Thursday, October 31, 2013

Jobless rate in Eurozone at record high; China's asset hunt; India and the world's tallest statue

1 Jobless rate in Eurozone at record (Jack Ewing in The New York Times) The economic recovery in the euro zone is feeble. Employment continues to suffer. And the patient is likely to be getting around on crutches for months if not years to come. That was essentially the prognosis from two key economic indicators published this week and from economists assessing the latest conditions. The number of people out of work in the countries using the euro currency rose slightly in September, while inflation fell more than expected — both signs of a weak economy.

Neither indicator necessarily contradicts other more positive economic news recently, notably an end to the recession in Spain. But the data, which showed euro zone unemployment stuck at a record high of 12.2 percent and inflation at its lowest level in four years, served as a reminder that a long convalescence lies ahead for Europe. 

The unemployment rate is an especially critical economic indicator in Europe. Years of austerity and joblessness have fed radical political parties and strained democracy throughout the euro zone. The longer that record unemployment persists, the harder it will be for political leaders to contain discontent and push through changes in labour regulations and other rules that are needed for the region to grow more strongly. 

The jobless rate was the same as August’s, which was revised up to 12.2 percent from 12 percent. But the absolute number of jobless people in the 17 countries in the euro area rose by 60,000 to a total of about 19.5 million, according to Eurostat.  Employment often takes a long time to respond in an upturn. Ms. Diron, the Ernst & Young adviser, said it could be six months or more before euro zone unemployment started to fall, because companies first try to extract more production out of existing employees before they hire new ones. 

There remains a huge gulf between economic performance in Austria and Germany, which had the lowest unemployment rates, and Greece and Spain, which had the highest. Unemployment in Austria was unchanged at 4.9 percent in September, and in Germany the rate fell to 5.2 percent from 5.3 percent.

2 China's asset hunt (Khaleej Times) Cash-rich Chinese business groups are increasingly being seen as saviours by not just African nations eager for fresh investments, but even by Western governments, bankers and businesses, who are welcoming both state-owned and private entities with open arms. Governments and domestic business groups around the world have traditionally eyed foreign investors with suspicion. But the continuing economic slowdown, especially in Europe, has led to a sea change in the attitude of many towards organisations (including corporates, sovereign wealth funds and private equity funds) with deep pockets.

The biggest beneficiaries of this gradual change in perception have been Chinese firms. According to the Heritage Foundation, a US-based conservative think tank, China’s outbound investments have shot up from a mere $10 billion in 2005 to a hefty $42 billion in the first six months of 2013. China’s foreign investments are expected to top $170 billion in just four years, making it the world’s second-largest foreign investor after the US, overtaking even Japan.

While conservatives in the US and Europe fear the ‘takeover’ of  Western assets by the Communist Party of China  (which is seen as the ultimate owner of its state-owned conglomerates), many Western leaders are laying out the red carpet for these firms. Britain’s Treasury chief George Osborne, who recently wrapped up a visit to China, even offered to allow Chinese companies acquire majority ownership in nuclear power projects in the UK. Britain is eager for Chinese firms to invest in infrastructure projects and even in the country’s banking sector.

Sitting atop a humungous pile of foreign exchange — its reserves shot up by a whopping $163 billion in the third quarter of this fiscal, touching a record $3.66 trillion — China is busy investing in assets around the globe. The Asian giant initially invested in acquiring energy and mining assets in Africa and Latin America, but with declining returns on its cash pile, its appetite for Western stocks, corporate debt and real estate has grown enormously.

3 India and the world's tallest statue (BBC) Work has begun in India on what is billed as the "world's tallest statue" after Chief Minister Narendra Modi laid the foundation stone in the western state of Gujarat. The statue of Sardar Vallabhbhai Patel, one of India's independence heroes, is being erected on a river island. At 182m (597ft), it would be twice as high as New York's Statue of Liberty. 

But critics say the statue's 20.63bn-rupee ($336m) price tag is much too expensive. The memorial would be called the "Statue of Unity". Officials say the statue is expected to be ready in 42 months. Thursday is Patel's 138th birth anniversary. Sardar Patel, generally called the "Iron Man of India", played a major role in the country's fight for independence from British rule. He was a close friend and ally of Mahatma Gandhi and became the first home minister of independent India.

Correspondents say the statue is viewed as a direct challenge by Mr Modi, the prime ministerial candidate for India's main opposition Bharatiya Janata Party (BJP), to appropriate the mantle of Patel, who was associated with the governing Congress party. Earlier this week, Mr Modi said that Patel would have been a much better choice than Jawaharlal Nehru as India's first prime minister. The comment was seen as a dig at the country's Nehru-Gandhi dynasty, led by Congress party chief Sonia and her son Rahul, who are descended through Nehru. The family has ruled for most of India's post-independence history.

