Daily Press Cuttings

Wednesday 28th February 2001

Thailand: Thailand is set to follow Malaysia and Indonesia by setting up a national asset management corporation to buy the banking system’s non-performing loans – at a discount – and issue them with bonds. By carving out $28bn of bad debts, the government hopes to kick-start lending to galvanise economic growth. While most agree that such a scheme will strengthen the banks, few believe it will generate new lending. Credit-worthy customers are paying back debt while the needy companies are bad risks that no one wants to lend to.

South Korea: Creditors yesterday took a step towards seizing control of troubled Hyundai Engineering & Construction from the family of Chung Ju-yung by demanding a debt-for-equity swap in return for offering a payment guarantee of $400m on foreign loans. If concluded, it would represent a further dismemberment of South Korea’s largest chaebol, or conglomerate.

IMF/UK: IMF staff have warned in a report that Gordon Brown’s tax and spending plans risk harming the economy. According to one official present, the IMF was supported by a majority of significant member governments. The fund’s report suggests that "the Chancellor’s borrowing plans could push up interest rates and keep sterling high." Under Mr. Brown’s ‘golden rule’ for fiscal management, the govt. is permitted to run a deficit to fund investment. The rule states that the amount collected from taxes should equal current spending, as opposed to spending on investment. Mr Brown plans to announce tax cuts of up to £4bn in his Budget next Wednesday and leave unchanged his estimate of future borrowing needs.

Holocaust slave labour: In an attempt to ensure dismissal of US lawsuits against German businesses, the German industrial fund for compensating former Holocaust-era slave labourers yesterday asked all its contributing companies to increase their payments by 50% from the current required level of one thousandth of their annual sales. Last year, German industry and government pledged to pay DM10bn but have only so far raised about DM3.6bn of its DM5bn share from 5,489 companies.

Aids/Drugs: Wim Kok, the Dutch prime minister told members of the South African parliament that "the global problem is too threatening to leave the provision of Aids drugs to market forces alone." He urged the EU to interpret intellectual property rights "in a way compatible with the needs of the poor."

Italy: Italy’s centre-right coalition reacted furiously yesterday to a Belgian warning that the EU could censure Rome if Silvio Berlusconi wins May’s general election with the help of far-right groups. The Belgian foreign minister, Louis Michel, said he would approach a Berlusconi government "in exactly the same way as with Austria" – a reference to the sanctions imposed on Vienna by EU states last year after the inclusion of Jorg Haider’s Freedom party in an Austrian government. Mr Berlusconi is campaigning alongside Gianfranco Fini, whose party, the National Alliance, has fascist links, and Umberto Bossi, the Northern League leader, who has taken a strong stand against immigrants.

India: There appears to be little sign amid a slowdown in investment and a pick-up in inflation that the Indian economy is on the path to the 9-10% annual growth needed to end endemic poverty in the country. India had found itself constrained by the rise in the country’s oil import bill ($15bn), the drought that’s afflicting swathes of central India and last month’s catastrophic earthquake in Gujarat, which caused estimated damage of more than $5bn as well as claiming more than 30,000 lives. As a result, few believe the government can effect reforms to cut the deficit, re-orient spending and downsize the government which has to find ministerial posts for 76 of its members.

Lebanon: The prospect of Lebanon obtaining a £316m aid package from international financial institutions was the most tangible outcome of a special meeting in Paris yesterday to consider the country’s $25bn foreign debt burden. Lebanon’s debt service is expected to cost $6.6bn this year, accounting for more than two-thirds of its deficit. Mr Hariri, the Lebanese prime minister said the aid package would be linked to government programmes, most notably privatisation - the cabinet, for instance, has voted to fire all 523 workers at Tele-Liban and close the state owned television station for 3 months "in order to streamline it."

Asia: The message was different at the Asian economic summit held in Bo’ao in China from that of Davos. In an inaugural address, Dr Mahathir, Malaysia’s prime minister, suggested taxing the rich countries of the world through an office of the UN and passing the revenue on to fund infrastructure programmes in poorer countries. "Since part of the wealth of the rich comes from the exploitation of the resources of the poor, it is only fitting that they return some of it to the poor," he said.

