World poverty 'more widespread'
- By: Steve Schifferes
- Source: BBC News
August 27, 2008
 The World Bank has warned that world poverty is much greater than previously thought. It has revised its previous estimate and now says that 1.4 billion people live in poverty, based on a new poverty line of $1.25 per day. This is substantially more than its earlier estimate of 985 million people living in poverty in 2004.
The Bank has also revised upwards the number it said were poor in 1981, from 1.5 billion to 1.9 billion. The new estimates suggest that poverty is both more persistent, and has fallen less sharply, than previously thought.
However, given the increase in world population, the poverty rate has still fallen from 50% to 25% over the past 25 years.
"This is pretty grim analysis coming from the World Bank," said Elizabeth Stuart, senior policy advisor at Oxfam. "The urgency to act has never been greater, especially in sub-Saharan Africa where half the population of the continent lives in extreme poverty, a figure that hasn't changed for over 25 years."
The new figures confirm that Africa has been the least successful region of the world in reducing poverty. The number of poor people in Africa doubled between 1981 and 2005 from 200 million to 380 million, and the depth of poverty is greater as well, with the average poor person living on just 70 cents per day.
The poverty rate is unchanged at 50% since 1981. But in absolute numbers, it is South Asia which has the most poor people, with 595 million, of which 455 million live in India. The poverty rate, however, has fallen from 60% to 40%.
China has been most successful in reducing poverty, with the numbers falling by more than 600 million, from 835 million in 1981 to 207 million in 2005. The poverty rate in China has plummeted from 85% to 15.9%, with the biggest part of that drop coming in the past 15 years, when China opened up to Western investment and its coastal regions boomed.
In fact, in absolute terms, China accounts for nearly all the world's reduction in poverty. In percentage terms, world poverty excluding China fell from 40% to 30% over the past 25 years.
The new figures still suggest that the world will reach its millennium development goal of halving the 1990 level of poverty by 2015, according to World Bank chief economist Justin Lin. "Poverty has fallen by about 1% per year since 1981," he said.
"However the sobering news that poverty is more pervasive than we thought means we must redouble our efforts."
Oxfam, however, warns that another 500 million people may be forced into poverty by rising food prices, wiping out the gains of poverty reduction in the past 25 years.
The Bank's findings come as the OECD has reported that many rich countries have cut back on their foreign aid budgets, with little sign that the pledge made at the G8 summit at Gleneagles in 2005 to double aid to Africa by 2010 is being met.
http://news.bbc.co.uk/2/hi/business/7583719.stm
Russia should still join WTO, entry possible - EU
August 26, 2008
 The European Commission said on Tuesday it still believed it was right and possible for Russia to join the World Trade Organisation, after Russian officials questioned the value of belonging to the trade body.
"It should hasten its efforts to join, but that is obviously an issue for Russia. There are a number of stumbling blocks but these can be overcome with the right political will," a spokesman for the EU executive told a regular news briefing.
EU support for Russian membership of the WTO is seen as crucial. There has been speculation that withdrawing that support could be a lever the West could use to apply pressure to Russia to ensure a full withdrawal of its troops from Georgia following the brief war there this month.
Prime Minister Vladimir Putin said on Monday he saw no advantages to WTO membership and that Russia should freeze some commitments made during talks about entry to the WTO, Interfax agency reported.
Separately, it quoted First Deputy Prime Minister Igor Shuvalov as saying he saw no prospect of joining the body within the coming year as initially targeted, adding that talks would continue but that Russia wanted to renegotiate some terms.
The EU spokesman said there were a number of "outstanding issues" the EU wanted to clear up with Russia, notably duties on Russian wood exports which are hurting EU paper makers.
"The situation is not easy… (We) believe Russia should be a member of the WTO … and we will continue to work towards that end," he said.
Russia is the only major world economy still outside the WTO despite having begun talks in 1993.
http://www.reuters.com/article/asiaCrisis/idUSLQ235484
Tough Policy Choices as Low-Income Countries Gain Ground
- Source: IMF Survey Magazine
August 25, 2008
Many of the world's low-income countries are again having to make tough policy choices. With food and oil prices touching record highs in recent months and global growth on a down trend, countries battling to reduce poverty levels need to juggle to curb inflation, while maintaining growth and social spending.
