Posts of February 2008

SWFs: Euro-Protectionism Rears Its Ugly Head

♠ Posted by Emmanuel in Europe at 2/29/2008 01:15:00 AM

Just out is the European Community paper on A Common European Approach to Sovereign Wealth Funds. In the coming months, the EC will likely try and persuade SWFs to comply with its provisions...or else. It is a nasty read on several levels, and you can see why for yourselves. Among other things I would like to ask the EC are:- Why aren't hedge funds operating in Europe subject to the same "transparency" provisions?- Can't foreign investment more readily be expropriated if relations go awry with SWFs' home nations?- In what historical cases have SWFs used their investments in the EU in a "political" way?I doubt whether any answers are forthcoming. In any event, here are the recommendations by the EC on improved SWF "transparency":Transparency practices that could be considered would include:• Annual disclosure of investment positions and asset allocation, in particular for investments for which there is majority ownership;• Exercise of ownership rights;• Disclosure of the use of...

The Problem with Wind Power (No Wind)

♠ Posted by Emmanuel in Energy at 2/28/2008 10:17:00 PM

Allocating more power production to wind makes you more vulnerable to power losses when there's little or no wind for a prolonged period of time, 'nuff said. From Reuters:A drop in wind generation late on Tuesday, coupled with colder weather, triggered an electric emergency that caused the Texas grid operator to cut service to some large customers, the grid agency said on Wednesday. Electric Reliability Council of Texas (ERCOT) said a decline in wind energy production in west Texas occurred at the same time evening electric demand was building as colder temperatures moved into the state. The grid operator went directly to the second stage of an emergency plan at 6:41 PM CST (0041 GMT), ERCOT said in a statement. System operators curtailed power to interruptible customers to shave 1,100 megawatts of demand within 10 minutes, ERCOT said. Interruptible customers are generally large industrial customers who are paid to reduce power use when emergencies occur. ...

Top Ten Things the Dollar is Still Useful For

♠ Posted by Emmanuel in Casino Capitalism at 2/28/2008 08:57:00 PM

According to Iranian President Mahmoud Ahmadinejad--a blogger just like me--"the dollar has no economic value." Ol' Mahmoud wasn't quite right, but surely it's getting near that point as B-B-B-Bennie of the Feds keeps cutting rates Stateside. Inflation? What's that? Let me be perfectly honest and explain the source of my pique: since late last year, I have been trying to change my remaining dollars into something more useful, namely Euros. However, there has been no buying opportunity as dips in the EUR/USD rate have been hard to come by. And things are getting worse for dollar holders (suckers, patsies, dupes) as the Euro...

Shipbreaking: The Dirtiest Job

♠ Posted by Emmanuel in Development at 2/28/2008 01:46:00 AM

Journalist William Langewiesche wrote a notable article sometime ago in the Atlantic on the shipbreaking "industry"--if you can call it that. Taking apart ships to reuse the raw materials contained in them is nasty and brutish business, for sure. However, it does provide livelihoods for thousands of folks in South Asia, no matter how meager. The Atlantic article is well worth reading if you haven't seen it yet. Meanwhile, Foreign Policy offers a photo essay on shipbreaking. What jogged my memory, actually, is this 60 Minutes excerpt about the topic at hand. For more, there is also another video clip on YouTube about Chittagong...

Getting to Know Islamic Banking

♠ Posted by Emmanuel in Islamic Banking,Middle East at 2/27/2008 05:18:00 AM

I am fascinated by this race among financial centers and major banks to create Islamic banking products [1, 2]. With the oil windfall set this year to hit an amount unimaginable to your humble correspondent who takes public transportation and cuts out store coupons, Islamic banking has become all the rage. As you know, Shar'ia law prohibits the charging of interest. However, many observers and I myself have observed that these Islamic banking instruments basically emulate the concept of interest without actually calling it so. Is there anything fundamentally different to it, or am I correct?In any event, one of the banner ads in the Financial Times brought me to this HSBC site hawking Islamic banking products. Here's a sample; figure out for yourselves what the difference is from regular banking. As I've said, it's beyond me...Mudaraba [="venture capital"?]A mudaraba transaction is an investment partnership. In a mudarab arrangement, the contract is between an investor (or financier)...

