Industry rebounds sharply in INDIA

Indian industrial output rose at its fastest pace in nearly a year
and half in June, official data showed Wednesday in a sign that
Asia's third- biggest economy is emerging from a downturn.
Industrial production increased 7.8 per cent from a year earlier in
June, after a 2.2-per cent rise in May, data from the Central
Statistical Organisation showed. The rate of expansion was the
highest since February 2008 when industrial output had risen 8.6 per
cent. The manufacturing sector, which accounts for two-thirds of
industrial production, showed growth of 7.3 per cent in June, while
output of durable consumer products rose 15.5 per cent and capital
goods by 11.8 per cent. 'The capital goods and manufacturing goods
numbers point to a momentum building up,' said A Prasanna, an
economist at ICICI Securities Primary Dealership, quoted by Dow Jones
Newswires.

US, MEXICO prob oil thefts from MEXICAN company

The US and Mexican governments are probing a scheme to steal millions
of dollars worth of crude oil and refined products from Mexico's
state-owned oil company and sell it to US refiners, a US official
said on Monday. 'There is a cooperative effort by the United
States and Mexican governments to investigate the theft of petroleum
products from Mexico,' said Nancy Herrera, spokeswoman for the US
Attorney's office in Houston. The Immigration and Customs
Enforcement agency, or ICE, will hold a news conference in San
Antonio on Tuesday to announce that the United States will return
$2.4 million in funds generated from oil smuggling to the Mexican
government, the agency said. The announcement comes on the heels of
US President Barack Obama's meetings over the weekend with Mexican
President Felipe Calderon and Canadian Prime Minister Stephen Harper
in Guadalajara, Mexico. At least one US energy industry executive
has pleaded guilty in a scheme to steal about $2 million worth of
petroleum products from Mexico's state oil monopoly Pemex and sell it
to US refiners. Donald Schroeder, president of Houston-based
Trammo Petroleum, pleaded guilty in May to smuggling stolen petroleum
products—including crude oil condensate—from Pemex, according to
court documents. Schroeder is scheduled to be sentenced in December.
Trammo Petroleum purchased the stolen petroleum products, which
were shipped into the United States on barges and trucks, and then
sold them to unspecified unnamed companies, according to documents
filed by the US government in May 2009. 'He has admitted he and
others were involved in shipping a barge of condensate worth $2
million from Brownsville (Texas) to a company near Houston,' Herrera
said. Fuel theft is rampant in Mexico and costs state oil monopoly
Pemex (PEMX.UL) more than $2 billion a year. Federal police last
month raided the Pemex headquarters as part of an investigation into
the thefts. President Felipe Calderon last week accused the
country's powerful drug gangs of being involved in the fuel thefts.

Sona Masjid landport C & F agents threatents strick

Alleging huge extortion under the banner of Sramik Samannya Committee
the C&F agents of Sona Masjid land port have threatened to go on
strike from August 21 if the menace is not stopped. Addressing a
news conference on Wednesday their association leaders said the
so-called labour leaders extort tolls for loading and unloading
every truck at the port. They estimated the extortion at Tk 1.25 lakh
every day. Association general secretary Ruhul Amin read out a
written statement. He said Sramik Samannya Committee president
Mobarak Hossain Malu and his brother and leader of local Juba League
are behind the extortion of tolls. He said the matter was
repeatedly brought to the notice of port officials without any
result. Finding no alternative they sent a written complaint to
the commerce minister on August 11 seeking immediate steps against
extortion. They will go on strike for an indefinite period from
August 21 disrupting export-import activities through the land port
if their grievance is not redressed by that time, added Ruhul Amin.
When contacted, Sramik Samannya Committee general secretary Harunur
Rashid flatly denied the allegation of extortion.