Ahead of a series of prominent international meetings on help for developing countries, starting in Accra, Ghana in early September, the latest issue of the IMF's quarterly magazine Finance & Development examines key issues facing low-income countries today.
The IMF's Masood Ahmed, in an overview, identifies four major macroeconomic challenges that low-income countries are grappling with and outlines possible approaches to tackle them. The downturn comes at a time when things were starting to look better for low-income countries, particularly in sub-Saharan Africa, where some economies are now successfully attracting international investors and are seen as a new tier of "frontier" emerging markets, an issue examined by the IMF's David Nellor.
Three articles explore emerging trends, and problems, in the aid business and how to transform the governance of aid. Eckhard Deutscher and Sara Fyson of the Organization for Economic Cooperation and Development examine the changing landscape of donors and find that aid fragmentation poses a major problem, with a proliferation of donors straining the government apparatus of some smaller countries.
Aid unpredictability is another major difficulty, say Oya Celasun and Jan Walliser. It prevents countries from making full and good use of the money. The 2005 Paris Declaration on Aid Effectiveness is a dynamic, action-oriented road map that attempts to remedy these and other problems in the delivery of aid, Elaine Venter writes, but it still remains donor-centric.
http://www.imf.org/external/pubs/ft/survey/so/2008/NEW082508A.htm
Bernanke, Buiter, Draghi Diverge on How to Forestall Crises
- By: Scott Lanman and John Fraher
- Source: Bloomberg
August 25, 2008
One year into the financial crisis, central bankers and scholars at the Federal Reserve's annual retreat this weekend couldn't agree on how to prevent a repeat.Fed Chairman Ben S. Bernanke, European counterpart Jean- Claude Trichet, former officials and economists meeting in Jackson Hole, Wyoming, split over whether central banks should be made responsible for financial stability and how closely to heed the concerns of Wall Street.
"We shouldn't delude ourselves into thinking we are going to build a panic-proof system," former Fed Vice Chairman Alan Blinder, who attended the conference, said in an interview with Bloomberg Television. "But there are choices between less and more panics, more virulent ones, less virulent ones, and that is the way we want to push the system."
At stake is the shape of financial regulation as governments and legislators draft new laws in response to the crisis, which stemmed from a collapse in U.S. mortgage bonds and has sparked more than $500 billion in losses and writedowns. Too many new rules may hobble financial innovation, while a hands- off approach could create more bubbles after a series of asset- price busts over the past decade.
Bank of Israel Governor Stanley Fischer said in a speech closing the two-day conference in the Teton Mountains that "it didn't settle a whole lot."
Participants, greeted by a stuffed 600-pound (272 kilogram) grizzly bear as they entered the Jackson Lake Lodge's wood- paneled meeting room, heard Trichet and Fed Governor Frederic Mishkin defend the track record of central banks over the past year. Critics such as academic Willem Buiter countered that their willingness to bail out distressed investors is "unhealthy and dangerous."
"You want to keep the baby in the bathwater, so to speak, but throw out the bathwater," former International Monetary Fund chief economist Raghuram Rajan said in an interview with Bloomberg Television. "That's going to be a very hard thing."
Rajan and two co-authors presented a proposal at the symposium for disaster insurance that gives banks access to capital when they suffer big losses on their loans.
The conference is the central-banking community's hottest ticket, hosted by the Kansas City Fed bank in Grand Teton National Park since 1982.
Attendees heard Bernanke signal in his opening speech Aug. 22 a need for new Fed powers and comprehensive supervision of systemic risk. Senior U.S. lawmakers, such as House Financial Services Committee Chairman Barney Frank, advocate giving the Fed authority to supervise investment banks.
A few hours later, European Central Bank governing council member Mario Draghi, who chairs an international group of regulators and finance officials, said policy makers additional responsibility for ensuring stable markets would risk impeding their ability to control inflation.
Participants nevertheless agreed that change is on the way, even if its form is as yet unclear. Pippa Malmgren, a former financial-markets adviser to U.S. President George W. Bush, said firms' capital and liquidity requirements are likely to increase, making it tougher for them to generate profits on the scale they have in the past.
