group – appears to violate the guidelines the government has just embraced.

UN/Aids: Meeting for the first time as a group with the chief executives of some of the most powerful drug firms, UN Secretary General Kofi Annan received high-level assurances that the industry intends to accelerate price reductions of its Aids drugs in the world’s poorest nations. The industry officials agreed that their companies are now willing to negotiate with the 50 least-developed countries as a group – abandoning the lengthy process of cutting pricing deals for Aids drugs with each country individually. In return, Mr Annan promised that the UN would not join the escalating crusade to strip the industry of the patents that are its lifeblood.

UK: The Bank of England cut its base lending rate by a quarter percentage point to 5.5% and hinted that more cuts could follow. The bank’s Monetary Policy Committee said it had cut interest rates because of risks from "the slowdown in the global economy, the recent fall in equity markets and, in the short term, from foot-and-mouth disease." The European Central Bank, looking exposed as it prepares for an interest rate decision next week, is the only major central bank yet to respond to the downturn in the US economy.

Labour: Anti-sweatshop campaigners are claiming a significant victory after a court ruled that 9 union leaders at a textile plant in Nicaragua were sacked illegally. The appeals court in Managua this week ordered Chentex, the factory owners, to re-employ the nine at the same pay and conditions they enjoyed when they were fired for starting a strike over conditions in May last year. "This is the first time a court in Nicaragua or anywhere in Central America has ruled against a foreign multinational like this," said Charles Kernaghan, a spokesman for the National Labour Committee in New York. Chentex, owned by the Nien Hsing consortium of Taiwan, stitches jeans for stores such as Wal-Mart and Kohl’s.

Environment: Urgent action is needed to prevent irreversible damage to the environment over the next 20 years, according to a pioneering study by the Organisation for Economic Co-operation and Development (OECD). The OECD’s first extensive analysis of environmental problems calls for the removal of environmentally harmful subsidies and a more systematic use of environmental taxes, charges and other economic instruments. "It is not longer feasible to separate economic and social policies from environmental needs," says Joke Waller-Hunter, the OECD environment director.

Ecuador: Ecuador’s difficulties with its creditors are growing, after the decision of the IMF this week to cancel a meeting to discuss the country’s $304m standby agreement. If the standby agreement were suspended, Ecuador would lose more than $400m in credits from other multinational organisations. The Fund’s decision followed suspension on Tuesday by the Paris Club of creditor nations of its talks with the country until Ecuador resolves its tax reform problems. Jorge Gallardo, economy minister, has said that without an increase in VAT to 15%, Ecuador’s fiscal deficit for 2001 would increase to $674m, or between 3.5 and 4% of GDP. Under the terms of the standby agreement Ecuador is committed to cut its deficit to about 1.5%. The suspension of talks with the Paris Club could scuttle an agreement to exchange some $300m in debt for social projects. It would also mean Ecuador might have to pay past due interest on debt going back to 1995.

WTO: In reply to Philippe Legrain, special adviser to the directory-general of the WTO, Bert Schouwenburg, of the GMB Trade Union, writes in the Letters section to say: "The very fact that developing countries’ producers have to prioritise the cultivation and export of cash crops rather than the production of food for their own domestic consumption only highlights the inequalities and unfair terms of trade endemic to the prevailing neo-liberal economic model. By being more concerned about restricting choice for European consumers rather than the imperative to develop a more sustainable and equitable global trading system that would allow farmers in developing countries to supply local markets, Mr Legrain has provided further evidence, if it were necessary, that the WTO is interested only in preserving the status quo."

Environment: Green groups called yesterday for a boycott of US corporations that back George Bush’s dumping of the global warming treaty. Greenpeace said it had written to the 100 biggest companies, including the largest energy corporations, demanding that they "declare their opposition" to the policy "or face the consequences". Gerd Leipold, Greenpeace International’s executive director, said: "The American people can register their opinions at the ballot box, but for the rest of the world, all we can do is register our opinions via the marketplace." Friends of the Earth Europe announced that 50,000 emails to protest at Mr Bush’s decision had been sent to the White House via its website since March 29.