South-east Asia: Supachai Panitchpakdi, Thailand’s former commerce minister and the next director-general of the WTO, told the Financial Times in an interview that "people have become disenchanted with foreign direct investment because of the financial crisis in 1997 and the takeovers made by foreign institutions in some industries." He warned that south-east Asia could suffer from a "backlash" against such foreign investment at a time when the region faces ever stronger competition from China for such investment flows.

Exchange Rate Regimes: Martin Wolf in his article "Turkey trips on its weak peg" finds the "bipolar view" of Stanley Fischer , the IMF’s first deputy, compelling. As he explains, "countries open to global capital flows should either have irrevocable long-term fixes – such as currency boards, adoption of another country’s currency as one’s own or currency unions – or flexible rates – such as free or managed floats (without announced targets or bands) or pegs with very wide bands. What are precluded are systems in which the government is thought to be wedded to a particular exchange rate or narrow range of rates but is not institutionally committed to defending them at all costs."

Spain: Spanish police says that there is a flourishing slave trade in prostitutes between Africa and Europe. Prostitutes are forced to sign a contract – with death threats included - in which they promise to pay about $28,000 to prostitution gangs. Prostitutes are trapped with a huge debt burden. Women are brought overland from Africa, taken into Madrid, and make to sign their "contract". "The police said some of them had their debt bought by Spanish pimps, who took them to work in roadside brothels. They were sold to other people and women were expected to pay off their purchaser as well as the gang that brought them to Spain", the police said.

US: eToy – a US company – has filed for bankruptcy. It said its stated debt figure of $274m was likely to become "substantially higher" when the full amount of money owing was calculated.

UK: Global trade forces exodus from land. The Vale of Pewsey, like almost every corner of Britain has been globalised. Alan Lathan of Wilds farm, says "Outside economic forces have done me in. You have no control over prices, everything is set by outsiders. It doesn’t matter how well you farm, it just gets harder and harder." He, too, has left. The same forces that affect Britain are sweeping through rural areas everywhere. The twin motors have been rapid globalisation, backed by world trade rules which are opening every market to international competition, and a system of subsidies which encourages intensification.

Colombian president Andrés Pastrana said to the US president George Bush that political dialogue and trade liberalisation are the two alternatives to guerrillas and drug traffic. Mr Bush said that he will not seat to talk with the Colombian Revolutionary Army Forces (FARC) until this group hand over the killers of three North Americans in 1999. Mr Pastrana expressed his wish that Mr Bush support a law which is to be presented to the Congress by senator Bob Graham. This law expands the Preferential Commercial Andean Law (Atpa) which, since 1992, has given preferential access to the US. Market to almost 6,000 Colombian goods, in order to stimulate the fight against drug trafficking.

Pharmaceuticals: Glaxo SmithKline said last week that it was ready to supply non-governmental organisations working in developing countries with HIV/AIDS drugs at discounts in excess of 90%. Oxfam, however, remains skeptical about the depth of the industry’s commitment to cut-price medicines, given the tough legal stance taken to defend patents in poor countries.

Indonesia: The rupiah fell 2% Monday to its lowest level against the dollar since October 1998 as investors worried that the current impasse with the IMF could jeopardise an agreement to restructure some $5.8bn of foreign debt through the Paris Club of commercial creditors. The agreement, struck last year, needs to be renewed at the end of March, and requires that Indonesia continue to comply with IMF prescribed economic reforms. The loan program with the IMF has been stalled since December when the agency withheld a $400m payout because the government missed targets on privatising key banks and failed to issue fiscal guidelines on a move toward a decentralised government.