Narendra Modi is a controversial figure who has been credited for bringing prosperity and development to the state of Gujarat but who has also been accused of complicity in some of the worst religious riots in recent Indian history. Mr Modi has always denied any wrongdoing.

Wednesday, October 30, 2013

Facebook revenue up 60%; Spain ends two-year recession; World heading for wine shortage

1 Facebook revenue up 60% (BBC) Social networking giant Facebook reported a 60% surge in revenue, to $2.02bn in the third quarter, generating profits of $425m. Revenue from advertising grew by 66% to $1.8bn, with nearly half of that coming from mobile ads. "The strong results we achieved this quarter show that we're prepared for the next phase of our company," said Mark Zuckerberg. Shares in the company have nearly doubled in value since July, when it first announced a big jump in its mobile advertising revenue.

The company has made a concerted push to boost its mobile offering, and now says that 874 million of the site's more than one billion users access Facebook on their phone. Speaking during a conference call, Mr Zuckerburg called Facebook a "mobile company" and noted more than half of people are only using Facebook from their phones. By growing its mobile users, the company has also been able to sell more mobile ads, a crucial metric that is widely watched by analysts.

Facebook has grown its share of the mobile ad market in the US from just 9% last year to 14.9% this year, according to research firm eMarketer. But Google is still by far the leader, accounting for close to half of all mobile ad spending in the US.  Revenue from mobile ads was around $880m this quarter, compared to just $150m a year earlier. However, Facebook's user growth in the US and Canada appears to have slowed dramatically. This is significant as the site earns about $4.19 for each user in the US and Canada, compared to just $0.74 for users in high-growth areas such as Asia.

2 Spain ends two-year recession (BBC) Spain has seen its first quarterly economic growth since 2011, according to data from the country's National Statistics agency INE. The country's GDP grew 0.1% in the July-to-September period, after contracting for the previous nine quarters. Spain was one of the countries worst hit by the global economic crisis, with street riots and soaring unemployment. 

The INE said an increasing number of exports supported the growth, with a boost to the tourist industry from holidaymakers avoiding northern Africa and the Middle East. Ben May, economist at Capital Economics, said the growth was encouraging and cited business surveys that suggested there "may be more to come in the near term". Mr May said: "However, domestic demand is still contracting and against that backdrop, it's hard to see a strong and sustained recovery."

Spain's economy has been ailing since its property bubble burst in 2008. Since then, the country has endured Europe's highest level of unemployment, at 26%. There have been huge street protests in response to government austerity cuts and thousands of businesses have gone bust.

3 World heading for wine shortage (Johannesburg Times) The world is heading for a wine shortage as vineyards struggle to keep pace with steadily rising demand, economists warn. Last year the wine industry had its deepest shortfall in more than 40 years as demand for wine, including for use in blends such as vermouth, outstripped supply by 300million cases - about a tenth of total wine consumption worldwide.

A decade ago, the industry produced an excess of 600million cases, according to research by US financial services giant Morgan Stanley. "Data suggest there might be insufficient supply to meet demand in coming years, as current vintages are released," said the report. Global wine production has been in decline since a 2004 peak, and supply been in balance or deficit since 2006 as makers deplete their stocks.

A fall in global "area under vine" - the total area covered by vineyards - has driven the decline in wine production. In the last 12 months, production from Europe, the world's biggest wine-producing region, was hit by inclement weather. Apart from a short dip between 2008 and 2010, wine consumption has been on an upward march, with booming demand in the US and China driving the rise, with the former poised to overtake France as the world's No1 wine buyer. Net wine exporters, such as Australia, Chile, Argentina, South Africa and New Zealand, stand to benefit from the shortage.

Tuesday, October 29, 2013

Rich-poor gap driving migration; Tata Steel cuts 500 UK jobs; US intelligence chief defends spying

1 Rich-poor gap driving migration (Matt Wade in Sydney Morning Herald) World Bank economist Branko Milanovic points out that the difference in gross domestic product per person between rich nations such as the US and Australia, and some of the poor countries of Africa, is about 50 to one. That's up from a ratio of 10 to one in 1960. Even in fast-growing Asian countries such as India, Bangladesh and Indonesia, hundreds of millions of people have not benefited much from the economic changes.

A recent report by investment bank UBS that compared prices and earnings across the world showed the real hourly wage rate of a bus driver (adjusted for the cost of living) was about $US20 in Sydney but only $US3 in India's biggest city, Mumbai. The same report found the weighted hourly wage for 15 common professions in Sydney was 12 times higher than in Jakarta. The gulf in average incomes is the main motivation for migration.

