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United States

UK Budget Forecasts Slower Growth
Gerorge Osborne’s Austerity Drive Presages a Tough Year

British Chancellor of the Exchequer unveiled a tough-but0fair budget on 23 March. He cut corporate tax by two percent (from 28 to 26 percent) but warned that Britons would face a year o slow growth a Britain tries to rein in its budget deficit.

The chancellor has missed a huge op­por­tunity to turn environmental necessity to our economic and social advantage and end our dependency on fossil fuels. According to a report in The Guardian though, the budget missed several opportunities: The first full budget from a government claiming to be the 'greenest ever' is a betrayal of our environment and our future. In his determination to balance the nation’s finances, George Osborne has forgotten that living within our means is also about natural resources. This budget is an attempt to return us to the failed policies of the past – unsustainable growth based on dwindling and ever-more expensive resources. The chance to turn environmental necessity to our economic and social advantage has once again gone begging.

This is not only bad economics – it is also a huge missed opportunity. Between the extremes of Tory kill-to-be-kind austerity and a return to Labour’s debt-fuelled spend-a-thon lies a more subtle alternative: avoiding savage cuts in public spending that could trigger a new recession, but also concentrating that spending where it has the maximum economic, social and environmental benefit. The environment provides the clearest example of how this would work in practice. Even before the current economic crisis had fully developed, the "green deal" was showing how money invested in energy-saving measures could sustain far more jobs than other forms of government spending, and also contribute to reducing fuel poverty, improving health and tackling climate change. Today, the arguments in favour are stronger, particularly with hikes in regressive taxes such as VAT and cuts in benefits and services leaving the poorest even more vulnerable.

Britain is forecast to grow 1.7 percent in 2011 (pared dowb from the earlier estimate of 2.1 percent) and unemployment remains at nearly 2.50 million. GDP is currently areound $2.20 trillion and over the next four years growth is likely to be hanstrung by low retail sales and a stagnant housing market.

Libya

Libya War Could Send Commodities Soaring
Gold May Turn Out To Be The Best Hedge

In You don't have to scour the front pagWith the Libyan war and cascading pro-deocracy movements across the Middle-East, oil and other commodities is soaring. A report in the Wall Street Journal says: “Coal and gas prices are supported by worries that Japan’s battle to make its nuclear reactors safe after the earthquake. For each story, it seems, there’s at least one commodity heading higher. However, there are signs that investors are bullish on commodities for the longer-term, not simply as a result of current news flow.

Indeed, 80% either maintained or increased their investment in them over the last twelve months, Barclays Capital said in its annual survey of institutional investors. The survey was conducted as events in Japan and the Middle-East unfolded over the past few weeks and found that 83% of investors expect to maintain or increase investment flows into commodities over the next three years. This chimes with research from Societe Generale. The bank said that the net outflow of cash from emerging-market equity, which has been a feature of 2011, was continuing. However, instead of this money finding a home in developed-market stocks, it has headed into bond and commodity funds instead in the last four weeks.

However, investors should remember that commodities can bite and none harder than oil. Crude was scaling all-time price peaks back in 2008. It got up to $147 a barrel, from $95, in the first six months of that year, propelled, it’s been estimated, by about $39 billion of speculative money. The markets were looking for $200 oil and a big payday. Sadly for them, the final demand just wasn’t there. Oil was smashed back to around $40 by the early months of 2009. That’s unlikely to happen of Asia – Japan and the Arabian Gulf.

United States

Steve Jobs Takes Sick Leave
Apple Founder-CEO Steps Aside For Six Months

Even as Apple Inc. CEO Steve Jobs takes six-month leave to look after health issues (he is a pancreatic cancer survivor and has had a liver transplant), rival tech firms are snapping at the iconic company's heels.

According to Reuters and other news agency reports, "Job's latest medical leave, the third time since 2004, comes at a time when the world's most valuable technology firm faces the biggest threat from Google, through its Android mobile operating system, which has seen torrid growth as the preferred choice of both iPhone and iPad rivals. "Samsung, at the forefront of the long queue of rivals determined to halt Apple's runaway boom in smartphones and tablets, is seen as a key threat, and its shares jumped more than 3 percent to a record, partly helped by such expectations.

"Samsung, under the Lee family, has become a top global brand in the space of 10 years and now boasts a market value of $136 billion, equal to the combined value of Sony Corp, Nokia, Toshiba Corp and Panasonic corp. Still it’s worth less than half of Apple, which boasts $320 billion market value."