Goh Chok Tong to West: R-E-S-P-E-C-T Asia's Rise

♠ Posted by Emmanuel in Bretton Woods Twins,Development,Southeast Asia at 2/27/2008 05:06:00 AM

Singapore's former PM and current Senior Minister Goh Chok Tong recently made a noteworthy speech at the Second Annual Asian Leadership Conference in South Korea. In the speech, he asked the Western powers that be to consider a greater role for Asia in global governance. This is the introduction:For more than 200 years, the West has dominated the international system both politically and economically. But Asia is now growing rapidly, shifting the balance back towards the East. It began with Japan, and was followed by Korea and the Newly Industrialised Countries, and now China and India. Asia’s continued economic growth will compel political and strategic adjustments to the established international order. Such adjustments are best brought about through win-win global cooperation rather than a winner-takes-all competition. Therefore, it is in the interest of the West to give the emerging Asian powers a stake in the existing international order and accommodate its legitimate...

Sarko's Latest Guise: Doha Round Fiend

♠ Posted by Emmanuel in Agriculture,Europe,Trade at 2/26/2008 12:12:00 AM

One thing you cannot accuse French President Nicolas Sarkozy of being is staid. His extroverted character has taken a number of turns, many of which are in conflict with each other: tabloid fodder, potty mouth, free market skeptic, union buster, defender of French national champions..and now this. It is known by every third world campaigner and NGO from Afghanistan to Zaire that France is the European state whose farmers rely the most on farm subsidies. Furthermore, "the farm" still has a mystique (mistake?) among the French electorate that keeps it lathered in subsidies which hurt farmers in the developing world. Well, here's...

Showdown: US Treasury v. Iran's Central Bank

♠ Posted by Emmanuel in Middle East at 2/26/2008 12:06:00 AM

Here's more conflict escalation, American style. The US Treasury Department is in the process of gathering dirt on Iran's central bank, accusing it of facilitating the transactions of Iranian banks that have been sanctioned against by the US of A. Isolating Iran's central bank would be a major move by the US to choke off one of Iran's key remaining financial links to the rest of the world, though the US needs to gain the support of its allies. The US hopes to do so by linking Iranian financial activity to terrorist financing. This showdown will be an interesting one to watch. Unlike the US, most European countries are not as harsh in their treatment of the Islamic republic. From the Wall Street Journal:The Treasury Department is gathering evidence it says shows that the central bank of Iran is helping other Iranian institutions elude U.S. economic sanctions, in what could be a prelude to penalties against the central bank. The investigation, described by financial-intelligence...

Euro-Protectionism Has Fits Over SWFs

♠ Posted by Emmanuel in Europe,Trade at 2/25/2008 12:11:00 AM

Uh-oh, here we go again. Just after I made a largely positive write-up of Peter Mandelson being interviewed in the Wall Street Journal, he springs some nasty SWF-bashing rhetoric on us. The above table from the SWF blog illustrates that the EU isn't really the largest of SWF investment destinations, so it's kind of puzzling why the EU is gearing up to protect itself from an invasion of purported SWF-body snatchers. I had been aware that the EU was becoming increasingly wary of sovereign wealth funds, but I didn't know that Mandelson was the ringleader of the whole affair. The Financial Times writes on the emerging sordid...

World's Busiest Port in 2007: The Rematch

♠ Posted by Emmanuel in Southeast Asia,Trade at 2/24/2008 12:42:00 AM

Sometime ago I made a post regarding the world's busiest ports. Out of curiosity, I decided to look whether the status quo was preserved in 2007 of Shanghai having the world's busiest cargo port and Singapore the world's busiest container port. To understand the nature of this difference, let's go back to my earlier post's definitions. Cargo tonnage refers to the total weight of goods that are loaded and discharged at a port, whereas container throughput refers to the number of twenty-foot equivalent units (TEUs) which go through a port. For example, a forty-foot container would count as 2 TEUs.Let us begin with cargo tonnage....

Liechtenstein und der German Pastime, Tax Evasion

♠ Posted by Emmanuel in Europe,Underground Economy at 2/24/2008 12:15:00 AM

It is always a sign of more difficult times when governments start cracking down harder on perceived tax cheats. The whole non-dom brouhaha here in the UK attests to this, but there's another quarrel going on in Germany that has attracted less attention. The recent free-for-all began when the former head of Germany's largest mail carrier Deutsche Post, Klaus Zimwinkel, came under fire from the government for using the tiny nearby country of Lichtenstein to help avoid taxes to the tune of Eur 1M. The Principality of Liechtenstein has fallen afoul of the OECD in recent times for being one of three non-cooperative tax havens...

