Monday, November 30, 2015

$1trn to tackle climate change; China manufacturing activity deteriorates; Yuan to join global currency club

1 $1trn to tackle climate change (Khaleej Times) The world's 48 poorest countries will need to find around a trillion dollars between 2020 and 2030 to achieve their plans to tackle climate change - and those plans should be a priority for international funding, researchers said.

Estimates based on plans submitted by the least-developed countries, or LDCs, toward a new United Nations deal to curb global warming show they will cost around $93.7 billion a year from 2020, when an agreement expected to be ironed out in Paris over the next two weeks is due to take effect.

That includes $53.8 billion annually to reduce emissions and $39.9 billion to deal with more extreme weather and rising seas, according to a report from the London-based International Institute for Environment and Development, or IIED. IIED director Andrew Norton said the least-developed countries currently get less than a third of all international climate funding provided by wealthy governments.

The least-developed countries - from Ethiopia to Zambia, and Yemen and Pacific island nations - are home to some of the poorest communities who are suffering the worst impacts of intensifying droughts, floods, storms and crumbling coastlines. Yet they produce just a tiny fraction of the planet-warming gases that drive climate change.

Such countries have a widespread lack of resources and expertise to tackle climate change. But nearly all have produced so-called Intended Nationally Determined Contributions, or INDCs, to a new global climate deal. On Monday, 11 donor governments pledged close to $250 million in new money for adaptation in the poorest countries at the start of the UN climate talks.

2 China manufacturing activity deteriorates (BBC) Factory activity in the world's second largest economy, China, deteriorated in November as the manufacturing sector continued to shrink. The official purchasing managers' index (PMI) fell below forecasts to 49.6 in November, down from the previous month's reading of 49.8. A reading below the 50-mark indicates contraction in the sector, while one above suggests growth.

China's factories have struggled to gain momentum in a slowing economy. The Asian giant is headed for its slowest growth in a quarter of a century this year and economists are concerned that it will miss Beijing's official growth target of 7%. Activity in its vast manufacturing sector shrank for the fourth consecutive month in November and hit a three-year low.

The government is trying to move China from an export-driven economy to a consumption-based one. Activity in the country's services sector did pick up last month which helped offset the decline in manufacturing. The services PMI rose to 53.6 from 53.1 in October.

China's central bank has cut interest rates six times since last November, among a series of other measures to stimulate the economy. The Caixin/Markit manufacturing PMI contracted for the ninth month in a row in November, but factory activity shrank at a slower pace than the previous month.

3 Yuan to join global currency club (Katie Allen in The Guardian) China’s yuan will be added to an elite basket of global currencies used by the International Monetary Fund, in a boost to Beijing’s global economic ambitions.

Shareholders in the Washington-based IMF voted to include the yuan, also known as the renminbi, as the fifth member of its special drawing rights (SDR) currency basket alongside the dollar, the Japanese yen, sterling and the euro.

Christine Lagarde, head of the IMF, said that including the yuan in the basket was an important milestone in integrating China into the global financial system. China had been lobbying for the IMF to add the yuan to its basket of currencies, which it uses to lend to sovereign borrowers.

A vote by representatives of the IMF’s member countries to support the move marks a significant milestone for Beijing as it seeks to put the yuan on a par with the US dollar and play a growing role in global markets. Lagarde endorsed that view, saying the yuan appeared to meet important criteria, including being deemed “a freely usable currency”.

The SDR basket is typically reviewed every five years by the IMF’s executive board to ensure it “reflects the relative importance of currencies in the global trading and financial systems”.  The IMF said: “The inclusion of the renminbi will enhance the attractiveness of the SDR by diversifying the basket and making it more representative of the world’s major currencies.”

Sunday, November 29, 2015

Sliding oil fails to tighten Gulf oil taps; Grim realities facing StanChart shares; Europe's walls are going back up

1 Sliding oil fails to tighten Gulf oil taps (Gulf News) Saudi-led Gulf Opec members will reject pressure to shoulder the cost of cutting oil production alone despite warnings that prices risk sliding further, officials and analysts say.

Saudi Arabia, Kuwait, the UAE and Qatar, which pump more than half of Opec’s 32 million barrels of daily output, want a solid commitment from all other producers, especially non-Opec member Russia, to agree to production cuts across the board. “Gulf states will not undertake a unilateral output cut. They need strong cooperation from other producers, mainly Russia, to cut,” Kuwaiti oil analyst Kamel Al Harami said.

The Organisation of the Petroleum Exporting Countries is to hold a crucial meeting on December 4 to study prices, which have fallen around 60 per cent since mid-2014. A senior Gulf oil official said nothing has changed to alter Gulf states’ oil policy. But another Gulf official hinted at some flexibility in case of cooperation.

Opec heavyweight Saudi Arabia said last week it was ready to cooperate with other producers to stabilise the oil market and support prices. The Opec meeting comes at a time of a massive production glut, with oversupply continuing and inventories at almost record levels of more than 3 billion barrels, triple the normal rate.