UK: At the conference about child poverty held in London yesterday, Graca Michel, the wife of Nelson Mandela, the former South African president, said that the war against child poverty needs to be fought on several fronts, including debt relief for poor countries, greater overseas development assistance, better market access for poor countries and cheaper drugs to fight killer diseases. The heads of both the IMF and WB said that most rich countries were short of their target of donating 0.7% of national income in overseas development aid. As Horst Kohler, head of the IMF, said yesterday, fulfilling this promise would mean a rise of $10bn a year for a decade. There were no new promises. On the issue of drug costs and availability in poor countries, most rich nations seemed to want a co-operative approach, fighting shy of a radical reform of the trade-related intellectual property rights (Trips) regime which would allow poor countries to manufacture generic versions of brand-name drugs. Giuliano Amato, the Italian prime minister, said "These rights are taxes that these [developing] countries pay to us with no intellectual justification." Other countries, including the UK, seemed unwilling to take on the pharmaceutical companies, offering instead tax credits and a purchase fund to stimulate investment into anti-malarial and other drugs.

EU: The European Union yesterday agreed to end all barriers to trade with the world’s 48 poorest countries. Duty- and quota-free access will start for nearly all poor-country products from March 5. Arms are excluded from the deal and import of sugar, rice and bananas will be fully liberalised only after seven years. Pascal Lamy, the EU trade commissioner, said that the agreement marked the first time EU trade policy had been modified in the interests of development. However, Mr Lamy admits that the volume of imports from the poorest countries was small in relation to the EU’s overall trade. The Commission will monitor import of rice, banana and sugar and have power to reimpose trade barriers in case of a surge in imports or a disturbance of EU markets.

Russia: Russia will catch up on payments to the Paris Club. Last week Russia paid Paris Club creditors $577m. This week it intends to pay another $600m or so, enough together to cover its obligation for February, official said yesterday.

Turkey: Turkey yesterday sought to contain the economic upheaval that led to its decision last week to float the lira, while signalling its determination to press ahead with its long-term goal of membership of the EU. Turkish officials expressed the hope that the IMF might agree to an increase in funding. However, the IMF has so far shown no inclination to offer Turkey further support.

Turkey: In a letter to the FT, Peter J. West, Chief Economist at BBVA Securities, comments on the difference between Turkey and Argentina peg regimes. Turkey’s system, he writes, is a "soft" peg regime. It had a tightly managed crawling peg that, under the IMF, was destined to be gradually converted into a freely floating regime by mid-2002. The process has now been truncated. Argentina, on the other hand, has one of the "hardest" pegs in the shape of a currency board. Such an arrangement does have its drawbacks, particularly as the link is with the still-strong dollar.

Mexico: The World Economic Forum’s meeting in Cancun coincides with the start of a two-week, 2,000-mile march by masked Indian rebels led by the subcomandante Marcos. The aim of the march is to press for Indian rights. Fanned by international support, the gaze of the protesters is on a hemispheric free trade summit in Quebec City, Canada, in April.

Rating agencies: Downgradings of the credit ratings of European telecommunications operators in the past six months has brought the work of Fitch, Moody’s Investors Service and Standard & Poor’s to the attention of a wider spectrum of spectators. During the emerging market crises of 1997/98, rating agencies were accused of being too slow to spot risks. Similar accusations were leveled last year about companies in the European telecoms sector, which took on tens of billion of new debt to pay the Euro 100bn bill for acquiring third generation mobile phone licences in Europe. The rating actions have prompted bond investors to question the accuracy of credit ratings they use to estimate the risks factors in their portfolio. Confidentiality agreements between agencies and companies – which pay to be rated – mean that the reasons behind ratings moves are often far from transparent.

Moody’s Investors Service yesterday changed its rating outlook for BT from stable to negative, reflecting the ratting agency’s increased uncertainty over the company’s debt-reduction plan. BT’s debt is expected to reach £30bn by the end of next month.

Spain: Telefonica Moviles, the wireless arms of Telefonica of Spain, yesterday pledged to squeeze more revenues out of its Latin American franchises and increase core earnings by 15% to 20% this year. Moviles is the largest wireless operator in Argentina and Peru: it bought four mobile operators in northern Mexico last year, and it recently agreed to merge its mobile interests in Brazil with those of Portugal Telecom. Luis Lada, chairman, said Moviles’ net debt stood at Euro 6.5bn, a level "more than reasonable" for a company with a market capitalisation of Euro 33bn. He sounded bitter about the market’s inability to distinguish between "telecom groups with very different debt levels and business projects".