YaHadTaBeThere: Houston's Demise as Oil's Capital?

♠ Posted by Emmanuel in Energy at 2/24/2008 12:03:00 AM

A big ruckus was made when the Houston-based oil services firm Halliburton, once headed by US veep Dick Cheney, decided to move to Dubai. It makes some sense: with oil production in the US going down--especially in Texas and the Gulf of Mexico--major firms will shift more of their activity to other parts of the world. The exodus of, ah, "al-Halliburtoni" may be the shape of things to come as more and more exploration activity moves to the Middle East and elsewhere from unproductive US sites. The Financial Times Weekend has a nice feature from which I excerpt a bit. Do read it if you've got the scratch. Hopefully those Texans...

Coal, the Future of Clean Energy?

♠ Posted by Emmanuel in Energy,Environment,Europe at 2/23/2008 09:15:00 PM

Wind power, biofuels, and even nukes seem to be dominating the talk about energy sources that should help reduce greenhouse gas emissions. Lost in the discussion is the possibility that ol' coal can go some way towards providing clean power using the process of underground coal gasification (UCG). This technology is particularly salient here in the UK with its large, untapped coal supplies. With the high costs of importing fuel from abroad--both economic and political--UCG is gaining a serious look. Consulting firms, energy industry, and academic institutions have already teamed up to form a UCG partnership. A whole raft of...

Russia Plays Nice to Gain WTO Accession

♠ Posted by Emmanuel in Europe,Trade at 2/22/2008 07:05:00 PM

This is interesting if somewhat predictable: Russia's general disdain for former Soviet republics cottoning up to the West has been set aside--for now at least--as it attempts to gain WTO accession. It needs to gain the assent of other WTO members if its long-delayed bid is to push through, and these include the Ukraine and Georgia, both of which have fallen afoul of Russia in recent times. From our second-favorite official news agency Tass (Xinhua is still tops) comes this report on the Ukraine and Russia playing nice. After (in)famously cutting gas supplies to the Ukraine in 2006, Russia is now contemplating the establishment of a free trade area with the Ukraine [aww, ain't that sweet?]:Ukraine and Russia are going to establish a free trade zone on the basis of norms and procedures of the World Trade Organization (WTO), Ukrainian Prime Minister Yulia Timoshenko said at the government’s meeting on Friday, commenting results of her February 20-21 visit to Moscow. She ordered...

Lies, Damned Lies, and World Poverty Statistics

♠ Posted by Emmanuel in Development at 2/22/2008 12:58:00 AM

Global poverty and inequality numbers are among the most controversial of statistics. Sometime ago I featured the work of Branko Milanovic on global inequality. Until now, I consider his work the most authoritative on the subject. That he is quoted a lot by both the "globalization is deepening poverty and inequality" and "globalization is reducing poverty and inequality" camps shows the respect he is accorded by the partisans. Just when you thought we had safely escaped from this controversy for a while, the World Bank completed the results of its International Comparison Program (ICP) to accurately estimate price levels across various countries. It is especially important because Chinese and Indian price levels have not been subject to price basket comparisons since the mid Eighties, causing distortions when measuring purchasing power parity (PPP) incomes in these two huge emerging countries with a combined population of 2.4B persons. PPP concerns what folks living in these...

London Mayor "Red Ken" Livingstone v. Porsche

♠ Posted by Emmanuel in Environment at 2/21/2008 02:01:00 AM

Ladies and gentlemen, let me assure you that nearly everything humanly possible has been done to discourage automobile use here in the UK. From sky-high gas prices, cars that are nearly the same price in £ as in $ given that the prevailing exchange rate is £1.00 = $1.94, to carbon dioxide emissions duties, it simply amazes me that there are so many people who still bother to own cars here. If nothing else, the British are attached to "motoring" despite the government's efforts to tax motorists until kingdom come. Talk about cash cows (moo). Now, London is famous for its so-called congestion charge to reduce traffic on that...