Opec member Venezuela and some international economic reports have warned that the oil pirce could slide to the range of $20-$30 a barrel from around $42 now if output is not trimmed. The International Energy Agency said this month that growth in demand for crude is set to slow next year as the allure of cheap oil fades.

The IEA expects demand to grow by 1.2 million bpd in 2016, down from 1.8 million bpd this year. Harami believes oil pricess will remain low for at least the next two years until the global economy picks up. By then, falls in high-cost oil production will make way for Opec crude, he said.

2 The grim realities facing StanChart shares (Matein Khalid in Khaleej Times) Standard Chartered has been the most spectacular international banking meltdown since the failure of Lehman Brothers in September 2008. I had recommended a strategic short on StanChart shares at 1,500 pence since I thought the bank's foray into global investment banking was a flawed strategy, given its DNA as a stodgy old British colonial bank with a penchant for falling for banking snake pits.

StanChart's loan underwriting and risk management culture was a disaster, as evidenced by $4 billion in provisions and successive earnings misses since 2014. Temasek, the Singapore sovereign wealth fund that is the bank's largest shareholder, reportedly forced out CEO Peter Sands and approved ex-JPMorgan investment banking head Bill Winters as the new CEO. Yet the share price collapsed 70 per cent amid one of history's greatest bank bull markets.

StanChart was mired in an ugly Iran sanctions violations spat with Uncle Sam. China's hard landing means even world trade is shrinking, hitting the bank's core trade finance franchise. The bank will face significant loan losses in the Middle East, Africa, India, China, at least 40 per cent of its global loan book.

The new strategy attempts to focus on recurrent fee businesses such as private banking and wealth management. This strategy is doomed to failure in a world where Chinese growth scares will devastate Asian wealth creation.

There is no immediate turnaround in StanChart's future. The bank is now valued at only £15.8 billion in London, a disgrace for the world's largest pure-play emerging markets bank with a 160-year pedigree. StanChart has lost 34 per cent of its value in 2015. The bank trades at 0.8 times tangible book value.

Yet StanChart is a potential banking turnaround story in the long run, though 2016 will see a rise in non-performing loans in its core banking markets, a fall in fees/commissions, compression in net interest rate margins and (billion-dollar) Uncle Sam regulatory fines.

3 Europe’s walls are going back up (Timothy Garton Ash in The Guardian) The walls are going up all over Europe. In Hungary, they take the physical form of razor and barbed wire fences, like much of the old iron curtain. In France, Germany, Austria and Sweden, they are border controls temporarily reimposed, within the border-free Schengen area.

And everywhere in Europe there are the mind walls, growing higher by the day. Their psychological mortar mixes totally understandable fears – after massacres perpetrated in Paris by people who could skip freely to and fro across the frontier to Belgium – with gross prejudice, stirred up by xenophobic politicians and irresponsible journalists.

What we are seeing in 2015 is Europe’s reverse 1989. Remember that the physical demolition of the iron curtain started with the cutting of the barbed wire fence between Hungary and Austria. Now it is Hungary that has led the way in building new fences, and its prime minister, Viktor Orbán, in stoking prejudice. Europe must keep out Muslim migrants, Orbán said earlier this autumn, “to keep Europe Christian”.

He is joined in this chorus by such exemplary Christians as France’s Marine le Pen, the Front National politician who has been making the running in French politics, and Kelvin MacKenzie of the Sun. Brother MacKenzie used that newspaper’s grossly misleading presentation of its opinion poll among British Muslims to write a column under the headline: “This shocking poll means we must shut door on young Muslim migrants”.

As if Britain’s already 2.7 million Muslims were not going to have any more children. As if Europe’s tiny but deadly minority of Islamist terrorists were not here already, many of them born, brought up and radicalised on the back streets of Britain, Belgium and France.

Three distinct developments have led to the return of the walls. First, in Britain – and to a lesser extent in other parts of northern Europe – is the sheer scale of the movement of people inside the EU. Second, there is the refugee crisis. Ever more people have fled the wars, terror and economic misery that have replaced old-fashioned dictatorships (also providing terror and economic misery) across much of the wider Middle East and Africa.

Third, there are Islamist terrorists, most recently mowing down innocent concert-goers and diners-out in Paris. Most of them are homegrown in Europe, though some learn their murderer’s skills in Syria or Afghanistan. At the moment, all we can say with certainty is that Europe used to be known as the continent where walls come down and is now the one where they are going up again.

Friday, November 27, 2015

Saudi data show slowing economy; Black Friday sales move online; L-Fi 100 times faster than Wi-Fi

1 Saudi data show slowing economy (Gulf News) Saudi Arabian money supply and bank lending figures show the economy of the world’s biggest oil exporter has started to slow as low global energy prices force the government to clamp down on spending.

M3 money supply grew just 3.9 per cent from a year earlier in October, the slowest expansion since November 2010, when Saudi Arabia was emerging from the global financial crisis, according to central bank data released late on Thursday. Annual growth in September 2015 was 8.5 per cent.

