NEWS,30.07.2013

Egyptian exports start to boom

Egypt is in the early stages of an export boom, suggesting its economy could begin to recover in the next few months if a minimum level of political stability is restored.
Helped by a falling Egyptian pound, non-oil exports have grown at double-digit annual rates since early this year despite violence on the streets and deep uncertainty over the country's political future.
Egypt's export sector accounts for only slightly more than 10% of the overall economy, and this relatively modest contribution cannot by itself end high unemployment or generate enough tax revenue to fix the government's shattered finances.
But the surge in exports, which has received little publicity amid this year's flood of bad economic news from Egypt, shows many manufacturers are finding ways to ride out the political turbulence - and could enjoy strong growth if the country eventually gets a stable government.
"It's a good sign if they're managing to achieve that kind of export growth, especially in the current environment," said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.
Overall Egypt still runs a huge merchandise trade deficit, which was $23.8bn in the financial year to March, although this was already 2.7% narrower than in 2011-12 as exports grew and imports remained steady.
In the separate energy sector, which accounts for about a fifth of overall exports, Egypt has sharply cut back natural gas shipments, diverting supplies to the domestic market to avoid power shortages.
Recovery
Egypt's non-oil exports grew strongly for much of the past decade, rising 18.5% to $18.6bn in 2011, the year when Hosni Mubarak was overthrown, according to the State Information Service.
Their growth plunged last year as the election of Islamist president Mohamed Mursi worsened political tensions and deterred investment; industrial unrest, poor security, fuel shortages and difficulties obtaining finance hit many companies.
Non-oil exports inched up just 2% in 2012, less than half the rate of consumer price inflation. But shipments began to recover around the start of this year, rising 7% from a year earlier in the first two months of 2013.
Trade minister Mounir Fakhry Abdel Nour told reporters that non-oil exports jumped 21% year-on-year in June, a month when big Egyptian cities were rocked by mass protests against Mursi that led to his overthrow by the army on July 3.
In many ways, the operating environment for Egyptian companies has remained as tough as it was last year. But exports of low-technology, cost-sensitive products such as textiles, food and leather have jumped, businessmen say.
Textile exports rose 16.5% from a year ago, according to the Textile Export Council. Processed food exports climbed 26% year-on-year in the month of May alone, and were nearly twice their level in May 2010.
A major reason for the export recovery is the depreciation of the Egyptian pound, which makes shipments more competitive. Depreciation accelerated in the first half of this year.
There are also signs that some Egyptian exporters are starting to tap fast-growing demand in markets beyond Europe and the Arab world, their traditional focuses.
Non-oil exports to non-Arab African countries surged 28% from a year earlier in the first five months of this year. Exports to the Arab world climbed 20%, helped by an economic recovery in neighbouring Libya after its civil war.

Bulgaria set to slash electricity prices

Bulgaria's energy watchdog says it will lower electricity prices by up to five percent starting on Thursday, in a new bid to appease protesters calling for the government to step down.
The DKEVR state energy regulatory commission late on Monday approved the price cut, which will come into effect on August 1, as the EU's poorest country continues to struggle against high bills, the commission said.
Last winter, high electricity bills sparked mass street protests against low living standards, growing poverty and unemployment, forcing out the previous conservative cabinet.
New protest rallies have called for the resignation of current technocrat Prime Minister Plamen Oresharski in office only since May.
To appease public anger, Oresharski's government has passed a package of social measures but the daily protests have continued for the 47th day on Tuesday and the electricity price cut was not expected to put an end to them.
Bulgarians pay about eight cents per kilowatt hour of electricity half of what consumers in wealthier EU countries pay their power utilities.
But incomes in the Balkan country are also just a fraction of the rest of the bloc, with monthly salaries averaging about €400  ($530) and pensions at €138.
Slumping household consumption and meagre exports contributed to an overheating energy production sector this year, prompting authorities to curtail output, while deals on expensive green energy prevented utilities from lowering costs for consumers.
Under the new move, all clients of the three power utilities Austrian EVN, Czech CEZ and Energo-Pro will see daytime electricity costs reduced by up five percent and nighttime costs by up to about seven percent.

