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f|§| r ? Ptare Smart 

yffi+i Testing time 
for Alcatel 

v -■ IV'*-: j tatonriew, Page 17 


x\ • 


War of attrition ^ 

Lewis Preston's plans 
for the World Bank 

FT Interview, Page 14 


V • • 


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Tony Blair 

British Labour’s 
leader-apparent 

Page 15 


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k ')• T 4 I' 



South Africa 

Now , to deliver 
the promises 

Survey, Section W 



FINANCIAL TIMES 






4 ri SSIISM?* 


s S'hTc'tesh 668 Berlusconi faces resignation threat to coalition 

nAAP B— — e - - - Bv David Lane in Rome nf invnluomont in fhn “■Partmaninnnli 1 ' nnmf in mil nn ,ai ll njv-npinnr ,!vwia ammci nr. , .. .I nllrtn Will, Klin nf ilii 






near Zaire border 

3 As many ns 80 Rwandans were killed in stampedes 
-.-.v-; whfin rebels attacked the retreating government 

£*-23 pny at Gisenyi as the refugees were fleeing 

towards the Zairean border. The UN high, commis- 

^ sioner for refugees estimated that between 800,000 

£ and one millicin refugees had poured into Zaire 

j hi the previous five days. In Paris. French officials 

j held an emergency meeting on Rwanda amid 

3 sports that the UN had suspended its airlift for 

the refugees because of an attack on Zaire's Goma 
airport Germany joins aid moves. Page 4 

V-ej Standard Chartered directors quit; Two 

?3 directors of Mocatta, Standard Chartered’s bullion 
arms, have quit after taking responsibility for 
a corruption scandal at the bank. 'Hie resi gnations 
follow a probe into bribes paid by Mocatta employ- 
ees in return for business. One director was based 
in London, the other in Hong Song. Page 17 

French minister quits: French communications 
minister Alain Carignon resigned over a legal 
25 ^ case involving a press group based in Grenoble, 
where he is mayor. A statement said he was quit* 
^ ting “in order to be able to express himself freely". 
Page 16 

^ European Monetary System: In a week which 
saw the D-Mark shed some of its recent strength 
against the dollar, the only change in the fms 
grid was the Belgian franc overcoming a small 
cut in interest rates to move above the D-Mark. 

The spread between strongest and weakest cur- 
rency was little changed. Currencies. Page 29 


EM& Grid 


Guilder 

B.Franc 

D-Mark 

Irish Punt 

F.Franc 

DJCnme 

Escudo 

Peseta 


July 15, 1994 



0 © 1% 2% 3% 4 % 


The chart shows the member currencies of the 
exchange rate mechanism measured against the 
iceakest currency in the system. Most of the curren- 
cies can fluctuate icithin 15 per cent of agreed central 
rates against the other members of the mechanism. 
The exceptions are the D-Mark and the guilder 
which move m a narrow 125 per cent band. 

Hostages feared kilted: Britons D omini c 
Chappell and Tina Dominy and Australian Kellie 
Wilkinson, kidnapped in Cambodig in April by 
suspected Khmer Rouge guerrillas, are feared 
to have been killed. The Foreign Office in London 
said items found near where the three went missing 
were undergoing forensic analysis. 

Minister to meet after fishing raw: Spanish 
fisheries minister Luis Atienza was due to meet 
his French counterpart Jean Puech today to discuss 
a row between fishermen from the two countries 
over illicit drift nets- Yesterday Spanish fishermen 
headed for port towing an abandoned French 
trawler which they claim will verify their allega- 
tions of illegal fishing. 

IRA kills ^informer': The IRA said it “executed" 
a Northern Ireland woman because she was a 
police informer. The terrorists dumped her body 
in Co Fermanagh, close to the border with Ireland. 

Action or^ consultancies: A radical shake-up 
in the wa^- dp^TK government hires consultants 
is recomnil — a report due out soon. The 
recoramendatk 'ijnes after the disclosure that 
- the British government spends more than SSQQm. 

1 t$760m) a year on outside consultants. 

Lebanon branch for Dutch bank: Dutch 
v .i bank Internationale Nederianden Bank is to be 
& i i d allowed to set up a full branch in Beirut - the 

first time Lebanon’s central bank has given such 
an approval for 25 years. Page 19 

Opec countries urged to hedge: 

International banks and commodity exchanges 
are trying to persuade big petroleum producing 
countries to use futures contracts and forward 
_§§ oil sales to hedge against sharp foils is oil revenues. 