Growth in narrower measures of money supply, M1 and M2, also slowed sharply to multi-year lows. Growth in bank lending to the private sector fell to 5.0 per cent, again the lowest rate since November 2010, from 7.1 per cent. The government has until recent weeks been able to keep the economy growing strongly by boosting Saudi oil output; the October data suggest this strategy may have reached its limits.

Facing a budget deficit of over $100 billion this year, Saudi finance officials have said they are trimming spending in some areas to economise, and the cutbacks have started to crimp money supply.

2 Black Friday sales move online (BBC) Online purchases appear to be surging in the US and UK during Black Friday as more consumers shun standing in line. This has not stopped US stores reporting massive queues outside their shops, although in the UK there were smaller crowds than a year ago.

New York's giant Macy's store said thousands of people queued to get in. In the UK, consultants Experian and retail group IMRG said that online sales were on course to pass £1bn on a single day for the first time.

Last year's Black Friday saw shoppers in the UK fighting over bargains, websites crashing and delivery companies struggling to cope. The discount day originated in the US, where it takes place the day after Thanksgiving, traditionally kick-starting the Christmas shopping period.

In the US, some retailers started offering deals early and several stores have turned the event into a weekend of discounting. The National Retail Federation, based in Washington, estimates that about 135.8 million Americans will shop during the four-day holiday compared with 133.7 million last year.

The US shopping bonanza has spread, not only to the UK and other parts of Europe, but also countries such as Brazil and India. It is still dwarfed by China's Singles Day - the world's biggest online shopping event. On that day earlier this month, Chinese e-commerce giant Alibaba reported sales worth 91.2bn yuan ($14.3bn; £9.4bn), a 60% increase from last year.

3 Li-Fi, 100 times faster than Wi-Fi (Christian Science Monitor/Khaleej Times) When the first version of the Wi-Fi protocol was released in 1997, it boasted wireless speeds of up to 2 megabits per second. Now, there's Li-Fi, a potential successor to Wi-Fi that's capable of transmitting data at 1 gigabit per second, about 100 times faster than today's average home wireless connection and 500 times faster than that first incarnation of Wi-Fi.

Li-Fi uses LED bulbs switching on and off billions of times per second to transmit strings of data. Think of the way a Morse code operator would tap out a message, then speed up the process by several orders of magnitude.

Though the communication takes place in the visible spectrum, meaning humans can see the light that's being emitted, the flickering happens far too fast for our eyes to notice it. In other words, to humans, a Li-Fi light bulb appears like any other, but actually transmits lightning-fast Internet at the same time.

Velmenni, an Estonian tech company that has installed Li-Fi in its offices, says that the technology has achieved speeds of up to 224 gigabits per second in the lab and 1 gigabit per second in real life, where transmissions must contend with other factors such as movement and interference from other light sources.

There's a catch, though: Because light can't pass through walls or other obstacles, a Li-Fi access point can cover only a single room. That means multiple smart LEDs will be needed to cover an apartment or a house with speedy wireless coverage. But on the other hand, wireless interference will be greatly reduced.

Li-Fi might also be more secure than Wi-Fi. Because the wireless signal doesn't spill outside rooms or buildings, it's much harder for an intruder to set up nearby and gain access to the network.

Li-Fi was invented by Harald Haas from the University of Edinburgh, Scotland, back in 2011, when he demonstrated for the first time that by flickering the light from a single LED, he could transmit far more data than a cellular tower. Think back to that lab-based record of 224 gigabits per second - that's 18 movies of 1.5 GB each being downloaded every single second.

Li-Fi will probably not completely replace Wi-Fi in the coming decades, the two technologies could be used together to achieve more efficient and secure networks. The technology is still in its infancy today, but within the next few years, flickering LEDs could let us transfer gigabytes in the blink of an eye.

Thursday, November 26, 2015

Biggest-ever overhaul of China military; Portugal seems to be going the Greece way; India gold demand may fall to 8-year low

1 Biggest-ever overhaul of China military (Kor Kian Beng in Straits Times) China has launched its biggest-ever set of military reforms, including the establishment of a new joint operational command, to turn the People's Liberation Army (PLA) into a more combat-ready force. The long-anticipated reforms come as tensions simmer over territorial disputes with neighbours and to address the strategic rivalry with the US and Japan.

China unveiled them at the end of a three-day, closed-door meeting chaired by President Xi Jinping and attended by 200 military officials. Other key reforms on target for implementation by 2020 include the rezoning of the existing seven military regions into new strategic zones; strengthening the Central Military Commission (CMC) command structure over the PLA; and reorganising the military headquarters.

The imposition of strict discipline on the army, another reform pledge, will see the PLA setting up a new disciplinary structure and a new legal and political committee to weed out graft and legal violations. But details were scant on most reform pledges except on a promise by Mr Xi at a military parade in September to downsize the 2.3-million strong PLA by 300,000 troops.

