After Chinese manufacturing sector recovery, I keep focusing on international issues. In this post, I will be going through the reading of several articles (Reuters, Daily Telegraph) concerning the harmful situation that is going on in the Niger Delta. This area suffers many problems at the moment and had been suffering these issues for decades now since oil production started. This asset has been mismanaged over years due to a lack of political efficiency. And from a potential wealth it has came to a source of conflict over several countries concerned by oil extraction.
First of all, oil production has led to social issues in the Niger Delta. Foreign companies are dealing with oil extraction and local population is in most cases left behind. This leads currently to a major issue in this area of Africa. Militancy is increasing and it appears that abducting has become a “fashionable” activity, because of the great amount of money it could provide. Indeed, many groups use to kidnap more and more people, mainly individuals suspected of having money or at least linked with people that do have money. Kidnappers are asking for ransom usually ranked between $700.000 and $3 million.
It is obvious to me that the government should lead as quick as possible legislative schemes in order to slow down militancy because as far as financial outcomes are concerned, this situation is likely to bring foreign investors reluctant on spending money in oil companies, joint ventures or upgrading production facilities schemes.
The main issue that local governments will have to face is oil productivity which has been cut by almost 40 percent due to sabotage or kidnapping of oil workers. Government earn $ billion a year and local population receive a very few part of it. That’s why government is trying to pass a proposal through parliament. Government should curb its stake in joint venture with foreign oil companies by 10 percent and give it to local trusts. That would bring local population to be involved in oil producing process and relying on it. This should lead to calm down militancy and offer local population what they had always be asking for. Then, it is all relying on governments processes, as it has always been a matter of implementation in this African area. But according to Nigerian President and his advisor this scheme is all Nigeria has always needed. Only time could bring a proper reply to this.
A comparison between different articles would not be relevant to this issue, because every single article deals with a different analysis of the situation. It allowed me to have an overall viewing of the situation in the Niger Delta though. Of course, to me it is pretty obvious that potential wealth are in most cases mismanaged in black Africa, and instead of leading to an upgrade of countries economic situation, it comes up more with conflict, disputes, attacks, kidnapping and murdering. Government has to run tightened policies to try and end up militancy in this area of the globe, and getting local population involved in oil producing process could be a great idea to keep the assets safe. This point is really important to keep the industry attractive to industrialized countries investors, on which this sort of countries are relying on their way to stand up as an economic power.
References :
http://www.telegraph.co.uk/expat/expatnews/6452428/Now-its-not-just-oil-workers-under-threat-from-Nigerias-kidnappers.html
http://uk.reuters.com/article/idUKLS714353._CH_.2420
http://www.telegraph.co.uk/news/worldnews/africaandindianocean/nigeria/6377224/Nigeria-planning-oil-deal-for-delta-to-reduce-violence.html
dimanche 1 novembre 2009
China, the greatest winner from the global financial crisis ?
Since I had focused the main part of my reading on Britain’s issues, I have decided this week to present a sharply different subject. I focused my reading on articles dealing with Chinese issue. The articles I will go through deal mainly with the outcomes of a survey issued in late October, according to which China’s manufacturing sector has been growing in October at its fastest pace in 18 months.
The main fact issued of this survey is the rise of the PMI index (Purchasing Managers Index) which came from 54.3 in September to 55.2 in October. The sector has been expanding for 8 months in a row now while major economies are just starting to show signs of recovery. The index has ended up its eighth month in a row above the 50 percent line while it was 38.8 last November. The nearly whole of this survey shows positive figures which should give way to a firmly Chinese recovery in the next months. This recovery will rely on the increase of both abroad and domestic demand.
"All these show that economic growth will accelerate in the future, and the growth rate in the fourth quarter is likely to be 9.5 percent," said Zhang Liqun, a researcher with the Development Research Centre, reported by Reuters.