Spain's economy close to leveling off

Spain's economy all but emerged from a two-year slump in the second quarter but its recovery looks fragile at best, given weak consumer demand and a simmering political scandal at home and faltering growth abroad.
Gross domestic product shrank 0.1% between April and June from the previous quarter, according to Tuesday's data from state statistics agency INE, which matched a Bank of Spain estimate given last week as well as market forecasts.
Between January and March the economy shrank 0.5%.
Given the signs of an upturn in economic activity, also including the first drop in unemployment in two years in the second quarter, Economy Minister Luis de Guindos has called an end to Spain's recession.
Many economists are not convinced.
"We're not counting on a further improvement in the third quarter and are very sceptical of any statement that the recession in close to being over," Ebrahim Rahbari, an analyst at Citi in London, said.
Spain's economy has been in and out of recession since 2008, when a burst property bubble undermined the foundations of one of the country's key pillars of growth, construction.
That sent unemployment to record highs, depressing business and saddling the banking system with billions of euros of soured real estate assets and loans.
Spain's biggest bank Santander SA, which insulated itself against the worst of the market meltdown by expanding its already dominant foreign operations, said on Tuesday half year group profits rose 29% on lower loan losses.
It said operating earnings were hit by the sluggish Spanish economy but also offered hope the impact of the property slump on the government and lenders - bailed out last year with €42bn of European aid - might be easing.
It said provisions against loan losses which many Spanish banks booked heavily in 2012 - dropped sharply, and that it might consider buying nationalised banks Catalunya Banc or NCG Banco if they came up for sale.
Temporary respite
Since 2008, already subdued domestic demand has been knocked back further by tax hikes and spending cuts aimed at balancing a budget which has one of the largest shortfalls in the eurozone.
Growth-friendlier policies have played a bigger role in Europe's economic debate in recent months as austerity has lost its lustre, but Spain's still high fiscal imbalances mean more budget cuts will have to be made, potentially hitting the tentative signs of recovery.
Meanwhile, allegations of millions of euros being filtered illegally to ruling party leaders, including Prime Minister Mariano Rajoy, has helped half the conservatives' approval rating putting them level with the opposition Socialists.
That has added an element of political instability that carries faint, but nonetheless unwelcome, echoes of events in fellow euro zone struggler Italy, where a shaky coalition government could fall if former prime minister Silvio Berlusconi loses a supreme court appeal hearing that began on Tuesday.
But the centre-right People's Party of Rajoy, who has denied wrongdoing, has a strong majority in parliament and unless new evidence ties him directly to the scandal, he is expected to remain in power.
Rajoy, along with his economy minister, has recently done his best to talk up the economy, and the second quarter also saw the first drop in unemployment in two years, to 26.3%.
But that lower figure still more than double the euro zone average was largely due to temporary factors especially strong trade data, which includes seasonal tourism.
Spanish retail sales due on Wednesday are expected to show high-street spending has shrunk every month for three years.
Spain's high reliance on activity beyond its borders exports rose to a third of economic activity in the first quarter adds uncertainty to the outlook amid a shaky global recovery and enduring weakness in Europe, where around 70 percent of Spain's exports are sold.
Martin van Vliet, analyst at ING, said he expected Spain's economy to flatline and then gradually return to growth in the first half of next year. "But the pace of growth will probably be too slow to create jobs, which is a prerequisite to embark on a self-sustaining recovery," he said. 

NEWS,19. AND 20.7.2013

G20 wary of scaring markets

The Group of 20 nations, wary of renewed market volatility, pledged on Friday to shift policy carefully and communicate clearly as they seek to chart a course to recovery.
A final draft communique prepared for G20 finance ministers and central bankers meeting in Moscow said an action plan to boost jobs and growth, while rebalancing global demand and debt, would be readied for their leaders in September.
"We remain mindful of the risks and unintended negative side effects of extended periods of monetary easing," the draft, obtained. "Future changes to monetary policy settings will continue to be carefully calibrated and clearly communicated."
Ministers will review the text over dinner with the global sell-off in stocks and bonds and a flight to the dollar, caused by a plan to withdraw US monetary stimulus, uppermost in their minds.
G20 leaders will meet in St Petersburg in September.
A paper that International Monetary Fund staff prepared for the Moscow meeting warned financial market turmoil could deepen unless policymakers were careful.
"The current market turbulence could continue and deepen. Growth could be lower than projected due to a protracted period of stagnation in the euro area, and risks of a longer slowdown in emerging markets have increased."
"The eventual exit from low rates and unconventional monetary policy in advanced economies could pose challenges for emerging economies, especially if it proceeds too fast or is not well communicated."
Ben Bernanke's announcement two months ago that the Fed may start to wind down its $85bn in monthly bond purchases sparked a panicky sell-off, particularly in emerging markets.
Investors were calmed by testimony to Congress this week by Bernanke, who is not in Moscow, although he said the exit plan from money-printing remained on the cards.
"Clearly there is a fear among emerging market economies that after being flooded by capital inflows ... we could be on the verge of a reversal of that flood," a European Central Bank official said. "So it is important to dispel that worry."
China shift
G20 sources said China would be urged to encourage domestic demand-driven growth and allow greater exchange-rate flexibility as part of wider efforts to rebalance the global economy which features a huge Chinese surplus and matching US deficit.
"We are determined to continue progress with rebalancing of global demand, which requires internal rebalancing through structural reforms and exchange rate flexibility," the draft said.
Beijing offered an early olive branch, removing a floor on the rates banks can charge clients for loans, which in turn should reduce the cost of borrowing for companies and households.
The G20 took the lead in the 2008-09 financial crisis and now faces a multi-speed global economy in which only the United States appears to be nearing a self-sustaining recovery.
China, for years the engine of global growth, is suffering a slowdown amid doubts over the stability of its financial system, Japan has only recently embarked on a radical fiscal and monetary stimulus experiment, and Europe's economy is more stop than go.
Bank of Japan Governor Haruhiko Kuroda said he would "strongly pursue" quantitative policies to lift growth and end deflation.
"Japan has just started qualitative and quantitative easing on April 4. It's been only 3-1/2 months, and we need to proceed with it to achieve our 2% price stability target," he said.
Tokyo has so far been given a free pass at international gatherings from countries which had previously urged it to get growth going. But there is growing disquiet about the lack of progress on structural reforms that were promised in tandem.
The Brics emerging markets caucus  Brazil, Russia, India, China also met on Friday but joint measures to limit the fallout of a stronger dollar remained on the drawing board.
More to boost growth
Washington is putting increasing pressure on Europe to do more to foster growth. Germany, in contrast, is seeking internationally agreed debt reduction goals.
The communique referred to credible medium-term fiscal strategies but said they should be flexible. On growth, it was more definite, saying:
"Large surplus economies should consider taking further steps to boost domestic sources of growth, while deficit economies should implement measures to improve competitiveness."
G20 labour ministers held a joint session with finance ministers earlier, putting the jobs crisis in Europe where youth unemployment is above 50% in debt-strapped Greece and Spain at the centre of the debate.
The communique pledged to boost jobs and growth via a "comprehensive" series of reforms to raise employment and productivity.
The G20 also backed a fundamental tax rethink that takes aim at the loopholes used by multinational firms and responds to widespread anger among voters hit with higher tax bills to cover soaring national debts.
The group endorsed a tax action plan drawn up by the Organisation for Economic Co-operation and Development (OECD) that said the existing system didn't work, especially when it came to taxing companies that trade online.
The plan is one of the major 'deliverables' that will go to the St. Petersburg summit hosted by President Vladimir Putin.