Retired PLA colonel Yue Gang said the latest reforms constitute the biggest military overhaul since the 1950s, shortly after the Communist Party took power in 1949. "The reform shakes the very foundations of China's Soviet Union- style military system, and transferring to a US-style joint command structure will transform China's PLA into a specialised armed force that could pack more of a punch in the world," he said.

2 Portugal seems to going the Greece way (San Francisco Chronicle) An anti-austerity alliance including radical leftist parties takes power. A shaky economy and huge debts menace the national economy. The rest of Europe watches with a wary eye. Sound familiar? It's not Greece, but another eurozone country: Portugal.

A nation that just months ago was hailed as an example of how to follow through with budget austerity measures has become a new source of concern in Europe. A left-wing coalition has unseated a center-right government that introduced the deep spending cuts and steep tax hikes demanded since 2011 by creditors during Portugal's 78 billion-euro ($82.6 billion) bailout.

The developments echo what happened in Greece, whose radical leaders this year almost crashed the nation out of the eurozone. Led by the moderate Socialist Party, which took office Thursday, Portugal's new administration will be backed in Parliament by the Communist Party and the radical Left Bloc and Green Party.

Their rise and rhetoric bring to mind the radical Syriza party in Greece and its dramatic clashes this year with its eurozone creditors. Syriza initially refused to agree to more budget cuts and the creditors responded by almost pushing Greece out of the euro. The new government in Lisbon — the country's second-largest ever, with 17 ministers and 41 deputy ministers — is taking up a similar battle cry, vowing to "turn the page" on austerity, which Germany has championed for years to reduce high debts despite the economic hardship it can create.

Greece and Portugal each represent less than 2 percent of the eurozone's gross domestic product, but their troubles can re-ignite market fears about the bloc's financial well-being. The people of Portugal and Greece have both been hit hard by years of budget cutbacks.

Portugal's government debt, like Greece's, is still very high. At 130 percent of gross domestic product it is the third-highest in the European Union, and the three main ratings agencies still classify Portuguese bonds as junk. Both countries, like the rest of the European Union, must submit their spending plans to officials in Brussels for approval.

3 India gold demand may hit 8-year low (Rajendra Jadhav in DNA) India's gold buying in the key December quarter is likely to fall to the lowest level in eight years, hurt by poor investment demand and back-to-back droughts that have slashed earnings for the country's millions of farmers. The sluggish demand could halve imports by the world's second-biggest gold consumer in US dollar terms in the final quarter, a retailer and two bank dealers said.

December quarter demand could fall to 150 to 175 tonnes, said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation, from 201.6 tonnes a year ago and a five-year average for the quarter of 231 tonnes, according to World Gold Council data. The December quarter usually accounts for about a third of India's gold sales as it takes in the start of the wedding season as well as festivals like Dhanteras and Diwali, when buying gold is considered auspicious.

Two-thirds of demand comes from rural areas, where jewellery is a traditional store of wealth, but weak monsoon rainfall this year has eroded farmers’ earnings and their purchasing capacity. A weak rupee has also kept local gold prices relatively strong compared with a slump in US dollar-denominated gold, further denting demand, while investment buying has stalled as investors see little chance of a quick price recovery.

The Indian rupee has fallen over 5% this year, restricting the drop in local gold prices to 5.5 percent, compared with a 9.3% drop in US dollar denominated gold. India's gold imports, which account for nearly all of its demand for the precious metal, could fall to around $5.7 billion in the December quarter, Bamalwa said.

Wednesday, November 25, 2015

Climate change: 2015 to be hottest year ever; Saudi builder to cut 15,000 jobs; South Africa economy 'can only get worse'

1 Climate change: 2015 to be hottest year ever (Arthur Neslen in The Guardian) Climate change made 2011-2015 the warmest five-year period on record, according to the World Meteorological Organisation’s (WMO) state of the global climate report. This year is set to be the single hottest ever registered, with planetary temperatures passing the symbolic milestone of 1C above pre-industrial levels.

The WMO’s stock-take attributes the sweltering conditions to a cocktail of man-made global warming and the effects of the El Niño oceanic phenomenon. “The state of the global climate in 2015 will make history as for a number of reasons,” the WMO’s secretary-general, Michel Jarraud said. “2015 is likely to be the hottest year on record, with ocean surface temperatures at the highest level since measurements began. It is probable that the 1C Celsius threshold will be crossed. This is all bad news for the planet.”

Extreme weather events such as heatwaves can now be attributed to anthropogenic climate change with greater confidence, Jarraud said. Last summer, 2,500 people died in India during a heatwave blamed on climate change, while Pakistan recorded another 2,000 fatalities as temperatures soared as high as 49C.

China experienced its warmest ever year on record in 2015 in the period to October, while the continent of Africa is currently undergoing its second warmest. Other increasingly severe weather events such as floods, droughts and tropical storms were developing in line with the WMO’s expectations, based on climate models.

Prof Sir Brian Hoskins, chair of the Grantham Institute at Imperial College London, said: “Carbon dioxide in the atmosphere is at record levels and so are global temperatures. These are indicators of the big climate problem we are creating for ourselves.”

