VOA News: Economy

India's Slowing Economy Unlikely to Stage Quick Recovery

Anjana Pasricha — Fri, 10 Feb 2012 13:51:54 GMT

Economists in India say the nation's economy is growing at its slowest pace in three years. From New Delhi, Economic growth is not expected to pick up significant pace anytime soon.

Government estimates have confirmed what economists have been saying for several months. India’s economy will grow by 6.9 percent in the financial year that ends in March. That figure is sharply down from the 9 percent growth the government had forecast at the start of 2011. It is also the slowest pace since the economy was hit by the 2008 global financial crisis.

At that time, India’s economy had staged a swift recovery. But most economists say this time, that will not happen.

A. Prasanna, an economist at ICICI Securities in Mumbai, says global economic turbulence and domestic problems have contributed significantly to the slackening pace this time.

“Investment demand has really slowed down in India because business sentiment has turned weak," explained Prasanna. "On top of that we had the Reserve Bank hiking interest rates quite aggressively though the whole of last year to contain inflation, so the higher rates have had further dampening impact on investment.”

The government is being blamed for the reduction in investment demand. It put pro-business policies on hold to deal with a series of corruption scandals and a lack of political consensus.

Moreover, its own finances are also not as healthy as they were in 2008. Then, the government injected billions of dollars to boost consumer demand. It cannot do this again because it is grappling with a high fiscal deficit.

Economist Prasanna says all eyes are on the federal budget to be announced next month because the government’s response could be critical in determining the pace of recovery.

“If the government does send out a signal that they will work hard to bring down the deficit, that and take up an opportunity to proceed with some reforms in key sectors, it will help in bringing down interest rates," Prasanna said. "It will also help in improving business sentiment. That may not help much in the current year, but it's important down the line.”

However, there is some cause for cheer. After losing 25 percent of their value last year, stock markets are recovering as more foreign funds begin to flow in. The local currency, the rupee, has also recovered some value after falling to an all time low against the dollar last year.

But economists caution that the government cannot take high growth for granted as it has done for years. They say it will have to work harder to give fresh momentum to the economy.

Most forecasts put growth at around 7 percent in the coming year. That is high compared to developed countries, but not high enough for an emerging economy that hopes to be one of the engines of a global economic recovery this decade.

Greece Reaches Accord on Austerity Demands

VOA News — Thu, 9 Feb 2012 18:34:52 GMT

Greek lawmakers say they have reached an accord on austerity measures demanded by international lenders so the country can secure another bailout and avoid defaulting next month on its financial obligations.

After an all-night negotiating session that ended early Thursday, Greek political leaders remained deadlocked on the extent of pension cuts for retirees, while agreeing to trim the country's minimum wage by 22 percent and eliminate 15,000 government jobs.

Hours later, however, Prime Minister Lucas Papademos and his coalition partners announced they had found an unspecified, alternative way to pare government spending, marking a key turning point after weeks of negotiations with Greece's creditors.

Related video by Mil Arcega:

Greek Finance Minister Evangelos Venizelos headed to a Brussels meeting with other European finance ministers to plead the debt-ridden country's case to win their approval for a new $172 billion bailout, the country's second in two years. Greece says it needs the aid package from the European Union, the European Central Bank and the International Monetary Fund in order to avoid defaulting on $19 billion in bond payments due in March.

EU Economic Commissioner Olli Rehn said Greece will have to convince the finance chiefs it is serious about economic reform.

"We have a staff level agreement now and I am sure the ministers will thoroughly scrutinize this agreement and it's up to the Greek government by concrete actions through legislation, and other actions to convince its European partners that the second program can be made to work," he said.

The Athens government is also completing negotiations with private lenders to cut in half the amount it owes them, a $132 billion reduction. Under the revised financing of the country's debt, 32 large financial institutions would lose 70 percent of their Greek investment.

European leaders have grown impatient with Greece's protracted negotiations over its debt, with financial analysts voicing fears that a default could plunge the global economy into a new recession. Meanwhile, Greek leaders have faced widespread opposition at home from workers angered by earlier austerity measures. Unions called for more work stoppages on Friday and Saturday to protest the latest budget-cutting plan.

Even with the agreement on more austerity, Greece remains in a precarious financial state. It is in the fifth year of a recession. The government says the country's unemployment rate is increasing and nearly reached 21 percent in November.

Meanwhile, the continent's central bank kept its benchmark lending rate at the record low rate of 1 percent, in an effort to spur economic growth. The bank has kept the rate low as the 17-nation bloc that uses the euro currency faces a stalled economy and is possibly headed to a recession.

Bank chief Mario Draghi says Europe's economy remains threatened.

"Based on our regular economic and monetary analysis we decided to keep the key ECB interest rates unchanged. the information that has become available since January, broadly confirms our previous assessment. Inflation is likely to stay above 2 percent for several months to come before declining to below 2 percent. Available survey indicators confirms some tentative signs of stabilization in economic activity at low level around the turn of the year. The economic outlook remains subject to high uncertainty and downside risks," said Draghi.

Draghi rejected the idea that the central bank assume losses on the Greek debt it holds. But he said the bank could return some of its profits on the Greek bonds to the countries supporting the institution.

Some information for this report was provided by AP and AFP.

Deal Reached in Massive US Foreclosure Case

VOA News — Thu, 9 Feb 2012 16:45:16 GMT

U.S. President Barack Obama said Thursday that a $25 billion deal with banks is a "major step" toward reviving the troubled housing market, and turns the page on an era of "recklessness."

Banks have agreed to cut the amount of money some homeowners owe, allow others to refinance their loans at lower interest rates, and compensate still other people who suffered wrongful foreclosures.

It took top federal and state legal officials 16 months of haggling with the five biggest banks to get the agreement. It resolves widespread civil complaints about the way lenders handled thousands of foreclosures growing out of the financial crisis.

The scandal erupted when it was learned that many companies that process foreclosures failed to verify documents, had employees sign many documents they had not read, or used fake signatures to speed foreclosures.

A foreclosed home tends to reduce the appeal and the price of neighboring homes, which is one of the reasons that this key part of the U.S. economy has been so slow to recover from the financial crisis.

The banks involved are: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial.

Some information for this report was provided by AP.

BP Reports 2011 Gains As It Braces for Oil Spill Trial

VOA News — Tue, 7 Feb 2012 18:39:17 GMT

British oil giant BP says it made nearly $40 billion in profits last year even as it prepares for the opening of a massive trial later this month about damages that resulted from the company's 2010 oil rig explosion off the southern U.S. coastline.

With higher oil prices through much of last year, BP chief executive Bob Dudley said Tuesday the firm's revenues are increasing and it was able to erase nearly $4 billion in 2010 losses. BP raised the dividend it pays stockholders by 14 percent.

An oil rig operated by BP and its corporate partners exploded in April 2010 in the Gulf of Mexico. Eleven workers were killed and nearly five million barrels of oil spewed into the waters over a three-month period before the well was capped. It was the worst-ever offshore oil spill in the United States and the company now says it expects the damages from the accident to total $43 billion.

BP faces about 600 civil lawsuits brought by individuals and companies damaged as the oil spread in the gulf, and from the U.S. government, which says the company violated the country's environmental regulations. A combined trial is set to start February 27 in New Orleans, Louisiana, a major city near where the spill occurred.

BP's Dudley said the firm remains willing to settle the lawsuits "on fair and reasonable terms," but that if it cannot, it is "preparing vigorously for trial."

Some information for this report was provided by AP, AFP and Reuters.

Greek Police Clash with Austerity Protesters

VOA News — Tue, 7 Feb 2012 16:42:51 GMT

Greek police clashed Tuesday with some of the thousands of striking workers in Athens protesting the latest austerity measures the government is seeking to impose to meet the demands of the country's international creditors.