Aids: Karen DeYoung in her article "US Study backs Aids care for Africa" says the debate in developed nations has now turned to two issues. "The first is whether the wealthy have any remaining moral or economic justification for not buying the drugs to treat everyone in the world suffering from a pandemic that is expected to claim more lives than the Black Plague did in the 14th century. Second is the question of how African countries with virtually no health care infrastructure and largely illiterate populations could safely and effectively administer the complex Aids treatment regimes." The article is written in the light of the Harvard study that called on the Senate to approve at least $1.5bn for a global Aids trust fund during the budget debates this week.

South Korea: Lee Jae Wook, assistant deputy governor of the Bank of Korea, said the government had approved measures to draw from a reserve cushion that now totaled $94.4bn to halt the decline of the won. Although South Korea’s foreign exchange reserves appear healthy, the admission that the bank will have to draw on them evoked memories of late 1997, when reserves fell to almost zero and the government had to ask the IMF to piece together a rescue plan of nearly $60bn.

Democratic Republic of Congo: President Joseph Kabila said Thursday that he hoped to appoint a new cabinet within a week and to hold elections as soon as possible. Mr Kabila dismissed his entire cabinet on Wednesday hours before leaving for Berlin for talks with German leaders to seek their backing for his approach to the Congo peace process.

US/China: With the standoff between China and the US showing little sign of being resolved, members of Congress are expressing growing sentiment for selling advance weapons to Taiwan, and an emboldened anti-China coalition has begun talking about the more remote possibility of denying China normal trade relations.

India: For shoppers, especially among India’s fast-growing middle class, the lifting of the so-called quantitative restrictions on hundreds of items means a boon in both prices and selection. "Those who want quality and name-brand status may now purchase an array of high-end electronic appliances from Japan or Singapore, while cost-conscious consumers can buy cheaper Chinese versions of the same goods." For many Indian farmers and manufacturers, however, the new liberal import policies are a source of uncertainty and worry. Many Indian products are made in small, family-owned workshops that cannot compete with global prices, while most farmers own less than two acres and are accustomed to selling their crops at a minimum guaranteed price. India’s economy, one of the largest in the world, has long been sheltered by steep protective tariffs and other measures that kept out foreign competition while sheltering the development of domestic industry and agriculture. As a result, India is now self-sufficient in food production and manufactures a wide variety of goods, from basics like steel to advanced nuclear missiles. However, since 1991, the economy was gradually opened up to foreign imports and investment. Saturday’s latest lifting of import controls, say the Indian authorities, are merely another "critical step towards transforming the country into an open, globally competitive market".

Thursday 5th April 2001

Japan: With Japanese Prime Minister Yoshiro Mori declaring his intent to resign on Wednesday, jockeying began in earnest among various candidates for his job. According to Makoto Koga, the ruling Liberal Democratic Party’s secretary general, the party would "elect a successor" later this month. The Liberal Democratic leader traditionally holds the prime minister’s job as well.

Turkey: About 5,000 tradesmen marched through the capital of Ankara waving banners and chanting slogans after Turkey raised gasoline prices by 20% and diesel fuel prices by 18% earlier in the day. The fuel-price increase followed a 12% slide in the lira’s value Tuesday, bringing the currency’s total losses against the dollar to some 45% since the crisis began in late February. Thousands of businesses have gone bankrupt and hundreds of thousands of workers have lost their jobs.

According to Rusdu Saracoglu, former governor of the Central Bank of Turkey, in his article "Turkey needs economic, and political, reforms", writes that there is a general consensus that the new economic program will have to focus primarily on the weak banking system and the profligate public sector. The government has belatedly decided that public-sector banks should be reorganised along commercial lines. It has also realised that additional taxation will not work; that government spending must come down; and that other reforms such as privatisation must go ahead at full speed in tandem with a drastic reduction of the public sector’s participation in the economy." Only then, he says, can the problem of inflation be tackled and the economy stabilised. The IMF, with a desire to produce a "success" case in the wake of the Asian and Russian crises prepared a "theoretically" well designed program that would have worked in the environment of a sound a healthy banking system.However, the IMF and the governmetn both knew that the Turkish banking system was neither sound nor healthy. "Doesn’t the international financial community have a right to question the wisdom of the IMF in designing or endorsing a stabilisation program that, from its outset, was prone to collapse because the underlying conditions were not appropriate for its implementation? In a world where international and transational organisations are rightly forcing the international financial community to disclose risks to their clinets, is it too much to ask the IMF to do the same? "

