ARAB TIMES, TUESDAY, AUGUST 16, 2011
French firms eye Australian high speed rail China says local debt risks can be controlled
French companies are keen to build a Canberra has costed the project will decide whether you do it or not.” China’s finance ministry tried Much of that is owed to state banks, and high economic growth.
high-speed rail network in Australia, at between A$61 billion ($63.6 bil- The matter is expected to be on Monday to allay concern about bil- prompting concern they might face “Our country’s local government
France’s Transport Minister Thierry lion) and A$108 billion, and Mariani the agenda when Mariani meets lions of dollars in bank loans owed problems if borrowers default. debt risks are generally control-
Mariani said Monday, despite the said French transport companies Federal Transport and by local governments, saying risks The finance ministry gave no lable,” said the report on the min-
prospect still being in the early stages. were keen to be involved. Infrastructure Minister Anthony can be controlled and officials are details of individual borrowers but istry website. Still, it said, “the abili-
The idea of a very fast train sys- “Of course we are interested by Albanese on Tuesday. looking at ways to ease the burden. acknowledged in a report that ty of some local governments to
tem linking the major cities of this opportunity, but as your (New “If the government decided to go It was Beijing’s most detailed com- some have a “weak ability to repay” repay their debts is weak and there
Sydney, Melbourne, Brisbane and South Wales state transport) minis- ahead with a high speed train line ment since disclosing in June that money lent for public works and exist some risks.”
Canberra has been debated for ters told me this morning, I think then we can bring our experience local governments have piled up other expenses. It said others Private sector analysts say a bank-
years, but gained momentum last you are in the first steps,” Mariani and expertise which is actually 10.7 trillion yuan ($1.6 trillion) in should be in good shape because ing crisis is unlikely because China
year after the government told journalists in Sydney. found all over the world,” Mariani debt, the equivalent of 25 percent of they have adequate tax revenues, state lenders are flush with cash and
announced a study into a network. “And after that your government said. (AFP) China’s annual economic output. access to land and other resources can absorb possible losses. (AP)
Second largest foreign ownership of Treasurys after China
Some advocates selling US bonds for Japan
PGO information inaccurate TOKYO, Aug 15, (AP): The idea that means. But they aren’t totally fringe Nakanishi that the government is trying lation of debt by the US government is
Japan would ever dump its $900 billion either. to raise taxes to fix its deficit and finance unsustainable.
‘Money man’ missing,
holdings of US Treasurys, the second “The holdings translate to 1 million the earthquake recovery, a move he fears “The more money the world lends to
largest foreign ownership after China, has yen ($13,000) per Japanese taking this would further squeeze the Japanese econ- America today, the more money they’re
long been just that — an idea never seri- risk in shouldering US debt, all without omy. going to have to lend tomorrow,” he said
ously entertained. their fully being aware of it,” said Kenji Views like Nakanishi’s may be win- in a telephone interview. “It’s a giant
leaves little evidence The long-standing argument paints a
horrific picture of the consequences: The
dollar would crash, world markets would
Nakanishi, a lawmaker in a new opposi-
tion party that made significant gains in
the last election.
ning some acceptance. No one expects
them to be acted upon immediately.
The Japanese government and ruling
Ponzi scheme. Nobody is ever going to
get their money back.”
Japan would be venturing into untested
be sent into a tailspin and the post-World Nakanishi told The Associated Press party officials have repeatedly said Japan territory if it decided to reduce Treasury
Continued from Page 38 War II military and political alliance that Japan shouldn’t sell all its holdings at won’t sell US bonds, and instead will holdings.
This left DDCM holding bonds with a face value of $350 million for between the US and Japan would be once, but should reduce them by about 10 keep buying them. In 1997, mere musing by then Prime
which it had paid just $5 million. At the same time, another Australian com- shaken. trillion yen ($130 billion) each year, and The common wisdom is that a weak Minister Ryutaro Hashimoto about sell-
pany closely related to PGO, called Nexus Management, gave DDCM $150 But after Washington’s credit rating earmark some of that money for recovery dollar would prove devastating to the ing Treasurys set off a Wall Street plunge
million worth of the same oil-backed bonds in return for a $75 million stake was downgraded for the first time ever spending in northeastern Japan, which Japanese economy by making it more dif- until Japanese officials quickly jumped in
in the fund, in a transaction directly authorised by the fund’s directors. earlier this month — from AAA to AA+ was devastated by the March 11 earth- ficult for Toyota Motor Corp, Sony Corp for damage control and promised Japan
Netting it out, and including a $1.25 million listing fee, Micalizzi and by Standard & Poor’s — some daring quake and tsunami. and other pillars of corporate Japan to sell had no such plans.