Oil demand weak despite Asian baost

Oil demand is lagging behind vague signs of global recovery from the
economic crisis, the IEA said on Wednesday in a cool assessment of so-
called 'green shoots' of growth. Demand this year would be far
weaker than last year, and an unexpectedly weak rally next year
would fall far short of compensating for this, the International
Energy Agency said. It noted that the oil price had turned more '
bullish' recently, rising by 8.0-10 dollars per barrel from the July
average to about 70 dollars a barrel now, but said that the market
was being underpinned mainly by demand in China and also India.
The benchmark New York contract fell in London on Wednesday by 10 US
cents to 69.35 dollars per barrel. The IEA reported that the US
driving season, a big factor in demand for petrol at this time of
year, had 'fizzled out,' US industrial activity was still falling and
global use of diesel fuel, which is used for trucks, transportation,
and in generators, remained weak. The broad headline findings of
the IEA report chimed with the overall assessment of the
Organization of Petroleum Exporting Countries which reported on
Tuesday that world oil demand would decline slightly this year but
begin to grow in 2010. The IEA said that Chinese demand had '
rebounded' and that it saw 'recovery in economic growth' outside the
OECD area of advanced economies 'prompting a demand rebound in
2010.' For 2009, the IEA revised upwards slightly its expected
demand data but said that this was a mere drip compared to the
overall fall from demand in 2008. It also noted record low oil
output by Nigeria but unexpectedly high production by Russia. The
agency said that it was 'now among the bears for 2009 demand' which
would fall by 2.3 million barrels per day from the 2008 average,
marking contraction of 2.7 per cent. 'Has the global recession
ended?' the IEA asked, posing the pivotal question because demand
for energy is tied to economic activity. 'The most that can be said
is that the global economy may be stabilising—but even if this is
confirmed, it remains far from evident that growth will resume
strongly before the end of the year.' It said: 'Only in China and
India is industrial production growth positive.' Elsewhere
industrial production remained in a state of contraction even though
the rate of decline had slowed slightly. 'More worryingly,
industrial production has seemingly not reached the bottom in the
US.' The monthly report said that shrinkage of demand for oil in
Europe had increased to 900, 000 barrels per day in the second quarter
of this year. 'And the US 2009 gasoline (petrol) season now seems
to have fizzled out before getting started.' Initial US demand for
gasoline in July was 1.8 per cent below the figure for 2008 after a
fall of 1.6 per cent in June. 'Green shoots of economic recovery
there may be, but motorists have curbed driving and, at the margin,
schemes to encourage vehicle fuel efficiency may begin to have an
increasing impact.' The agency, the oil policy and monitoring arm
of the Paris-based Organisation for Economic Cooperation and
Development, said it had revised upwards expected global demand for
oil this year by 190,000 barrels per day, and for next year by
70,000 barrels, because the outlook for Asian demand had risen for
both years. 'This barely dents the sharp demand contraction to
83.94 mbd expected this year, while growth in 2010 is slightly lower
than previously estimated, at plus 1.6 per cent or 1.3 mbd to 85.25
mbd,' the report said. 'The evidence of a bottoming out of the
global recession is patchy, and global gasoil (diesel) demand—a key
indicator of economic health— remains significantly subdued.' The
IEA reported that global oil supplies had risen by 570,000 barrels
per day to 85.1 million barrels per day in July. Two thirds of
this increase had come from producers outside OPEC. Non-OPEC
supply for this year was revised upwards by 160,000 barrels per day
to 51.0 mbd, mainly because of unexpectedly strong Russian supply in
recent months. But supplies of crude oil from OPEC fell by about
100,000 barrels per day in July to 28.64 million barrels owing in
part to record low output by Nigeria. The IEA was at pains to list
issues which fuzzed the outlook for 2010, saying that although 'the
global economy is expected to rebound next year' under the effects of
massive stimulus action by authorities around the world, there was
great uncertainty over what would happen as stimulus was withdrawn.
'It is also unclear whether a rebalancing of the world economy will
occur... as there is little sign that private consumption in key
exporting economies, like Japan, Germany, China, is growing enough
to offset its sharp fall in countries with large current account
deficits, most notably the US.'