How will Jobs' long absence andhis skeletal frame has led to much speculation – affect Apple's medium-term health? As per the report quoted earlier, "A rapid rise of competitors adopting Android phones would also mean little differentiation and weaker profit margins for many Asian firms rushing to introduce copycat products, compared with Apple’s estimated 40 percent-plus margins on the iPhone. Sony has also joined the fray, declaring it wants to become No.2 tablet maker after Apple by 2012, although it has yet to unveil its own tablet and needs to regain the ground lost to Asian rivals first before targeting Apple, analysts said.

But analysts said the impact on Apple’s operations and its Asian rivals and partners should be limited in the short term, since its product line-up was strong, although his absence would be a worry if it became prolonged. Cook ran day-to-day operations during Job’s last absence in 2009.

"Riding a boom in Android-based phones, Samsung has sold 10 million units of Galaxy S smartphone since its June launch and around 1 million units of the Galaxy Tab tablet since October. It has also launched the Nexus S smartphone recently based on the latest version of Android and plans a series of new product launches in February to double its martphone sales this year to around 50 million units. Strong sales of such devices and ensuing launches of copycat products by the likes of Lenovo Group, Motorola and Research In Motion are set to drive up demand of flash memory chips, benefiting key producers Samsung, Hynix Semiconductor and Toshiba."


Tunisia

After Libya, Is The Arab Street Awakening?
Democratic Movements Spread Across West Asia

Arab governments across West Asia and North Africa are watching political developments in Libya, Tunisia, Yemen, Bahrain, Oman and Egypt with growing trepidation. Are Arab citizens – long denied democracy – finally waking up?

According to CNN.com, Tunisian opposition leaders joined the current ruling party in a new government to replace Zine El Abidine Ben Ali, who fled to Saudi Arabia after ruling the country for 23 years. Ben Ali’s departure followed weeks of protests over what Tunisians said were poor living conditions, high unemployment, government corruption and repression.

"The unrest was triggered by the December suicide of Mohamed Bouazizi, an unemployed college graduate who set himself ablaze after police confiscated the fruit cart that was his source of income. And recent diplomatic cables from the U.S. Embassy in Tunisia, disclosed by the WikiLeaks website, revealed growing dis­content with what Tunisians believed was widespread corrup­­tion and nepotism within Ben Ali’s government."

The larger question is: will the Jasmine "revolution" and the Libyan-Egyptian contagion spread to other Arab countries whose citizens have precious little democracy? Big Arab nations like Saudi Arabia are watching carefully to see how the issue plays out in the next few months.


Singapore

Oil Is A Concern Again
Could Seriously Affect India’s Trade Deficit

WILL OIL BE A SPOILER IN INDIA’S 9 PER CENT-plus GDP growth story? According to news agency reports, “Oil prices climbed near a two-year high, boosted by an unexpected surge in global demand that has fueled the biggest drop in U.S. crude stockpiles in more than a decade. U.S. crude for February rose 13 cents to $90.61 a barrel after settling at the highest level since October 2008. ICE Brent crude traded 4 cents higher at $93.69. Oil has soared more than 40 percent since hitting a 2010 low of $64.24 in May, driven by a faster-than-expected recovery in global fuel demand.”

Virtually the entire trade deficit India runs up every year—over $100 billion – can be attributed to oil imports .The failure of ONGC and private oil exploration companies to cut Indian dependence on foreign oil with greater domestic output is one of the untold failures of our energy policy.
“Oil has risen as inventories have fallen more than expected due to the cold weather in the northern hemisphere,” Serene Lim, an oil analyst at ANZ told Reuters, adding that prices would need to rise above $110 before impacting economic growth.

U.S. crude oil inventories fell 5.33 million barrels, the Energy Information Administration said. Stockpiles in the world’s biggest oil user have fallen by 19 million barrels since November 26, roughly equivalent to one day of U.S. fuel consumption and the biggest three-week drop since 1998.

According to Reuters, its poll showed a surge in fuel demand in the fourth quarter sent 2010 demand growth to near record levels, adding support to prices in recent weeks, with further increases expected in 2011 as the economy improves. The agency reported: “Demand growth was still centered on the developing world, with one third of the 1.5 million barrel-per-day (bpd) global growth coming from China, according to the survey of 12 top oil-tracking analysts. China’s apparent oil demand rose 13.9 percent from a year earlier to a record-high of 9.34 million bpd in November. Oil also found support from forecasts for cold weather in northern Europe and the United States, with U.S. heating oil demand expected to average 4.6 percent above normal.”