Page 17 


Rolling settlement for UK shares comes into 
force today. Under the new system, shares must 
be delivered or paid for 10 business days after 
a bargain is struck instead of the two or three 
weeks that has been traditional on the London 
Stock Exchange. 

Lloyd’s of London 'poised for profits’: 

Lloyd’s of London insurance market can expect 
to make comfortable profits in 1993 and for the 
next three years, according to Nick Bunker of 
Hoare Govett UK Investment Research. 

Page is 

Tumberry golf win for Zimbabwe’s Price 

- — ■vfsm-w - -it. Nick Price (left) holed 

a 75-ft eagle putt at 
the 17th hole and made 
a safe par on the last 
green to win the Open 
golf championship 
at Tutd berry. Scotland. 
'Hie 37-year-old Zimba- 
bwean’s first Open 
title was achieved 
with a four-round total 
of 268 , 12 under par, 
and one stroke ahead 
of Sweden's Jesper Paraevik who had taken the 
lead in the late stages of the championship. 


By David Lane in Rome 

The survival of Italy's three-party 
coalition government led by Mr Silvio 
Berlusconi was in danger Last night, fol- 
lowing the resignation threat of a senior 
cabinet minister in a worsening row 
over a controversial decree curbing the 
power of magistrates. 

Mr Roberto Maroni, minister for home 
affairs and deputy to Mr Berlusconi, 
accused cabinet colleagues of trickery. 
He said he had been deceived about the 
contents of the decree, promulgated last 
week, which lias already led to the 
release from jail of several well-known 
politicians and business people accused 


of involvement in the “Tangentopoli" 
(“Bribes ville") corruption scandal. 

Mr Berlusconi said yesterday evening 
that Mr Manmi’s accusations were not 
tree, and he demanded that his deputy 
should either make an unconditional 
withdrawal of the accusations or resign. 

The cabinet crisis and trial of strength 
between Mr Berlusconi anil members of 
his government come at the start of a 
week when the government’s economic 
policy is scheduled to be announced. 

Mr Maroni, who said be should have 
not trusted his cabinet colleagues when 
he sought assurances that the decree 
would not lead to the freeing of sus- 
pects, told his party, the populist North- 


Italian ministers trade blows on 
decree Page 2 

era League, that he was ready to resign 
from the government 

However, at a meeting yesterday after- 
noon, the League’s executive declined 
his offer to resign from the cabinet Mr 
Umberto Bossi, the League's leader, said 
the deputy prime minister enjoyed the 
full confidence and support of the party. 

Following the meeting Mr Bossi said 
that the decree should be withdrawn 
and that the affair should not be used as 
an excuse for fresh parliamentary elec- 
tions, which Mr Berlusconi has threat- 


ened to call on several occasions since 
assuming power two months ago. 

A firm line against corruption has 
been a fundamental part of the Northern 
League’s policy. Any softening of this 
position would threaten the standing of 
Mr Bossi, and the release of those under 
investigation might be seen as a sign of 
weakening. 

Mr Bossi’s call for withdrawal of the 
decree aims to reassure his party’s fol- 
lowers. Similar calls were made this 
weekend by the neo-fascist MSI/National 
Alliance party, government partners 
with the League and Mr Berlusconi’s 
Forza Italia. In common with the 
League, the MSI takes a strong line 


against corruption. With two of the 
coalition members expressing misgiv- 
ings about the decree. Mr Berlusconi has 
been left isolated. Opinion polls suggest 
the public is against the decree and sup- 
ports the Milan investigating magis- 
trates who resigned in protest last week. 

However, the prune minister appears 
to enjoy full support from his own party. 
Mr Alfredo Biondi, a member of Forza 
Italia and minis ter of justice responsible 
for the decree, described. Mr Maroni’s 
accusations as grave and false. 

Mr Berlusconi has counter-attacked, 
listing twelve points to justify the 
decree. Among these was the slow pro- 
cess of justice. 