Oil declines in ASIA

Oil was lower in Asian trade Wednesday on further worries over the
pace of the global economic recovery, analysts said. Prices will
be under further pressure if the release of a key US energy
reserves report later in the day indicates falling demand in the
world's largest oil user, they said. New York's main contract,
light sweet crude for September delivery, dropped 54 cents to $68.91
a barrel. Brent North Sea crude for September delivery was 69
cents lower at $71.77. 'Traders are going to concentrate on the
crude and gasoline numbers,' said Peter Donovan, vice president at
Vantage Trading. 'If the inventory numbers are not bullish, you
could see prices sliding further.' A Dow Jones Newswires poll of
analysts tipped US crude stocks to rise by 700, 000 barrels and
gasoline stocks to fall by 1.3 million barrels. Distillate
inventories, which includes heating oil and diesel, are expected to
drop by 300,000 barrels, the poll showed. Crude oil prices fell
Tuesday on fresh worries that the global economy may not recover as
fast as had been hoped, meaning energy demand would also be
affected. 'The recovery is far from firmly established,' analysts
from London-based Capital Economics consultancy said in a report.

Banks rates lack transparency claims Wahiuddin Mahmud

An eminent economist on Tuesday cast confusion over the interest
rates charged by commercial banks and said monetary transactions
maintained by the banks and their effective rates of interest
remained fishy. At the seminar on 'Microfinance Interest Rate and
Transparency' on Tuesday, they pointed out that the microfinance had
ensured access of a large number of poor to the formal financing,
despite the controversies surrounding the higher interests.
Wahiddin Mahmud, a senior economist and chairman of Institute of
Microfinance, also underlined the importance of bringing
transparency in the micro-credit lending rate and suggested that
alternative financing for microfinance institutions to fund micro
enterprises might help reduce the much-talked interest rate.
'There are questions about micro-credit interest rate but not about
transactions of crore of Taka. For banks, it is the transactions, if
not interest rate, which is the grey area. Transparency should be
ensured to show the effective interest rate and method of
transactions of the commercial banks,' he observed. Presiding over
the opening session of two-day seminar, the economist said the
commercial banks followed fishy practices while rescheduling the
loans of the 'big fishes'. He also mentioned that there should be
transparency in interest rates and overall operations of the
microfinance institutions to prove their positive role and stop bad
players from making windfall profits from hedge- financing business.
'There is no reason to hide and seek with lending rate. It will be
slightly high because the MFIs have to reach the doorstep of the
poor,' Wahiduddiin said adding that interest rates must come down and
the microfinance institutions should also be made sustainable. The
Institute of Microfinance and the Micro- credit Regulatory Authority
jointly organised the seminar at Palli Karma-Shahayak Foundation to
discuss wide ranging issues of interest rates charges by microfinance
institutions, mainly NGOs, and transparency in their operations.
The finance minister, AMA Muhith, addressing the inaugural session,
said the interest rate had come down in recent years and would
decrease further if they improve efficiency. He also stressed the
need for containing cross-financing to save borrowers from
indebtedness. 'The more micro-credit has expanded, the less the
interest rate has been charged,' he said lauding the growth of the
micro-credit in the country. The governor of Bangladesh Bank,
Atiur Rahman, explained a set of factors that should be taken into
consideration for calculating interests rates. Such factors include
inflation, cost of funds, administrative expenses, efficiency of
operation, and cost of losses. He recalled that today's Grameen
Bank evolved based on a project of the central bank, which was
almost rejected by the board of governors in view of its 'lack of
financial sustenance'. 'What was valued eventually was the social
benefits and professor Yunus rose to the occasion to meet the needs
of the poor in the rural areas,' added Atiur, known to be economist
of the marginalised people. The executive vice chairman of the
Micro- credit Regulatory Authority, Khandaker Muzharul Haque
mentioned that they wanted to issue a cap on the interest rate but
they failed to reach a consensus on such issue. The interest rate
charged by the microfinance institutions is said to be up to 30 per
cent. 'The decision was taken to calculate the interest rates
through stakeholders' meeting,' he said. The amount of
micro-credit disbursed annually has stood at around Tk 25,000 crore,
said Baqui Khalily, executive director of the Institute of
Microfinance.