World Bank: The World Bank yesterday debarred eight Swedish consulting firms and two individuals after discovering corruption in the awarding of contracts. The move bars them from future business financed by the bank. The corruption led five European governments to freeze disbursements from consultant trust funds, administered by the bank, and to the bank’s sacking of three employees.

Aids: More than 100 Harvard academics yesterday called on western governments to set up an emergency global trust fund of an initial $1.1bn to begin tackling the African Aids crisis, described as the "greatest pandemic in modern history". Jeffrey Sachs, director of Harvard’s Centre for International Development, said lack of donor funding had become the main limiting factor to treatment following recent offers by drug companies to supply medicines at manufacturing cost. Prof Sachs said that, with an initial $1.1 bn, 1 million Africans could be treated. By increasing the amount to $5.5 bn by the fifth year, 3m-5m people could be put on therapy. Of an estimated 25 million Africans who are HIV infected, about 3m-4m have late-stage disease. In the west, use of anti-viral drugs is being increasingly postponed until late-stage illness.

Telecommunications: Banks have reduced their lending to the telecommunication sector – which regulators scrutinised last year amid concerns of overexposure – sending activity levels to their lowest for more than a year. In the first quarter, just over $15 bn was lent to telecommunication companies, down from $30 bn in the previous quarter. Last year, the sector was lent about $250bn according to Capital Data Loanware figures. The price paid to banks for lending to telecoms companies has also gone up, reflecting the reassessments of risks which have taken place in the equity and bond markets. The high levels of debt taken on for 3G and for acquisitions – volumes of which have fallen sharply – has weighed on the telecoms sector, as credit ratings have fallen due to an inability to reduce debt with sales of assets in the weaker equity markets.

Japan: According to the authors of the article "US urges quick launch of Japan’s reform package", the main concern among officials in Washington seems to be that a failure to implement reform will further undermine confidence in Japan’s banking system, with potentially turbulent effects on global capital markets. Alan Greenspan, chairman of the US Federal Reserve, warned that the continued stagnation of the Japanese economy had significantly dampened global economic growth and was hurting the US economy. The remarks came hours after plans for Japan’s latest emergency economic package descended into chaos when last-minute disagreements among politicians forced a delay. The package would have set up a government-backed fund to purchase up to £62bn of shares owned by banks.

US: The US last year needed a net inflow of more than $400bn – equal to 4.4% of GDP – to fund its current account deficit. Such giant flows of capital, it was almost universally believed, would continue only if equity markets continued to rise and US bonds offered greater returns than assets elsewhere. Without capital flows propping it up, the dollar would surely slide. But for the moment, the currency is defying gravity. However, Alan Beattie and Christopher Swann in their article "A dollar of dangerous strength", warn that the dollar’s continuing strength could not only make global economic imbalances worse but also mean any eventual correction is sharper and more damaging.

UK: Gordon Brown had hoped to give a pre-election boost to Labour’s heartlands by scrapping stamp duty on all property sales in the poorest areas. But the measure cannot be introduced until a map of poverty hotspots throughout the UK has been completed. Stamp duty is paid on property deals worth more than £60,000. Buyers have to pay 1% of the value of their property on sales over £60,000 and under £250,000.

South Africa/Aids: A panel of international scientists convened by the South African president, Thabo Mbeki, to resolve the issue of whether HIV causes Aids has failed to reach agreement after nearly a year of debate. An interim report produced conflicting sets of recommendations because of divisions between the mainstream scientists, who believe HIV is the cause of Aids, and the "dissident" faction, which claims that the disease is the result of social factors such as drug use and poverty. Nonetheless, the health ministry is moving towards the distribution of some of the very anti-Aids drugs the president once condemned as too toxic and ineffective.