But a potent new dynamic has been added to the migration equation - widespread access to information. Thirty years ago, many people in poor countries knew very little about nations such as Australia. The growth in media and communications in Afghanistan illustrates this transformation. When the former Taliban regime was toppled in 2001, the Afghan telephone network was barely functioning and television was virtually non-existent. But a little more than a decade later, the country has about 22 million mobile phone subscribers and more than 70 television stations.

The global income gap has become common knowledge among the world's 7 billion people and that has fuelled the motivation for migration. Economists call this a "disequilibrium phase" - a huge mismatch between supply and demand. Because migration is one of the only mechanisms to fix this disequilibrium, migration pressures will exist until the income gap between countries becomes much smaller.

British economist Paul Collier's new book on migration, Exodus, explores this volatile issue from three perspectives: the migrants, the host societies where they relocate, and the people they leave behind. He points out that moving to better governed and wealthier nations has been good for migrants because their productivity rises sharply. The disequilibrium now creating migration pressures will gradually change but probably not for many decades.

2 Tata Steel cuts 500 UK jobs (Sean Farrell in The Guardian) Tata Steel is cutting almost 500 jobs in the UK, blaming a slump in demand across the European construction industry and the cost of green levies. Announcing the cuts, the company and its biggest union called on the government to do more to support the steel sector by helping with exports and encouraging use of UK steel in building projects.

The cuts come less than a year after 900 steel job losses. Tata said then that the cuts were part of a plan to cope with terrible market conditions. The financial crisis exacerbated overproduction in the European steel industry. China's rapidly expanding capacity has also pushed up the price of iron ore, the sector's main raw material, while putting downward pressure on the price of steel. Eurofer, which represents the steel industry, forecasts that steel consumption will fall 4.5% this year in Europe with only 0.5% growth expected in 2014.

Europe has emerged from its long recession but growth is still sluggish and manufacturing is picking up in the UK, albeit from a low base. Tata said steel is one of the last industries to benefit from economic recovery because customers can use stockpiles left over from the boom years before buying more. The Unite union accused Tata of trying to "sack its way out of a downturn". Its national officer Paul Reuter said: "We are urging the leadership of Tata Steel in the UK to look at what steps are needed to grow the company rather than slashing jobs."

3 US intelligence chief defends spying (Lara Jakes & Julie Pace in San Francisco Chronicle) Facing lawmakers who suggested US surveillance has gone too far, the national intelligence director has defended spying on foreign allies as necessary and said such scrutiny of America's friends — and vice versa — is commonplace.

National Intelligence Director James Clapper defended the secret surveillance that sweeps up phone records and emails of millions of Americans as vital to protecting against terrorists. He played down European allies' complaints about spying on their leaders, saying the allies do it, too. "That's a hardy perennial," Clapper told a House intelligence committee hearing.

He said during his 50 years working in intelligence it was "a basic tenet" to collect, whether by spying on communications or through other sources, confidential information about foreign leaders that reveals "if what they're saying gels with what's actually going on." Committee Chairman Mike Rogers asked whether allies had conducted the same type of espionage against US leaders. "Absolutely," Clapper responded.

Asked about the reports of eavesdropping on world leaders, president Barak Obama himself said in a television interview that the US government is conducting "a complete review of how our intelligence operates outside the country." He declined to discuss specifics or say when he learned about the spying on allies.

Monday, October 28, 2013

When all companies are tech companies: Kid gloves for India's billionaires; Why bugging allies is stupid; Dubai opens world's biggest airport

1 When all companies are tech companies (Sylvia Pennington in Sydney Morning Herald) Although only a fraction of companies around the world would consider themselves to be in the technology business, increasingly the great majority of them rely on technology to stay in business. But John Roberts, Gartner vice-president, says businesses are still working out how to extract maximum value from technologies, including social media, mobile communications, big data and cloud. Even chief information officers say only 43 per cent of technology's potential has been deployed in their organisations.

"Through cloud and software as a service, everybody will be able to play in the same space, and they'll have to. It will be the next wave of what used to be called e-business." Finding a babysitter has traditionally been a low-tech affair but Sydney taxi driver Edward Atra plans to drag the process into the digital era with MySitters. His online marketplace enables families to find and book local sitters using smartphones' geo-location in minutes. The app uses PayPal to avoid the late-night hunt for cash.

Former teachers Michelle Jones and Ron Geritz are transforming their business of growing ornamental trees and shrubs into an operation with international reach. The pair own Blerick Tree Farm, in Neerim South, Victoria, and run a garden design service. They scored a juicy consultancy gig with a fledgling tree farm in China, courtesy of their "excellent web presence", according to Jones. The couple use Vend's web based point-of-sale system, Quickbooks accounting software and Dropbox to do business at home and when in China. Security cameras controllable by iPad also allow them to see what's happening at the Chinese facility.