Huawei & 3Com: Stupid Protectionist Tricks

♠ Posted by Emmanuel in China,Security at 2/21/2008 12:27:00 AM

Oh man, does this make my stomach churn: I thought it wouldn't end like this, but Huawei and Bain Capital's bid for US telecoms gear maker 3Com has fallen through in the same way that the CNOOC bid for Unocal did. Still, I am 100% on board with the manager at Huawei who characterized the CFIUS "national security" rigmarole as "bullsh--t." To spare itself the trouble of invasive investigations, it appears Huawei has scuppered its bid. Worse, the prospective buyers already signaled that they were willing to get rid of the sensitive bits of 3Com that sold security gear to Uncle Sam (see below).If I were the Chinese, I'd demand much better treatment in the US over these shenanigans. The operative principle is "beggars can't be choosers" as the US keeps handing out the begging bowl to China and Co. to get a fix on its debt addiction. There are so many ways China can hurt the US and I don't think the latter fully understands the range of possible consequences for offending the real...

China: Rips Off CDs, DVDs...and Olympic Slogans?

♠ Posted by Emmanuel in China,Marketing,Sports at 2/21/2008 12:00:00 AM

I am often delighted by the range of stories that the Financial Times puts out. When it comes to genuine "scoops," the FT is hard to beat. Here's another case in point: the apparatchiks were touting the slogan for the 2008 Olympic Games in Beijing ("One World, One Dream") as a homegrown creation reflecting the aspirations of the Chinese people, yadda-yadda. Actually, it turns out that an American advertising exec came up with the slogan. Knockoff CDs, DVDs, and now Olympic slogans? If imitation is the sincerest form of flattery, the PRC is an absolute slave to Western culture. No wonder it's so upset that Spielberg has pulled out from the Olympics. A week after Spielberg's action, state media is still bellyaching over the matter. Anyway, back to today's feature...The “One World, One Dream” slogan of August’s Beijing Olympic Games was created by a US brand strategist on the basis of a phrase proposed by the honorary chairman of the organising committee, a local court has been...

US Survey on Medical Tourism Says...

♠ Posted by Emmanuel in Health at 2/20/2008 05:59:00 PM

I featured a lengthier post on medical tourism sometime ago and thought this new Financial Times story complements it. Recently, the consulting firm Deloitte conducted a survey regarding Americans' willingness to try medical tourism. The answers are informative...Two in five Americans would consider travelling abroad for a medical procedure if it cost half the US price and quality was at least equal, according to a Deloitte consumer health report published on Wednesday.The data highlight the exploding interest in so-called medical tourism, where patients seek treatment for elective surgeries such as hip replacements available more cheaply overseas.Medical tourism has surged into the healthcare debate as costs rise and consumers are asked to share a growing proportion of up-front expenses. The practice was once seen as a desperate move to seek care that was unavailable, unapproved or dangerously cheaper than procedures in the US. But healthcare experts have noted increasing interest...

Nope, FDI Ain't Behind China's Rampant Pollution

♠ Posted by Emmanuel in China,Environment,Trade at 2/19/2008 08:46:00 PM

I was browsing through the well-regarded journal International Studies Quarterly while looking for something entirely unrelated when I came across this most intriguing study by Ka Zeng and Josh Eastin. As you probably know, the "pollution haven hypothesis" concerns firms locating away from developed countries to developing countries to take advantage of laxer environmental regimes in the latter. By doing so, firms are supposedly able to manufacture their wares more cheaply by dodging higher environmental standards in the West.What better place is there to observe a putative "pollution haven hypothesis" than China, the world's largest carbon emitter and workshop to the world? Zeng and Eastin use regression models to determine the relationship between FDI / trade openness in various Chinese provinces and sulfur dioxide emission (Model 1), industrial soot emission (Model 2), and solid waste emission (Model 3). Their findings:In all of the model specifications, our key independent...

Will Basketball Overtake Soccer Worldwide?

♠ Posted by Emmanuel in Sports at 2/18/2008 05:58:00 PM

After a very self-serving article on why football (soccer) is the global sport according to a British Financial Times commentator, what we have here is a return of serve on why basketball may be poised to overtake football by, er, The American. Journalistic jingoism--don't leave home without it:Now Heidi Ueberroth has one of the most daring jobs in all sports—to make basketball the most popular game in the world, surpassing soccer, and to make the NBA the most powerful global athletic league. Beat soccer? To most experts, the idea sounds quixotic. Soccer is more popular than basketball practically everywhere in the world outside the United States. According to the Gaskins Company, in any given year three billion fans view soccer games on TV or in person. But soccer’s capacity for growth may not be as broad as basketball’s.Sitting in a conference room surrounded by huge wall posters of the biggest names in basketball—Yao Ming, Dwyane Wade, and LeBron James of the NBA, and Diana...