Microsoft 
deal settles 
anti-trust 
probe 


By Louise Kehoe in San 
Franci sco 

Microsoft, the world's largest 
computer software company, has 
avoided potentially costly legal 
actions on both sides of the 
Atlantic by settling allegations 
that it used anti-competitive 
practices to maintain a monopoly 
in the personal computer market 

The deal between Microsoft, 
the US Justice Department and 
the European Commission settles 
one of the biggest anti-trust 
investigations since the break-up 

of American Telephone and Tele- 
graph, the US telephone group, in 

1964. 

The settlement, which requires 
Microsoft to drop some alleged 
monopolistic practices, marks the 
end of a four-year investigation 
which involved unprecedented 
cooperation between competition 
authorities in the US and 
Europe. 

In a telling judgment upon the 
methods Microsoft used to main- 
tain its predominance in the soft- 
ware industry, the US Justice 
Department said: “While the 
company fairly and legally 
climbed to the top of the industry 
ladder, it used unfair and illegal 
practices to maintain its domi- 
nant position." 

Microsoft, with annual reve- 
nues of $L5bn dominates the per- 
sonal computer software indu&ry 
with its operating systems 
installed in more than 120m 
machines. Operating systems act 
as the “central nervous system” 
of a computer, controlling its 
basic functions. 

The company founded by Mr 
Bill Gates, a young entrepreneur 
who has become one of the rich- 


est people in the world, has faced 
increasing criticism for commer- 
cial practices winch its competi- 
tors allege limit their ability to 
break into the market 
Microsoft provided the operat- 
ing system for the original Inter- 
national Business Machines PC 
in 138L This rapidly became a 


■ Joint effort is a warning to 

others 

■ Undisputed leader backs 
down 

■ Details of the complaint and 

settlement 

world standard and Microsoft has 
dwarfed its competitors ever 
since. 

The US authorities, announc- 
ing the settlement on Saturday, 
said that Microsoft had “built a 
barricade of exclusionary and 
unreasonably restrictive licen- 
sing agreements to deny others 
an opportunity to develop and 
market competing products". 

Ms Anne Bingaman. Assistan t 
Attorney General in charge of 
the anti-trust division of the US 
Justice Department said: “Micro- 
soft is an American success 
story, but there is no excuse for 
any company to try to cement its 
success through unlawful means, 
as Microsoft has done." 

She added: “This case sends a 
powerful message that the anti- 
trust authorities of the US and 
the EC are prepared to move 
decisively and promptly to pool 
resources to attack conduct by 
multinational firms that violate 

Continued on Page 16 



Detergent war enters a new cycle 


By Diane Summers, 

Marketing Correspondent 

Unilever and Procter & Gamble 
are about to open a new front in 
their washing detergent wars, 
with Unilever preparing to test 
samples of a new product devel- 
oped by its rivaL 

The Anglo-Dutch consumer 
goods group said it had obtained 
a draft sales brochure and a sam- 
ple of a new Procter & Gamble 
detergent. 

Procter & Gamble plans to 
launch its own new-generation 
detergent, called Ariel Future, in 
Germany in the autumn and then 
elsewhere in Europe. 

The two consumer giants have 
been engaged in a battle for 
months over Unilever’s deter- 
gent, called Persfl Power or Omo 
Power. Procter & Gamble claims 
the detergent could damage 
clothes after frequent washing. 

Unilever will later this week 


publish details of its own tests on 
its detergent which, it will argue, 
vindicate the product 

Mr Andrew Seth, who heads 
Unilever’s UK detergent busi- 
ness, said the Procter product. 
Ariel Future, was “rivetingly 
similar” to its own detergents in 
the way the sales literature 
emphasised better stain removal 
at lower temperatures. 

Mr Seth said the apparent simi- 
larities between the products 


“unquestionably" explained Proc- 
ter’s attacks. “This completed the 
jigsaw puzzle for me,” he said. 

Mr Seth said he thought Proc- 
ter had been working on its new 
formulation for some time but 
had been pipped to the post by 
Unilever “I think this is some- 
thing they’ve been intending to 
do for a long time but we got in a 
bit sooner than they thought we 
would. You realise how galling it 
must be to have somebody do it 


before you." 