Colombia: American backed crackdown on coca growers hit food crops and spread resentment among the poor. US pilots spray on average 3.8 litres of glyphosate herbicide on every hectar, and local farmers say that crop-dusting has destroyed thousands of hectares of food crop and pasture, devastating the local economy. At today’s meeting in Washington, Andres Pastrana, the Colombian president, is expected to ask the US for up to $500m a year in extra financial assistance, and trade preferences to help bail out the struggling Colombian economy. George Bush has inherited a $1.3bn aid programme for Colombia. Out of this $180 million will be spent in Peru, Bolivia, Ecuador and elsewhere in Latin America.

Globalisation: According to John Gray in his article "Goodbye to globalisation", globalisation as a political project is dead. "The high flying rhetoric of the Clinton administration has been replaced by a hard-headed focus on American national interest. The US is now more concerned with protecting itself in a dangerous and intractably disordered world than with spreading its values to the last corners of the globe." But it is also a triumph of reality over illusion he says. "The popular idea of globalisation expressed what might be called the Dow Jones interpretation of history – the theory that booming stock prices somehow demonstrated that free markets were spreading irresistibly across the world. With the pricking of the Wall Street bubble, that theory is now itself history." He warns that the most worrying aspect of the new American administration may not be its defence plans but rather its attitude to the global environmental crisis.

UK: The deficit in the UK’s trade in goods with the rest of the world ballooned last year to a record £29bn, the largest cash shortfall of exports below imports since records began more than 300 years ago. Indicators point to the worsening trend as being a sign of hidden inflationary pressure. The burgeoning deficit also indicates that manufacturing – which exports a greater proportion of its output – is suffering compared to the booming services sector and that the currency is over-valued.

Japan: The credit rating of the Japanese Government was downgraded by Standard & Poor’s yesterday and the rating agency’s analyst also concluded that Japan may one day be forced to default on its debt.

WTO: China’s entry into the WTO could be delayed by a year because of serious questions about Bejing’s commitment to internal reforms. Much of the difficulty surrounds China’s refusal to budge on key agricultural issues which has become exacerbated by US reluctance to compromise. The US is also concerned that China could retreat on the assurance it gave that it would not block Taiwan’s entry into the WTO immediately after its own accession.

Globalisation: According to Sebastian Mallaby, NGOs don’t want to block globalisation, they want to control it. He cites Oxfam’s campaign to regulate drug companies and Global Witness who have pushed successfully for regulation of the diamond industry and who have also helped regulate the oil industry. The UN is currently considering incorporation of NGO codes of conduct into its own declarations which could well establish such codes as customary law in many countries. Nonetheless, there remains the problem of aid budgets which have stagnated in the past decade whilst NGO regulatory efforts have multiplied. This has meant that even with generic copies cutting drug prices by 90%, poor countries cannot afford the transport and clinics to deliver such drugs to people in the countryside.

Aid: Brian Atwood in his article "Bush, too, is going to need USAid" writes that removal of US aid "would do serious harm to US efforts to prevent future conflict in the developing world, assist nations in transition to democracy and thwart new, non-traditional threats. It would terminate government-to-government collaboration in using assistance to promote agreed-upon international objectives." Furthermore, poverty in all its manifestations - whether that be dangerous infectious diseases or environmental decay - constitutes a serious threat to US national interests.

Arms/Iraq: The Bush administration plans to drop many of the economic sanctions imposed on Iraq a decade ago and refocus the restrictions more tightly on President Saddam Hussein’s military and his ability to produce weapons of mass destruction.

El País (Spain)

Former Argentinean dictator Jorge Videla justified the forced disappearance of thousands of people during the military regime. Jorge Videla admitted to two journalists that the Military committee thought about the possibility of making public the list of the people who disappeared, but they changed their mind because they didn’t want to answer question about the killings. Jorge Videla ensured that "all" the chiefs of the Army agreed on detention, torture and disappearance of members of the political opposition. According to the Subsecretary of the Ministry of Human Rights, 18,000 people disappeared during the dictatorship – 1976-1983 – but humanitarian organizations say that the figure is more likely to be 30,000. Jorge Videla had a life sentence in 1985 together with other military chiefs for violations of human rights. He is now under domiciliary arrest.