Zimbabwe: Zimbabwe’s Parliament steamrolled through the Broadcasting Services Bill and the Political Parties (Finance) Bill yesterday to give President Mugabe’s regime control of radio and television and to starve the Opposition of finance, alleges the article "Rushed law give Mugabe medai control". Welshman Ncube, the secretary-general of the Movement for Democratic Change (MDC), said: "This is a twin strategy to ensure the Government gets to presidential elections next year without anyone else having access to finance or to alternative broadcasting."

India/Aids: J V R Prasada Rao, director of the National AIDS Control Organisation, says India had a total of 3.7 million people infected with the AIDS virus in 1999. Some outside experts believe the real number is double that or more. Many parts of India have an infection rate of under 1%. But there are pockets where AIDS is far more prevalent, especially in Bombay, Calcutta and Madras. Some prenatal clinics in the state of Tamil Nadu report that nearly 5% of their patients are infected.

Wednesday 4th April 2001

Japan: The Japanese government is set to propose rules that would curb the amount of stocks banks can hold and is thinking of imposing a deadline by which banks must write off their worst classes of bad loans, as the leadership prepares a package of measures meant to heal the nation’s troubled financial system. Yet critics, namely investors and US officials, which advocate "full quick changes" that would involve painful job losses, say the measures will not solve the biggest problem facing the Japanese economy – the fact that banks are keeping tens of thousands of sickly companies alive with cheap credit.

Asia: Pressure is growing for Japan to halt the further depreciation of the yen before devaluation of its currency gets out of hand and threatens companies and economies that can’t afford a replay of the region-wide financial crisis of 1997. Korea and Thailand both sent signals this week that they don’t want to see their currencies dragged any lower by the weakening yen. And pressure appears to be mounting in Japan itself to prop up the currency.

Money Laundering: The government’s "unco-ordinated and piecemeal" approach to money-laundering – prosecutions in British courts are rare - threatens to undermine the role of the City of London as a financial centre, according to MPs investigating corruption in developing countries. The Home Office has yet to respond to a request made last June by the Nigerian government for assistance in tracing $1bn of funds stolen under the regime of the late General Sani Abacha. A lawyer told the Commons International Development committee that evidence to back a similar request from Pakistan under its last democratic government had sat in the Home Office for two and a half years. MPs have called for more resources for regulators and investigatory agencies and changes in the law to make it easier to freeze suspicious assets.

Kenya: When Richard Leakey, the iconoclastic head of Kenya’s civil service, agreed to step down last week, the initial reaction among international observers was of profound shock. But, according to diplomats and officials of the international financial institutions, it was four mouths ago in December, that the country’s anti-corruption strategy had moved backwards, that privatisation had stalled, and the parliament had introduced controls on interest rates. Donors had already ceased programme support, which with the lack of receipts from the slated Telkom sale, leaves a gap of almost $300m in the budget – and say they will release funds only anew if key conditions are met. Who is in charge when that happens, they say, makes no difference.

However, insiders say that appointment of Sally Kosgei as head of the civil service will be shortly followed by announcements of progress on reforms. Those include the sale of Telkom and the reinstatement of Kenya’s anti-corruption authority.

Peru: As election campaigning continues, business leaders are demanding further market and institutional reforms plus more incentives for investors. The business community is feeling bruised by last year’s political turbulence which saw the stock market shed 29% of its value and foreign investment dip sharply while GDP growth, which had been 3.6% overall in 2000, turned negative in the last quarter. Meanwhile, half the country lives below the poverty line, a figure that has barely budged in the last three decades. Of the candidates for president, Erlinda Cruz, an office worker said, "What’s the point of voting? They’re all liars and crooks."