`They're going to take the keys to the Maserati away," said Malmgren, now president of London-based adviser Canonbury Group. "This is going to dramatically change the financial landscape."
The event's biggest debate was sparked by Buiter, a former Bank of England policy maker, who presented a paper saying the Fed pays too much heed to the concerns of financial institutions. In response, Blinder, now professor of economics at Princeton University in New Jersey, said the central bank's performance, though not flawless, has been "pretty good" given the magnitude of the crisis.
Trichet also came to the Fed's defense, saying "what has been done until now has been pretty well done under very difficult circumstances."
While lawmakers and regulators will be busy trying to figure out how to write new rules, how any expansion of the Fed's authority works in practice may be out of the central bank's control, said Carnegie Mellon University professor Allan Meltzer, who is writing the second volume of a history of the Fed.
"Lawyers and bureaucrats make regulation, and markets decide how to circumvent them," Meltzer said during an audience discussion period.
One thing attendees did agree on: The yearlong credit crisis has yet to run its course, with continued turmoil likely in housing and banking. Martin Feldstein, a Harvard University economist, said he expects "some failures in the regional banks, including some big regional banks."
"It was clear from what was said that most people here don't believe the financial crisis is necessarily over or close to being over," Fischer said in his closing speech.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adZFGmw7A6zw
Schwab warns on trade talks
- By: James Politi
- Source: Financial Times
August 23, 2008
 Susan Schwab, US trade representative, yesterday warned that it was premature to say whether the Doha round of multilateral trade talks could be revived after their collapse in Geneva at the end of July.
While Ms Schwab said the US was still committed to Doha, she was cautious as senior negotiators - below ministerial level - prepare to meet again in early September to pick up the pieces and try to find a new path towards an agreement.
“It is much too early to tell,” Ms Schwab told the FT shortly after a meeting that ran longer than expected with Pascal Lamy, director-general of the World Trade Organization. “[The September meetings] will give us the first indication of whether there is a seriousness of purpose.”
The July talks were scuppered by a dispute between the US on one side and China and India on the other over the trigger for measures designed to protect developing countries against unexpected surges in agricultural imports. The US was suggesting a much higher threshold for the application of protective measures - called the “special safeguard mechanism” - than what was being proposed by China and India.
Ms Schwab hinted that there had been some progress on the SSM subject since July, claiming it was now being “viewed as the serious substantive issue that it is rather than some technical glitch”. However, she would not be drawn on where there could be grounds for a compromise.
Ms Schwab said that a disagreement with Mr Lamy over a text circulated by the WTO this month summarizing the state of negotiations on market access for industrial goods – another significant flashpoint in the Doha round – had not been cleared up in their meeting.
“The…text is so inconsistent with what the G7 was looking at,” Ms Schwab said. In Doha round negotiations, the G7 includes the US, EU, India, Brazil, Japan, Australia and China.
Mr Lamy was in Washington after a visiting New Delhi to assess India’s positions after the collapse of the talks. As well as meeting with Ms Schwab yesterday, Mr Lamy also met with business groups such as the US Chamber of Commerce and the National Association of Manufacturers.
Critics of the US stance in Doha have argued that it has not been willing to make sufficient concessions, particularly on farm subsidies, but Ms Schwab rejected that view saying the US had made “more than our share” of concessions in agriculture.
http://www.ft.com/cms/s/0/0f06b920-70ad-11dd-b514-0000779fd18c.html
Political turmoil dims Thai investment appeal: World Bank
August 22, 2008
Political turmoil and a shortage of skilled labour has dimmed Thailand's appeal to investors in recent years, according to a World Bank survey Friday.Nearly 70 percent of the business operators surveyed between April and November last year said macroeconomic instability had dampened the investment climate, compared to just under 40 percent in 2004.
More than 60 percent said uncertainty over government policies had weakened the investment climate in 2007, against 30 percent in 2004, the survey said.
"Business operators' perception on the investment climate in Thailand significantly dropped in 2007," Xubeu Luo, a World Bank economist, told reporters.
In addition to the political turmoil, a shortage of skilled labour, poor access to capital, inadequate but costly regulations and unreliable infrastructure also hurt investors' opinions of Thailand, she said.
The findings also showed rising oil and raw material costs had dampened investment in the past year.