The kickoff of such a recovery has been enabled by a government stimulus to industry, allowing financial packages to companies involving spending on infrastructures to boost the domestic economy. Even though government aid will be curbed in further quarters, China should be able to offset this decrease by relying on external demand, consumer spending and private real estate investment. That is why economists like Brian Jackson are quite confident about Chinese economy for the next quarters. These statements are released by Bloomberg and BBC News articles, which are quite optimistic and seem to rely on the same references.
But while BBC News article is kind of throwing figures and just quoting economists, the Bloomberg journalist tries to infer a little more.
To him, the manufacturing sector soar is kind of boosted by auto sales. Car purchased exceeded 1 million for the first time in September and General Motors said that sales doubled. Car industry grew mainly thanks to tax cuts.
So most of the lights are turning to green, like gross domestic product, which growth accelerated to 8.9 percent in the third quarter from 7.9 percent in the second. The report was not universally positive though. It showed a slump in employment and finished goods inventory and input prices rose.
Basically, all of these four articles are quite optimistic about Chinese recovery boosted by its manufacturing sectors. They are all more or less relying on the same figures, issued from the same survey. So differences between articles are how well they use these figures to try and infer the situation. It is obvious that outlooks are likely to be profitable to China with soaring both external and domestic demand which it can rely on. Furthermore, the restart of private real estate investment and low interest rates should help China to take advantage from the current situation. And if policy makers manage to deal with inflation that high demand should lead to, we might face a major shift in economic position, while China passing over United States. Thus, China could be the greatest winner from the global financial crisis (Bloomberg).
References :
http://news.bbc.co.uk/1/hi/business/8336695.stm
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2gJKUZAwJv0&pos=1
http://uk.reuters.com/article/idUKTRE5A00IM20091101?pageNumber=1&virtualBrandChannel=11564
http://www.ft.com/cms/s/0/1e91ee86-c6d4-11de-bb6f-00144feab49a.html
dimanche 18 octobre 2009
A weakened currency, a key to a balanced recovery ?
It is not a breaking news but rather a statement settled in the financial landscape that sterling is weakening for a couple of years now. UK currency is at the moment sinking at his lowest level since early april. Sterling is now worth 25% less than at the beginning of 2007 and is nearly reaching the parity against euro, as it fell to 1.0947 euros. I will try firstly to explain the reasons of such a devaluation and then the consequences on the UK economy through the reading of articles from different English papers.
So, why does the sterling remain weak ? It is suffering two fronts : first of all, on a short term viewing, low UK interest rates have reduced financial inflows. Then in the medium term : “concerns about the UK public finances have raised fears of a downgrade to UK debt by credit ratings agencies.” According to the Financial Times. This paper explains that Sterling’s devaluation has been hidden by the spotlight put on dollar’s fell, though the pound remain the worst performing currency at the moment.
To the BBC News journalist, this current weakness could give a profitable lift to exportations. As a result of a fear due to high UK debt level, that has frozen financial flows, it is kind of obvious that such a devaluation in comparison with the euro (and the American dollar as well), would be a key to boost UK overseas sales. To the Central Bank, it would be helpful to UK economy to keep going with a weak currency for moments.
UK trade minister opinion sounds quite the same, according to a conference he gave in Cambridge, which is summarized by Reuters. He says that the current period is a great opportunity to export, particularly for small and medium sized businesses.
These two last articles are kind of following governments assumptions. Both journalists are supporting government actions by quoting largely members of it. But it is obvious that a feeble currency provides an advantage towards other countries when trading. Actually these two articles are not really going into consequences of such a devaluation. I found out that the last article, written by a Guardian’s journalist, provides the best analysis among what I have read despite it is quite overwhelming to go through it.
This article tries to answer a question : can a weak pound make Britain’s economy strong again ? Indeed, a weakened currency has always been seen as a symbol of national humiliation throughout years, showing off poor ability of governments to manage economic policies. Actually, it appears that the current government was concerned more about collapsing banks and soaring unemployment than about foreign exchange markets.