G20 backs reform of corporate taxation

The G20 backed a fundamental rethink of the rules on taxing multinational corporations on Friday, taking aim at loopholes used by companies such as Apple and Google to avoid billions of dollars in taxes.
The group of leading economies released an action plan drawn up by the Organisation for Economic Co-operation and Development (OECD) that said the existing system didn't work, especially when it came to taxing companies that trade online.
Large budget deficits and public anger at inter-company structures designed to channel profits into tax havens has prodded governments to act.
Google, Apple and others say they follow the law wherever they operate and pay what tax is due, while tax specialists point out that companies have a duty to shareholders to organise their affairs in a tax-efficient way within the laws set by politicians.
Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy, said governments' frustration with companies' aggressive tax avoidance had created a "once in a century" opportunity to overhaul the rules, which date back to the League of Nations in the 1930s.
Currently, tax systems respect inter-company contracts even if they evidently seek to shift profits out of countries where they are earned into low or no-tax jurisdictions. New rules will seek to put more emphasis on economic substance, the Paris-based think tank said.
"We clearly have reached the point where the governments don't care any more about taboos, and they just say we cannot be bound by pure contractual arrangements. It's not possible to only allocate the profit through only contractual arrangements," Saint-Amans told reporters.
The OECD, which advises its mainly rich members on tax and economic policy, has two years to come up with specific measures that can be adopted internationally.
Business concerned
Business lobby groups such as the United States Council for International Business (USCIB) and Britain's CBI dispute that there is a broad problem with tax avoidance and say measures to address it could hit job creation, trade and innovation.
Yet non-governmental organisations and those representing smaller or domestically focused companies support the OECD project.
"EEF welcomes today's report and urges the UK and the G20 generally to respond positively to its central recommendations," said Steve Radley, Director of Policy at EEF, which represents many small and medium-sized British manufacturers.
Saint-Amans noted that all OECD members including Switzerland, Ireland and the Netherlands, which have been described as tax havens by lawmakers on both sides of the Atlantic, had backed the action plan.
The report identified a raft of loopholes used by companies in the technology, pharmaceutical and consumer goods sectors.
These include the practice of companies not creating tax residences or 'permanent establishments' in countries where they have major operations.
The OECD also criticised the corporate practice of designating units in tax havens as holders of group funds, patents or brands that can then be lent or licensed, for generous fees, to affiliates in countries where customers or factories are located.
International treaties designed to avoid double taxation of profits earned from cross-border activities but which have been used to avoid any taxation, are also under scrutiny. Saint-Amans said protocols to amend existing treaties could be developed to stop such "double non-taxation".
He added that representatives of OECD and G20 members who helped draft the plan had rejected an idea favoured by some non-governmental groups that would split multinationals' profits among the different countries where they operate, according to an agreed formula, with each country assessing its share of profit.
Such a system exists in the United States for the application of state taxes, but countries agreed it was too complex to adopt internationally.
Some countries had proposed a reform of corporate income tax whereby companies would be taxed where their customers were based, but the group did not accept this idea.