The survey involved interviews with more than 1,000 businesses nationwide in nine sectors including autoparts, textiles, electrical appliance and food processing.
http://afp.google.com/article/ALeqM5jB-n5izmz90Vs9Bx3szKXFhMdYQw
World Bank to assess damage from Georgia war
- By: Lesley Wroughton
- Source: Reuters
August 21, 2008
 A World Bank team will travel to Georgia on Friday to assess economic damage caused by the conflict with Russia and to discuss reconstruction plans, a senior bank official said on Thursday.Theodore Ahlers, World Bank vice president for Europe and Central Asia, said Georgia's economic fundamentals were strong but the economy depended on foreign investment and growth would likely be affected.
"At the government's request the bank will assist the authorities in assessing the toll of the damage and reconstruction needs with international partners and other stakeholders through a follow-up mission," Ahlers said in a statement.
He said the World Bank will help the government establish a multi-donor trust fund for reconstruction investment.
The World Bank assessment will focus on damage to infrastructure, such as roads and railway lines, and the environment and agriculture sectors, Ahlers said.
He expressed concern with reports of forest fires in Georgia's Borjomi national park. Georgia has accused Russia of deliberately starting a fire that threatens to destroy an area regarded by Georgians as a national treasure.
"The World Bank sincerely hopes that arrangements can be made urgently to facilitate access to the area of the necessary equipment and other resources to bring these fires under control as soon as possible."
http://www.reuters.com/article/bondsNews/idUSN2130113820080821
China ousts US as top Japanese market
- By: Michiyo Nakamoto
- Source: Financial Times
August 21, 2008
Mainland China overtook the US as Japan’s largest export destination for the first time last month, underlining the growing importance of Chinese demand to the world’s second-largest economy. Exports to China, which have risen in each of the last 38 months, expanded by 16.8 per cent in July to their highest level since the Japanese government began compiling statistics in 1950.
At the same time, exports to the US declined by 11.5 per cent, marking the 11th consecutive monthly drop. Overall, shipments rose by 8.1 per cent by value, after falling in June for the first time since 2003, the finance ministry said.
Japanese companies such as Toyota, Honda Motor and Komatsu have recently identified an increasing reliance on China and other emerging markets for sales growth as the US economy slows. Honda last month announced double-digit increases in the volume of China sales in the three months to June, compared with a 5 per cent fall in the US.
However, the export growth will provide little cheer to policymakers, faced with rising input costs and an uncertain outlook in the economies of Japan’s main trading partners.
Japan’s July trade surplus suffered an unexpectedly large decline of 86.6 per cent to Y91.1bn ($829m, €562m, £445m) because of an 18.2 per cent surge in imports by value. The market forecast was for a trade surplus in July of more than Y200bn. The fall, the fifth monthly decline in a row, reflected a near 70 per cent rise in the price of crude oil and a more than doubling of the price of coal.
Many analysts expect exports to fall again in coming months as the slowdown in western economies begins to have an impact on demand in emerging economies such as China. “It is difficult to believe that Japan will be able to maintain the kind of growth in exports that it saw in July. I think there is a higher chance of a slowdown,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo.
Given China’s growing dependence on the EU as an export destination, Chinese growth was likely to decelerate, leading in turn to a slowdown in Japanese exports to China, Mr Morita said.
http://www.ft.com/cms/s/0/938fdeb8-6fab-11dd-986f-0000779fd18c.html
U.S. wants push to revive Doha trade talks: report
- By: Jonathan Lynn
- Source: Reuters
August 21, 2008
 The United States wants officials to resume international trade talks in September after a meeting of ministers collapsed without a breakthrough last month, U.S. trade chief Susan Schwab was quoted as saying.She said in an interview with specialist newsletter Inside U.S. Trade on Wednesday that senior officials from a small group of countries should meet next month to explore the possibility of restarting the Doha round negotiations at the World Trade Organization (WTO).
"We need to come to the table in September at the senior official level to test the seriousness of going forward, to bring forward new ideas to overcome some of the problems that we encountered in July that we were not able to overcome at that time, and quite frankly to stop the deterioration and the erosion of what was on the table in July," Schwab said.