So, to whom this weakness would be profitable ? To Heather Stewart, it would enable manufacturers to build up high profit margins, dealing with the combination of 0.5% interest rates and an exchange rate of less than 1.10€. Of course, it is not that easy, because most of them have been sharply hit by the financial recession. As we stated before, such a weakness should be also profitable to exporters and would allow to balance UK trade’s deficit. It emphasizes the need to build a balanced recovery thanks to a more interventionist policy. But such a depreciation has bad consequences as well, it tends to boost inflation by increasing foreign goods’ price.
We have to be careful when talking about currencies value, because of course, currencies can go up as quickly as they went down, so the pound should soon get better, at least against euro, according to Graham Turner, a GFC Economics consultant. Currencies market volatility is kind of intangible, and it makes the analysis difficult to be made. That is why we have to be careful when getting into such an issue.
Heather Stewart article provides a wide analysis of the situation as well as its consequences upon UK economy, it is quite objective and tries not to throw out figures but basing its framework on quoting government members or financial analysts.
So basically, the growth remain stuck at the moment, because of the regulated banking sector braking the credit supply and a public sector which tends to cut jobs. And a weakened pound will not be bringing back a feelgood factor but it could at least lay the ground work for a further recovery.
References :
http://www.guardian.co.uk/business/2009/oct/18/sterling-devaluation-exports-heather-stewart
http://www.ft.com/cms/s/0/cd1042d2-b4eb-11de-8b17-00144feab49a.html
http://uk.reuters.com/article/idUKLG73367420091016?pageNumber=1&virtualBrandChannel=11564
http://news.bbc.co.uk/1/hi/business/8272661.stm
So, why does the sterling remain weak ? It is suffering two fronts : first of all, on a short term viewing, low UK interest rates have reduced financial inflows. Then in the medium term : “concerns about the UK public finances have raised fears of a downgrade to UK debt by credit ratings agencies.” According to the Financial Times. This paper explains that Sterling’s devaluation has been hidden by the spotlight put on dollar’s fell, though the pound remain the worst performing currency at the moment.
To the BBC News journalist, this current weakness could give a profitable lift to exportations. As a result of a fear due to high UK debt level, that has frozen financial flows, it is kind of obvious that such a devaluation in comparison with the euro (and the American dollar as well), would be a key to boost UK overseas sales. To the Central Bank, it would be helpful to UK economy to keep going with a weak currency for moments.
UK trade minister opinion sounds quite the same, according to a conference he gave in Cambridge, which is summarized by Reuters. He says that the current period is a great opportunity to export, particularly for small and medium sized businesses.
These two last articles are kind of following governments assumptions. Both journalists are supporting government actions by quoting largely members of it. But it is obvious that a feeble currency provides an advantage towards other countries when trading. Actually these two articles are not really going into consequences of such a devaluation. I found out that the last article, written by a Guardian’s journalist, provides the best analysis among what I have read despite it is quite overwhelming to go through it.
This article tries to answer a question : can a weak pound make Britain’s economy strong again ? Indeed, a weakened currency has always been seen as a symbol of national humiliation throughout years, showing off poor ability of governments to manage economic policies. Actually, it appears that the current government was concerned more about collapsing banks and soaring unemployment than about foreign exchange markets.
So, to whom this weakness would be profitable ? To Heather Stewart, it would enable manufacturers to build up high profit margins, dealing with the combination of 0.5% interest rates and an exchange rate of less than 1.10€. Of course, it is not that easy, because most of them have been sharply hit by the financial recession. As we stated before, such a weakness should be also profitable to exporters and would allow to balance UK trade’s deficit. It emphasizes the need to build a balanced recovery thanks to a more interventionist policy. But such a depreciation has bad consequences as well, it tends to boost inflation by increasing foreign goods’ price.
We have to be careful when talking about currencies value, because of course, currencies can go up as quickly as they went down, so the pound should soon get better, at least against euro, according to Graham Turner, a GFC Economics consultant. Currencies market volatility is kind of intangible, and it makes the analysis difficult to be made. That is why we have to be careful when getting into such an issue.