China in $5bn Sea gas drive

Chinese state-run oil companies hope to develop seven new gas fields in the East China Sea, possibly siphoning gas from the seabed beneath waters claimed by Japan, a move that could further inflame tensions with Tokyo over the disputed area.
Beijing had slowed exploration in the energy-rich East China Sea, one of Asia's biggest security risks due to competing territorial claims, but is now rapidly expanding its hunt for gas, a cheaper and cleaner energy to coal and oil imports.
State-run Chinese oil and gas firm CNOOC Ltd will soon submit for state approval a plan to develop Huangyan phase II and Pingbei, totalling seven new fields, two industry officials with direct knowledge of the projects.
The approval would bring the total number of fields in what is called the Huangyan project to nine.
China is already working on Huangyan I which has two fields approved. The Huangyan project is expected to cost more than 30bn yuan ($4.9bn), including 11 production platforms now under construction at Chinese shipyards.
If approved, the seven new gas fields would not see a big jump in China's total gas output, supplying only a fraction of last year's 106 billion cubic metres (bcm) and dwarfed by operations in the disputed South China Sea and Bohai Bay off north China. Chinese geologists said gas deposits in the East China Sea region were much smaller and more scattered.
The greater issue is the political risk if Beijing approves the new gas fields. Tensions over the East China Sea have escalated this year, with Beijing and Tokyo scrambling fighter jets and ordering patrol ships to shadow each other, raising the fear that a miscalculation could lead to a broader clash.
"It's a sign of impatience on the side of the Chinese, stemming from a lack of movement on the Japanese side on the gas fields issue," said Koichi Nakano, associate professor of political science at Sophia University in Tokyo.
China and Japan in 2008 agreed to jointly develop hydrocarbons in the area, but Tokyo wishes to settle the issue of maritime boundaries before developing the gas fields.
"The question is what will be Japan's response and whether they would be able to talk China out of a unilateral move," said Nakano. "But escalation of tensions leading to a war? I don't think so. The Americans will be watching this situation with grave concern and may play a role of a mediator here."
A spokesperson for Japanese Prime Minister Shinzo Abe said: "Our understanding is that Japan and China should continue to have dialogue on the issue of joint exploitation of this area, so any unilateral action should not be accepted".
Even if the National Development Reform Commission gives approval for the new gas fields, the pace of the development could be determined by China's Foreign Ministry which requests oil companies to seek its approval before every drilling. Such permission may be influenced by tensions with Japan at the time.
Major east china sea expansion
China and Japan disagree on where the maritime boundary between them lies in the East China Sea. Beijing says its activities are in the Chinese territories, while Tokyo is worried the Chinese drilling near the disputed median line would tap into geological structures in its waters.
Japan lodged a protest early this month after detecting well construction works at Huangyan I about 26 kms (16 miles) west of the disputed median line. China's foreign ministry rejected the protest as a baseless, saying Beijing had the right to drill in its sovereign waters.
U.S. Energy Information Administration estimated in 2012 that the East China Sea has between 1 and 2 trillion cubic feet (28-57 bcm) of proven and probable natural gas reserves, a modest gauge versus estimates by Chinese sources at up to 250 tcf in undiscovered gas resource.
If approved, the new gas fields would supply China's manufacturing hub of Zhejiang province, about 400 km (249 miles) away on the east coast, with production slated to start in the fourth quarter of 2015, said the officials.
The fields would have a combined annual production capacity of nearly 4 bcm, up from the region's current output of less than 1 bcm, and would account for about 2 percent of China's estimated gas output by the end of 2016.
CNOOC and partner Sinopec Corp are already developing Huangyan I, which was officially approved by the National Development & Reform Commission in June 2012 and is due to start producing gas in September next year. Also on the planning board is Pingbei II, expected to come on line in 2016.
CNOOC media officials declined to comment on the new developments and industry sources quoted for the story declined to be identified due to the sensitive nature of the topic.
China fast-tracking hunt for gas
China, the world's top energy user, is on a fast track to boost the use of natural gas, with demand for gas forecast to grow more than four fold by 2030 from the 147 bcm last year. China is the world's fourth biggest gas consumer.
China first started pumping gas in early 2006 from the Chunxiao field, part of the massive Xihu trough, but territorial disputes have hindered an industry keen to explore and develop the region, Chinese industry experts said.
"China has made compromise, having slowed down the works quite a few years," said a state oil official, "The cards are in the hands of Chinese, as companies are capable of developing (this area) after all the explorations done over the years."
China's plan to expand East China Sea operations comes after a near six-year lull in investment in the area, since the 2008 agreement to jointly develop hydrocarbons in the area.
"Since 2008 when the two nations reached a consensus for joint development, Japan has barely made any sincere diplomatic moves towards that direction...It seems that Japan wants to settle the boundaries first before moving to cooperations, which is totally unrealistic," said Liu Junhong, research fellow at China Institutes of Contemporary International Relations.
Under the proposed expansion plan, Huangyan II, which is adjacent to the disputed maritime border, would consist of two gas fields. Huangyan I has two fields.
Pingbei, an uncontested area located in the western side of the Xihu trough, would have three fields under phase I and another two under phase II.