Monday 26th February 2001

Switzerland: Nestle SA recorded a 22% jump in net profit for 2000, to 81.4 billion francs. The company said its results were boosted by strong performances from emerging markets. In Russia, Nestle said, sales volume grew 40%. Nestle posted 2.5% real internal growth in Europe, 3.5% in North America, 5.8% in Latin America and 6% in Asia, Oceania and Africa.

Child poverty: Child poverty is the focus of an international conference today in London convened by Gordon Brown and attended by the heads of the WB and IMF. Its aim is to bring joined-up government to international development – an area notable for a mish-mash of bilateral aid programmes by the IMD, WB, the UN and specialist agencies. In particular, it aims to get finance ministers included. Mark Malloch-Brown, head of the UN development programme, says "The finance ministers have dealt with the [International Finance Institutions] while development ministers deal with bilateral programmes and the UN". For most countries, their strategy to reach the development targets is enshrined in the poverty reduction strategy papers (PRSP) they produce to gain funding from the IMF and WB. Justin Forsyth of Oxfam says "We can address education either inside or outside PRSP programmes…But at the moment is not happening. There is no joining-up of development".

Debt relief: "Eliminating child poverty is a laudable ambition but the process should begin with more debt cancellation", argues Bob Geldof on the feature pages - "businessman and supporter of Drop the Debt. In Gordon Brown, we have someone who moves faster, is bolder and acts more radically on behalf of the world’s poor than most of his mainstream political contemporaries. The issue of child poverty should be addressed together with the issue of debt reduction. The 22 countries that received debt relief had their annual debt payments reduced from $2.9bn to $2.1bn. But most of these countries will still be spending more on debt payments than on health. The African countries that have benefited from partial debt cancellation will still pay $1.4bn each year to creditors. This is the amount of money that UNAids estimates the same countries need to increase their effort against HIV/Aids to a realistic level. The rich nations have agreed to cancel all debt for some countries. The World Bank and IMF, pleading poverty, have not, stopping at less than half. The WB and IMF haven’t agreed to cancel all debt of the poorest countries. Drop the Debt argues that for the 22 countries so far in the debt relief process, full cancellation would cost the World Bank less than $200m, and the IMF less than $300m The argument that the IMF and WB are too poor to play their part in righting the historical injustice of debt could be resolved by an independent review of their resources by an accounting firm.

Thailand: Thailand’s new government is to tackle the country’s bad-debt problem by creating a state agency to buy up most non-performing loans from private commercial banks. Critics have expressed concern that the bad-debt buyout would mean taxpayers shouldering the burden for the mess made by banks and powerful corporate interests during the boom years before the 1997 economic crash.

Week end edition

Italy: The 1,000 largest companies in the world are to be invited to donate $500,000 each to a new trust fund that would help to alleviate poverty in developing countries, under a proposal being tabled by the Italian government for discussion by G7. Italy is to raise the idea of creating such a fund at the G7 summit in Genoa in July. Under the terms of the Italian proposal, G7 governments would be committed to matching private-sector contributions, with the aim of raising a total of $1bn for a trust fund that would be jointly managed by the World Bank and the World Heath Organization. Vincenzo Visco, Italy’s finance minister, said the trust fund would ensure that "decisive action is taken to ensure that vaccines become more affordable in poor countries and [to] introduce widespread curative treatment". Mr Visco also said that while he supported further measures to reduce the debt of developing nations, the focus should be on efforts to improve economic growth in countries that have already benefited from debt relief. "The debt is a consequence of their poverty, not the other way round…If we don’t do something to relieve poverty, these countries will simply become indebted again within 15 years". On trade liberalisation, Mr Visco said that Italy would raise in Genoa the possibility of removing tariff barriers for poor countries. He said that the issue would ideally be dealt with at the WTO through a multilateral trade round. "But if no progress is made on this, the G8 heads of state should commit themselves to removing such barriers by the end of the year".