However. Procter & Gamble is 
already preparing its defence of 
Ariel Future. It said yesterday ; 
"This is not a copy-cat product 
but a leap-frog product" 

It emphasised that Ariel Future 
would not contain the manganese 
based ingredient which has been 
at the centre of the controversy 

Continued on Page 16 
Lex, Page 16 


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Shipbuilding nations avert 
trade war over yard subsidies 





By John RkJdBng in Paris 

Leading shipbuilding nations 
yesterday agreed to scrap subsi- 
dies to their shipyards in a land- 
mark deal for the industry, avert- 
ing a potentially serious trade 
dispute. 

France, however, opposed the 
deal, reached after a week of 
negotiations at the Organisation 
for Economic Co-operation and 
Development in Paris. Its rejec- 
tion indicates a lift with its Euro- 
pean Union partners, represented 
in the talks by the European 
Commission, which are unlikely 
to be swayed by the French 

The agreement, between the 
OS. the EU, Japan. South Korea, 
Finland, Norway and Sweden, fol- 
lows five years of talks and was 
concluded in the early hours of 
yesterday. It win end direct and 
indirect subsidies to shipyards in 
these co untri es and includes an 


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anti-dumping code, drawn up in 
response to concerns about Japa- 
nese and Korean pricing. 

Officials said failure to con- 
clude an agreement could have 
provoked a subsidy war between 
the bigger shipbuilding nations 
and triggered US retaliation 
against ships b uilt in subsidised 
foreign yards. 

“Given the huge increase in 
capacity in Korea and the rise of 
producers like China and 
Ukraine, European countries 
might have been forced to pro- 
vide increased aid to their yards, 
prompting a subsidy and price 
war,” said an official involved in 
the talks. “It was clear ... the US 
was considering unilat eral action 
if a deal wasn’t reached." 

The agreement must be ratified 
by all participants and is due to 
take effect at the be ginning of 
1996. But it faces opposition from 
France, which sought to suspend 
the talks at the weekend, and 


-CONTENTS 


Ails 

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Busnon Trawl. 
Crand 


which is concerned about jobs at 
its remaining shipyards, notably 
Saint- Lazare and Le Havre. 

France, on its own, would be 
unable to stop a qualified major- 
ity vote on the deal in the Euro- 
pean Council of ministers and 
appears isolated in its opposition. 

Yesterday's agreement fol- 
lowed the resolution of several 
protracted disputes. These 
included European concerns 
about the Jones Act, which 
restricts US coastal trade to ves- 
sels built in US yards. The Jones 
Act will remain in place, but 
there will be a cap placed on the 
tonnages it covers and counter- 
measures will be available in the 
case of misuse. 

The agreement covers about 75 
per cent of the world’s shipbuild- 
ing capacity and officials want to 
extend it 

Danes attack Brussels on ship 
subsidies, Page 3 


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Wald Bern fcfcrtBfc 22 

E«4)r Maritas 23 

FT Warid Actuaries 21 

Managed Funds 35-SS 

Money Mates 29 

Shoe Msmadon 3031 

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^ Ttre csuMriiT TIMES LIMITED 1994 No 32.421 Week No 29 


LONDON " PARIS - FRANKFURT - NEW YORK - TOKYO 









NEWS: EUROPE 


FINANCIAL TIMES MONDAY JULY lg 1994 


Bosnia Serbs 


Italian ministers trade blows on decree 


may reject 
peace plan 


By Laura saber In Belgrade 

Bosnia ’5 rival assemblies - the 
republic's Moslem-led legisla- 
ture in Sarajevo and the Serb 
deputies in nearby Pale - will 
today give their verdict on an 
internationaUy sponsored 
peace plan. And all the signs 
are that the Serbs will say No. 

Diplomats said yesterday 
that only a last-minute turn- 
round. under the influence of 
Serbian President Slobodan 
Milosevic, could avert a 
resounding rejection from dele- 
gates in Pale. 

If they turn down the plan 
devised by a five-nation con- 
tact group, the Bosnian Serbs 
will by defying International 
opinion. In effect, they would 
be challenging the group to put 
into effect the threatened ‘‘dis- 
incentives’’ for those who 
refuse to cooperate. 

The contact group has 
pledged to tighten economic 
sanctions against Serbia and 
possibly to lift the arms 
embargo against the Bosnian 
government, if the Serbs say 
No and the government says 
Yes. United Nations and Nato 
commanders at the weekend 
met in Zagreb to decide possi- 
ble responses if one side rejects 
the plan. 