Wall Street wary as firm bets on dagga

In the sparse Seattle offices of Privateer Holdings, Brendan Kennedy grabs an iPad to show how his bet on legal marijuana is already paying dividends in the form of a Google results page for "blue cheese."
When Web users search that term, high on the list is a link to reviews of the pot strain "blue cheese" on Leafly.com, the medical cannabis website Privateer bought a year-and-a-half ago and which it calls the Yelp of weed.
"We've got Wikipedia blue cheese and pictures of blue cheese, and the third thing you see is the 'blue cheese' strain on Leafly," Kennedy said as he displayed the Google results page. He says Leafly produces revenue of over $100 000 a month.
Popular interest in marijuana and moves by Washington state and Colorado to legalise recreational pot have led Kennedy's two-year-old private equity firm and a handful of politically connected investors to dive into the pot business. The drug remains illegal under federal law.
Privateer this week said it closed a $7m first round of fundraising. It also named to its board of directors Michael Auerbach, an investor with ties to former US secretary of state Madeleine Albright.
A next round of Privateer fundraising to begin in the fall will be not less than $25m, Kennedy and Auerbach said.
With annual marijuana sales both on the black market and in 18 states that allow the drug as medicine estimated at $20bn nationally, according to Harvard economist Jeffrey Miron, businesses are seeking legal avenues to enter the industry.
Still, the $7m raised by Privateer is small by the standards of private equity firms, which typically raise hundreds of millions of dollars per fund.
"The obstacle is it's not a legal product yet... It's not legal under federal law," Miron said. "That's a huge impediment to being able to earn a profit or keep a profit."
Apart from Privateer, the only other fund raising money with the sole purpose of capitalising on the fast-growing pot industry is Emerald Ocean Capital, a division of Southern California-based venture capital firm Ghost Group, said Josh Rosen, a former analyst at Credit Suisse who co-founded cannabis retailer consultant 4Front Advisors.
Rosen said Privateer appears to be the larger of the two.
2014 start
Washington state and Colorado are still tweaking their rules for the recreational-use pot business, which is slated to be up and running in both states next year.
Privateer says it will insulate itself from the risk of federal prosecution by investing in pot-related businesses not directly tied to US production, distribution or sale of the drug.
"I'm not about to invest my personal funds in something that could get shut down tomorrow," said Auerbach, a senior adviser to global strategy firm Albright Stonebridge Group, which is co-chaired by Albright.
Auerbach said he has not spoken to Albright about pot, but both he and Kennedy, a Yale MBA graduate, have lobbied members of Congress for a more tolerant federal stand on cannabis.
A US department of justice representative declined to comment on groups investing in pot-related businesses.
Kennedy said Privateer, which has raised funds from family offices and high net worth individuals, will look at investing in everything from light designers for indoor cannabis growing to makers of harvesting equipment and trimmers.
Others are making bolder choices. A senior political aide in Washington state, who declined to be named, hopes to leave his job to build a marijuana farm in wine-producing Walla Walla. He said he and several co-investors had pooled $250 000 and hoped for $2.3m more from a venture capitalist.
In May, former Microsoft executive Jamen Shively announced plans, criticised as unrealistic because of the federal ban, to create a US marijuana brand. He drew attention for winning political support from former Mexican president Vicente Fox.
Kevin Sabet, co-founder of Project SAM which opposes pot legalisation, said the entry of large investors in the market was worrisome. "This is about profit maximisation based on addiction," he said.

More men happy to be ‘house husbands’

More and more men seem to be happy to be “house husbands”.

It is estimated that more than four in ten women are now the main breadwinner in their home. They claim more of the men in their lives are happy to merely stay at home.

A survey done in the UK by an insurance company LV= shows that about 26% of women earned more than the men in their lives twenty years ago. This figure has now increased to 41%.

The survey found that more than 70% of women believe more men are happy to take on the role of house husband or stay-at-home dad.

At the same time, it turns out 6% of men openly resent earning less than their female partners. About 10% of those men who earn less than than their partners, actually still tell other people that they earn more.

About 30% of the women surveyed indicated that their partner was unemployed due to the economic crisis.

According to Mark Jones of LV= it is a good thing that antiquated stereotypes are changing.

Recent official figures in the UK showed that the number of stay-at-home mothers had fallen to a record low in 2012. There are now about two million women in the UK in this category.

The overall number of working women has increased a lot since the start of the financial crisis in 2008. Over the same period the number of stay-at-home fathers has almost doubled to 209 000.

In the US four in ten households have women are the main earners, according to The Guardian. The majority of these are single mothers and not well-off.

In South Africa the 2011 Census showed the number of women breadwinners is increasing, but  the average South African household is still headed by a man.