Some demonstrators charged the steps of parliament and threw rocks at police, who fired tear gas at the protesters and hit some of them with their batons. A handful of protesters burned a German flag and a Nazi flag in protest of the role Germany, Europe's biggest economic power, has played in demanding Greek economic reforms. The planned day-long general strike, the second this year, disrupted transportation services, closed government services and schools and shut shops.

The protest came as government officials were set to meet later in the day to try again to reach agreement on several austerity measures sought by the country's creditors.

The international lenders have demanded that Greece's three fractious political parties jointly agree to impose new budget cuts. The lenders have said they fear that if there is no uniform consensus, the winner of planned national elections this spring could renege on spending reductions.

Greece said late Monday it would abolish 15,000 government jobs this year, while it is still considering a steep cut in the country's minimum wage and other changes.

The country's main unions and employers have rejected government plans for more wage cuts, saying they have already sustained significant losses with earlier spending cuts and tax increases.

Despite weeks of negotiations, Greece has been unable to complete an agreement with large international financial institutions to cut $130 billion of the country's debt, half the amount it owes them. In addition, the Athens government is seeking to work out details of a new $170 billion bailout, its second in two years, from the European Union, the European Central Bank and the International Monetary Fund.

Greece says it needs the debt relief and new funding to avoid defaulting next month on $19 billion of its financial obligations, something analysts say could trigger a worldwide recession. Caretaker Prime Minister Lucas Papademos met through much of the early hours of Tuesday with EU and IMF lenders about the perilous financial condition of Greece, now in its fifth straight year of recession with high unemployment.

Some information for this report was provided by AP, AFP and Reuters.

Norway, India At Odds Over Multibillion Telecom Deal

Anjana Pasricha — Tue, 7 Feb 2012 14:59:06 GMT

Norway has raised concern with the Indian government about its multibillion-dollar investment in the country's telecommunication sector, after India’s Supreme Court canceled licenses of mobile phone operators, including a Norwegian firm, citing irregularities in the licensing process.

On Tuesday, Norway’s Information Technology Minister Rigmor Aasrud met her Indian counterpart, Kapil Sibal, in New Delhi to stress the need to protect Oslo-based Telenor’s nearly $3 billion investment in India’s telecom sector.

“We have mentioned the Telenor case. We had fruitful discussion,” Aarud said.

Telenor was one of the overseas companies which made a deal with a domestic company to enter India’s fast growing mobile phone sector in 2009, after India liberalized rules for foreign investors.

But these investors are worried after a Supreme Court judgment last week scrapped 122 telecom permits issued by the government in 2008 because they were supposedly “under-priced and rigged.”

Telecom licenses lie at the heart of India’s biggest corruption scandal. They were awarded in a process that apparently favored some domestic companies. Some of the original buyers later sold them at hefty profits to foreign investors such as Telenor, Gulf-based Etisalat and Russia’s Sistema.

Government auditors estimate that the country lost $40 billion because of the flawed auction process.

Companies like Telenor have protested, saying they have been “unfairly harmed”, and asking why would foreigners invest in India if they could not trust the rules and conditions.

In New Delhi, Rishi Sahai at consulting firm Cogense Advisors said the recent judgment has raised new uncertainty about India as an investment destination. Foreign investors eyeing the country will worry that investments made following all rules and regulations could be at risk for no fault of theirs, he said.

“The issue is that these are sovereign licenses and if a court can come and change decisions three years down the line, then what happens to investments already made? And people are going to be especially more concerned in sectors such as aviation and insurance, which are opening up, as to whether courts in this country can come and overrule sovereign licenses. So there is a level of skepticism and the government needs to take some steps to protect foreign investments for these companies,” Sahai said.

The Supreme Court has ordered that new telecom licenses to replace those scrapped should be sold in an open auction and not on a first-come-first-serve basis as before.

Some analysts feel that, in the long term, the Supreme Court judgment will ensure that the investment climate will improve by guaranteeing the government follows a more transparent path.

N. Bhanumurthy, a senior economist with the National Institute for Public Finance and Policy in New Delhi, calls it a "one-off case."

“It is one way of cleaning the overall governance system," he said. "It needs to be taken in a very positive way.”

Telenor, which claims 36 million customers in India, has said it may bid for new licenses, but could also consider exiting as an option.

Greece to Cut Government Jobs as Debt Pressure Intensifies

VOA News — Mon, 6 Feb 2012 17:05:39 GMT

Greece has agreed to cut 15,000 jobs from its government workforce amid growing international pressure to quickly complete deals to cut its debt and impose more unpopular austerity measures.

The Athens government announced the job cuts Monday, hours after German Chancellor Angela Merkel and French President Nicolas Sarkozy sternly warned it. The German and French leaders said Greece would not get a second $171-billion bailout to avert a default on its loans next month if it did not complete its negotiations with private creditors to cut in half the amount it owes them, and cut its government spending.

Greece has been negotiating for weeks with international financial institutions to cut $131 billion of its debt, but has been unable to complete an agreement. At the same time, the Greek government has encountered resistance at home to demands by the European Union, the European Central Bank and the International Monetary Fund that it cut the wages of Greek workers, before securing the new bailout, the country's second in two years.

Watch related video of Papademos after emegency meeting

Merkel said the public lenders' demands "are on the table. Something needs to happen quickly."

Greece's creditors say the wage cuts are necessary to make it more competitive with its trading partners. But Greek unions and employers have resisted the cuts, with the unions calling for a 24-hour strike on Tuesday to show their opposition. One union leader, Stathis Anestis, said European leaders have no right to undermine labor agreements.

"Collective bargaining agreements in the private sector is a European right, and Europe is obligated to respect it, something that has been done up to now," said Anestis. "That is what social agreements are based on. It is the first time there is intervention - rather it is the first time a demand is made for intervention - to annul collective wage agreements, to annul social dialogue, to annul agreements among social partners."

Caretaker Greek Prime Minister Lucas Papademos has been attempting to get the country's socialist, conservative and far-right political parties to agree to support the new austerity measures. International lenders have demanded the broad agreement among Greece's fractious parties, saying they are fearful that after a national Greek election in the coming months, lawmakers would renege on government spending cuts.

Political leaders had planned further negotiations Monday, but postponed the talks until Tuesday.

Greece's precarious financial state was underscored by a new EU report. The EU said that Greece, among the 17 countries using the common euro currency, has the highest governmental debt level compared to its economic output, and that its ratio is worsening.

The EU said the Greek debt level was at 159 percent of its gross domestic product in the July-to-September period last year, up more than 4 percentage points from the previous three months. By contrast, the debt ratio for Germany, Europe's strongest economy, was just under 82 percent of its national economy in the third quarter last year, and 10 other eurozone countries recorded even lower figures.

Some information for this report was provided by AP, AFP and Reuters.

US Economy Remains Focus of Presidential Race

Michael Bowman — Sun, 5 Feb 2012 23:48:50 GMT

While the White House hails data showing an improved U.S. labor market, Republican presidential contenders continue to blast President Barack Obama’s economic performance.

It is the central political issue of 2012: the U.S. economy, which suffered the worst recession of the post-World War II era in 2007 and 2008, and has endured an anemic recovery since. But the economic landscape may be changing. U.S. unemployment has fallen for four consecutive months, down from 9 percent in September to 8.3 percent in January.

While Wall Street rallied Friday on the latest jobs report, President Obama highlighted the good news. “In January, American businesses added another 257,000 jobs. The unemployment rate came down, because more people found work. And altogether, we have added 3.7-million jobs over the last 23 months," he said.