Russia/IMF: As recently as two months ago, Russia was near to defaulting on the $42bn it owed to the Paris Club such that it was asking for relief, especially from Germany which holds about half the debt. However, last week, Russia, which is flush with oil income and booming economic growth, shook off Western assistance, particularly from the IMF, and said it would manage its finances on its own. According to Alexei Kudrin, the finance minister and deputy prime minister, the country expects, by the end of the month, to catch up on all its foreign-debt arrears and so "cannot afford to get embroiled in obligations".

Argentina: A tide of homelessness is sweeping Buenos Aires. Massive unemployment from a 33-month recession and large-scale downsizing during a decade of US-backed free-market reforms have wreaked havoc on the lives of residents, especially as the once large middle class tumbles down the ladder of prosperity. The city today, says Anthony Faiola in his article "Argentines slip down the ladder: poverty hits the middle class", recalls New York during the Great Depression. The number of indigents in greater Buenos Aires – the poorest of the poor who live on less than a $1.60 a day in a metropolitan area of 12m people – rose to 921,000 people in 2000 from 324,810 in 1991, the year that former President Carlos Menem embraced the free-market reforms that swept across much of Latin America in the 1990s. Meanwhile, the very rich have retreated to gated communities, exiting for work in high-rise office buildings and shopping in designer boutiques in upscale parts of town.

Japan: Bankruptcies are mounting in Japan while corporate earnings, exports and asset values are falling, all of which constrains the ability of Japanese companies to repay their debts. Yoshimi Watanabe, a member of Parliament, figures that in the past 10 years, asset value equal to about 2 years of Japanese GDP, or more than $8 trillion, has been lost. The problems of Japanese companies and those of the banks are two sides of the same coin, but says Stephanie Strom in her article "’Cancer’ in Japan’s Economy", the roots to the country’s financial difficulties are in corporate Japan. David Atkinson, a banking analyst at Goldman Sachs, estimates that at current earning

levels, it would take 150 years for companies to pay back their loans.

Tuesday 3rd April 2001

IMF: The IMF plans to sharply cut this year’s forecast for euro-zone growth – from 3.4% in October to 2.5% this year – and has urged the European Central Bank (ECB) to trim interest rates amid signs that the region’s manufacturing activity had slowed to the weakest level in nearly 2 years. Last week, the ECB said it would "wait and see" on rates, even though it conceded that inflation risks are receding gradually. Until Monday, the IMF had publicly supported ECB policy.

Pharmaceuticals/Aids: Data presented by Merck & Co confirm unofficial information that healthy lab monkeys given the company’s Aids vaccine stayed healthy after a subsequent injection of an Aids-like virus. These results suggest that Merck is furthest along among several relatively new test vaccines intended to protect people against the lethal disease. "We need to see," says Norman Letvin, an Aids vaccine researcher at Boston’s Beth Israel Deaconess Medical Centre, "if the vaccine can generate a similar immune reaction in humans." Although the vaccine will not provide full protection against a viral attack, it will trigger an immune-system reaction that may simply keep the virus under control, unable to cause illness or death.

Pakistan: The Pakistani rupee yesterday fell to a record low, prompted mainly by concerns over future debt payments and the weakness of the economy. The rupee has fallen by about 17% since the beginning of the Pakistani financial year in July last year. Market analysts were surprised to note that Friday’s release of a tranche by the IMF in continuation of its loan programme did little to stem the fall.

US/bankruptcies: WR Grace, the US chemicals and building products group, yesterday filed for Chapter 11 bankruptcy protection under the strain of mounting asbestos claims and liabilities. The company is likely to create a vehicle to handle asbestos claims, with its businesses emerging with no continuing liability. Babcock & Wilcox, Pittsburgh-Corning, Owens Corning, Armstrong, and G-1 Holdings, formerly GAF, have also been hit by asbestos claims recently.

South Korea: Hyundai Engineering & Construction (HEC), South Korea’s largest builder, could still collapse in spite of the new debt-for-equity swap rescue plan , its consulting firm, Arthur D Little, warned yesterday. It proposed cutting jobs by 20% to reduce costs. Analysts believe prospects for HEC remain bleak because the Korean construction sector is unlikely to recover soon due to a slowing economy. Investor confidence has since evaporated in spite of HEC’s financial rescue causing the company’s share price to collapse on Friday to a record low.