Britain plans tax breaks for shale gas

The British government unveiled what it described as the world's most generous incentives for shale gas on Friday, offering tax breaks to drive investment in a sector that has already transformed the US energy market.
Finance minister George Osborne said the government wanted to create the right conditions in Britain for industry to unlock the potential of shale gas.
"This new tax regime, which I want to make the most generous for shale in the world, will contribute to that," he said.
The government is looking to shale gas to reduce Britain's reliance on natural gas imports and hopes it will also lower consumers' energy bills.
The British shale industry is still in its infancy, however.
Experts say it is difficult to estimate how much shale could be developed commercially, and their estimates vary widely.
Utilities analyst Peter Atherton at Liberum Capital said the new tax allowance could attract more companies.
"It (shale exploration and production) is a tough thing for industry to do, costing from tens to hundreds of millions of pounds, and with a fair amount of technical risk and reputational aggravation in the early years," he said.
Infant industry
The proposed allowance for shale gas, subject to consultation for three months, would reduce the tax payable on income from shale production to 30% from 62% for oil and gas.
The tax break is based on existing allowances for oil and gas production aimed at supporting almost £14bn ($21bn) of investment next year.
Called the shale gas "pad" allowance, it would likely go into the finance bill next year and last for the lifetime of the shale well, a UK Treasury spokesperson said.
British exploration firms IGas and Cuadrilla are at the exploration stage in shale gas, while other energy firms such as France's Total are watching developments with interest.
Shares in Alkane Energy, which has extraction licences in the Bowland area, were up 4.6% at 40.4 pence at 13:42, while IGas was 5.58% higher at 123 pence.
Shares in Centrica, which has a stake in one of Cuadrilla's exploration licences, was down 0.2 pence to 380.9 pence.
Shale gas is natural gas trapped in dense rock formations. The process of fracking, in which water and chemicals are pumped deep underground to break open the rocks, has led to fears it could cause earthquakes and contaminate drinking water.
Last month, the British Geological Survey estimated the rocks of the Bowland shale area in northern England held 1 300 trillion cubic feet of gas, double the amount previously forecast.
However, it is still uncertain how much gas can be extracted and how many shale wells developed.
A report by the House of Commons' Energy and Climate Change Committee said this week: "It is impossible to determine reliable estimates of shale gas in the UK unless and until we have practical production experience."
Experts say there should be a period of at least two years of exploratory drilling to see whether UK shale is a viable business.
Jenny Banks, energy and climate change specialist at WWF-UK, said encouraging more fossil fuel investment was at odds with tackling climate change.
To help placate local opposition to shale, the industry will have to provide communities near exploratory wells with £100 000 sterling ($152,000) in benefits and 1% of the revenue from each production site, the government said last month.

Detroit files for bankruptcy

Detroit on Thursday became the largest city in US history to file for bankruptcy protection after decades of decline and mismanagement rendered the home of the nation's auto industry insolvent.
The bankruptcy is expected to make it harder for municipalities in Michigan - and across the country - to borrow money by undermining confidence in what used to be among the most trusted bonds available.
Michigan Governor Rick Snyder said there was no other option.
"The fiscal realities confronting Detroit have been ignored for too long," Snyder said in a press release.
"I'm making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future."
Once the fourth largest US city, Detroit has seen its population shrink by more than half - from 1.8 million in 1950 to 685 000 today - as crime, flight to the suburbs and the hollowing out of the auto industry ate away at its foundations.
"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder said in a letter accompanying the court filing.
"The only feasible path to a stable and solid Detroit is to file for bankruptcy protection."
Earlier this year Snyder appointed an emergency manager with a background in bankruptcy to restructure the Motor City's finances.
He said he had "very much hoped" the move would help Detroit avoid bankruptcy, but that now it is time to "face the fact that the City cannot and is not paying its debts as they become due and is insolvent."
Detroit stopped making payments on some of its $18.5 billion of debt and obligations last month as the emergency manager sought relief from creditors.
But the city's employee pension plans - which are owed some nine billion dollars  filed a lawsuit to prevent any cuts to retirement benefits.
The bankruptcy filing places that case on hold and comes days before what could have been a key hearing.
It will be up to a federal judge to determine if Detroit is allowed to restructure and even shed  its obligations in a Chapter 9 bankruptcy.
"You can expect challenges right out of the box," said bankruptcy lawyer Douglas Bernstein of Michigan-based Plunkett Cooney.
It could take years for the case to be resolved, he warned.
"One of the biggest challenges is that there haven't been very many municipal bankruptcies in the history of the bankruptcy code so there's not a lot of guidance," Bernstein told AFP.
Pension funds are protected by the state constitution, but filing for bankruptcy in federal court ought to give Detroit a way out of its pension obligations because federal laws have precedence.
Snyder listed a host of problems that prove Detroit cannot meet its obligations to its citizens while weighed down by debt.
The homicide rate is the highest in nearly 40 years and, for more than two decades, Detroit has been on the list of the most dangerous cities in the United States.
People have to wait an average of 58 minutes for the police to respond to their calls, compared with an average of 11 minutes nationwide.
There are 78 000 abandoned buildings scattered across the city, and 40% of the streetlights don't work.
A lack of funds for maintenance and repairs means only a third of the city's ambulances work and police cars and fire trucks are also in poor condition.
The city has been borrowing money to pay its bills for more than a decade, a short-sighted move that raised costs.
Some 38 cents of every city dollar was going to debt repayment and obligations like pensions, and that was projected to hit 65 cents on the dollar by 2017.
The city's tax rate has reached its legal limit and even if it could raise rates, residents can't afford to pay more, Snyder said.