The response from Republicans vying to challenge the president in the November election? Too little too late to alter what they see as Mr. Obama’s failed economic stewardship. Addressing supporters after his caucus victory Saturday in Nevada, former Massachusetts governor Mitt Romney pointed out the Obama administration initially aimed to keep the unemployment rate at 8 percent or less.

“This week he has been trying to take a bow for 8.3-percent unemployment. Not so fast, Mr. President. This is the 36th straight month with unemployment above the red line your own administration drew," he said.

Former House Speaker Newt Gingrich had a similar line of attack on NBC’s "Meet The Press" program. “Unemployment has dropped. Well, it has dropped. You know why? Because over 4 percent of the people who would be unemployed have quit looking for work. If we had the same participation rate we had a couple years ago, we would be at 12- or 13-percent unemployment," he said.

For President Obama, a fine line to walk: trumpeting good news while acknowledging the need for further improvement. “There are still far too many Americans who need a job or need a job that pays better than the one they have now. But the economy is growing stronger. The recovery is speeding up. And we have got to do everything in our power to keep it going," he said.

Polling firms report modest improvements in President Obama’s approval ratings that coincide with recent positive economic data.

Greece on 'Knife Edge' to Agree on Bailout

VOA News — Sun, 5 Feb 2012 14:00:52 GMT

Greek Prime Minister Lucas Papademos continues emergency talks with Greek party leaders Monday on more spending cuts, with his finance minister warning that the country is "on a knife edge" (brink of disaster).

The government and parliament must agree on a new austerity plan if it is to get another crucial bailout from the European Union and International Monetary Fund.

A day of talks between Greek officials and EU and IMF debt inspectors ended Sunday with no breakthroughs.

The IMF and EU are demanding Greece make more spending cuts and economic reforms before they agree to another $169-billion rescue package. This would include more pay cuts for Greek workers.

Conservative New Democracy Party leader Antonis Samaras is urging the government to reject the demands, saying the country cannot bear any more austerity measures.

Greece is also negotiating with private lenders and bondholders on a plan to swap old bonds for new ones at a considerably lower interest rate, saving Greece $130 billion in debt. The country faces default when the old bonds come due next month.

Some information for this report was provided by AP, AFP and Reuters.

President Obama Urges Congress to Help Homeowners

VOA News — Sat, 4 Feb 2012 13:30:43 GMT

U.S. President Barack Obama is urging Congress to pass a housing plan he says will save qualifying homeowners thousands of dollars each year on their mortgage.

During his weekly address Saturday, Mr. Obama said the housing crisis has been one of the largest drags on the recovery from the recession. He says passage of his housing plan will help some homeowners refinance their loans at lower interest rates and save an average of $300 per month.

President Obama says the program can be paid for by requiring larger financial companies to pay additional fees.

President Obama is rallying citizens to urge their congressional representatives to back his plan.

During the Republican's weekly address, Representative Pat Meehan (Pennsylvania) said the Republican-controlled House of Representatives has passed an extension to the payroll tax cut, but the Senate, controlled by Mr. Obama's Democratic Party allies, has not.

Meehan also said cutting government regulation of energy industries could cut fuel prices and create jobs.

January Surge in US Hiring Lowers Unemployment to 8.3 Percent

Mil Arcega — Fri, 3 Feb 2012 17:10:22 GMT

There's more evidence that the U.S. economy is improving. The U.S. Labor Department says private sector companies added 243,000 jobs in January, pushing the unemployment rate down to 8.3 percent from 8.5 in December. The latest reading lifted the Dow Jones Industrial Average to its highest close since before the 2008 financial crisis, and helped lift investor confidence around the world.

For job seekers - a welcome ray of hope. The job market is improving and unemployment is at its lowest level in nearly three years.

"Job growth was widespread in the private sector in January, with the largest gains occurring in professional and business services, leisure and hospitality and manufacturing," said John Galvin, acting commissioner at the Bureau of Labor Statistics.

The number of jobs created last year also was revised higher - up 60,000 in November and December.

Reaction was immediate on Wall Street. Just five minutes after the opening bell, the Dow Jones average was up more than one percent.

Economist Stewart Hoffman said the jobless rate has fallen for five consecutive months.

"So when you get consistent decline in the unemployment rate and three out of the last five months job growth have topped 200,000, I think you're at the self-sustaining sort of reinforcing positive with this number and the revisions," said Hoffman.

Kicking off a new jobs initiative for military veterans on Friday, President Barack Obama welcomed the strong jobs report, but warned against complacency.

"The economy is growing stronger. The recovery is speeding up. And we've got to do everything in our power to keep it going," said the president.

"It's been 35 months of unemployment above 8 percent," said Republican presidential contender and former Massachusetts Governor Mitt Romney.

With Republican presidential hopefuls arguing that the president's economic policies have failed, Yahoo economic editor Daniel Gross said Republicans are likely to push back.

"The only people disheartened by this report were probably Republican campaign consultants," said Gross.

That pushback was evident at a joint economic hearing Friday as Republican Congressman Kevin Brady clashed with Democratic Congresswoman Carolyn Maloney.

"For 23 months we've been gaining jobs in this country, we should be pleased with this news," said Maloney.

"Madame Chairman, my only point, I think, ours is, we do think these numbers are encouraging. Our concern is the unemployment rate is going down because people are giving up," said Brady.

Republicans argue that counting those who have given up looking for work, and those who have been unemployed more than a year, the actual unemployment rate is closer to 15 percent.

Obama: Economic Recovery Is Speeding Up

Kent Klein — Fri, 3 Feb 2012 19:49:37 GMT

President Barack Obama Friday welcomed news that the U.S. unemployment rate dropped again in January. The president again pressed Congress to support his economic proposals.

Mr. Obama is encouraged by the better-than-expected numbers, which show 243,000 new jobs and a jobless rate that eased to 8.3 percent in January from 8.5 percent in December.

“These numbers will go up and down in the coming months, and there are still far too many Americans who need a job, or need a job that pays better than the one they have now. But the economy is growing stronger. The recovery is speeding up," said President Obama.

The chairman of the president’s Council of Economic Advisers, Alan Krueger, called the job gains in recent months “an encouraging sign.”

Mr. Obama, speaking at a fire station in Arlington, Virginia, near Washington, urged lawmakers to pass a payroll tax cut extension “without drama or delay.”

“So I want to send a clear message to Congress: Do not slow down the recovery that we are on," said Obama. "Do not muck it up. Keep it moving in the right direction.”

While the administration is cautiously embracing the improved jobs figures, top Republicans say they would do better.

The leading Republican presidential candidate, Mitt Romney, said Mr. Obama’s policies have prevented a true economic recovery.

A statement from the number-two Republican in the House of Representatives, Majority Leader Eric Cantor, said “We can do more.”

As part of his economic proposals, President Obama said Friday he will do all he can to provide new jobs and opportunities to returning military veterans.

“They have managed convoys and moved tons of equipment over dangerous terrain," he said. "They have tracked millions of dollars of military assets. They have handled pieces of equipment that are worth tens of millions of dollars. They do incredible work.”

The president said more than 3 million veterans have returned to civilian life in the past 10 years, and hundreds of thousands more are expected home as the war in Afghanistan winds down.

US Central Bank Chief: Deficits 'Unsustainable'

VOA News — Thu, 2 Feb 2012 19:29:30 GMT

The U.S. central bank chief says the government's huge annual budget deficits are "unsustainable" and pose "serious economic consequences" for the country.

Federal Reserve Chairman Ben Bernanke told a congressional committee Thursday that lawmakers need to make it a "top priority" to make certain the U.S. debt, now more than $15 trillion and growing daily, is at least stable compared to the national income, if not declining. The country's annual economic output now about equals the debt level.