Senior Bosnian Serb officials 
have defiantly predicted that 
the deputies who arrived in 
Pale over the weekend from all 
parts of their self-proclaimed 
Serb republic will turn down 
the proposals, even though 
they have been described as a 
“last chance". 

In Belgrade, President Milos- 
evic has not delivered a firm 
opinion on the peace plan but 
is believed to support it. if only 
to ease economic pressure an 
Serbia. 

However, he claims to have 
only limited influence over his 
kinsmen in Bosnia, and he 
wants Co avoid the humiliation 
he suffered last year, when the 
Bosnian Serbs ran counter to 
his advice and turned down 
the Vance-0 wen peace plan. 

The latest proposals call for 


a Moslem -Croat federation to 
control 51 per cent of Bosnia, 
while the Serbs - who cur- 
rently control 70 per cent - 
would pull back to a 48 per 
cent share. 

Some of the strongest evi- 
dence that Mr Milosevic backs 
the plan comes from the edito- 
rial line of the daily Politika, 
which is close to the president 

Mr Milosevic's hand has also 
been detected in the pursuit of 
a corruption scandal which has 
embarrassed the Bosnian Serb 
interior minister and could 
give the Belgrade leadership 
greater leverage over its kins- 
men in Pale. 

Mr Milosevic indicated to the 
British and French foreign 
ministers Last week that he 
took seriously their offer to lift 
economic sanctions in return 
for co-operation. 

But Mr Radovan Karadzic, 
the Bosnian Serb leader, told 
the visiting ministers he had 
strong objections to the plan, 
mainly constitutional ones. He 
wanted the Bosnian Serb terri- 
tory to be fully independent, 
while the plan called for both 
statelets to form a loose con- 
federation. 

Mr Karadzic was frustrated 
by the contact group's refusal 
to allow the Bosnian Serbs to 
opt out of the confederal 
arrangement after two years. 

Politicians from the Serbian 
Democratic party, the main 
political grouping in Pale, 
made it clear they intend to 
vote No. 

Some of the loudest rejec- 
tions have come from represen- 
tatives of regions that would 
have to be ceded to the Mos~ 
lem-Croat federation under the 
peace plan. Bosnian Serb para- 
militaries at the weekend 
rounded up Moslems who have 
remained in Serb-held terri- 
tory. 

General Ratko Mladic, mili- 
tary commander of the Bos- 
nian Serbs, has told Mr Milos- 
evic he will never hand over 
such strategic positions as 
Mount Ozren in northern Bos- 
nia. 


Haute couture 
comes back 
into fashion 


By Alice Bawsthom m Paris 

I t might be seen as a poi- 
gnant symbol of the pros- 
pects for haute couture, 
the most exclusive - and 
expensive - form of Paris fash- 
ion, that this week's couture 
collections opened last night 
with a show by Gianni Ver- 
sace, a designer who is not 
French but Italian. 

An Interloping Italian, how- 
ever, is only one of the prob- 
lems confronting the French 
couture bouses, which have 
been fighting for survival in 
the early 1990s in the race of 
economic recession and the 
anachronistic structure of the 
haute couture system. 

The market had been in 
decline since the 1960s until a 
brief renaissance in the mid- 
1980s. with turnover peaking at 
FFr320m ($ 60 m) in 1988 and 
1989. according to the Chambre 
Syndicate. But the decline then 
resumed, with sales falling to 
around FFr290m in each of 
1991, 1992 and 1993. 

Haute couture, once the 
most creative area of French 
fashion, had deteriorated into a 


source of publicity for the 
scents and sunglasses from 
which the fashion houses make 
most of their money. 

Yet couture now seems to be 
staging a revival after years of 
decline. “There’s definitely 
been an improvement,” says 
Christian Lacroix, one of 
France's most famous couturi- 
ers. “Our spring collection sold 
very well at the January 
shows. The increase in sales 
hasn't been enormous, hut 
business is better." 

Mr Lacroix is not alone in 
having noted such an improve- 
ment. Denise Dubois, an offi- 
cial at the Chambre Syndicate 
de la Couture Paris ienne, the 
industry body, reckons that 
most of the couture houses 
reported increased sales after 
this spring's collections. 