2 Saudi builder to cut 15,000 jobs (Gulf News) Construction company Saudi Binladin Group plans to cut about 15,000 staff, people with knowledge of the matter said, in a sign of the pressure on the industry as the Saudi government trims spending in response to low oil prices.

The possible layoffs at Binladin, one of Saudi Arabia’s biggest firms and among the Middle East’s largest builders, would represent a small fraction of the group’s total workforce, which is around 200,000, according to its LinkedIn page.

But the planned cutbacks are an example of the choices which companies are having to make as Saudi Arabia’s economic boom loses steam.

3 South Africa economy 'can only get worse' (Johannesburg Times) Manufactures might have saved South Africa from slipping into a recession, but it is merely the gloss on a tanking economy dragged down by poor government policies and falling commodity prices.

StatsSA has announced that the gross domestic product had increased 0.7% quarter on quarter in the three months to September. In the previous quarter it had shrunk 1.3%. "The growth is so marginal you need a magnifying glass to see it," said consulting economist Cees Bruggemans. "Remember the growth of 0.7% is for the period, before the worst of the drought."

Economists say consumers are in for a rough ride next year. "The stress of consumers is about to be compounded, with no let-up likely in the near future, especially with looming electricity hikes and difficulty in saving and settling debt," said political economy analyst Daniel Silke.

Any shocks from currency declines, rating downgrades, future labour unrest, continuing power-supply constraints, the drought and food-price inflation would keep the economy on the cusp of a recession, he said.

A 9.8% plunge in mining was one of the main reasons for the worse-than-expected growth rate in the quarter, according to Michael Manamela, executive manager for national accounts at StatsSA. Though manufacturing expanded for the first time since the fourth quarter of 2014, three sectors are now in recession: agriculture, mining and electricity. Farming output plunged an annualised 12.6% in the third quarter as drought cut crops.

Kevin Lings, Stanlib chief economist, said, "During 2014 as a whole the economy grew by a weak 1.5%, down from 2.2% in both 2013 and 2012. For 2015 as a whole, we still expect growth of only 1.4%, slowing to 1.1% in 2016." Other economists are less optimistic. Bruggemans predicted no growth and 50,000 job losses next year.

Tuesday, November 24, 2015

US growth more than expected in Q3; Rolls Royce warns of senior job cuts; India surrogates hurt by govt ban on foreign clients

1 US growth more than expected in Q3 (BBC) US economic growth for the third quarter has been revised up, helped by stronger investment and house building. The Commerce Department said gross domestic product rose at an annual pace of 2.1%, not the 1.5% rate it reported last month. Consumer spending was revised down slightly, although this was offset by growth in other economic areas.

Even with the GDP revision, growth still slowed from an annual pace of 3.9% in the second quarter. However, in the second quarter of the year the economy was rebounding from the impact of the harsh winter weather experienced at the start of the year, which slowed the US economy to a crawl.

The better third quarter growth is still likely to fuel speculation that the US Federal Reserve is ready to raise interest rates next month. The upward revision by the Commerce Department puts the US economy on course to grow at least 2% in the second half. It comes in the wake of strong jobs growth in October.

The main factor behind the upward revision to the growth figure was the discovery that businesses had restocked their inventories at a faster pace than first estimated. Growth in business investment slowed to a rate of 3.4% from 5.2% in the previous quarter. That was mainly due to a sharp drop in spending on oil and gas exploration by energy firms because of the weak oil price.

2 Rolls Royce warns of senior job cuts (Sean Farrell & Rob Davies in The Guardian) The new chief executive of Rolls-Royce has warned that senior job losses will form part of £200m in annual cost cuts. Warren East, who replaced John Rishton in July, said the company was so opaque and bloated that another in a string of profit warnings was possible, as he set out plans to revive the engine-maker.

He said Rolls-Royce was overburdened with managers, committees and processes to the point where it was hard to know what was going on. He acknowledged that the “self-help” he expected to implement would involve “streamlining senior management”. Rolls-Royce has 54,000 staff worldwide, about 2,000 of whom are deemed senior managers.

East did not go into details about potential job cuts, business disposals, or exiting certain countries, but he said large layers of cumbersome bureaucracy needed to be stripped away so the company could function properly and respond to market changes.

Over more than two decades Rolls became a beacon of British manufacturing excellence as one of the world’s top makers of engines for aircraft, ships and industrial use. But it has issued five profit warnings in the past 18 months, including two under East as he has sought greater clarity about the business.

Rolls is already shedding 3,600 jobs and East said more would go, including a swathe of top managers. “We are overmanaged,” he said. Asked how Rolls had got into such a position, East said: “If you’ve got a big business with a lot of different things happening, over the years people add complexity for good reason.”

Rolls, which makes engines for Boeing’s 787 Dreamliners and Airbus’s A380 superjumbos, has bet on demand for wide-bodied aircraft but the trend among regional airline operators has shifted towards single-aisle plane orders.East said Rolls could have reacted more quickly to the changing market if information from staff talking to customers had been reported more quickly to top managers.