World Trade: The Bush administration has suggested to congressional leaders that it is willing to consider a radical shift in the use of trade sanctions to enforce agreements, as a way to break the deadlock over giving the president new trade negotiating authority. The idea was to substitute monetary fines for the use of trade sanctions as a mechanism for enforcing trade pacts. Congressional Democrats have refused to support President Bush’s request for new trade negotiating authority unless he agrees to integrate labour rights and environmental protection into future trade agreements. The said shift is likely to be greeted skeptically by US companies, which insisted in the Uruguay Round of world trade talks that the agreement should be enforceable through trade sanctions.

Caribbean/Bananas: Amid increasing concern over the future of their preferential access to the European market, banana exporters in the Windward Islands have seen a fall in their income from sales to the EU. The decline was said to be caused by the weakening euro and problems of fruit quality, which continues to afflict the industry in the region.

EU/Bananas: Lamberto Dini, Italy’s foreign minister, urges the EU to reform its banana import regime to promote genuine market liberalisation for the benefit of producing countries rather than the traders which he says are making unjustified profits. It was also vital, he said, to make the system compliant with international trade rules so the US can lift its retaliatory measures. Italy alone has lost $39m a year on a list of products that includes canned food, clothing and car batteries. Mr Dini advises implementation, in the long-term, of a tariff-based system that would not rely on quotas of any kind and would include duty-free treatment of African, Caribbean and Pacific states. In the transitional period, he suggests that EU countries adopt a system of allocating import licences based on "auctioning", in which import licences are distributed by means of public bids, underpinned by a transparent procedure.

Africa/Tobacco: Imperial Tobacco is planning to take its Regal and Superkings brands to smokers in sub-Saharan Africa through a £179m deal to buy 75% of Tobaccor, a leading distributor of cigarettes in the region. Tobaccor’s big markets include Ivory Coast, Burkina Faso and Senegal. It also has an operation in Vietnam. The acquisition is part of Imperial’s strategy of international expansion to offset its exposure to high taxes and strict health regulations in Britain. Analyst Jonathan Fell of Merrill Lynch said the deal should enhance Imperial’s earnings by 3% next year.

Sudan: Yousif Kuwa, the teacher who turned to armed struggle to get recognition for the Nuba people of central Sudan, has died at the age of 56 after a year-long battle with bone cancer. In the past year, Khartoum has redoubled its efforts to defeat the rebellion he led by attacking the most fertile parts of the mountains and driving the inhabitants into "peace villages". About 150,000 Nuba have been displaced this year. Mr Kuwa was critical of the UN for failing to deliver relief to the Nuba mountains three years after Khartoum promised to end its 12 year blockade.

Globalisation: The global market for knowledge and expertise has developed far less rapidly and thus far has produced only one big winner, the United States, according to James Glanz. "Although information technology generates about one-third of the economic growth in the US, it employs only 5m workers in the industry, and more than 1m of those people are foreign born." But, says the article "Fishing for the best brains in ebbing and flowing global market" America is beginning to lose its monopoly on the world’s best brains. However, in the competition for the best and brightest, the cost to the losers can be devastating. A study by the Colombian government estimated that the country lost tens of thousands of people with 3 years or more of higher education in 1999 alone.

Monday 2nd April 2001

US: US personal income edged up 0.4% in February, while personal consumption expenditures grew 0.3%, albeit at a slower pace than last year but still growing enough say analysts to keep the US economy from tipping into a recession. Consumer spending, which accounts for two-thirds of economic growth, offset sharp declines in business spending and kept the economy growing at a 1% annual pace during the last three months of 2000.

South Africa: According to Cedric Muhammad, investors are fleeing the once-vibrant South

African economy because of a proposed new tax on capital gains, as well as galloping inflation and falling exchange rates. For years, foreign investors had been attracted to countries like South Africa, Argentina, Belgium, the Netherlands, New Zealand and Singapore because of the exemption from taxation of personal capital gains on stocks, bonds, real estate and other investments.