Heather Stewart article provides a wide analysis of the situation as well as its consequences upon UK economy, it is quite objective and tries not to throw out figures but basing its framework on quoting government members or financial analysts.
So basically, the growth remain stuck at the moment, because of the regulated banking sector braking the credit supply and a public sector which tends to cut jobs. And a weakened pound will not be bringing back a feelgood factor but it could at least lay the ground work for a further recovery.
References :
http://www.guardian.co.uk/business/2009/oct/18/sterling-devaluation-exports-heather-stewart
http://www.ft.com/cms/s/0/cd1042d2-b4eb-11de-8b17-00144feab49a.html
http://uk.reuters.com/article/idUKLG73367420091016?pageNumber=1&virtualBrandChannel=11564
http://news.bbc.co.uk/1/hi/business/8272661.stm
dimanche 11 octobre 2009
Royal Mail blackcats
Currently , UK is facing a threat of Royal Mail massive rolling strikes. Once I came up to that news, I’ve been reading through different papers dealing with this issue. French people are famous for their “striking patterns”, that’s why this issue caught my curiosity. At the moment, the Communication Workers Union is threatening the UK with probably leading a strike in the next weeks, blaming Royal Mail for intend to cut jobs further to a year to year decrease in their activity. Employees are planning to go on strike in the run-up to Christmas, to disrupt people and businesses as much as they can.
The Financial Times is displaying a quite short article, which explains in a basic way terms of the dispute. The CWU have voted for a 24-hour all-out stoppage followed by rolling strikes. The CWU is expected to offer The Royal Mail a mediation but chances to reach an agreement appear slim. Then the three-day rolling strikes strategy, aiming to save 2 days out of 3 of salary is explained. Further to this induction statement, the journalist starts dealing with the consequences of such a scheme which would be terrible to post-relying businesses.
This news have already received many reactions, and The Times summarizes what they are. We can obviously see how lucky are businesses which rely on different delivery services. Customers might start to put off online shopping, which worries online entrepreneurs who are seeking other ways to deliver. This article remains quite negative, but points out that Royal Mail executives are responsible for this situation. The Royal Mail is weighed down by a 3.4£ billion pension deficit and successive boards have failed to privatise the service, refused to accept flexible working, led a poor management and a draconian regulatory regime. This article does not deal with strike itself, but with why Royal Mail has came to such a terrific situation. It is quite overwhelming because it throws up many figures and analysis on why Royal Mail is currently going down.
I have found another article, presenting the news in a very different way. The Daily Mail is focusing on consequences of this upcoming strike, consequences on businesses mainly. It presents how businesses are trying and avoid a Christmas disaster, with first of all, the great internet retailers such as Amazon or Tesco Direct, that are looking for other ways to deliver. Then, it is coming into a more casual analysis on why The Royal Mail is facing such a crisis. Annual revenue have collapsed to around £1billion below expectations in the past year. It basically going through negative consequences by the end of the document, but it insists on employees point of view, quoting largely the CWU deputy general secretary Dave Ward, who finishes saying he would be aware to reach an agreement.
I have faced three very different ways to deal with this issue. The financial times article is quite straightforward but remains too basic to me. It is not going through reasons of such a threat for UK businesses and families. The most relevant article to such a critical situation is the Times one, which is going through a wide analysis of issues that are striking The Royal Mail at the moment, there is a bias in it because the journalist is blaming the Royal Mail boards for not having managed to avoid The Royal Mail to sink.
To me, it appears that it will be quite difficult to come out such a critical situation, because Royal Mail have been mismanaged for years now, and the CWU queries have not been met. It is up to Royal Mail board to lead a more flexible social policy from now on, if they want to give them a chance to avoid a major issue in the run-up to Christmas.
References :
dimanche 4 octobre 2009
Lisbon treaty approval in Ireland, a step forward for European construction.
In his way to create a superstate, Europe has moved a step closer recently, following the Irish Lisbon treaty approval, with more than two thirds of "Yes". Only Poland and Czech Republic still have to set up an approval by now. Ireland Republic had say No to the previous referendum in 2008, which had been seen as a step back in European superstate construction. Last week agreement has now paved the road for this european wish. I have read several papers dealing with this piece of news, provided by The Daily Telegraph, The Guardian, The Times and The Daily Mail.
