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									                                                                                                                                                                                                                     ARAB TIMES, TUESDAY, AUGUST 16, 2011
BUSINESS                                                                                                                                                                                                                                                                    39

                                  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
             Special Report
                                                                                      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.

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