The U.S. currently pays very low interest rates on the money it borrows to help operate its government, even after the financial services firm Standard & Poor's downgraded the country's top-rated AAA credit rating last year. But Bernanke warned that interest rates "can sour quickly" if investors lose confidence in the government's ability to handle its financial policies. That could markedly increase the government's borrowing costs.

The U.S. government said this week it expects to run a $1.1 trillion deficit for the year ending in September, a drop from 2011, but the fourth straight year deficits have totaled more than $1 trillion. President Barack Obama and Congress embarked last year on a deficit-cutting plan, but much of the savings has yet to take effect.

Bernanke said that over time the government's increasing debt would inhibit the growth of the country's economy, the world's largest.

The U.S. economy has recovered sluggishly from its 2007 to 2009 recession, the country's worst in seven decades. Bernanke called the U.S. economic growth "frustratingly slow," and said the pace has left the economy "vulnerable to shocks."

U.S. employers have been adding more workers to their payrolls, but not fast enough to substantially reduce the unemployment rate. It was 8.5 percent in December and economists are predicting it will remain at that level when the government releases its January figure on Friday. Companies added 200,000 jobs in December, a figure analysts say perhaps fell to 155,000 last month. About 13 million U.S. workers are unemployed.

The government said the number of workers making their initial claims for unemployment benefits dropped 12,000 last week to 367,000. The weekly number has fluctuated somewhat recently, but over several months has dropped. Economists say that when it consistently falls below 375,000, it is an indication that more hiring is occurring and the jobless rate is likely to go down.

Some information for this report was provided by AP.

Uganda Government Defies Parliament, Signs Oil Agreements

Douglas Mpuga — Fri, 3 Feb 2012 21:59:42 GMT

Uganda has signed two oil production agreements with an Anglo-Irish firm, Tullow oil. The agreements allow the company to finalize a long-delayed $2.9 billion asset sale to France’s Total and China’s China National Offshore Oil Company (CNOOC).

As a result of this signing, according to a Uganda government official, Tullow will finalize arrangements with CNOOC and Total for completion of a "farm-down," which will partly divest its assets in Uganda to the two oil companies as agreed.

The government says that Tallow has met all the government’s demands, including agreeing to an oil refinery being built in Uganda, and a potential for a pipeline to export crude oil if more deposits are discovered.

The agreements have been signed amid protests from members of parliament who last year passed a resolution stopping the signing of oil contracts without relevant oil laws in place. In October last year, Parliament gave government 30 days to table these laws, but so far none has been brought before parliament.

“I am shocked and surprised,” said Theodore Ssekikubo, member of parliament for Lwemiyaga County. “This is a matter that parliament will have to consider.”

He said Parliament still has options and will decide, in due course, what action to take.
The options, he said, are Parliament looking at the legality of this matter or deciding to resort to the courts of law. “Certainly this [action by government] goes against the spirit of the parliamentary resolution. It is a challenge to the Parliament of Uganda; it’s a challenge to the people of Uganda.”

Ssekikubo also questioned the legality of Tallow’s interests in Uganda’s oil, saying the memorandum of understanding the oil company signed with government is illegal, and should not have been a basis for entering into new contracts. “What they claim to have acquired is not theirs in the first place.”

He said many members of Parliament are determined to defend the interests of the people of Uganda. “There is no way you can justify the signing of these agreements before resolving the issues raised by Parliament.”

Even Tallow Oil, he added, knows its claim of ownership is being challenged in court. “I think the whole transaction is under suspicious circumstances.”

There are five running Production Sharing Agreements, the most important being the $2.9 billion transaction in which Tullow is to bring on board Total and CNOOC to jointly undertake production, transportation and distribution activities.

Last year Parliament was recalled from recess to debate these (hitherto) secretive oil deals. During the debate, Prime Minister Amama Mbabazi, Foreign Affairs Minister Sam Kutesa and Internal Affairs [former Energy] Minister Hillary Onek were named as allegedly having taken bribes from oil companies.

Greece Likely to Need Another $20 Billion to Cut Debt

VOA News — Thu, 2 Feb 2012 21:53:05 GMT

Financial experts are concluding that Greece may need another $20 billion cash infusion even if it eventually completes contentious negotiations with its private creditors to cut in half the money it owes them.

For weeks now, the Athens government has been attempting to finish talks with 32 large financial institutions to trim $130 billion of its debt. The goal is to cut Greece's debt so that over the coming years it would total no more than 120 percent of the country's annual economic output.

But European officials and the International Monetary Fund reached the conclusion this week that even as the private creditors assume losses that could total more than two-thirds of the amount they lent Greece, it still will not be enough to put the country on sound economic footing. News agencies Thursday quoted officials as saying the prospective shortfall is $20 billion.

Now the question is how the gap could be covered. Some European officials have suggested that the European Central Bank, or the 16 nations in the eurozone currency bloc other than Greece, should contribute toward a solution. But Europe's economic powerhouse, Germany, is balking. German Finance Minister Wolfgang Schaeuble said there is "no need" for further public assistance for Greece.

Aside from the deal with its private creditors, Greece is faced with imposing more unpopular austerity measures, even as it seeks a new $169 billion bailout, its second in two years. Athens says it will default on $19 billion in bonds in March without the new funding.

The head of the Greek Orthodox Church, Archbishop Ieronymos, urged the Greek government Thursday to reject what he described as "foreigners' blackmail and fatal recipes" for solving the country's economic woes. In a letter to Greek Prime Minister Lucas Papademos, the cleric said rising poverty in the county could trigger a "social explosion."

Meanwhile, China says it is considering increasing its investment in Europe's rescue funds for debt-ridden countries, and possibly providing aid through the International Monetary Fund.

After meeting with German Chancellor Angela Merkel in Beijing, Premier Wen Jiabao said China could invest in Europe's temporary bailout fund, or the new $656 billion permanent fund set to start in July.

Wen said it is "very urgent and important" to resolve Europe's two-year governmental debt crisis. He said China supports Europe's efforts and that it has confidence in the continent's economy.

China has $3.2 trillion in foreign exchange reserves, but Wen made no explicit commitments to provide more aid.

Merkel said the 17 countries in the European bloc that use the euro currency have to be disciplined in their spending and cannot continue to roll over their current debts without reducing them. She said the eurozone nations must collectively work to protect the euro.

"As a common currency, euro has made the European Union more powerful than before. Germany as a major exporting nation has largely benefited from this currency and we will carry out more constructive work within the framework of the eurozone and the European Union," said Merkel. "Since we have a common currency, all the member nations should do their homework properly, and move forward with their responsibilities to ensure they are a more reliable member. On the other hand, all the members must help each other because a common currency means we need to make joint efforts to safeguard it. Meanwhile, we need to be more cooperative and creative in making our economic policies and I believe in the future the European nations will stand closer to each other."

The German leader, who oversees Europe's strongest economy, is on a three-day trip to China aimed partly at assuring it that Europe is acting to resolve the debt crisis. European Union leaders earlier this week adopted a plan calling for tighter controls over the spending of individual countries, although Britain and the Czech Republic did not join the other 25 EU nations in approving the pact.

Some information for this report was provided by AFP.

Asia Land Rights Activists Protest World Bank

Daniel Schearf — Thu, 2 Feb 2012 22:08:13 GMT

About 200 people from across Asia protested Thursday outside a shopping complex in front of the World Bank office in Bangkok.

The demonstrators, primarily land rights activists, say the global lender’s principles of responsible agricultural investment, known as RAI, fail in their stated objective to protect rights of small farmers.

