by Jules Evans | May 1, 2008 | Influence and networks, Off topic
One of the trends we’ve seen in investment banking over the last two or three years is what PWC calls the ‘global war for talent’. Local banks in rich emerging market countries have more money to spend than their troubled rivals on Wall Street, so they’re hiring the top talent from western banks to join them.
We’re seeing a similar process slowly occurring in the media. Western media are in financial trouble. Sales at every American national newspaper except the Wall Street Journal and USA Today are on a long-term downwards trajectory. The same is true in the UK, with the exception of The Sun and The Observer, whose circulations are slightly rising.
Papers are being undercut by sites like Google News and Yahoo News, and by free rags like Metro and London Lite, which have skeleton editorial staffs and rely on recycling press releases and paparazzi photos.
However, in the emerging markets, the story is much rosier. The World Association of Newspapers says that in India, daily newspaper sales rose by 33% between 2001 and 2005, while in China, circulation rose by 28% between 2000 and 2004.
As the Guardian’s media section noted last year:
The seemingly inexorable decline of the newspaper in Europe and, more dramatically, in North America sometimes makes the industry sound doomed, regardless of its heavy online presence.
Overall, however, global newspaper sales are on the increase, a fact which is all too often ignored by gloomy commentators in the West, who need only look eastwards when optimism is in short supply at home.
That means western media firms are now targeting markets like India and China. Journalists at The Times, for example, were told to keep the Indian market in mind while writing web stories (how does one do this exactly? Describe the new budget as ‘pukka’?) The Sun, The Independent and The Daily Mail have all launched joint ventures in India in the last 12 months.
But it also means local media firms having the capital to attract western journalists onto their staff for English language ventures. This often involves quite serious culture clashes, and the results can be quite comic. (more…)
by Daniel Korski | Apr 26, 2008 | Europe and Central Asia, Influence and networks
For three weeks, Europe’s “big men” have been polishing off their CVs in the hope of getting one of the new top EU jobs to be created if the Lisbon Treaty comes into force. They all want to be at the other end of the phone when the U.S wants speak to Europe, as Henry Kissinger said he wanted to.There’s the new permanent President of the European Council, the old job heading up the European Commission, the new EU Foreign Minister (alright, “High Representative”) and the lesser-know slot of Mr. Euro i.e. the chair of ECOFIN. Add to this the President of the European Parliament, the head of the ECB and – outside the EU – NATO secretary-general, which also comes up in 2009.Not all the jobs are connected. Some, like the EU Foreign Minister, have to be decided on in January. Others, like the President of the European Parliament and the Commission President, will depend on the 2009 parliamentary elections held later in 2009. Jean Claude Trichet, the French banker in charge of the ECB, is going nowhere. But having a Frenchman in the post will make it more difficult for Paris to get other slots.
You still with me? Then there’s the politics. EU elections in late 2009 will be key, as the European Parliament has a say on some of the slots. Right now, the centre-right EPP holds power and last time pushed to install current European Commission President Jose Manuel Barroso in 2005. But a swing to the left, will impact choices.
Politics in the EU-27 also matters. Right now, the return of Italy’s Silvio Berlusconi would seem to favour centre-right candidates, yet Poland’s new centre-left government may counterbalance this. But the centre/left divide is not always a useful guide; right-wing Nicola Sarkozy has publicly backed New Labour’s Tony Blair. In the EU context, the federal/intergovernmental is important.
Have I lost you? Good. So with all this, who’s in the running?
(more…)
by Alex Evans | Apr 21, 2008 | Climate and resource scarcity, Global system
So far, most of the consensus on what to do about food prices is (as you might expect) strongly focused on the short term: measures like spending more cash on humanitarian aid, or building up social protection systems for the poorest and most at risk. But one medium term measure also seems to command widespread consensus: we should press ahead with the Doha trade talks. Here’s Bob Zoellick at the World Bank, for instance:
If ever there is a time to cut distorting agricultural subsidies and open markets for food imports, it must be now. If not now, when?
Peter Mandelson, meanwhile, opines that “without a doubt” a trade agreement would help to restrain spiralling prices. And for once, this is something where he and Gordon Brown agree: Brown’s recent letter on food prices to G8 heads has trade as the very first action point, noting that
We should surely redouble our efforts for a WTO trade deal that provides greater poor country access to developed country markets and cuts distortionary subsidies in rich countries.
Now you can’t fault the political opportunism here, of course: part of the reason for the push on liberalisation now is that, as food importing countries frantically slash their import tariffs to try to keep the grain flowing in, they’re also achieving liberalisation where trade negotiations have failed.