At the other end of the scale, Procter and Gamble, valued at $82 billion, is one of the most famous examples of a global company that has undergone enterprise-wide digital transformation. Change is often led by 'digital champions' who are quick to see how technology can make operations more efficient.

2 Kid gloves for India's billionaires (Manu Joseph in The Wall Street Journal) Prime Minister Manmohan Singh is a wise man, but in recent times no one in India has called him a “competent authority.” Yet, that expression, mentioned in a preliminary report by the Central Bureau of Investigation that formally opened a police inquiry, inspired a consensus in the news media that Mr. Singh was indeed the unnamed “authority” in question. The report was a part of the bureau’s examination of the government’s allocation of the country’s coal deposits to private corporations between 2004 and 2009. Among those whose roles the bureau is interested in examining is one of India’s richest men, Kumar Mangalam Birla. 

In their coverage of the report, India’s mainstream news media treated Mr. Singh and Mr. Birla very differently. Once again, Indian journalism appeared bold while attacking the prime minister and subdued when it had to investigate a billionaire. Mr. Birla was treated as an unfortunate victim of politics and overenthusiastic investigators, and even of India’s historical mistrust of businessmen. On the front pages of newspapers and on television, leading businessmen expressed shock that Mr. Birla, whose company, Hindalco, was a beneficiary of a seemingly arbitrary allocation of coal deposits, had been dragged into the muck. 

Last week, the bureau raided Hindalco’s offices and in its Delhi office found 250 million rupees, or $4 million, in cash. The bureau said the cash was unaccounted for. Hindalco expressed surprise at the discovery. The news media reported on this development but did not dwell on it for too long. A fact that will not startle any professional journalist in India is that the nation’s mainstream news media are firmly in the grip of corporations, which exercise control chiefly through direct or indirect ownership of news outlets and advertising budgets. 

The national fame of the anti-corruption gladiator Arvind Kejriwal, whose party will debut in electoral politics when it contests the Delhi state elections in December, is in no small measure due to the contribution of reporters suffocated by their own management. Mr. Kejriwal held news conferences accusing some of the richest Indians, including the billionaire Mukesh Ambani, of sponsoring corruption. Except for the occasional reports on court rulings and briefings by government agencies, there is nothing much in India’s mainstream media that has hurt the nation’s big corporations. Indian journalism, it appears, has been tamed.

3 Why bugging allies is stupid (Eric S Margolis in Khaleej Times) Revelations of US electronic spying by whistleblower Edward Snowden have ignited a furor across Latin America and now Europe. The latest uproar was intensified by claims that the US National Security Agency (NSA) had tapped into the cell phone of German Chancellor Angela Merkel, Europe’s most important and influential leader. Further outrage erupted in France after reports that its leaders and diplomats had been tapped by NSA’s big ears.

Today, the NSA and CIA are sweeping up all communications of supposed allies as part of the runaway US national security state. Call it the Stasi meets Apple’s late Steve Jobs. Still, one wonders if Obama knew what his spies were doing. He has little control over the Pentagon and probably even less over America’s mammoth, ever-growing spy state built by former president George W. Bush that costs over $80 billion per annum. Some 4.8 million Americans now have secret security clearance and work for the octopod national security state.

Bugging the leaders of America’s closest European and Latin American allies was an incredibly stupid act. Nothing thereby learned could have been worth the damage caused. US Elint (electronic spying) has humiliated European and Latin leaders and made them and Nato look like American vassals to be dismissed or disdained. How can Europe’s leaders face their own voters after this shameful episode? Revelations by Snowden and Army private Bradley Manning show that Washington treats its Nato allies in the same imperious manner the old Soviet Union bossed around the Warsaw Pact. One question remains: how come US foreign policy is such a mess considering that Uncle Sam is listening to everyone’s phone and reading their mail?

4 Dubai opens world's biggest airport (Abdul Basit in Khaleej Times) The new Dubai airport demonstrates a new concept in which logistic and residential services integrate to form an aviation city on its own, His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, said after the inauguration of the passenger terminal at Al Maktoum International Airport.

The airport, which is part of Dubai World Central’s development, will be among the biggest airports in the world with five runways, a capacity of 160 million passengers and a cost of Dh120 billion upon completion. “Twenty-eight years ago we believed in open skies policy, today we receive more than 130 airline companies, and we link 50 million passengers across the world. The aviation sector contributes directly and indirectly more than Dh44 billion to our national economy and provides 85,000 job opportunities,” Shaikh Mohammed tweeted.

While talking to his accompanied delegation, Shaikh Mohammed asserted that the idea of this international airport, that will be the biggest in the world once completed, had always been in the mind of Shaikh Rashid bin Saeed Al Maktoum. Adding that “the idea became reality”.