DDCM had spent just $6.25 million and given away a stake in the fund advocates are voicing that taboo idea: A simple explanation to Washington their goods overseas. But Naoto Amaki, a writer and for-
worth $75 million, according to Reuters calculations. In return, it had Why not sell Treasurys? that the move won’t change the US-Japan Peter Schiff, chief executive of Euro mer government bureaucrat, thinks the
become the owner of bonds with a face value of half a billion dollars. Those playing devil’s advocate aren’t political and defense alliance should be Pacific Capital, a New York-based invest- time is ripe to start thinking the
The bonds were then added to the fund’s balance sheet at the end of 2008 Japan’s mainstream policymakers by any enough, according to Nakanishi. It alarms ment company, said the current accumu- unthinkable.
with a value of $462.4 million.
Fund administrator PNC, now part of BNY Mellon, was responsible for
Japan economy shrank ‘less’
preparing financial statements for
the fund. It declined to comment,
other than to confirm its role. ‘Modern day Monaco’
Daniele Palla, an Italian com-
modities trader, says he is a repre-
sentative of PGO. He told Reuters ‘Gillier’ to create
than thought after earthquake
Micalizzi had signed purchase
agreements with PGO to buy $500 thousands of jobs
million of bonds and made a down-
payment of $5 million. When he LONDON, Aug 15, (RTRS):
didn’t pay the full amount, however, FASD, based in the small village
the bonds were cancelled. of Hadlow Down in southern
“He (Micalizzi) cheated us,” said England, is one company that has
Palla. “He signed the contract, pur- shown interest in bonds that were
bought by failed hedge fund DD
Figures highlight recovery on track
chased a number of bonds and he Growth Premium, although its
didn’t pay for it. He defaulted on chairman denies this.
it... Both PGO and Nexus are vic- On its website, FASD says its
TOKYO, Aug 15, (AFP): Japan’s economy shrank less than looks likely to grow again in the July-September quarter, although he warned
tims of this situation.” mission “is to find and manage expected in the April-June quarter, data showed Monday, of the risk posed by the strong yen, which hurts Japan’s exporters.
The bonds’ history is perplexing. financially rewarding alternative The Cabinet Office said Japan’s economy shrank an annualised 1.3 percent in the
fuelling hopes that its recovery from the March 11 quake and first full quarter since the nation’s worst post-war disaster — beating bleak market
They were originally issued in 2008 investment options for those
by a tiny company called Asseterra accredited and experienced tsunami disasters is on track. expectations of a 2.7-percent contraction.
Inc., based in the small town of clients who want to grow their Finance Minister Yoshihiko Noda said Asia’s second-biggest economy The figures highlight that Japan’s economy has started to bounce back from the
Apache Junction, Arizona, and financial wealth as well as partici- calamity, which killed more than 20,000
incorporated in Nevada. pate in global humanitarian proj- people, wiped out entire towns along the
Asseterra’s president, chief exec- ects”. Pacific coast and sparked a nuclear emer-
Wim Van Hooydonk, FASD’s gency.
utive, secretary, director and treas- chairman and director, told
urer is David Spargo. He has run “It was negative growth, but not bad
Reuters in a telephone interview data,” said Mitsumaru Kumagai, chief
two other firms from the same he didn’t “want anything to do with
address as Asseterra. One of these, a these bonds. Somebody from economist at the Daiwa Institute of
venture capital firm, was shut down Italy, a certain professor, has Research. “Our basic expectation now is
last year when it failed to file mixed us up in these transactions, to see gradual growth on the back of
accounts and ran into trouble over a and we don’t want to be involved reconstruction demand.”
bond issue, according to U.S. feder- in these transactions at all.” On-quarter, Japan’s gross domestic
al court records. But correspondence seen by product (GDP) shrank by 0.3 percent in
Reuters between Van Hooydonk April-June, after a 0.9-percent contrac-
Asseterra said when it issued the and Grant Thornton, liquidators of tion in the January-March period and
bonds it was acting on behalf of the DDCM Master fund, indicates shrinkage of 0.6 percent in the previous
Pacific Global Oil. But liquidators he had at one stage been very quarter.
Zolfo Cooper said in a report to keen. “We remain totally commit- Exports plunged by an annualised 18.1
creditors Asseterra was in fact a spe- ted to complete the transaction percent in the second quarter, when
cial purpose vehicle set up by and confirm that the first payment tsunami damage to factories in Japan’s
Pacific Global Oil to issue them. is going to be completely (sic) northeast still hobbled supply chains,
According to public records and quite shortly, very likely before the especially in the crucial auto and elec-
interviews by Reuters, Spargo did in end of the week,” said an Oct tronics sectors.
fact set up a physical location for 2010 mail about a planned pur- As the scale of the disaster weighed on
Asseterra — in an Apache Junction chase of the bonds.