Japan: With the Japanese currency in a tailspin – the yen fell to a 29-month low on Friday – US administration officials are saying that Japan must embrace necessary, if painful, reforms to boost domestic growth and not use foreign-exchange rates to export their way out of trouble. More to the point, it is considered in US circles to be politically unacceptable, at a time when the US economy is slowing to a crawl, that the yen be allowed to fall so far or so fast that American companies lose ground to Japanese competition.

Week end edition

Russia/WTO: Russia said yesterday it was committed to joining the WTO but would need a transitional period of up to seven years to comply with WTO commitments. Miklail Kasyanov, Russia’s prime minister, said Russia considered membership a priority but needed to be able to protect its economic interests. Opposition within Russia is likely to come from its domestic producers such as the textiles sector and farmers and from parliament.

US: In response to a diplomatic offence by the EU to persuade the Bush administration not to abandon the Kyoto protocol, a White House official said the issue was receiving "high-level attention" and the administration was "not opting out of the process." The US still planned to attend a meeting of environment ministers due in Bonn on July 16 to discuss the next steps in the Kyoto process. The administration has a dearth of knowledgeable counsellors on climate change and has yet to hire a science advisor or the State Department an undersecretary for global affairs.

Shedding some overview on the situation, Gerard Baker writes in his article "Bush’s tough stand", that an anti-regulatory stance at home and a unilateralist approach abroad are signs that the US government will be the most conservative since the Second World War. The confirmation of Mr Bush’s decision this week to reject the Kyoto protocol on global warming was, in his view, merely the latest alarming manifestation of the administration’s priorities: big business over the environment; the unfettered market over sensible regulation; and America’s insatiable appetite for immediate consumption over the interests of the globe. Meanwhile, Kjell Larsson, the Swedish minister who chaired a weekend meeting of EU environment ministers, said: "No individual country has the right to declare a multilateral agreement dead. We hope the United States will participate in the Kyoto process. We are, however, prepared to find a solution also without the US."

Free Trade: In the article "The truth about protectionism" summarised on 30th March the authors say that the welfare of both domestic and far poorer foreign workers requires that church groups campaign to dismantle rich countries’ protectionism while advocating adjustment and retraining programmes that are compatible with a humane concern for workers in rich countries. "Is it too much to expect," say the authors, "that just as the Jubilee 2000 movement triumphed where many exhortations to give debt relief had failed, we could now count on a church-led movement, a Jubilee 2010, to do the same for ending rich countries’ protectionism?"

Money Laundering: Mr D S Schwarzkopf in reply to Edwin Truman article "Clamping down on kleptocrats" writes in the letter section on 30th March that there is a growing realisation that restrictions on money-laundering is fundamentally unenforceable. He suggests that the costs to private financial organisations is not only vastly disproportionate to prosecutory benefit but that defenders of free and open societies everywhere should also fear such infringement upon their privacy and personal liberty. Somewhat astonishingly, he goes on to say: "The true consequence of debt forgiveness campaigns by well-meaning organisations and celebrities is the perpetuation of irresponsible and predatory governments. When accountability and respect for contract law are thus diminished, the entire population is deprived of the opportunity to participate in a civil society and the creation of legitimate wealth. The appropriate response to kleptocracy and money laundering is not spiraling regulation and bureaucracy. At least one answer is to promote the development of civil societies and the rule of law through strict enforcement of contracts and international financial obligations".

Today’s edition

UK/Aid: Clare Short, the international development secretary, will announce that the UK gave 0.31% of national income in overseas development aid in 2000. This remains well short of the UN target of giving 0.7% of national income in aid, but represents a sharp rise from the levels it sank to in the mid-1990s. In common with many countries, the UK cut aid as a proportion of national income in the 1990s, a move condemned by the World Bank and many development campaigners.