Japan: Standard & Poor, the US credit rating agency, lowered Japan’s rating from AAA to AA+. Although most Japanese government bonds are bought by domestic investors who are less concerned about international credit ratings, the move is a blow to the government. Standard & Poor expects Japan’s government debt to surge from 134% of gross domestic product to 165% in five years. Hakuo Yanagisawa, financial minister, said the decision was uncalled for and insisted the market was absorbing the high levels of debt.

Russia: Germany has postponed approval of hundreds of millions of D-Marks in new export credit guarantees to Russia, pending Moscow’s performance in servicing its sovereign debts. Officials in Berlin declined to say whether the export credit guarantee move was a unilateral decision, or part of a co-ordinated policy with other Paris Club lenders. The German finance ministry has so far received less than a third of the DM1.8bn (£570m) due from Russia in interest and capital for January and February. Although Russia had transferred DM67m in interest payments for January, DM640m in capital repayments remain outstanding.

US Budget: President George Bush will say to Congress on Tuesday that his budget plan effectively eliminates the national debt, even after accounting for his $1.6 trillion tax cut and his goal of creating private Social Security accounts. Debt reduction and tax cuts are apparently compatible now that Mr Bush has become "armed with higher surplus projections and a new method of calculating how much debt can really be paid off." Aides view the address to Congress as Mr Bush’s "first step in educating Americans on the president’s new budgetary math."

EU: A plan to scrap duties and quotas on exports from 48 of the world’s poorest nations will top the agenda of the EU foreign ministers’ meeting Monday, with France and Spain objecting to the deal.

Pharmaceuticals: The editorial "Health Before Profits" starts off by saying that the charge that globalisation puts profits before people is almost entirely nonsense. Nonetheless, it does take the view that the US administration should oppose the pharmaceutical lobby. "It should lead an international effort to clarify poor countries’ right to fight emergencies with generic drugs, and it should declare its sympathy for the South African government in the pending case". Why? Because "fragile support for globalisation depends on showing that profits are not being promoted at the expense of the….30,000 people that die each day from treatable and preventable infectious diseases." The editorial "Medicine for Africans" mentions that US Secretary of State, Colin Powell has called AIDS an economic and national security problem. He has also said that Congress has been generous in its provision of aid to fight the disease. But as the article states, Congress’s allocation amounts to only $315m this year for all AIDS programs worldwide – vastly inadequate to prevent the catastrophic scenarios looming in Africa.

Gats: Brian Garvey of the University of Sheffield, in the Letters section, writes that developing countries will be obliged to accept the new terms of Gats, the general agreement on trade in services that is shortly to be negotiated, under the proposed expansion of article vi, whereby a country’s labour laws, safety guidelines, licensing standards, subsidies, grants or environmental protection may be called "trade restrictive" and thus subject to court action from multinational service providers. "Globalisation, led by multinationals, is failing and will, under its current form, continue to fail the poor. Where developing countries are held to ransom by policies such as structural adjustment in return for debt relief, they are never given the chance to be choosers. Under Gats things are no different. If it is indeed "Bottom-up" it’s hard to see why Bolivia’s government would have sold its water rights to a British company which then charged peasants one-third of their income for drinking rain water."

Aids/Pharmaceuticals: As Regina Keith of Save the Children remarks, tax incentives to drug companies in return for vaccine development may bring vital drugs to the market. Nonetheless, it is hard to see how this will address the absolute lack of resources needed for effective health care in the poorest countries. She cites Liberia which takes 4 months to procure a vaccine supply. "In one country there is only one doctor per 850,000 people and in another only one health vehicle for 1m people." Mark Goldring, the chief executive of VSO, welcomes Glaxo SmithKline’s (GSK) offer of cheaper drugs but warns that more radical and far-reaching solutions than one-off donations are required. "We need global cuts by the major pharmaceutical companies, setting price levels affordable to the poor." He also warns that new WTO patent rules are likely to damage developing countries abilities to produce generics unless there is global political support for them to do so. "Recognising that developing countries have legitimate rights to buy medicines from the cheapest sources, even if that source is not GSK, would be extremely significant."

El País (Spain)

Subcomandante Marcos said his first speech in front of thousands of indigenous and said that he wanted to deconstruct the strategy of government of Vincent Fox: he wants to take as his own the objectives of the march of the Zapatista army of the National Liberation (ELN).