Protest leaders told the Foreign Correspondents Club of Thailand the principles indirectly endorse land grabs by speculators because they are weak and fail to question ownership rights.

Jeff Wong, anti-eviction coordinator for LOCOA, a group of female community leaders supporting slum dwellers in India, Indonesia, and the Philippines, says the principles encourage consolidation and development of rural land.

"In effect, the principles of responsible agricultural investment, as it turns out, end up giving a green light to investors who wish to buy land in rural areas causing great displacement," says Wong, explaining that, subsequently, many small farmers are forced to look for work in cities where too many end up in poverty. "[It] often takes [the] form of land-grabbing involving violence, corruption, collusion with local government, and so on."

The World Bank worked with other United Nations agencies to develop the seven principles of investment, which include respecting land and resource rights.

They also say investments should ensure food security, transparency, good governance, consultation and participation, and sustainability.

However, the principles are voluntarily enforced, and activists say that makes it easy for small farmers to be pushed around.

Rebecca Leonard of the activist group Focus on the Global South says there is not enough support for farmers who want to keep their land.

"It does not consider the interests and the long-term struggles of the peasants and farmers movements around the world for agrarian reform," she says. "It does not consider the need that has been expressed to redistribute land and to reorganize the way that land is managed in the countries."

The protesters presented their petition to World Bank representatives.

Salman Zaheer, the World Bank’s program director for regional integration in South Asia, says the bank’s policy was aimed at protecting small landholders and addressing unequal negotiations between farmers and larger industry.

"So, it’s interesting that they are actually complaining exactly about that," said Zaheer. "So it’s important for us to listen to their concerns, because obviously the intention of the policy was exactly to address their concerns. So, if their concerns still remain, or [are] even aggravated, then we certainly need to hear and understand what their concerns are specifically."

Zaheer said they agreed to hold a formal meeting with activist leaders this month to discuss their complaints and see how they might be addressed or incorporated into the World Bank principles.

Indian Supreme Court Telecom Decision Deals Blow to Government

Kurt Achin — Thu, 2 Feb 2012 20:17:16 GMT

In a serious blow to India's ruling Congress party, the country's Supreme Court has ordered Thursday the cancellation of 122 telecommunications licenses at the heart of what many see as one of the biggest scandals to hit the country. The Indian government issued the licenses to mobile phone companies in 2008.

India's former Telecommunications Minister A. Raja, who brokered the sale of those licenses to eight different companies, is in jail. He faces accusations of taking bribes and selling the licenses for less than market value, possibly costing the government up to $40 billion in lost revenue.

Prashant Bhushan, a co-petitioner in the case to have the licenses revoked, hails the Supreme Court decision as "historic."

"Now these companies which were the beneficiaries of these illegal licenses given in this dishonest manner will have to effectively refund the benefit that they got out of these illegal licenses," said Bhushan.

The court's view that the licenses were granted in an "arbitrary and unconstitutional manner" is the latest in a string of public embarrassments for India's ruling Congress Party. The 2G mobile licenses scandal has become the driving force behind accusations that Prime Minister Manmohan Singh has been unable or unwilling to contain corruption.

"The system has shown its strength," said Arun Jaitley, a leader of India's main political opposition, the Bharatiya Janata Party. "The system has now hit back. and while hitting back, the kind of repercussions are going to be earth shaking."

Political opponents of Prime Minister Singh are calling for the resignation of current Telecommunications Minister Kapil Sibal, as well as Home Minister P. Chidambaram, who was finance minister when the licenses were sold.

Sibal has continually defended Chidambaram and the prime minister, saying his predecessor in the telecommunications ministry was acting on his own.

"The prime minister was in no way responsible. Nor was the finance minister in any way responsible for whatever happened and whatever was done by the then-minister," said Sibal.

Political analyst Prem Shankar Jha says Prime Minister Singh needs to respond personally to Thursday's verdict.

"The prime minister cannot shift this burden. His reaction must be clear, sharp and immediate. This is what has been lacking throughout the last seven and a half years," said Jha.

Indian telecommunications officials say Thursday's Supreme Court decision is only likely to affect about five percent of the country's mobile phone users. New licenses are to be auctioned in four months.

Facebook To Raise $5 Billion From Initial Public Offering

Mil Arcega — Thu, 2 Feb 2012 02:05:34 GMT

Facebook is going public. The world's largest social media network filed documents late Wednesday for its much anticipated initial public offering (IPO). Analysts say the initial offer will raise about $5 billion in the first go around, making it one of the biggest in recent history. We take a look at how much the company is worth and what that could mean for investors.

With more than 800 million users worldwide, Facebook is second only to Google as the most visited website on the Internet.
But with plans to raise an initial $5 billion from its first IPO, analysts say the company is poised to become one of the richest.

Equity analyst Anupam Palit at Greencrest Capital says when it comes to social media, nothing even comes close to Facebook.

"It is the biggest company in this space and we believe what makes it very unique from every other company that went public last year in this space is that it is very, very profitable," said Palit.

How profitable? Early estimates suggest the social network is worth between $50 to $100 billion. David Kirkpatrick is author of The Facebook Effect:

"Will Facebook's IPO be the biggest IPO in American history, probably not, but it will certainly be by far the biggest Internet or technology IPO we've ever seen," said Kirkpatrick.

And when ticker symbol FB starts trading a few months from now, it could make Facebook founder Mark Zuckerberg - at 27 - one of the world's youngest billionaires.

Institutional investors are likely to get the first shot at buying Facebook stock. But asset manager Jim O'Shaugnessy says that's not such a bad thing.

"Many IPO's come out being very, very overvalued because they get so hyped up and investors are so taken in by the story that they're willing to pay any amount just to be able to get into the stock," said O'Shaugnessy. "That generally translates to being very overvalued. So we generally tell investors that they should wait, probably a good full year before they look at buying stock that was recently IPO'd."

Market performance for Internet IPO's often does not live up to the hype. The most recent - LinkedIn, Groupon and Zynga, all saw share prices plummet as much as 25 percent after going public.

There were similar doubts about Google when it went public in 2004. Back then Google stock sold for $84. Today it's worth almost $600 a share.

Despite the risks, analysts say there's no shortage of investors willing to take a chance on the next big thing.

Obama Proposes More Help for Troubled US Homeowners

Kent Klein — Wed, 1 Feb 2012 22:21:20 GMT

President Barack Obama has unveiled a plan to boost the economy by helping some homeowners refinance their mortgages. The initiative, announced Wednesday, would build on an earlier White House program.

Declining housing prices and widespread foreclosures are among the biggest drags on the U.S. economic recovery.

President Obama went to a neighborhood near Washington where home values have dropped sharply, to lay out his proposal to fight the problem.

“I am sending Congress a plan that will give every responsible homeowner in America the chance to save about $3,000 a year on their mortgage by refinancing at historically low rates," said President Obama.

The plan would expand a program that was intended for at least four-million homeowners to refinance their mortgages at lower rates, but reached only about one million.

Plunging home values have left an estimated 11 million Americans owing more than their homes are worth, according to one real-estate data firm. That amounts to one out of every four homeowners with a mortgage.

President Obama says the problem has been deeper than many experts and officials expected, and that it will not be solved quickly.

“It is going to take more time than any of us would like for the housing market to fully recover from this crisis," said Obama. "This was a big bubble. And when it burst, it had a big effect. Home prices started a pretty steady decline about five years ago.”

Some economists say Mr. Obama’s plan will not work. Cato Institute Financial Regulation Studies Director Mark Calabria says reducing mortgage rates helps the homeowner, but puts less money into the economy.