First of all, The Daily Telegraph presents positive statements towards Ireland recovery, based on quotation from famous chairmans, even though opposition critisizes this approval. But it was a key to Ireland Republic to face better crisis consequences. This would be likely to protect billions of american past years investments. Nowadays Ireland is no longer able to stay out of Europe construction, because recession and last June "No" voted have increased Ireland debt. It is said that this proposal includes plan to introduce a new European president, accelerate the decision making-process in the 27-bloc group, commitments to expand renewable energy, research and development and tourism. This approval is necessary for Ireland recovery, even though results must be expected in a long term view. This article states that the massive yes shows off Irish people are likely to accept to make decisions as a part of Europe and no longer as an independant republic. Gordon Brown said Europe can now start to work together.
The Times sets up a comparison betwin political views in Ireland. To the opponents, such a big Yes win means how scared Irish people are nowadays. “I’m surprised how big the Yes vote is. It just shows how scared people are.” said the leader of the anti Lisbon lobby group Declan Ganley. He praised quality and strength of the pro-Lisbon campaign. This comparison is kind of neutral, it presents reactions after results of both opponents.
Daily Mail's article is quite well written. It starts with a presentation of the Lisbon treaty scheme and his main proposals. It insists on Europe made a step forward thanks to Irish decision to approve the treaty. Then, the journalist starts an analysis of Irish behaviour shown by this vote. To him it means an important fear of current situation, a fear of becoming jobless and the lack of confidence in Ireland to govern herself.
References :
- http://www.telegraph.co.uk/finance/economics/6258132/Lisbon-Treaty-approval-could-save-Ireland-200m-a-year-in-debt-costs.html
- http://www.timesonline.co.uk/tol/news/uk/article6859950.ece#
- http://www.dailymail.co.uk/news/article-1217950/So-Ireland-votes-yes-Lisbon-treaty-1000-years-history-ends-like-this.html
First of all, The Daily Telegraph presents positive statements towards Ireland recovery, based on quotation from famous chairmans, even though opposition critisizes this approval. But it was a key to Ireland Republic to face better crisis consequences. This would be likely to protect billions of american past years investments. Nowadays Ireland is no longer able to stay out of Europe construction, because recession and last June "No" voted have increased Ireland debt. It is said that this proposal includes plan to introduce a new European president, accelerate the decision making-process in the 27-bloc group, commitments to expand renewable energy, research and development and tourism. This approval is necessary for Ireland recovery, even though results must be expected in a long term view. This article states that the massive yes shows off Irish people are likely to accept to make decisions as a part of Europe and no longer as an independant republic. Gordon Brown said Europe can now start to work together.
The Times sets up a comparison betwin political views in Ireland. To the opponents, such a big Yes win means how scared Irish people are nowadays. “I’m surprised how big the Yes vote is. It just shows how scared people are.” said the leader of the anti Lisbon lobby group Declan Ganley. He praised quality and strength of the pro-Lisbon campaign. This comparison is kind of neutral, it presents reactions after results of both opponents.
Daily Mail's article is quite well written. It starts with a presentation of the Lisbon treaty scheme and his main proposals. It insists on Europe made a step forward thanks to Irish decision to approve the treaty. Then, the journalist starts an analysis of Irish behaviour shown by this vote. To him it means an important fear of current situation, a fear of becoming jobless and the lack of confidence in Ireland to govern herself.
References :
- http://www.telegraph.co.uk/finance/economics/6258132/Lisbon-Treaty-approval-could-save-Ireland-200m-a-year-in-debt-costs.html
- http://www.timesonline.co.uk/tol/news/uk/article6859950.ece#
- http://www.dailymail.co.uk/news/article-1217950/So-Ireland-votes-yes-Lisbon-treaty-1000-years-history-ends-like-this.html
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