FASD has very close links to a the nation, private consumer spending,
strip mall located on Superstition charitable foundation headed by nearly two-thirds of Japan’s GDP, fell 0.1
Boulevard, next door to The Dog Bruno Gillier called Gillier percent on-quarter.
Run Saloon and one block from the Humanity which is, according to However, rebuilding efforts also stim-
local police station. its website, “dedicated to making ulated the economy. Government con-
A property manager for the suite a positive impact on the quality of sumption rose 0.5 percent and public
says Spargo listed another firm, life” in places such as Tahiti, Fiji investment increased 3.0 percent due to
Napis Inc., as the resident business and Thailand. relief and reconstruction projects for the
and always paid his rent on time Gillier Humanity plans to spend quake-hit areas.
until the lease expired in December at least $385 billion to create hun- Corporate investment grew by 0.2 per-
2009. dreds of thousands of jobs around cent, said the data, which follow recent
the world. The charity says it figures showing increases in industrial
Nobody interviewed by Reuters wants to buy two or three airlines,
in Apache Junction over two days, production and machinery orders, a key
a top 10 hotel or resort operator, indicator of capital spending.
including four city and county gov- and banks. Gillier also plans to
ernment officials and executives spend $5.5 billion to transform the Consumption
from businesses located nearby, had 400-acre Nicaraguan province of A businessman (left), reflected in the window showing the closing numbers of the Tokyo Stock Exchange’s morning Kumagai said that “despite the damage
heard of Asseterra Inc. Monte Cristo into a “modern day trading session walks past a securities brokerage in Tokyo on Aug 15. (AFP) done to supply chains, consumption of
Asseterra’s base of Apache Monaco”. durable goods, such as televisions and
Junction, population 37,000, is a air-conditioners, did not fall,” he said.
fringe suburb of trailer parks and
sand about 35 miles east of Phoenix. located for comment. ‘We’ve been through worse’ “Exports did fall, but not as sharply as
The town is home to a grassless golf Spargo did not respond to “For July-September, it is reasonable
requests for comment from
course called the Snakehole and
serves as the launch pad for people
searching for the Lost Dutchman
Reuters sent to an email address
for Asseterra. Three Arizona attor-
neys who represented him in the
S. Korea says can beat financial storm to assume a return to growth.”
Finance Minister Noda also said:
“There is a strong possibility the econo-
Gold Mine. Residents say no gold my will return to growth in the July-
Napis case resigned in October SEOUL, Aug 15, (AP): When it comes to that the external situation, while uncer- while spending time Sunday with a friend September period.
has ever been found. weathering economic storms, South tain, will not bring Asia’s fourth-largest at a Seoul coffee shop. The Asian crisis,
Property records indicate Spargo 2009. They did not respond to “But there are factors posing down-
requests for comment. Michael Koreans can rightly claim more familiar- economy to its knees. President Lee in particular, “gave our economic system side risks to the economy, such as the
lives on Saguaro Drive just north of ity than most with the harrowing experi- Myung-bak, a former CEO, made an a kind of immunity to resist crisis coming
town. A visit by a Reuters reporter Kessler, an attorney for Spargo in a yen’s strength,” he added at a news con-
Texas lawsuit related to the judg- ence of seeing hard-won prosperity evap- unscheduled visit to the Ministry of from foreign countries.” ference.
showed the property is a vacant lot orate. Strategy and Finance to discuss the tur- The 1997-98 trauma — known in
with a no-trespassing sign and some ment, did not respond to a request Recent global market turmoil sparked
for comment. Ever since the East Asian economic moil. South Korea as the “IMF crisis” after the by the eurozone debt crisis and the
cactus. A separate address for crisis spread to its shores in late 1997, nearly $60 billion international bailout
Spargo in Mesa, Arizona, is a stucco Like Asseterra, Canberra-based Unity uncertain US economic outlook has
Pacific Global Oil is a company that government officials, media and ordinary the country sought from the International prompted investors to flock to the yen,
home which went into foreclosure citizens have kept up a nervous vigilance “Korea’s economy has great potential Monetary Fund and others to get back on
leaves little trace of its existence. In to weather this global storm,” Choi Jong- which is considered a safe-haven curren-
last year. against any hint of turmoil. its feet — was particularly searing. cy.