Some of the avant garde 
designers who show in Paris 
- John Galliano, Vivienne Wes- 
twood and Koji Tatsuno - have 
introduced their own versions 
of. couture outside the 
Chambre Syndicate system. 
Meanwhile the official couturi- 
ers are attracting new custom- 
ers a gain 


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David Lane charts the events which have led to the Berlusconi government’s difficulties 



Umberto Boss! (left), Northern League leader, and Roberto 
Martini, home affairs minister, dislike the decree on detainees ap 


A s the Italian national 
football team prepared 
for the final of the 
World Cup in Los Angeles last 
night, in Rome a deeply 
divided cabinet led by prime 
minister Silvio Berlusconi 
neared a government crisis. 

Statements by ministers dur- 
ing the weekend highlighted 
the serious fault lines existing 
within the three-party coali- 
tion. Government colleagues 
accused one another of deceit 
and implied that self-interest 
might lie behind last week's 
decree to limit the use of pre- 
ventive detention. 

Mr Giuhano Ferrara, minis- 
ter for parliamentary relations 
and press spokesman for Mr 
Berlusconi's government, 
described cabinet colleague Mr 
Roberto Maroni, minister for 
home affairs, as politically 
infantile and amateur. Mr 
Maroni, a member of the 
Northern League and deputy 
prime minister, has said he Is 
ready to resign his ministerial 
post over the decree. He 
claimed he had been assured 
that the decree was agreed 
with opposition parties. 

He said he had placed his 
ministerial mandate at the dis- 
posal of the party. 

Mr Ferrara, who belongs to 
Mr Berlusconi's Forza Italia 
party, was responding to Mr 
Maroni's accusations of trick- 


ery in the cabinet Mr Maroni 
said he had been deceived 
about the contents of the 
decree, announced at the end 
of last week, and that he had 
been assured that the decree 
would not lead to the release 


from prison of persons accused 
of corruption. 

He said he was ingenuous in 
trusting his cabinet colleagues. 

The Northern League has 
won much of Its following in 
northern Italy as a result of its 


stand against corruption in 
public life and In business. 
Northern League supporters 
have criticised a decree which 
opens the gates of Italian pris- 
ons to many well-known fig- 
ures accused of corruption 
offences and cancels requests 
for extradition of others who 
are abroad. 

There were demonstrations 
in Milan on Saturday against 
the decree, and In favour of tbe 
team of investigating magis- 
trates who resigned last week 
in protest Although the dem- 
onstrations were organised by 
opposition parties, significant 
numbers of Northern League 
supporters were present Tele- 
vision news crews from Mr 
Berlusconi's media network 
empire sought police protec- 
tion during the demonstra- 
tions. 

Opinion polls taken after the 
decree seem to confirm that it 
is unpopular. Polls undertaken 
on behalf of the dally newspa- 
per lTJnito show that nearly 
three-quarters consider that 
the decree Is wrong. Only one 
in seven believes that Mr Ber- 
lusconi is right 

More than three-quarters of 
the paper’s sample support Mr 
Antonio Di Pietro, the head of 
the team of investigating mag- 
istrates. 

Results of on approval rating 
published in La Repubblica 


newspaper on Sunday show 
that Mr Di Pietro scored 85 per 
cent, while Mr Berlusconi 
slipped to 43 per cent At the 
end of last week the prime 
minister, whose offer of a min- 
isterial post to Mr Di Pietro 
was reftised when Mr Berlus- 
coni was forming his govern- 
ment accused the magistrates 
of seeking media star status. 

Under fire from the public, 
press, apposition parties and 
one of his coalition members, 


The League has 
won support 
through its stance 
on corruption 


Mr Berlusconi counter-at- 
tacked on Saturday, listing 12 
points to justify the decree. 
Among these were the crowded 
conditions in Italian prisons 
and the slow process of justice. 
Mr Berlusconi said that 
remanding in custody should 
be an exception and only used 
for serious offences. 

He added that it was the 
duty of the prime minister to 
defend the weak and that any 
modifications to the decree 
should reduce still further cus- 
tody for suspects. Motives 
other than concern for weaker 


Citizens have, however, been 
attributed to the commitment 
of Mr Berlusconi and Mr 
Alfredo Biondi. his justice min- 
ister, to the decree. 