But what effect will all of this have on food prices? If the US and EU start eliminating their subsidies too, isn’t there a risk that the short term impact could be to increase food prices to poor consumers? Why yes. Indeed, Gordon Brown actually says as much in his letter to G8 heads [emphasis added]:
…in the short term net food-importing countries may need support to cope with higher prices as a result of liberalisation…
by Alex Evans | Apr 12, 2008 | Climate and resource scarcity, Global system
A couple of weeks ago, Martin Wolf penned an FT op-ed proclaiming that the rescue of Bear Stearns “marked liberalisation’s limit”. We should remember Friday March 14th 2008, he said, for it was “the day the dream of global free- market capitalism died”:
For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over.
If the dream’s already over in financial services, food may be next. Here’s Javier Blas in the FT yesterday:
Governments are racing to strike secretive barter and bilateral agreements with food-exporting countries to secure scarce supplies as the price of agricultural commodities jump to record highs, diplomats and cereal traders say.
Wheat traders said yesterday that Ukraine was close to an agreement with Libya to devote up to 100,000 hectares of its own land to grow wheat for the north African country. Kiev-based analysts questioned the feasibility of such an agreement after the former Soviet republic restricted its cereals sales earlier this year.
The discussions follow a barter contract signed between Egypt and Syria in which Cairo agreed to supply Damascus with rice in exchange for secure wheat cargos. The Philippines also sought unsuccessfully last month to reach a deal with Vietnam to secure a large supply of rice.
Abdolreza Abbassian, an expert at the Food and Agriculture Organisation in Rome, said: “The use of bilateral agreements is on the rise.” Diplomats also say that the recent bilateral and barter contracts signal a broader trend.
Meanwhile, import substitution is back too. Just look at the Philippines, one of the world’s largest importers of rice – where prices have risen by up to 70 per cent over the last year. As the Manila Times set out last week, most of the Philippines’ rice comes from Vietnam, plus a little from Thailand – both countries that have reduced export levels as prices have shot up. The result: the Philippines’ equivalent of the FBI is raiding warehouses looking for rice hoarders, and political tension is rising.
As Roel Landingin reported in the FT a couple of days ago, part of the backdrop to the current situation is that the World Bank strongly encouraged the Philippines to place its trust in world markets for rice:
Less than a year ago, the authors of a World Bank paper on agricultural spending in the Philippines posed a question that now looks prescient: “Can the world market for rice be trusted?” Yes, was their unequivocal answer. And so the authors urged Filipinos not to worry too much about their reliance on rice imports…
Leocadio Sebastian, executive director of the government-run Philippine Rice Research Institute, said recent events had shown that the reasoning behind the World Bank’s recommendation “may not be true any more”. The World Bank study argued that rice production and prices were now more stable and that governments in rice exporting countries could not easily restrict foreign sales.
So much for that plan, as they say. Now, the talk in Manila is of self-sufficiency – within three years, no less: quite a reversal. And while this is not the sort of agenda calculated to gladden the hearts of economists at the Bank, it does appear to have the approval of the UN’s Food and Agriculture Organisation, whose advice to poor countries yesterday was to “rely more on local produce to cut food import bills and provide subsidised inputs to boost production”, according to ReliefWeb.
by Jules Evans | Apr 10, 2008 | Middle East and North Africa
I’ve started writing about Islamic finance as of a few months ago. It’s a fascinating, bizarre market, fusing as it does the world of ancient religious law with the world of international finance. And it’s an increasingly important market, because the Middle East is suddenly where all the capital is, so companies, banks, funds and even governments are scrambling for their Koran to work out how to attract this capital.
Particularly interesting to me is the world of Islamic debt. The market for Islamic bonds, or sukuks, has grown from almost nothing in 2000, to $60 billion last year, and is forecast to pass the $100 billion mark in the next few years. The UK is expected to issue its first sovereign sukuk later this year.
Each deal that gets arranged has to get a fatwa approving it from an Islamic scholar. In practice, bankers say that there are only 10 or so Islamic scholars who are well-known and credible enough for their ruling to have weight. So you have this handful of elderly scholars in Dubai, Bahrain and Riyadh giving their scholarly okay to tens of billions of dollars worth of deals.
Their rulings are very important because the whole idea of Islamic debt is a bit shaky. Islam forbids usury, or the earning of interest on loans. Investors have to be equal partners in economic projects, sharing in profits and losses, with aligned incentives. Otherwise lenders might have an incentive to profit from a borrower’s misery, like UK banks profit from credit card borrowers’ misery.
So the structure that has been invented in the last few years backs the sukuk with assets, which the investor ‘buys’ from the borrower, and then the borrower ‘buys’ them back at face value when the bond matures. It’s a bit of a fiddle, in effect.
Now, however, just as the sukuk market is getting really big, one of the leading scholars who cover the market has ruled that 85% of sukuk are haraam, or non-compliant with Shariah. (more…)