3 India surrogates hurt by govt ban on foreign clients (San Francisco Chronicle) For thousands of childless couples the world over, India has been the go-to destination to fulfill their dreams of becoming parents, thanks to its well-trained doctors, well-appointed fertility clinics and vast numbers of poor women willing to serve as surrogate mothers.

Not anymore. The Indian government recently banned surrogate services for foreigners and ordered fertility clinics to stop the practice of hiring Indian women to bear children for them. It's said to be intended to protect the women from exploitation, though some who have worked as surrogates say the ban actually hurts them.

"Becoming a surrogate mother is our one chance to build a house, or get a new roof. We earn more from one surrogacy than from 10 years of working as domestic help," said Tina Rajesh Chavan, from Anand, a major hub of fertility clinics, in the western Indian state of Gujarat.

India was among the few countries in the world that allowed surrogacy — where a woman could be hired to carry the child of a couple through a process of in-vitro fertilization and embryo transfer. India's home ministry has ordered Indian embassies abroad not to grant visas to couples visiting the country for surrogacy, or "reproductive tourism" as the practice has come to be known.

Though laws governing surrogacy have yet to be passed, the government outlined its position in an affidavit placed before the Supreme Court on Oct. 28. It said India "does not support commercial surrogacy and the scope of surrogacy is limited to Indian married infertile couples only, and not to foreigners." A previous order had already barred gay and unmarried couples and single people from hiring surrogates.

Chavan said she made 500,000 rupees ($7,700) for each surrogacy. That's typical for Gujarat, where the industry is most organized, but women in other states may be paid as little as 150,000 rupees ($2,300). Some women's rights activists say India's burgeoning surrogacy business should be regulated, not outlawed. Banning it, they say, will only drive it underground.

Monday, November 23, 2015

Pfizer seals $160bn Allergan deal; Attacks already hurting French economy; UK's permanent austerity -- Robbing poor to pay for the next crash

1 Pfizer seals $160bn Allergan deal (BBC) US drugs giant Pfizer has sealed a deal to buy Botox-maker Allergan for $160bn in what is the biggest pharmaceuticals deal in history. The takeover could allow Pfizer to escape relatively high US corporate tax rates by moving its headquarters to Allergan's Dublin base. The merged company will be the world's biggest drug maker by sales.

Hilliary Clinton, the likely Democratic presidential candidate, said inversion deals like Pfizer's would "leave US taxpayers holding the bag" and called on Washington to ensure that the biggest companies "pay their fair share". Senator Bernie Sanders, another Democratic hopeful, said the deal would be a disaster for consumers and allow another major US company to hide its profits overseas.

The merged business will be called Pfizer Plc. The companies said they expected the deal to be completed in the second half of 2016, subject to regulatory approval in the US and Europe. Pfizer said it expected the merger to result in savings of $2bn in the first three years. Pfizer boss Ian Read will be chief executive and chairman of the merged company, with Allergan boss Brent Saunders becoming president and chief operating officer.

Last year, Pfizer made an offer to buy AstraZeneca in a move that analysts said was designed to reduce Pfizer's tax bill. The UK drugs group rejected the bid, arguing it undervalued the company. The Pfizer-Allergan deal is the latest in a series of mergers and acquisitions in the sector, as pharmaceuticals companies struggle to cope with patents on a number of major drugs expiring.

2 Attacks already hurting French economy (San Francisco Chronicle) The attacks in Paris that killed 130 people and wounded hundreds more are hurting the French economy at a time when the wider 19-country eurozone appears to be growing at the fastest pace in four and a half years, a survey showed.

In a snapshot of business during November, financial information company Markit has found that service providers reported that the terrorist attacks in Paris had "negatively impacted on activity." Partly because of that, Markit said its purchasing managers' index for France — a broad gauge of economic activity — fell to a 3-month low in November of 51.3 points from 52.6 the previous month.

The drop takes the French economy nearer the 50 point level, which is the threshold separating economic expansion and contraction. The figures are prone to revision following further assessments, with the final results due in early December.

The French slowdown contrasts with the overall 19-country eurozone, which according to Markit is expanding at the fastest rate since 2011. The equivalent index for the eurozone rose to 54.4 points in November from 53.9 the previous month.

3 Permanent austerity – Robbing poor to pay for the next crash (Aditya Chakrabortty in The Guardian) Britain is now halfway through a transformative decade: staggering out of a historic crash, reeling through the sharpest spending cuts since the 1920s, and being driven by David Cameron towards a smaller state than Margaret Thatcher ever managed.

While much commentary still treats the Tories as merely muddling through a mess they inherited, George Osborne proudly promises a “permanent change” and “a new settlement” for the UK. The chancellor has the ambition, the power and the time – 10, perhaps 15 years in office – to do exactly that. Between 1979 and 1990 Thatcher permanently altered Britain and, going by what we already know, Osborne is on course to engineer a similar shift.