“But I am also lowering, at the same time, the interest payment that goes to the bondholder, the investor, whether it is a retirement fund or a pension fund," said Calabria. "So you are making one person wealthier with higher disposable income, but you are doing it at the same time that you are making another corresponding party poorer by the same amount.”

Calabria also says the initiative does nothing to address the top cause of foreclosure, which is job loss by mortgage holders.

The new program would cost between $5 billion and $10 billion. It would be paid for by a fee on large banks, a proposal Congress has previously rejected.

EU Blocks NY-Frankfurt Stock Exchange Merger

VOA News — Wed, 1 Feb 2012 15:43:39 GMT

European Union regulators have blocked the planned merger of the New York and Frankfurt stock exchanges, a $10 billion deal that would have created the world's largest financial market operator.

The EU's Competition Commissioner, Joaquin Almunia, said Wednesday the proposed deal between the owners of the New York Stock Exchange and the Deutsche Boerse exchange in Frankfurt was rejected because it would have created an unfair, near-monopoly in the trading of European derivatives. They are complex financial securities in which investors bet on the fluctuations in the value of such underlying assets as stocks, commodities and currencies.

Almunia said the new, combined exchange would have controlled 90 percent of the European derivative trading, which he said was not acceptable. He described trading in such securities as "at the heart of the financial system" and that it was crucial for the European economy that there be competition for the transactions.

The Wall Street exchange, often deemed the face of American capitalism, and Deutsche Boerse had announced the planned merger with great fanfare nearly a year ago, saying they needed to combine to save money and to offer their financial securities to a wider range of investors.

Deutsche Boerse's chief executive, Reto Francioni, called the EU's rejection of the merger "a black day for Europe and its global competitiveness on financial markets."

The operator of the New York exchange, NYSE Euronext, and the Frankfurt exchange said they are discussing how to call off the proposed merger.

Financial analysts say the New York exchange is now likely to look for merger deals with smaller exchanges.

Some stock exchange mergers throughout the world have won regulatory approval. But several have been rejected as well, for the same reason as in the New York-Frankfurt case, that the combination would limit competition in the trading of securities.

Some information for this report was provided by AP, AFP and Reuters.

Strong Reaction to Reports on Chinese Manufacturing Practices

VOA News — Wed, 1 Feb 2012 09:31:36 GMT

Recent reports charging harsh working conditions in manufacturing plants in China are prompting Chinese Internet users to examine the nation's labor laws and the way they are implemented.

Two articles last week in The New York Times looked at U.S. technology giant Apple's supply chain in China. The reports detailed harsh working conditions at plants operated by Foxconn, the Taiwanese company that assembles most of Apple's products.

The Times described "onerous work environments and serious, sometimes deadly safety problems." It said employees work excessive overtime, in some cases seven days a week, and live in crowded dormitories.

Foxconn denies such conditions exist, and Apple chief executive Tim Cook has circulated an e-mail to employees saying any suggestion the company is uncaring is "patently false." The company did not return phone calls from VOA's Mandarin service.

The New York Times reports also quoted a former Apple executive saying the flexibility and diligence of Chinese workers makes it far more efficient for the company to conduct its manufacturing in China than in the United States.

Beijing-based financial magazine Caixin posted Chinese translations of the two reports on its website. From there, they circulated widely online, prompting hundreds of reader comments.

One anonymous reader said he was speechless to read that companies are drawn to China because it is easier to exploit Chinese laborers. “Devoid of conscience has suddenly become a point of superiority,” he wrote.

But Liu Mengqi, a professor at the Guangdong Academy of Social Science, argues that pressure from foreign companies has helped to improve Chinese working conditions, especially in the southern and coastal areas where the foreign-owned plants are concentrated.

“Standards like minimum wage, government inspections, and companies' auditing processes have increased dramatically,” says Liu, who advises the government and industries on corporate social responsibility. She adds that workers have become more aware of their rights.

“Now, the goal is to create a system that protects the rights of workers indiscriminately, regardless what sector or type of company they work in,” Liu says.

Lee Kai-fu, a former head of Google China, acknowledges Apple's efforts on behalf of its workers but says the company should do more.

“On one side [Apple] incessantly requests that suppliers provide a safe environment for the workers; on the other, it asks suppliers for the lowest price,” Lee writes on his microblog account, which is followed by more than 30 million people. He says the company should use more of its profits in “bettering the work environment, and save laborers.”

Since 2008, China has adopted new labor legislation, which -- on paper -- requires employers to provide unprecedented protection to their workers. But labor rights groups say implementation of the law has been slow.

Chen Baizhu, professor of economics at the USC Marshall School of Business and senior researcher at the Chinese Academy of Social Science, says the new law for the first time enables workers to sue their employers for contract violations. “The atmosphere in China now is that the government is leaning more than it did before towards labor [protection],” he says.

Chen says Chinese officials want the nation's economy to move toward better paying and more sophisticated jobs, a drive which should improve working conditions.

“If you look at the many local Chinese governments, what they have been doing in the past couple of years, is that they have been raising costs, enormously, to drive out labor intensive industries from their regions,” Chen says.

Chinese workers themselves may eventually tire of exhausting and repetitive factory work.

One 28-year-old Internet user said that after working in a factory for six years, he decided to open up a small business.

“The reason is that I saw no future there,” he says, advising young people against working in factories for too long. “It is most likely going to be a hopeless experience,” he says.

Euro Jobs Data Worsens, Dampens Summit Optimism

Dominic Laurie — Tue, 31 Jan 2012 19:42:39 GMT

Unemployment in the eurozone has reached its highest level since the introduction of the European single currency 14 years ago. Twenty percent of Greeks and 23 percent of Spaniards are out of work.

A day after the summit of European heads of state ended with smiles and handshakes, Tuesday's jobs news was a reminder that Europe's economy will get worse before it gets better.

Figures from the EU statistics agency show the number of people out of work in the 17 countries that use the euro rose to a level not seen since the system was introduced in 1999. Sixteen-and-one-half-million people - 10.4 percent of the population - are now out of work.

Jobs and economic growth were at the top of the official agenda Monday at the Brussels summit. The final agreement provided for billions of euros from unused EU funds to go to projects to help unemployed young people.

But Economics Professor Paolo Guerrieri, of the College of Europe in Bruges, Belgium, said the rate will rise even higher this year because of wrong policies chosen by eurozone governments.

"Almost all countries in Europe are following austerity recession policies, so things are going to become worse and worse... We are still in a recession, in minus something for this year, and if you cut demand, if you cut expenditure public and private, the final story is unavoidable," said Guerrieri.

Under the austerity policies, many European countries are cutting spending and raising taxes. And it is Europe's young people who are suffering more than their older, more experienced colleagues. Almost one in two Spaniards and Greeks between the ages of 16 and 24 cannot find work. Many have been without a job for a year or more.

Professor Guerriero is not alone when he says violent protests will become more common if the job market does not improve soon.

"The social situation is still under control. In other words, the protests are still limited to some specific groups. But if the recession is going to become worse and worse, by the second part of the year, I am afraid the social kind of tension is going to increase and become quite difficult to control," said Guerriero.

Job creation needs economic growth, but the countries in the eurozone with the highest unemployment also have big debts to pay off, which will be difficult because their economies are still stagnating or even shrinking. They are not generating enough revenues to shrink their borrowings - let alone provide more money to assist job creation schemes on the scale needed.

US Consumer Confidence Drops

VOA News — Tue, 31 Jan 2012 18:36:17 GMT

U.S. consumer confidence dropped in January. A private research group, the Conference Board, says its monthly survey of consumer sentiment showed people increasingly think jobs are more difficult to find.

The group's closely watched index fell from 65 in December to 61 in the first month of the new year, well below the 90 level signaling a healthy economy.