In January 2009, a federal judge documents relating to the bond deal, ku, deputy finance minister for interna-
The Asian crisis, which started in The experience humbled a country The heavy buying has sent the yen
in Arizona ordered Spargo’s Napis the firm describes itself as “a pre- Thailand and spread to Indonesia before tional affairs, told reporters in a display proud of its stunning economic progress
mier provider of commodities solu- soaring to near its post-war high of 76.25
Inc. to repay $5.5 million to reaching South Korea, left a deep scar on of unity with top officials from the central from the ruins of the 1950-53 Korean to the dollar — a trend that hits Japan’s
investors in bonds that the company tions.” the country. Seoul had to seek a humiliat- bank and the country’s two financial reg- War. It came just a year after South Korea
But its quoted fax and phone export sector by making its goods less
had said it would register for sale in ing international bailout and impose ulators beside him. reached a development milestone by join- competitive abroad and eroding repatriat-
Luxembourg, according to docu- numbers “have proved to be unob- wrenching reforms to its economy and Choi cited the diversity of South ing the Organization for Economic
tainable and information provided ed overseas profits.
ments in three separate lawsuits in companies, which had become bloated by Korea’s exports — with more than 70 Cooperation and Development, a Paris- The yen traded at 76.83 to the dollar
Texas, Virginia and Arizona filed by Micalizzi regarding PGO has reckless overborrowing. percent destined for emerging markets based club of industrialized nations. amid thin trade in Tokyo in the afternoon,
since 2006 and related to the judg- proved to be inaccurate,” according Last week, when fears spiked of a against only about 22 percent to the cur- “We had this external shock and with from 76.76 yen to the greenback late
ment. It is unclear what assets to liquidators Zolfo Cooper. global financial meltdown after the first rently shaky United States and Europe — this external shock we did our homework, Friday in New York.
backed the bonds. The investors “The liquidators consider it sur- ever downgrade of the US sovereign as one factor bolstering the outlook. which is very painful,” said Sakong Il, a Japan’s government intervened in the
alleged in the lawsuits that they prising that PGO had guaranteed credit rating, the government sprang into Less debt since the 2008 crisis, the former finance minister and presidential forex market earlier this month in a bid to
were defrauded by other companies bonds over $10 billion but had a action to calm nerves. world’s seventh-largest foreign reserve adviser. That experience “became a tame the yen’s rise, and has signalled it is
which used their funds to buy the capital of just AUS $1,000 and in It was reminiscent of 2008, when talk holdings and record high current account strength in dealing with the last financial ready to do so again, as businesses have
dubious Napis-issued paper. addition PGO do not appear to have of an impending foreign exchange and surpluses would also help tide the coun- crisis and current financial crisis,” said threatened to move factories abroad.
For two years, Napis and engaged either lawyers or account- banking crisis rattled the country even try over, Choi said. Sakong, who currently heads the Korea Companies have also warned of the
Spargo refused to pay the judg- ants in relation to the issue of the before the collapse of Lehman Brothers Indeed, experience in overcoming pre- International Trade Association. risk of electricity shortfalls and higher
ment and have not responded to bonds,” Zolfo Cooper said. Holdings caused global liquidity to dry vious meltdowns has given South In the end, South Korea recovered prices as Japan goes through a summer-
requests for documents. On Jan. 5, PGO is closely linked to Nexus up and export markets to collapse. Koreans increasing self-assurance they quickly from the 1997-98 upheaval, time electricity saving campaign sparked
the Arizona court issued a warrant Management, the company which Then, South Korean officials were can ride out the next storm — whatever it using only about half of the total interna- by the Fukushima nuclear crisis.
for Spargo’s arrest on a contempt gave $150 million worth of oil- adamant that their country was far more may be. tional aid package and even paying off The accident has fuelled anti-nuclear
charge in the case, according to backed bonds to DD Growth resilient than in 1997. And they were Lee Joo-hun, who teaches at a media the last of the debt ahead of schedule. sentiment among the Japanese public and
court records. Premium Master fund in return for a proven right. Though markets tanked and and design institute, says the latest mar- Some argue a crisis mentality among kept many reactors offline after sched-
Spargo has not been seen since. $75 million stake. Both firms share the currency, the won, fell sharply, the ket dips and unease, while certainly South Koreans long predates the Asian uled safety inspections as many host
Philip Rudd, an attorney for one of the same address as their head office overall effect was less severe and the worth watching, are not enough to truly financial meltdown. communities have been unwilling to
and principal place of business — a economy roared back. rattle a people that have been through “The Korean psyche has been affected approve restarts.
the plaintiffs in the case, says he is worse. Only 15 of Japan’s 54 nuclear reactors
believed to have left the country. residential block of flats in This time, top economic officials have by crisis ever since the Korean War,” said
Canberra. again mobilized, holding emergency “That kind of experience gives us Donald Kirk, a Seoul-based author who are now operating, with more due to
Spargo’s wife, Karen, could not be meetings, issuing statements and trying Koreans a kind of special confidence to wrote a book on South Korea’s experi- cease operations soon for regular
to reassure investors and citizens alike get over this kind of mini-crisis,” he said ence during 1997-98. checks.