Chevron gets green light for shale gas

US oil giant Chevron has obtained permits to explore for shale gas in Eastern Romania, the Romanian environmental agency said on Friday, despite strong local opposition to the technique known as fracking.
"The environment protection agency of Vaslui county, in north-eastern Romania, has delivered an environmental permit to Chevron to build exploration wells," the agency said.
The permits will allow Chevron to prospect in three villages in this impoverished rural area.
Thousands of people took to the streets of Barlad in the last few months to say "no to shale gas".
In May, the company was granted permits to explore for shale gas on Romania's Black Sea coast.
Shale gas drilling has fuelled controversy around the world, and the technique used, hydraulic fraction or fracking, has been banned in France and Bulgaria.
Fracking is a process whereby liquid products, including water and chemicals, are pumped deep into oil or gas-bearing rock to cause fractures and release hydrocarbons.
A 2012 study by Duke University in the US state of North Carolina showed that drinking water wells are at risk of contamination from fracking.
Chevron maintains that all its activities "have, and will continue to be conducted in compliance with Romanian laws, EU (European Union) requirements and stringent industry standards."
Romania's centre-left coalition, in power since May 2012, had attacked the previous government's decision to grant Chevron and other oil groups concessions to prospect for shale gas.
But Ponta changed his opinion this year and said he was in favour of exploration.

NEWS,07.05.2013

EU targets banks to help consumers

The European Commission will propose new rules to make it easier for consumers to open and switch bank accounts, as well as see what banking fees they are being charged.

The proposal, to be published on Wednesday and which could become law in the European Union in three years, also requires banks to shoulder the administrative burden when clients switch accounts, such as transferring direct debits.

Officials with knowledge of the draft law said it would also oblige banks to spell out their charges in a standardised way, making it easier for customers to compare.

The Commission wants at least one bank in each country to offer a basic account, allowing people currently outside the banking system to deposit cash and pay bills.

The EU executive will also suggest giving citizens the legal entitlement to open an account, acting out of a growing sense of frustration that efforts to cajole banks into better self-regulation is not working.

Studies by Commission officials showed that banks did not offer enough information on switching accounts and that consumers did not know what fees they paid for banking services.

The studies also found that 58 million citizens in Europe had no bank accounts - including half the populations of Bulgaria and Romania.

The Commission hopes introducing a standard guide to fees for people opening an account, as well as an annual summary of charges and establishing a national comparison website will change this.

Under the new rules, consumers wanting to switch banks would only have to inform the new bank, which would then be obliged to tell gas, electricity and other providers of the changes to account payments.

The proposal will go to EU member states for their approval or possible change before the changes can be introduced.

China braces for surge in gold imports

Chinese gold imports are likely to swell further after rising strongly for a second straight month in March, as investors seek safety from economic uncertainty and after prices plunged to a two-year low last month.

"Physical demand picked up significantly over the last couple of weeks. Consumers and industrial users tend to see price drops as buying opportunities," Zhang Bingnan, secretary-general of the China Gold Association, told Reuters.

"Investment demand should continue to stay strong through the rest of the year because of limited investment alternatives," said Zhang, adding that gold sales and processing volumes both spiked in April. 

He said China's gold consumption in the first quarter probably rose 10% to 15% from 255.2 tonnes in 2012. Net gold flows from Hong Kong to China, the world's number two gold consumer after India, rose to 223.519 tonnes in March from 97.106 tonnes in February, data from the Hong Kong Census and Statistics Department showed on Tuesday (www.censtatd.gov).

In March, Shanghai gold futures fetched premiums of more than $30 to global prices, making it cheaper to buy the metal overseas. April could see imports swell further after the drop in international prices spurred frenzied buying in Asia, leading to a shortage of gold bars and coins in Singapore as well as Hong Kong, which is China's main source for gold imports.   

Demand for gold from India and China is a major factor in global prices, with the World Gold Council saying the two countries account for more than a third of global appetite. China produced 403 tonnes of gold in 2012, but consumption was more than double at 832.2 tonnes.

Gold tumbled to around $1 321 an ounce on April 16, its lowest in more than two years, after a fall below $1 500 and fears of central bank sales led to a sell-off that stunned investors and prompted them to slash holdings of exchange-traded funds.

It stood at around $1 460 on Tuesday.

 "April imports will be stronger than March," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "The world was buying gold and China was no different at all."

Heavy traffic 

The drop in gold prices has prompted a gold rush in China, with Chinese shoppers flocking to retailers to buy jewellery and gold bars.  

A spokesman for Hong Kong jewellery chain Chow Tai Fook , the world's largest jewellery retailer by market value, told that traffic at its China stores jumped by 50% during the May Day holidays.

The surge in Chinese travellers during the three-day May Day holiday also drove gold sales in Hong Kong to rise by an estimated 50%, with total gold sales from April 29 to May 2 reaching some 40 tonnes, local media quoted Haywood Cheung, president of the Hong Kong Gold and Silver Exchange, as saying. 

The jump in Chinese physical demand also prompted some banks to ship in more supplies from London and Swiss vaults, traders said.

With China's economy still on shaky ground, investors could increasingly be turning to gold as a so-called safe-haven investment. 

China's annual export growth may have picked up slightly in April due to a low comparison from a year ago, while import growth probably eased, a Reuters poll showed, suggesting the underlying momentum for both the domestic and global economies remains tepid. Gold exports to China from Hong Kong hit an all time high  of 557.478 tonnes in 2012.