Most SMEs out of institutional supports

The initiatives and supports by the SME Foundation in promoting the
small and medium enterprises are far below the demands across the
country for setting up such industrial units with entrepreneurial
zeal of the individuals. Saying so, the businessmen and officials
concerned have commonly observed that the whole range of the
micro-enterprises — considered almost 70 per cent of the so-called
SME — remain out of focus of the official coverage of the avowed
support for this unorganized sector. However, the managing
director of the Small and Medium Enterprises Foundation, Momtaz
Uddin Ahmed, aired optimism about growth of the sector saying that
banks and financial institutions with policy and financing supports
from the government were coming up with packages to help the small
and medium enterprises grow. Business leaders have contending
views as they pointed out that new and inexperienced small
entrepreneurs, such as young educated youths and women, faced
enormous difficulties in starting businesses from financing to
regulatory permission and from project development to marketing.
''Unless we include the micro enterprises into the fold of the SME,
we will not be to give a complete shape in the growth of small-scale
industries in view of the immense potentials of social
entrepreneurship in this county,' the chief executive of the SME
Foundation told New Age. Micro enterprises are defined by
employment of one to 10 people in terms of manpower whereas
industrial units of small and medium categories should have 10 to 49
and50 99 people working. He felt that the name of the SME
foundation itself should changed as MSME [micro, small and medium
enterprises] Foundation and that the micro-enterprises amounting to
70 per cent of the SME sector should be recognised and supported for
a healthy growth of potentials industries. 'For exploiting the
untapped potentials of a variety of sectors and for supporting the
people' s initiatives, we have to extend services to the small
entrepreneurs and reach them at every nook and corner of the
country,' added Momtaz Uddin, also a professor at economics
department of Dhaka University. Despite the potentials of
widespread growth, the enterprises of this category are concentrated
in a few locations in line with Dhaka-centric national development,
he observed and admitted that the outreach of the SME Foundation, a
growing institution, should be enhanced. The foundation does not
finance any projects rather than carrying out promotional activities
with the money drawn from the interests of a Tk 200-crore rolling
fund provided by the government during its formation. Currently
some 50 lakh workers and employees are engaged in SMEs numbering
more than one lakh, according to the SME Foundation. Its main job is
to provide training and carry out advocacy programmes to promote the
sector. 'The services provided by the SME Foundation are
inadequate and its focus should be widened,' said Selima Ahmad,
president of Bangladesh Women Chamber of Commerce and Industry, who
was a board member of the foundation until recently. She mentioned
that the functions of the foundation should be streamlined in view of
the needs of the entrepreneurs and capacity of the those involved in
the sector. KMH Shahidul Haque, president of The Saviour and a
former director of Dhaka Chamber of Commerce and Industry, expressed
his conviction that unless the SME Foundation could arrange funds,
develop projects and provide marketing facilities for the SME
entrepreneurs, they would not be satisfied with the SME Foundation.
'We know the barrier to business. The foundation has to solve those
with close collaboration with the government and the private sector.
Entrepreneurs should be provided with full package, not merely
training, for initiating new ventures,' he said. The foundation
chief expressed the hope that more commercial banks would come up
with lending offers for the small and medium enterprises by opening
widows for this category of entrepreneurs who need technical supports
for project development and market linkage of their products. Through
the commercial banks, the central banks is now providing funds to new
entrepreneurs from its re-financing scheme.