I think of the country we are morphing into as Austeria. It has three defining characteristics: it is shockingly unequal, as a deliberate choice of its rulers; it looks back to the past rather than investing in its future; and it has shrunk its public services for the benefit of its distended, crisis-prone banking sector.

Take unfairness. Remember Osborne’s promise, “we’re all in it together”? He is ensuring the opposite. Wanting to make massive cuts without rendering his party unelectable, the chancellor is deliberately targeting austerity at those sections of society where he calculates he can get away with it. Watch for them to be punished again on Wednesday, as the government looks to cut welfare and local government again.

The Austeria of 2020 is a country that has hacked back public spending in order to insure itself against another banking crash. In 2008 Britain’s bankers plunged the rest of the country into a crisis. What followed was austerity: the policy where those most responsible for the huge bill looked for the working and middle classes to pay for it. By the end of this decade, that policy will have become a regime, Austeria. In it most of us have to make do with less money in our pockets and dilapidated public services, to allow those at the top to continue as though nothing has happened. Because for them, very little has.

Sunday, November 22, 2015

Modern banking and automated cheating; Europe recession 'could be permanent'; Uber is slick, but not 'disruptive'

1 Modern banking and automated cheating (Financial Times/Gulf News) Back in 2012, when banks first started paying fines for manipulating interest rates, regulators and experts proposed a simple solution to prevent unscrupulous traders from rigging the markets: get rid of the human factor.

Libor and other interbank lending rates had proved vulnerable to misbehaviour because they were set by averaging estimates provided by a panel of banks. High-profile global task forces considered the problem and concluded that indices would be more reliable if they used actual transactions to set prices. Trading, meanwhile, would be cleaner if it were done on electronic exchanges rather than through voice brokers.

National regulators were then encouraged to look at the benchmarks set in their countries and push them to conform to this new, cleaner standard. But recent events have cast doubt on that comforting narrative. Last week, Barclays paid $150 million to settle allegations that it had used its electronic system to block foreign exchange trades that would have lost it money.

This penalty comes just six months after Barclays and five other banks paid a combined $5.6 billion to settle allegations that some of their human traders sought to rig the forex markets. Even worse, the latest Barclays penalty was about abuses that could only occur in an electronic trading system. According to the New York State Department of Financial Services, Barclays’ computer system held trades for hundreds of milliseconds. If the markets moved against the bank in that period, the trades were denied. If they moved in the bank’s favour, the trades went through.

Other banks also build tiny delays into their computer systems. They are known as “last looks”, and were intended to protect market makers and clients from predatory high-frequency traders, who were using superfast computers and data connections to jump ahead of everyone else.

A “last look” was supposed to allow a trade to be cancelled if markets moved unexpectedly in the milliseconds between placing and execution. The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused. Bankers say they have cleaned up their act since the financial crisis. If this case is not a one-off, it suggests they have simply figured out how to make technology do the dirty work for them.

2 Europe recession ‘could be permanent’ (BBC) The worst effects of the European recession risk becoming permanent in places, according to a left-leaning think tank. The IPPR's latest report pointed to the high level of unemployment and underemployment across Europe and said the chances of these becoming entrenched is "deeply alarming".

It said there was 10% unemployment and a 5% underemployment rate in Europe. The official unemployment rate for the 28 countries in the EU was 9.3% in September, down from 9.4% the previous month. The rate in the 19 countries that use the euro stood at 10.8%, down from 10.9% in August.

The IPPR said that unemployed workers risked being left behind as globalisation and technological progress lead to changes in the skills that employers require. The report suggested that European countries look to Germany as a good example of maintaining workplace skills and high productivity rates. Germany - Europe's largest economy - invests 50% more on average than other countries in research and development.

2 Uber is slick, but not ‘disruptive’ (John Naughton in The Guardian) Disruption, says the Shorter Oxford Dictionary, is “a disrupted condition, disorder; a disrupted part; a rent; a tear” or “the action or an act of disrupting something”. In other words, bad news. Islamic State, for example, specialises in the disruption of orderly democratic life. Over in Silicon Valley, however, disruption is the holy grail of the tech industry.

Why this obsession with disorder? It all goes back to a book, The Innovator’s Dilemma, by Harvard scholar Clayton Christensen, which was published in 1997, just as the first internet boom was beginning to build. The subtitle summarises the book’s theme: “When New Technologies Cause Great Firms to Fail”. It was a study of how profitable and successful companies can sometimes be unhorsed by scrappy upstarts that enter the market with novel (or different) technologies that are initially inferior to anything offered by the successful incumbents.

These upsets happen, in Christensen’s view, not because successful companies do not innovate, but because they only engage in a particular kind of incremental improvement that he calls “sustaining innovation”, whereas insurgents specialise in “disruptive” innovation, ie technologies with the potential to enable new products and services or to enable existing products and services to be delivered in radically new ways.

Christensen and his co-authors of a new article are obviously irritated by the valley’s conviction that the car-hailing service Uber is a paradigm of disruptive innovation. They argue that while Uber might be disruptive – in the sense of being intensely annoying to the incumbents of the traditional taxi-cab industry – it is not a disruptive innovation in the Christensen sense, for two reasons.