United States

US Housing Market Rises as Economy Grows
Could This Be A Blip — Or Real Recovery?

n THE HOUSING MARKET IS SHOWING SURPRISING signs of improvement in recent months, as the broader economy strengthens slightly in 2011, the Washington Post reported.
“Sales of previously owned homes climbed 5.6 percent in November, the National Association of Realtors said, with gains reported in every region of the country, although home-buying activity remained well below healthy levels, according to the report.”
The median price of existing homes sold in November was $170,600, up 0.4 percent from a year earlier, the association said.
The US Commerce Department revised upward its estimate of overall economic growth from July through September, saying that gross domestic product rose at a 2.6 percent annual rate, not the 2.5 percent earlier estimated.

“Most economic data in recent weeks have suggested that the pace of growth is picking up a bit at year’s end, with many forecasters now expecting fourth-quarter GDP growth to be in the 3 to 3.5 percent range. Most reports on holiday sales have shown solid improvement, for example. Moreover, many analysts expect a boost to growth from the tax deal President Obama signed (in December) which will temporarily reduce payroll taxes starting next month.

“Although the economy showed weak growth through the summer and early fall, the pace seems to be quickening, which should help bring down the 9.8 percent unemployment rate over time. The housing market might be poised to be at least a mild positive in the economy in 2011, though mainly because home construction and sales are already so low.
The level of activity will still be low relative to the boom,” said Diane Swonk, chief economist at Mesirow Financial. “But the trend is starting to move in the right direction, which is a little bit of good news with which to close out the year.”

China
China's Rise Reshaping Global Business
"Middle Kingdom" Automaker Buys Volvo

It is only the second time in history that this has happened and China Inc. is rejoicing.  Six years ago, computer maker Lenovo bought IBM�s personal computer business. Now, Zhejiang Geely Holding Co., a rapidly growing Chinese automaker, has bought Volvo from Ford Motor for $1.8 billion.
Chinas penchant for the acquisition of foreign assets has so far been focused purely on natural resources. These are deals conducted in the developing world and they are done by state-owned Chinese oil or resources companies. But though things are clearly changing, it will be a slow, gradual change. It has, after all, been only 30 years since Beijing opened its economic doors to the world. Besides appliance maker Haier, telecom giant Huwawei, Lenovo and Geely, there are very few Chinese companies that would be truly interested in Western acquisitions.
Industry gurus insist that it is not just commercial immaturity that makes China more comfortable with investing in the developing world. Acquisitions in the West tend to be scrutinised more closely not just by disgruntled competitors but by politicians and the press. The financing details of the Geely-Volvo deal, for instance, are still murky, but the Chinese press have reported that at least part of the $1.8 billion purchase will come from loans backed explicitly by municipal governments in China that will be home to some new Volvo production facilities. Another $1 billion will come from the state-owned Bank of China.
No party involved in the deal is really interested in putting the deal under a financial microscope. Ford has been eager to get rid of Volvo for some time now. After all, it paid $6.45 billion to acquire the company in 1999. Gothenborg, home to Volvo, one of Sweden's industrial crown jewels, was also eager for the deal to go through to prevent the company from being shut down entirely. So with minimal scrutiny of the arithmetic involved, the deal makes Geely, a manufacturer of low-end small cars in China, the winner of a global prize. Perhaps it may prove to be a front runner of China Inc's international acquisition race.


United States

Battle of the Net Neophytes
Google vs. Facebook is Story of the Decade

They are the Web�s two largest destinations and they are poised to participate in a gloves-off, no-holds barred battle for number one position. Facebook recently unleashed a string of new features at its developers� conference that may lay the groundwork for reorganising the Internet according to the relationships between people rather than the link between pages.
Google has, over the years, certainly earned its crown as the king of search. Besides serving up the most relevant and popular Web destinations, it has also continually endeavoured to personalise and improve searches. But as the Web becomes more dynamic, Google may find that its title is up for grabs. Thanks to microblogging services and social networks, anyone can publish online, creating a massive amount of data that often exists inside a social network.
Besides this, the Web today can be accessed on any device that has a browser from Blackberries and iPads to laptops. With its newest round of features, Facebook, the search engine that began as a destination for searchers, reaches far beyond the social network itself. For instance, the �like� button enables users to �like� Websites. Facebook will then collect that data, creating an expanding map of personal preferences.
Unfortunately most of Google�s efforts at harnessing the new types of information passed around within social networks have fallen flat. The company has inked a deal to show Twitter results in its search stream but its recent launch of Buzz as a feature that let Gmailers share updates and content outraged users who found that their address books were suddenly made public.
Rather than bringing its software to the places users already are in, Google is trying to build new places for users to come into. Facebook, on the other hand, is offering better integration with the tools and websites users already like. Yet Google has a feather in its technological cap � the inbox. Even die-hard Facebook devotees insist that the site�s messaging system is hard to organise. Google�s Gmail is undoubtedly the best free email system available, and despite the poor reception Buzz received, the company was committed to turning its email platform into a social networking platform. Whoever wins this battle, for users of the Net, things can only get better. Let the games begin.