Economists monitor consumer sentiment as a hint about the future of the national economy, because consumer spending accounts for 70 percent of the U.S. economic output. The the world's largest economy has sluggishly recovered from the recession in 2007 to 2009, but 13-million workers remain unemployed.

Consumer worries about employment prospects may mirror January employment numbers the U.S. government will release Friday. In December, America added 200,000 jobs, but economists are predicting the country only created 125,000 in January.

With 8.5 percent of the workforce unemployed, President Barack Obama called for Congress to quickly pass job-creating measures. He wants to extend tax breaks for small businesses and give new assistance to entrepreneurs who start companies.

While the American economy has advanced slowly, the U.S. government has also struggled to curb its deficit spending. The national debt has ballooned to a record-high of more than $15 trillion, and government officials say the trend is continuing. They projected a $1.1 trillion budget deficit for the year ending in September. That is down from last year's $1.3 trillion figure, but still high by historical standards.

Europe Returns Attention to Greece's Debt Woes

VOA News — Tue, 31 Jan 2012 18:00:33 GMT

After adopting a continent-wide plan to control government spending, European leaders again are focusing on the perilous financial state of Greece.

Greece, despite several weeks of negotiations, has yet to reach an agreement with its private creditors to cut its debt by $130 billion, half the amount the country owes them. European heads of state and the lenders are pressuring Greece to impose more unpopular austerity measures to cut its deficit spending, regardless of who wins upcoming elections in the country.

After the European Union summit in Brussels ended early Tuesday, German Chancellor Angela Merkel said Greece's financial path cannot continue for long.

"Greece is special in the sense that there is a private sector involvement here," said Merkel. "We confirmed this yet again because the debt sustainability of Greece is particularly bad."

Caretaker Greek Prime Minister Lucas Papademos acknowledged the dire straits his country faces.

"We are now at a crossroads. We should all be united in support of the Greek government in order to dig our country out of its hole. It is very important, this sacrifice so far made by the Greek people, in order not to have this sacrifice lost," said Papademos.

Greece is attempting to secure the agreement with 32 large financial institutions on the debt reduction, even as its seeks to win European approval for a new $169-billion bailout, which is its second in two years. Without the new aid package, the Athens government says it will default on repayment of a $19-billion bond in March.

The EU countries, with the exception of Britain and the Czech Republic, adopted a plan to impose tighter controls on the spending of individual governments, with sanctions against those that fail to comply. The EU summit also approved a $661-billion bailout fund, to take effect in July, to cover funding emergencies of debt-ridden countries in the coming years.

Merkel said the agreements show the rest of the world that Europe can act in a unified way to solve the two-year governmental debt crisis, economic turmoil that also has forced Ireland and Portugal to seek international bailouts.

"Now, two months after [the start of talks about the new treaty], we can safely say that we have concluded this negotiating process. It is an important step forwards towards a stability union," said Merkel. "For those that look at Europe from the outside, for those that look at the eurozone from the outside, it's very important that we have shown this degree of commitment."

France Lands Indian Fighter Jet Deal

VOA News — Tue, 31 Jan 2012 16:55:51 GMT

India has decided to buy 126 fighter jets from French firm Dassault in a $11 billion deal that is one of the world's largest arms contracts.

Indian government officials, who spoke on the condition of anonymity, told reporters Tuesday that Dassault was the lowest bidder and beat out the Eurofighter consortium to clinch the contract.

Further negotiations were expected to take place before India finalizes the agreement to buy Dassault's Rafale fighter jet.

French President Nicolas Sarkozy welcomed news of the deal and said the talks would begin "very soon."

James Hardy, Asia Pacific editor of Jane's Defense Weekly, said Dassault has been selected as the preferred bidder, but that "this means nothing" until the contract is signed.

In April, India rejected bids from U.S.-based Boeing and Lockheed Martin, as well as bids from Russian and Swedish firms.

Under the deal, 18 fighter jets will be delivered ready-made, while 108 jets will be built in India.

India is the world's largest arms importer and is spending billions of dollars to upgrade its defense capabilities, with an eye on rival Pakistan to the west and China to the east.

French Defense Minister Gerard Longuet had warned in December that production of the Rafale jet could be stopped if foreign buyers were not found.

Some information for this report was provided by AP, AFP and Reuters.

Investors Reluctant to Capitalize on South African Recovery

Delia Robertson — Tue, 31 Jan 2012 19:11:13 GMT

Both local and international investors have been slow to invest in South Africa since its economy began to recover in 2009 from the global recession.

South African corporate cash deposits are currently about $63 billion, and experts say this is an indication that companies are hesitant to expand current enterprises or invest in new projects. In addition there have been few major international investments in the country in the past three years.

South Africa's economy experienced nearly two decades of uninterrupted economic growth until the global economic crisis in 2008.

Constraints

But experts say problems with capacity - or a lack of it, in the country's rail network and in its electricity supply - have become a drag on further economic expansion, especially in the key mining and manufacturing sectors.

In early 2008, national power company Eskom embarked on a program of rolling blackouts due to unexpected plant failures, and the government was forced to admit it had vetoed earlier proposals to allow the state-owned enterprise to expand its capacity.

Cees Bruggermans, chief economist at First National Bank, says that electricity supply continues to be a major constraint for potential investors.

“We find on the supply side of the economy," said Bruggermans, "we have very specific South African constraints in the manner that electricity capacity is fully utilized, and for the time being it is not really capable of accommodating any additional electricity use, at least for the next two, three years - possibly longer depending on how quickly new capacity comes on stream,” said the economist.

Bruggermans says that these challenges have severely impacted the mining sector, which has not grown in a decade even though the country is resource rich with lots of reserves.

“And [there is] nothing more dramatic I think than our mining industry, which for the past ten years has basically not increased its production levels while worldwide of course we have had an enormous commodity boom."

In contrast, Bruggermans notes, mining interests in countries such as Australia, Chile, Brazil and Canada have expanded their operations substantially.

Labor laws

Some experts also say that labor in South Africa is both more expensive and less productive than that in other countries such as India and China.

Michael Bagraim, president of the Cape Chamber of Commerce and a labor lawyer, says the current labor laws in South Africa are a disincentive for investors.

“I get clients everyday who come to see me about the onerous labor laws and they look at the cost and the productivity of the South African worker and they try and weigh up cost against productivity and it looks like their mathematics are telling us that it is cheaper to invest elsewhere,” he said.

But Bagraim says that there have been recent cases where direct negotiations with unions have benefited companies, such as in the severely-threatened clothing industry.

“A perfect example is the clothing industry, which is dying in Cape Town. The clothing industry has now struck a deal between the manufacturers and COSATU and SACTWU in particular, the South African Clothing and Textile Workers Union, where entry workers would take a 30 percent knock less than their normal minimum wage. That has been agreed and it is put into place for one year, and already we are seeing results,” he said.

Economist Bruggermans says that South Africa is experiencing a slow start to its recovery, but expects that in time, companies will be stimulated toward investment.

India Attracts Record Foreign Investment Despite Slowdown

Anjana Pasricha — Tue, 31 Jan 2012 13:03:17 GMT

India attracted record foreign investment of about $50 billion last year. Despite a slowdown in its economy, India continues to be an attractive global investment hub.

Much of the economic news in India during the last year was not positive. High inflation persisted. The rupee depreciated. The stock market lost nearly a quarter of its value. Growth rates were revised downwards to seven percent.

But foreign investors are still keeping faith with the potential of Asia’s third largest economy. In the first eleven months of 2011, foreign direct investment totaled $50.81 billion, up 13 percent from the previous year, according to a recent report by global consultancy Ernst & Young.