Schwab was speaking ahead of a visit to Washington on Thursday and Friday by WTO Director-General Pascal Lamy, who also visited India last week.
Schwab's comments, reported in the newsletter's online edition, reinforce those made by several countries, notably Brazil. World Bank President Robert Zoellick has also backed the suggestion that WTO members should resume the talks soon to capitalize on the momentum gained last month.
That meeting saw progress on the headline areas of agricultural and industrial tariffs and subsidies. But it ultimately foundered on differences between the United States and India over a proposed safeguard to protect farmers in developing countries from a surge in imports.
Zoellick and others have sketched out compromises over the safeguard that would reconcile the needs of developing countries to protect their subsistence farmers from floods of imports with those of food exporters — rich and poor — who fear such measures could be used to block normal trade.
Inside U.S. Trade said Schwab had expressed the hope that senior officials in September could "clear the way, conceivably, for another round of ministerial engagement".
But Schwab also highlighted U.S. concerns about the wording of a report on the industrial goods negotiations, and warned that a compromise floated by Lamy in the talks "has unraveled in large measure", the newsletter said.
The United States says that the report's summary of discussions on proposals to open up individual industrial sectors like textiles or chemicals uses language that Washington never agreed to, reducing pressure on big emerging countries like China and India to take part in such sectoral deals.
U.S. business lobbies argue that such deals — provided countries like China take part — offer the best hopes of increased markets for U.S. exporters from a Doha deal.
http://www.reuters.com/article/topNews/idUSLL72376220080821?sp=true
Endurance test
August 21, 2008
During the six months to the end of June commodities posted their best performance in 35 years, rising by 29%. In July they had their worst month in 28 years, falling by 10%. The slide continues: an index compiled by Reuters, a news agency, shows that prices are almost a fifth below the pinnacle reached in early July. The Economist’s index, which excludes oil, has fallen by over 12%. Breathless headlines have hailed the bursting of a bubble.
But most analysts are more reticent. They cite various reasons for the recent drop in prices, chief among them the darkening economic outlook in rich countries. In recent weeks it has become clear that Europe and Japan are faring even worse than America, and so are likely to consume less oil, steel, cocoa and the like. But that does not necessarily presage a collapse in commodity prices, they argue, thanks to enduringly strong demand from emerging markets such as China.
Oil consumption, for example, has been falling in rich countries for over two years. Goldman Sachs expects them to use 500,000 fewer barrels a day (b/d) this year than last. But it reckons that decline will be more than offset by an increase of 1.3m b/d in emerging markets. It predicts China’s demand for oil will grow by 5%.
A similar story could be told of many commodities. Marius Kloppers, the boss of BHP Billiton, a huge mining firm presenting its results this week, argued that emerging markets were much more important to the firm’s fortunes than rich ones were. Developing countries, he said, consume four to five times more raw materials per unit of output than rich ones do. He predicted that China’s use of steel, already greater than any other country’s, will double by 2015. China’s continuing and rapid industrialisation, he argued, would outweigh any temporary slowdown in exports owing to the weakening world economy—although demand for metals that are used in consumer goods, such as aluminium and nickel, may suffer somewhat.
As Mr Kloppers pointed out, emerging markets, and China in particular, now account for the lion’s share of growth in global demand for raw materials, and a good chunk of overall consumption (see chart). China’s appetite for such goods is growing more slowly than it did in the early part of the decade—when oil consumption galloped ahead by more than 10% a year. And China’s economy has also slowed slightly—although it is still growing at a rate of about 10%. The IMF expects developing countries to grow by almost 7% this year. That should be enough to keep demand for most commodities expanding briskly.
In terms of supply, however, the picture is more mixed. Farmers, encouraged by high prices, have been planting more grain. Heavy rains in America’s farming heartland earlier in the year did less damage to crops than expected. The International Grains Council, an industry group, now expects a record wheat crop this year, 9% bigger than last year’s. China and India, meanwhile, have produced record amounts of soyabeans, while Thailand and Vietnam have harvested bumper crops of rice. Although stocks of most farm commodities remain alarmingly low, and demand continues to grow, the increasing evidence of a strong supply response has helped to push prices down.
http://www.economist.com/finance/displayStory.cfm?source=hptextfeature&story_id=11985956
|