The 3,000 Km march arrived yesterday in Tuxtla Gutiérrez, capital of Chiapas after14 days. On Saturday, accompanied by 23 comandantes, Marco denied the message of Mr Fox, who on Friday has asked for national reconciliation. Marcos said "For almost 200 years has this land been called a nation… For almost 200 years Mexico has been taken our blood, our suffering and our poverty to make it our country and not a shame. Almost 200 years have gone and we are still outside the house that we built, said Marcos, who assured that Chiapas will not be the waste bin of Mexico."

Out of a total of one million children between 5 and 14 year old, 33% never attends school, and only 100% go to University. Indigenous illiteracy is more than 50%, mortality is 40% higher than in the federal capital.

Feb 24th – March 2nd

Africa: Half of sub-Sahara Africa’s 600 million people live on just 65 cents a day, and recently they have been getting poorer. The World Bank reckons that, if North America, Europe and Japan were to eliminate all barriers to imports from sub-Sahara Africa, the region’s exports would rise by 14%, an annual increase worth about $2.5 billion. Another calculation shows that developed countries’ farm subsidies amount to over $360 billion a year, some $30 billion more than Africa’s entire GDP. And while the prices of rich countries’ exports have been rising, those of Africa’s primary products have, on average, been falling (by 25% in 1997-99).

During the cold war the rich world was happy to fight its wars through African proxies, to prop up corrupt regimes and sell them weapons with which to suppress their subjects and swell their foreign debt. Partly as a result, that debt has been crushing for Africa: several countries have been spending more on service payments than on education and health.

Meanwhile the aid that helped to assuage western consciences has often been tied to western exports. Official aid has been dwindling from $32 per African in 1990 to $19 in 1998. To add to Africa’s tribulations, it has been ravaged by disease: malaria and Aids. Much more can be done in terms not just of reducing trade protections, but also of promoting the development and provision of drugs: rich countries might, for instance, promise to pay the costs of vaccinating African against malaria, in order to encourage the pharmaceutical companies to develop a vaccine.

Africa/aid: Since the end of the cold war, Britain’s aid spending along with most of the rich world, has declined steadily and has been below 0.3% of GDP for the past five years. Africa got just £346m from Britain in bilateral aid in 1997-98. Two years later it gets £499m. The biggest recipients are Anglophone countries and members of the Commonwealth. Uganda, Tanzania and Ghana got nearly £200m between them last year. But that means some of the poorest parts of Africa, such as Angola, Niger and large chunks of West Africa, are still ignored because they lack historical ties to Britain. There is some criticism of such favouritism, on the ground that aid is going to political allies, not necessarily those who can best use it. And there is continuing dissatisfaction that too much aid is tied to purchases of British goods or services, or to the employment of British people.

South Africa/Aids: Aid makes most of South Africa’s other problems seem trivial. The Aids epidemic began in 1993. UNAIDS says that 4.2 million people – nearly a tenth of the population are HIV positive. Average life expectancy is set to fall from 60 years to 40 by 2008. South Africa is a middle-income country, but even a rich country would find it hard to deal with an Aids epidemic on the scale of this one. It costs over $10,000 a year to treat an HIV patient with the anti-retroviral drugs. With 4 million sufferers already, treating them all is out of the question. However, in their dying days Aids patients will have to be looked after This is likely to push up the public sector health bill from roughly 28 bn rand this year to roughly 38 bn in 2010. The UN expects the epidemic to knock 0.3-0.4% off the growth rate each year, making South Africa’s GDP in 2010 17% (or $22 bn) lower than it would have been otherwise.

FDI: In a briefing on foreign direct investment, the Economist argues that FDI is far more than mere "capital": it is a uniquely potent bundle of capital, contacts, and managerial and technological knowledge. It is the cutting edge of globalisation. Global FDI flows are projected to shrink this year from £1.1 trillion in 2000 to less than $800 bn. FDI to poor countries merely pauses, at around $200bn. United States will account for more than 25% of global inflows in 2001-05, followed by Britain, Germany, China and France.