Analysts say India’s expanding middle class and a large and cheap labor force remain attractive for global businesses.

Chief economist at consultancy Crisil in Mumbai, D.K. Joshi says economic turbulence in Western countries means multinationals will have to explore Asian markets for growth. Among these, India’s huge domestic market is clearly one of the main magnets.

"Growth slowdown that is taking place in India needs to be looked at in the global context. If you look at the weak growth prospects in advanced countries, especially Europe and Japan, and tepid recovery in U.S., seven percent growth in India looks very good. So, from a growth differential perspective I think we are still very attractive," said Joshi.

India has been attracting foreign investment in sectors such as automobiles, telecommunication, technology and pharmaceuticals.

But the area where it desperately wants foreign investment is infrastructure - a sector in which India plans to spend one trillion dollars in the next five years. On a recent visit to the United States, Indian Finance Minister Pranab Mukherjee pitched for overseas businesses to help build the highways, ports and power plants which the country needs.

However, analysts point out that many foreign investors have been deterred by lack of governance and slow policy-making in India.

D.H. Pai Panandiker heads the economic think tank, RPG Goenka Foundation in New Delhi. He says foreign investment in India also remains below potential because many sectors of the economy are still closed to outsiders.

"It could have encouraged much more if reforms had come. It would have been a flood of foreign investment. What people are expecting is more liberal reform. Retailing is one area, but in others like insurance, banking… that would make a considerable difference to Indian economy," he said.

The government has been assuring investors that those reforms will come. Although it backtracked on opening the retail sector to overseas investors in December, because of political opposition, the government's top ministers have said that the decision is only on hold and will be implemented.

Investors are wanting to tap the potential of the Indian market and U.S. based companies are the leading investors in India.

On Monday, U.S. based Starbucks Corporation announced plans to open its first store in August, to woo coffee drinkers. It plans to soon expand to 50 outlets. Like other companies, analysts point out that Starbucks wants to expand in the Asia-Pacific region, where growth is accelerating faster than in the United States.

Florida Primary Voters Focused on Economy

Jim Malone — Wed, 1 Feb 2012 16:43:36 GMT

Republican voters in Florida head to the polls Tuesday in a presidential primary election that could prove pivotal in the battle for the Republican presidential nomination. Voters will choose among four candidates on the ballot in Florida, but as VOA National Correspondent Jim Malone found out in Orlando, they are most concerned with the economy this election year.

If you are looking for the good life in central Florida, you could do a lot worse than Winter Park near Orlando. The calendar may say January, but the sunshine draws locals outside for a glass of wine and, in some cases, the taste of a good cigar.

Not far away, Orlando’s skyscrapers beckon as another workday begins with the ever-present presidential campaign as a backdrop. It is a different scene south of the city where abandoned stores and fenced-off lots tell a tale of broken dreams and a local economy still struggling to rebound.

The candidates, including Mitt Romney, talk a lot about the economy in their speeches. Romney blames the president. “He is so detached from reality that he does not know what it’s like here in Florida," he said.

Romney supporter Lucia Mezzancello says there is only one issue for her. “Economy and jobs, one in the same. He is a job creator. His success can filter down," she said.

At the same rally, Bob Bowman worries about Florida’s depressed housing market. “I own three houses here in Florida. All of them are down [in value]. Luckily I do not have a mortgage on any of them, but if I were to try to sell one right now, I would be crying," he said.

Jobs and housing are also a focus for Romney’s main rival, Newt Gingrich.

The economy is clearly on the minds of Florida’s early voters including Van Tran, whose spa business recently closed. “I would like to see the economy turn around and come back the way we were before. I would love to see that and everyone is struggling, fighting for that," he said.

For Kathy McArthur, the issue is jobs. “If we want a stronger America then we can not send jobs overseas. We have to have them here," she said.

After the candidates move on, Florida will once again be left to face an uncertain future where the promise of the good life can often run headlong into a sobering economic reality.

EU Moves on Budget Rules, Works to Promote Growth

Al Pessin — Mon, 30 Jan 2012 17:02:43 GMT

All but two European Union member countries have agreed on new fiscal rules designed to ensure there is not another regional debt crisis, and to regain the confidence of the financial markets.

The 27 European Union heads of government came to Brussels to finalize what is called the “fiscal compact” to avoid future crises, and to find ways to promote economic growth to lift their countries out of the current one.

The accord, which sets strict rules for government budgets, was approved by 25 of the leaders and is to be signed in March. Britain and the Czech Republic did not join the accord. Britain says it would take away too many powers it has to regulate its own economy.

The European leaders have been the targets of much criticism for not doing enough quickly enough to address the debt crisis and accompanying economic downturn. But the president of the European Commission, Jose Manuel Barroso, said the continent's effort is on track.

“We have a strategy, and we are staying the course,” Barroso said.

His colleague, European Council President Herman Van Rompuy, said he is not concerned that the two countries did not join the new agreement, saying the 17 that use the common euro currency and other interested countries must be able to work on their problems, even if the EU is not unanimous on the approach.

“With this treaty we maintain as much as possible the unity of the union, taking into account that those who have a common currency have the possibility to deal with the problems linked to their currency,” Van Rompuy said.

The European leaders also took several steps designed to stimulate economic growth, launching programs to help small businesses and to create jobs, particularly for young people. But they acknowledge the effort is difficult at a time when most countries do not have enough money to directly create jobs or stimulate economic growth.

The head of the Brussels-based research organization Friends of Europe, Giles Merritt, says European leaders and their people still have not faced up to the fundamental challenge before them.

“I don't think they've got very good marks from anybody. We all know Europe has been living beyond its means. There has to be a complete sort of restructuring of European society. We all know that. What we don't know is how to do it," Merritt said.

Merritt says European countries can no longer afford the generous social programs they provide to their people, but spending cuts to reduce or eliminate those programs are hugely unpopular.

Monday's summit coincided with a general strike in Belgium, called to protest that government's austerity plans. Merritt says more such actions, what he called “social sulking,” lie ahead as Europe faces a summer of slow growth or recession.

Meanwhile, one of Europe's most troubled economies, Greece, moved closer to agreement with creditors to restructure its debt, and default on part of it. A deal is expected within days, although Greek leaders rejected calls for EU officials to be given veto power over their future budgeting decisions.

French President Outlines New Economic Plans

VOA News — Sun, 29 Jan 2012 15:30:56 GMT

The embattled president of France, Nicolas Sarkozy, is outlining new economic proposals during a broadcast Sunday that observers say is aimed at boosting his poor standing with voters ahead of April's general election.

Though Sarkozy has yet to announce his candidacy, he is widely expected to face Socialist Francois Hollande, who is polling ahead in public opinion surveys, as he seeks a second six-year term.

Sarkozy's plan calls for an increase in the value-added tax on goods and services while employer's payroll contributions would be cut. The French leader's proposals are aimed at addressing the country's rampant unemployment with nearly three million people are out of work.

The French leader is also proposing a tax on financial transactions in France that he wants other European Union (EU) nations to adopt.

Sarkozy's television appearance comes two weeks after France lost its top triple-A credit rating and just a week after Hollande launched his presidential campaign with a speech attacking what he termed "the world of high finance."

Also Sunday, in Athens, the Greek Prime Minister, Lucas Papademos, met with the leaders of the country's three main political parties and later in a statement said there was complete agreement on the austerity measures needed to reduce Greece's debt and save it from bankruptcy.

The deal, due to be finalized later in the week, would qualify Greece for a new bailout from the EU and the International Monetary Fund.

Greece must secure a new $169 billion loan package within the next few weeks to avoid defaulting on financial obligations due in March.

Some information for this report was provided by AFP and AP.