Nestle trims outlook as sales disappoint

Nestle, the world's biggest food group, pared its full-year outlook on
Wednesday after missing forecasts with first-half organic sales
growth of 3.5 per cent, knocking its shares lower. Analysts polled
by Reuters had on average forecast that organic sales growth, which
strips out currency effects and acquisitions, would increase to 3.9
per cent after 3.8 per cent in the first quarter. The maker of
Nescafe coffee, KitKat chocolate bars and Maggi soup dropped its
target for 2009 organic sales growth 'at least approaching 5 per
cent,' saying only that it 'expects volume-driven organic growth to
accelerate in the second half.' Chief Financial Officer Jim Singh
said consensus forecasts for the full-year—with organic growth seen
at 4.3 per cent, according to a recent Reuters poll of analysts—were
a good interpretation of Nestle's guidance. After just 0.5 per
cent of organic growth came from volume in the first half, he said
volume should drive growth more than pricing in the second half,
adding Nestle had cut prices in the last quarter and did not see any
significant price rises ahead. 'We are seeing a recovery from a
tough period between November and March. We expect this trend of
improvement to continue in the second half,' Singh told analysts.
Nestle had already said in June that it expected performance to be
weighted toward the second half, but few analysts had expected it to
pull back from the 'approaching 5 per cent' target. Nestle shares
were down 3.2 per cent at 42.70 Swiss francs at 5:47 a.m. EDT,
dragging on the DJ Stoxx European food and beverage index, which was
down 1.3 per cent. 'Headline is that top line is a bit
disappointing, certainly relative to Unilever, but EBIT margin is
better, and net income is better,' Deutsche Bank analysts wrote in a
note. Second-quarter results at both Unilever, the world's
third-biggest food and consumer goods group, and French food group
Danone beat forecasts. Unilever reported volume growth of 2 per cent,
and Danone said price cuts helped volumes rise 2.7 per cent.
Nestle shares are trading at about 14 times 2010 earnings, about the
same as Danone and at a premium to Unilever's 13.2. While they were
disappointed by sales, analysts welcomed Nestle's 30 basis point
improvement in its margin on earnings before interest and tax to 14.1
per cent and a forecast- beating net profit of 5.1 billion francs.
Nestle reiterated it expected an improvement in the EBIT margin at
constant currencies for the full year.

Stagnant investment scenario irks MUHIT

The government has been cautioned of a possibility that the private
sector might try to turn projects under public-private partnership
into Publicly Financed Private Projects. Speakers at a roundtable
in Dhaka on Wednesday raised the concern along with other budget
implementation issues while the government is busy formulating a
guideline for the PPP. Addressing the meeting, finance minister
AMA Muhith dispelled the concerns over implementation of Annual
Development Programme, PPP, revenue targets and deficit financing.
He, however, expressed concern over slow investment and
infrastructure bottlenecks as the downside risks of development.
Centre for Policy Dialogue organised the roundtable titled
'Delivering on Budget FY2009- 10: A set of Implementation Issues' at
the CIRDAP auditorium. Former finance adviser Mirza Azizul Islam,
senior bureaucrats, former bureaucrats, economists, academics, civil
society members and representatives from private sector took part in
the discussion, moderated by CPD chairperson Professor Rehman Sobhan.
CPD distinguished fellow Dr Debapriya Bhattacharya presented the
keynote paper discussing issues relating to budget implementation
from the macroeconomic perspective. CPD reminded that
implementation of the budget remains dependent on the overall state
of good developmental governance of the country. The finance
minister expressed concern over the stagnant investment scenario and
wondered as to why investment was not taking place in the country
although the 'fear factors' had been removed by now. 'There are
some uncertainties over the global recession and poor energy and
power situation,' he, however, said. In response to an
apprehension over releasing the stimulus funds, he said Bangladesh
Bank would soon make available the data in this regard. He added
that the government would review the budget after six months and
reallocate the funds, if necessary. Muhith said the government
would also review the Poverty Reduction Strategy Paper for three
years keeping in mind the goals of the 5-year plan now under
preparation. 'The biggest task now is inspiring the administration
and the people to help implement the budget.' Responding to a
criticism on the government plan to borrow money from the ADB, and
suppliers' credit from China at hard terms, he said the terms cannot
be called hard, they are rather soft loans for 10-15 years at 3.5-4.0
per cent interest. The finance minister said the proposed loan
from IMF was not for project financing, but for financing petroleum
imports at 0.25 per cent service charge. Former finance adviser
Mirza Aziz said the shifting of the tanneries from Hazaribagh to
Savar had not been taking place as the private sector did not accept
a proposal to procure effluent treatment plant with a loan for 20
years only at an interest of 5 per cent. 'It does not bode well for
the PPP,' he said, expressing concern over the private sector
attitude in case of participating in PPP projects. ' Let's not allow
PPP to turn into Publicly Financed Private Projects.' The former
finance adviser said Bangladesh experience did not show that the
government borrowing from the banking system would crowd out the
private sector borrowing. Rather, he said the global recession, law
and order situation at home and energy crisis have depressed the
investment situation. 'In this situation we cannot expect investment
and that means credit demand will remain low.' Mirza Aziz
expressed dissatisfaction over dropping the employment guarantee
scheme of the caretaker government on policy weaknesses and wondered
whether the replaced scheme in the current budget has been framed
through addressing the policy weaknesses.