The first is that disruptive innovations originate in low-rent segments of existing markets or in entirely new segments. Uber, they point out, did not originate in either of these. “Neither did Uber primarily target non-consumers – people who found the existing alternatives so expensive or inconvenient that they took public transit or drove themselves instead: Uber was launched in San Francisco, and Uber’s customers were generally people already in the habit of hiring rides.”

They’re right. Uber is having a big impact on its market and looks like becoming a dominant company, but really it’s just a slick implementation of an idea that’s as old as eBay – providing a technological platform for putting buyers and sellers in touch with one another and taking a cut of the resulting proceeds.

Saturday, November 21, 2015

UK 'steel crisis' sparks rally; UAE's mega plan for post-oil world; Challenges remain for South-East Asia

1 UK ‘steel crisis’ sparks rally (BBC) Steelworkers from all over UK have demonstrated in Sheffield over cuts to Britain's ailing steel industry. Thousands of job cuts have recently been announced in Teesside, Scunthorpe and Lanarkshire, with unions fearing more to come. The TUC-organised rally urged the government to stem the influx of cheap steel from China.

Business Minister Anna Soubry said her department was doing all it could. TUC general secretary Frances O'Grady said: "The crisis in British steel isn't over. One in six steelworkers face losing their jobs.” Angry steelworkers feel the government is standing aside as their once mighty industry rapidly heads towards meltdown.

They blame Chinese dumping of steel on European markets for plummeting prices and high energy costs for making the UK industry uncompetitive. The result has been the heartbreak hitting thousands of families as the consequent economic squeeze has led to the forced loss of plants and jobs in recent weeks.

Rob Middlemiss, chairman of the Multi Union Tata Steel at Skinningrove in North Yorkshire, said the scale of job losses would be devastating for communities. "For every steelworker that loses their job, two or three more people lose it in the supply chain. If there's 30,000 people left in steel, we're talking 100,000 affected, so the economy in those areas is going to be decimated."

2 UAE’s mega plan for post-oil world (Khaleej Times) UAE President, Shaikh Khalifa bin Zayed Al Nahyan, has announced the adoption of the Emirates Science, Technology and Innovation Higher Policy which includes 100 national initiatives in the educational sector, health, energy, transportation, space and water.

The plan foresees an investment of over Dh300 billion and includes new national policies in legislation, investment, technology, education and finance. Its goal is to build a vibrant knowledge economy in the UAE. "The UAE has set its course for a post-oil world through investing in the development of our people in the fields of science and advanced technology," he said.

The Science, Technology and Innovation Higher Policy includes the establishment of funds for science, research and innovation in the UAE in addition to refocusing invesetment legislation to encourage technology transfer, support innovation and establish global contractual industrial partnerships. It also includes targets to increase investment on research and development in the UAE by threefold and increase the percentage of knowledge workers in the country to 40 per cent by 2021.

In addition, the Science, Technology and Innovation Higher Policy includes a set of educational and scientific initiatives that aim to prepare leaders to align with the developmental changes anticipated for the UAE. The policy aims to redouble the focus on STEM (Science, Technology, Engineering, and Mathematics) in all UAE educational institutions.

2 Challenges remain for South-East Asia (San Francisco Chronicle) Thirteen years after the idea was mooted, Southeast Asian leaders on Sunday formally created a unified economic community in a region more populous and diverse than the European Union or North America, and with hopes of competing with China and India.

The 10 leaders in the Association of Southeast Asian Nations signed a declaration during their summit establishing the ASEAN Economic Community, as part of a larger ASEAN Community that aims for political, security, cultural and social integration.

The community, known by its acronym AEC, is already a reality and many of its fundamentals have been applied in the region such as removal of tariff barriers and visa restrictions among others. It has also led to greater political and cultural cooperation.

But there is a long way to go before the AEC becomes fully functional after becoming a legal entity on Dec. 31. The region's diversity can be a hindrance sometimes. ASEAN has 630 million people, speaking different languages, following various faiths and governed by various systems, including rambunctious democracies, a military dictatorship, quasi-civilian, authoritarian, monarchy and communism.

It falls short in more politically sensitive areas such as opening up agriculture, steel, auto production and other protected sectors. ASEAN citizens will be allowed to work in other countries in the region, but will be limited to jobs in eight sectors, including engineering, accountancy and tourism. This accounts for only 1.5 percent of the total jobs in the region, and host countries still can put up constitutional regulatory hurdles restricting the inflow of talent.

ASEAN members also struggle to resolve diplomatic flare-ups among each other such as border disputes between Cambodia and Vietnam, or Indonesia's inability to fight annual forest fires that spew noxious haze for months over Malaysia, Singapore and Thailand.

There are also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping. A wide economic gulf divides Southeast Asia's rich and middle income economies — Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines — and its four less developed members, Communist Vietnam and Laos, Myanmar and Cambodia.