Companies 'cooking books' to meet targets

Hard-pressed company bosses across much of the world are under so much pressure to deliver on growth that many have resorted to cooking the books, Ernst & Young says in its latest Fraud Survey published on Tuesday.
One in five of almost 3 500 staff quizzed in 36 countries in Europe, the Middle East, Africa and India said they had seen financial manipulation in their companies in the last 12 months, the accounting and consultancy firm said.
In addition 42% of board directors and top managers surveyed said they were aware of "some type of irregular financial reporting".
And despite scandals and regulatory failures in the wake of the credit crunch, almost a quarter of top financial services staff surveyed said they were aware of manipulation and almost 10% of all staff said their companies had understated costs, overstated revenues or used unprincipled sales tactics.
Meanwhile, almost half of the sales staff surveyed across all sectors did not consider anti-corruption policies to be relevant and more than a quarter thought it acceptable to offer personal gifts or services to win or retain business.
In India, over a third felt justified in offering cash - triple the number in Western Europe.
"Our survey shows that to find growth and improved performance in this environment, an alarming number appear to be comfortable with or aware of unethical conduct," said David Stulb, head of E&Y's fraud investigation and dispute services practice.
In Spain, ranked alongside Russia and just below Nigeria and Slovenia, 61% of staff believed companies often exaggerated results, compared with only 7% in Finland.
And E&Y said the vast majority of managers from Norway to Nigeria and Russia to Greece were feeling the pressure to deliver a good financial performance over the next 12 months, despite little optimism that business conditions would improve.
They were now forced to balance the risks of expanding into rapid-growth markets, where winning contracts can go hand-in-hand with corruption, cutting costs further and piling pressure on staff or suppliers - or distorting results, the firm said.
E&Y warned multinationals based in mature markets they could be more vulnerable to the risks of unethical behaviour. One quarter of those asked thought watchdogs in rapid-growth markets focussed more on the behaviour of foreign businesses.
The consultancy called on managers to ask more robust questions focus on key risks, such as poor due diligence accounting checks of intermediaries and associates, and punish unethical behaviour.

Egypt replaces economy ministers

Egypt announced a cabinet reshuffle on Tuesday that removed two ministers closely involved in talks with the International Monetary Fund (IMF) and increased the representation of President Mohamed Mursi's Muslim Brotherhood in government.

The opposition had been demanding the installation of a politically neutral cabinet to oversee parliamentary elections later this year.

Prime Minister Hisham Kandil announced nine changes to his cabinet. These included the appointment of Amr Darrag, a senior official in the Brotherhood's Freedom and Justice Party, as planning minister.

The outgoing minister, Ashraf al-Arabi, had played a central role in talks with the IMF over a $4.8bn loan seen as crucial to easing a deep economic crisis. Egypt has yet to seal a deal with the IMF.

Fayyad Abdel Moneim, a specialist in Islamic economics, was appointed as finance minister, replacing Al-Mursi Al-Sayed Hegazy, another expert on Islamic finance who was appointed in January, the last time Kandil reshuffled the cabinet.

Abdel Moneim received a doctorate from Al-Azhar University in Islamic economics in 1999.

The government has been widely criticised for failing to revive an economy that is in deep crisis because of more than two years of political turmoil.

Another Brotherhood member, Yehya Hamed, was appointed investment minister. The new cabinet includes at least 10 politicians affiliated to the Muslim Brotherhood or the FJP, compared to eight in the old one.

Ahmed Suleiman was named as justice minister, replacing Ahmed Mekky, who resigned last month in protest at efforts by Mursi's Islamist allies to purge the judiciary.

The ministers of interior, defence and foreign affairs were left unchanged.

Crisis sees rise in German immigration

An influx of people from crisis-hit southern European countries like Spain, Italy and Greece has led to the biggest surge in German immigration in nearly 20 years.

The Federal Statistics Office said 1.081 million immigrants flocked to Germany last year, up 13% from 2011 and the highest number since 1995.
Leading the way were arrivals from countries in eastern Europe and from southern eurozone countries, struggling with recession and high unemployment as a result of the currency bloc's three-year old debt crisis.
The number of immigrants coming from Spain, Greece, Portugal and Italy rose by 40% or more compared to the prior year.
"The rise in immigration from EU countries hit by the financial and debt crisis is particularly strong," the Statistics Office said.
Safe haven
Germany has been a rare pillar of strength during the crisis, benefitting from deep structural reforms introduced a decade ago, competitive small-and-medium sized companies and record low interest rates resulting from its status as a safe haven.
Unemployment, at 6.9%, is hovering just above a post-reunification low.
By contrast, more than one in four workers in Spain and Greece are without a job, and youth unemployment in these countries is close to 60%.
This has made Germany, Europe's largest economy, an increasingly attractive destination, despite barriers like the language.
Still, the numbers from southern Europe remain fairly small in total terms compared to those from the east.
A total of 34 109 people came from Greece and 29 910 from Spain in 2012.
That compared to 176 367 from Poland and 116 154 from Romania.