China accuses US of protectionism in tire case

A Chinese trade official said Wednesday that a US complaint about
China's tire exports smacks of protectionism and appealed to
Washington to avoid taking steps that might harm relations. The
government of President Barack Obama is deciding what action to take
after the US International Trade Commission ruled in June that
increased imports of Chinese tires were harming American tire
producers. 'I believe the case is neither supported by facts nor
does it have valid legal grounds,' a deputy commerce minister, Fu
Ziying, said at a news conference. 'It is against basic WTO
principles and looks like trade protectionism,' Fu said. 'We hope the
US government will refrain from taking action, for the long-term
healthy and stable development of US-Chinese relations.' In
addition to tires, Washington has launched a series of investigations
into whether Chinese exporters were dumping goods including wooden
bedroom furniture, honey, candles, gift boxes, industrial chemicals
and fresh garlic. The union that brought the latest case, the
United Steelworkers, says Chinese tire exports to the United States
more than tripled in the 2004-08 period to 41 million tires a year.
The union said that led to the loss of 5,100 American jobs and
another 3,000 jobs could be lost this year. The union is urging
Obama to cap imports of Chinese tires at 21 million per year. Fu
said that while Chinese tire exports to the United States increased,
profits for US tire producers doubled over the same period. 'So we
can conclude that China's exports of tire products to the United
States posed no material injury to US tire makers,' he said. Fu
said the case was prompted by the financial problems suffered by US
auto and tire producers due to the country's economic crisis. 'They
are blaming China or Chinese products for their decreasing profits,'
Fu said.

BANGLADESH govt to tighten screws on polybag makers

Efforts to end the illegal use of non- biodegradable polythene bags in
Bangladesh have been frustrated by a lack of manpower and dearth of
dedicated mobile courts, say authorities, but the government is now
set to take tougher measures against the continued production and
spread of the environmental menace. 'Delays in implementing the
mobile court drive against the banned polythene bags is one of the
main reasons behind their continued use,' Muhammad Shahjahan Mia,
technical director of the department of environment, told bdnews24.
com on Tuesday. In 2002, the government banned both production and
use of 'thin' polythene bags of the type that are still widely found
in shops and markets throughout Bangladesh. Mia said a recent
government decision to kick- start mobile court drives, which have
been stalled since the caretaker administration's separation of the
judiciary in Nov 2007, would add much needed impetus to environmental
protection initiatives. The DoE official's comments follow a
recent call by the parliamentary standing committee on environment
for tougher measures against the production and use of the illegal
polybags. The committee, in a meeting held on Aug 6, said despite
the ban on their manufacture and use, they continued to create
environmental havoc in the capital and elsewhere by clogging water
bodies and drainage systems. It found the polythene bags were
partly responsible for exacerbating water-logging problems in Dhaka.
However, retailers in the capital's kitchen markets say the cost
of the plastic bags remains considerably lower than that for net or
paper bags, the two alternates promoted by the authorities.
According to the committee's findings, polythene bags returned to the
market in force towards the end of 2006. State minister for
environment Hasan Mahmud, in the parliamentary committee meeting,
said his ministry would strictly adhere to environmental legislation
that banned the non-biodegradable bags. Alamgir Kabir, of
environmental pressure group Bangladesh Poribesh Andolon, told
bdnews24.com that massive quantities of illegal polythene bags
continue to be manufactured in small factories in Lalbagh,
Hazaribagh, Kamrangirchar and Chakbazar. Kabir said some of the
'factories' have even secured fake DoE certificates to conduct their
highly profitable business free from official hassles. Official
confusion also persists over the exact types of plastic bag banned
under the 2002 legislation.