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United States

IMF Paints Rosy Global Picture
Will Its Predictions Hold?

The International Monetary Fund (IMF) has forecasted that the world economy will grow almost 4.3 percent in 2010 and 2011 on a purchasing-power basis. Economic exuberance is certainly part of the global landscape these days but does this figure portray the whole truth? Financial markets are certainly more buoyant with business confidence rising and global growth increasingly robust. Global output is now back to where it was before the downturn. With global business investment accelerating and consumer spending increasing, there is growing optimism that the recovery is not just on the anvil but is also becoming self-sustaining. In late 2008 and early 2009, economic fear was almost palpable. International consumers and companies cut spending wherever they could and, unfortunately, even where they couldn�t.
The IMF�s predictions are certainly optimistic. It has reduced its estimate of banks� total losses from the crisis by $500 billion, to $2.3 trillion, two-thirds of which has already been written off. While historically, deeper recessions are followed by stronger recoveries, this time around countries that were least affected by the recession are seeing the fastest acceleration. China�s economy, for instance, is now growing at double-digit rates. India�s GDP is expected to increase by almost 9% this year and some forecasters reckon that Brazil�s growth rate could reach 7%.
Cassandras predict that emerging economies, could easily overheat, risking inflation and asset bubbles. China needs to allow the yuan to strengthen soon. India�s recent interest-rate hikes have failed to keep up with inflation. But whatever the forecasts, the world is happy to see the economic storm clouds blow away.

Germany

Oxytocin is Male-Female Game Changer
The Cuddle Chemical

Pumped out by the hypothalamus, oxytocin is known more colloquially as the cuddle chemical. It soars during labor and nursing and plays a major role in mother-baby bonding. Psychiatrist Rene Hurlemann of Bonn University and neuroscientist Keith Kendrick of the Cambridge Babraham Institute conducted a two-part experiment to determine if the hormone could be artificially administered to manipulate feelings of empathy and perhaps even learning. To test how oxytocin might affect those capabilities, Hurlemann and Kendrick ran a two-part experiment. The results indicate that it enhances empathy and in the process, social learning.
Use of the hormone thus has more meaningful implications. If healthy social behavior is based to some extent on being able to feel the pain of others, antisocial behavior involves an ability to observe or even cause that kind of suffering and not experience any of it yourself. The researchers believe that oxytocin could change that. �Someone who didn�t sympathise with handicapped people might learn to with oxytocin,� says Hurlemann. �You�d probably have to administer it just once, because you learn the feeling forever.�
Other potential therapeutic uses could be more benign. Both schizophrenia and autism are defined by a lack of social feeling and an inability to read facial and other cues. When investigators administered oxytocin spray to 13 children with mild autism, the participants were better able to read body-language cues during a game of catch, and when looking at photographs of faces, they spent more time studying the images than they would have otherwise.
The researchers, however, warn that the hormone has its limits. An Israeli study has shown that when people are engaged in a contest, if one player�s emotions are manipulated by the offer of a bigger prize to the other player, the first player�s feelings of jealousy and ill will are actually exacerbated by a dose of oxytocin. �Oxytocin does not make you a better person,� Hurlemann says in warning. �In some cases it may simply intensify whatever you�re feeling.� 

United States

World's Largest Airline Takes Flight
United and Continental Set to Merge


The world�s largest airline will soon be created as United and Continental Airlines join fleets in a $3 billion deal. At the helm will be current Continental CEO Jeffery Smisek who will take over as Chairman from United CEO Glenn Tilton after a period of two years. The new parent company, United Continental Holdings Inc., will be based in United�s hometown Chicago with estimated revenue of about $29 billion and $7.4 billion in unrestricted cash.
The companies believe that the merger would save $1 billion to $1.2 billion a year by 2013, figures that include between $800 million and $900 million of new annual revenue, partly from increased international service. Owners of United parent UAL Corp. will hold 55 per cent of the combined company, with Continental Airlines Inc. shareholders owning the rest. The combination will test the notion that the money-losing industry can work better on a large scale.
Nearly two years ago, the Justice Department allowed Delta Air Lines Inc. to buy Northwest Airlines to form what is currently the world�s largest airline. Combining Continental and United would leave the U.S. with three big international airlines � the new United, Delta and American Airlines. Continental jumped in size in 1987 by swallowing Frontier, People Express and New York Air. But both airlines shrank to cope with the recession. United cut capacity 7.4 per cent last year and Continental shrank 5.2 per cent. And  both have been losing money. Continental reported a 2009 loss of $282 million as revenue plunged 17.4 per cent to $12.59 billion. UAL lost $651 million for the year as revenue fell 19.1 per cent to $16.34 billion. Things can only get better for both when they become one.