Indonesia: The government is to make deep cuts in fuel subsidies – diesel prices for instance were about a quarter of international rates – that had been swollen by the sharp depreciation in the rupiah against the dollar, to help prevent a blowout in the budget deficit this year, forecast at 3.5% of GDP. The subsidy cuts are also a key part of the government’s commitments under its IMF-backed economic reform package. The issue however, is politically sensitive. Sharp fuel price increases in 1998 sparked riots that toppled former president, Suharto. Leaded petrol is widely used for transportation for the country’s poor masses while kerosene is used for cooking.

India: In 1999, under pressure from the WTO, India agreed to abolish restrictions on 1,429 categories of foreign-made goods within two years. Restrictions on 714 items were lifted last year and the 715 categories on which restrictions were lifted at the weekend – ranging from textiles and agricultural products to cars and school materials – complete the process. "The benefit of the restrictions didn’t go to the government or the public but to the quota holders," said R. Chandha, an adviser at the National Council for Applied Economic Research, a New Delhi think-tank. However, the government also announced a set of safeguard measures including heavier taxes on imports, anti-dumping duties and non-tariff barriers aimed at preventing a much-feared surge of foreign imports that could cripple inefficient Indian industries.

US/Timber: In petitions to be filed with the US Commerce Department, US timber companies will seek a tariff penalty of 40% to counter alleged unfair government subsidies to Canadian producers. They are asking for an even stiffer penalty on charges that Canadian timber is being dumped below cost in the US market. The action could have a significant impact on the Canadian economy and the cost of US home construction. Softwood is one of Canada’s largest exports to the US and Canadian imports account for about 35% of US timber sales.

UK: The private wealth generated by rapidly rising stock markets and strong economic growth has more than doubled the number of millionaires in Britain in the past five years. Membership of the millionaires’ club has shot up from 33,063 to 73,990 representing a compound annual growth rate of 17% and a total increase of 124%. The wealth measurement included only liquid assets such as savings, equities and bonds. But, as the article says, rising property prices also boosted the wealth of people who sold houses they inherited.

UK: As Larry Elliott says in his article "It is about time Blair had a big idea", Britain is now remarkably similar to Britain on May 1, 1997. In point of fact, spending on the nation’s infrastructure has been lower in each of Labour’s four years than in the final 12 months of John Major’s administration and only 25% of what it was in the dying months of Jim Callaghan’s luckless government. To be spending less than 0.5% of the economy’s annual output on restoring the tattered remnants of the public realm is scandalous, says the author. But the reality appears to be "that politics now is more like the 1950s than the 1980s when only incremental changes where made in its 13 years in power to the status quo inherited from the Atlee government."

Germany: Directors of Germany’s Dresdner Bank last night announced they had accepted a £68bn merger proposal from insurance group Allianz, creating the world’s fourth largest financial services group. The merged business will have more than 20m clients in Germany and will rank second in Europe, behind HSBC which has a market value of £76bn. Elsewhere, its only bigger rivals are US groups Citigroup and AIG.

Italy: Silvio Berlusconi, the leader of Italy’s centre-right Opposition, will learn this week whether he is to face charges in Spain relating to alleged tax fraud in his acquisition of the Spanish television station, Tele Cinco.

March 31st – April 6th 2001

Mercosur: On March 26th, Mercosur, Latin America’s main trade block celebrated its tenth birthday. Only three days earlier, Domingo Cavallo, Argentina’s new economy minister, "temporarily" abolished duties on the import of capital goods from outside Mercosur and raised those on consumer-goods imports to 35%, in order to mimic a devaluation, speed growth and dispel the spectre of a debt default. Though trade between Mercosur’s member – Argentina, Brazil, Paraguay and Uruguay – has quadrupled since its creation, it has fallen since 1998 and amounts to only around a fifth of their total trade. "What Mercosur needs most is the re-creation of a sense of political understanding and shared interests," argues Roberto Bouzas, an Argentine economist, in a recent study. Without that, Mercosur may drift into irrelevance, with the trade links between its member no stronger that those that each individually has with third countries…Increased trade and political co-operation between Mercosur’s members have bolstered stability, democracy and economic reform in the region over the past ten years. All would benefit if the integration continued."