 

Canada

Canada's Economy on the Rebound
Could Exceed US Recovery

Canadians have cause to smile these days. The IMF has predicted that their country will have the highest growth rate of the G-7 countries this year. The Bank of Canada has echoed these predictions by projecting 3.7 per cent output growth this year and 3.1 per cent in 2011.
Last year�s Canadian recession was on par with the US slump. Real GDP contracted by 3.9 per cent from peak to trough compared to 3.8 per cent in the US. Production fell 16.4 per cent against a 14.3 per cent US fall. However, the Canadian economic rebound looks set to be stronger than that in the US Economic pundits attribute to a variety of causes: households were less overleveraged, a housing bubble was avoided and the financial system was less burdened by problematic assets.
Projected figures tell a promising story. Real consumer spending is slated to increase by 2.7 per cent in 2010, compared with 0.2 per cent last year. Private fixed investment will rise by 6.4 per cent, after a 14.1 per cent contraction in 2009. Exports will jump by at least 7 per cent, recovering from last year�s 14 per cent tumble. Recovering exports will reduce the current account deficit to $15 billion Canadian this year and $9 billion Canadian next year and the unemployment rate will dip to 7.8 per cent this year and 7.2 per cent next year, from 8.3 per cent in 2009.
Of course, the picture is not all rosy. The most significant challenge for Canadian monetary policy will be the country�s exchange rate. The Canadian dollar is already close to parity with its U.S. counterpart, and could easily rally to its November 2007 high of $1.10 Canadian. As Canadian business wants the exchange rate to remain closer to 90 U.S. cents, the risk of exchange-rate appreciation could slow the speed at which the bank raises interest rates. 


 

Gulf of Mexico

BP Rig Explosion has Far Reaching Consequences
The Blame Game Begins


It took the 1989 Exxon Valdez fiasco, America�s most infamous oil spill in Alaska, to nudge Congress into passing the Oil Pollution Act in 1990, which made oil companies responsible for paying all spill clean-up costs. The law set a liability cap for oil companies at $75 million for economic damage claims caused by a spill. The ongoing massive spill in the Gulf of Mexico may prove that the figure is still too conservative. The BP oil rig explosion not only claimed the lives of 11 of the rig�s crew of 126 but has placed human livelihoods and natural habitats on the coasts of four states in jeopardy. The United States Coast Guard has estimated that 5,000 barrels of oil are being added to the slick every day despite attempts to contain and disperse it.
The various efforts to deal with the crude are costing BP, one of the world�s largest oil companies, about $6m a day. The costs fall to BP because, as the majority shareholder in the consortium leasing the Deepwater Horizon rig and the project�s operator, it is liable under American law for the costs of cleaning up. BP is also, at the moment, taking most of the blame from angry Louisianans and from stock markets. In the first week of May, its capitalisation fell by $30 billion, or about 16 per cent.
But a number of other companies have also played roles, albeit supporting, in the disaster. Transocean, the world�s largest offshore-drilling firm, owned and ran the Deepwater Horizon. The blowout preventer was made by Cameron International, a specialist engineer and Halliburton, an engineering-services firm, is also involved. Currently none of them are being held culpable. Financial analysts forecast that in the worst case BP could spend as much as $12 billion fixing the mess, though it would later recoup some of that from its partners. Estimates to clean the spill and compensate other parties for the economic damage run from $2 billion to $14 billion.
There are also the losses to the fishing, tourism and shipping industries to be considered. These costs could easily exceed the cleanup bill. BP�s liabilities may be capped by the federal rule that limits the payouts for economic damages. Once that $75 million threshold is reached, a federal fund kicks in, covering an additional $1 billion. To ward off any confusion, lawmakers in the House and Senate have introduced bills raising the liability cap to $10 billion, an initiative they�ve dubbed the �Big Oil Bailout Prevention Act.� Whatever the final figures turn out to be, BP will certainly pay a big price for this environmental tragedy.



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