Mr Maroni noted that one of 
the effects of the decree has 
been to put a brake on Investi- 
gations into corruption cases 
involving the fiscal police in 
Milan, where important revela- 
tions had been thought immi- 
nent. One of the first beneficia- 
ries of the decree was Mr 
Biondi ’s former Liberal party 
colleague. Mr Francesco De 
Lorenzo, former health minis- 
ter. 

In holding a rigid line on the 
decree, Mr Berlusconi may be 
seeking a government crisis in 
the hope that another parlia- 
mentary election this year 
would lead to the strengthen- 
ing of Forza Italia's position at 
the Northern League's 
expense. 

The neo-fascist MSI/ National- 
ist Alliance, the third member 
of Mr Berlusconi’s coalition. Is 
taking a spectator's role, 
although it main tains a hard 
line on corruption. Before leav- 
ing for the US to watch the 
World Cup final, Mr Gian- 
franco Fini. its leader, said a 
solution to the conflict in the 
cabinet would be found. How- 
ever. even if he is correct, the 
longevity of the government is 
in question. 


Kuchma shows his true colours 


Ukraine’s new leader is embracing market reforms 
and is cautious of Russia, writes Chrystia Freeland 



President-elect Leonid Kuchma, who is to be inaugurated in Kiev 
tomorrow, is cautions about Ukraine’s links with Russia now ap 


D uring the cold war. it 
was a truism of US 
politics that only 
Republican leaders, with their 
impeccable anti-communist 
credentials, had the clout to 
negotiate with the Soviets. 

In a Ukrainian version of 
this political axiom. Mr Leonid 
Kuchma, the president-elect 
who is to be inaugurated 
tomorrow, appears ready to 
implement policies which, 
under a different leader, would 
provoke the fiercest outcry 
from his own constituencies. 

He was swept into office last 
weekend through the pro- 
Russian and communist vote, 
and is setting himself up as a 
free marketeer, a defender of 
the new republic and a cau- 
tious friend to Russia. 

Mr Kuchma is a farm-boy 
from central Ukraine who 
made his career in the Rus- 
sian-speaking defence industry 
but is increasingly reverting to 
the Ukrainian language of his 
childhood. The new president 
has a far greater ambivalence 
towards Russia than romantic 
proponents of Slavic brother- 
hood in Moscow, or his Rus- 
sian-speaking supporters at 
home, might wish. 

He sees the Ukraine's eco- 
nomic future as closely tied to 
Russia's fortunes and he aims 
to create "a Euro-Asia common 
market”. Mr Kuchma intends 
to tear down trade barriers 
between Ukraine and its larg- 
est market, viewing Russia as 
a potential economic partner 
rather than a still clawed, 
recently ousted, overlord. 

Even so, Mr Kuchma and his 
advisers retain what many 
Ukrainians would see as a 
healthy wariness of mother 
Russia. One of the new presi- 
dent's top economic aides (an 
ethnic Russian entrepreneur) 
bustled through the campaign 
headquarters serving as Mr 
Kuchina’s temporary office 
with a tale of Russian “spies" 


who had already visited him. 

Mr Kuchma is also commit- 
ted to hold on to the contested 
Crimean peninsula. It “is now 
a part of Ukraine and will stay 
that way". He points out that it 
“voted for the new Ukrainian 
president" 

The new leader’s confidants 
admit that the hard-headed 
industrialist has "a romantic 
side; this is a man who strums 
the guitar in his free time". 

Some observers have feared 
that this sentimental streak 
might extend to a belief that 
the old days of cheap Russian 
fuel might return, given a suf- 
ficiently accommodating gov- 
ernment in Kiev. But his ten- 
ure as prime minister, while 


He is committed 
to holding on to 
the contested 
Crimea peninsula 


Russia was jacking up oil 
prices almost to world market 
levels, appears to have cured 
Mr Ku chma of this nostalgia. 

“Of course, Russia won’t sell 
us oil an d gas at subsidised 
rates." Mr Kuchma says, lec- 
turing on the rules of the free 
market as though to a dim 
pupil. “That’s how the market 
works - no-one sells anything 
more cheaply than he has to." 

The new president realises 
that closer economic ties with 
Russia are no panacea - a 
harsh reality which Mr 
Kuchma did not often share 
with his voters. The fledgling 
administration will struggle to 
find more viable economic 
solutions. 

Ukrainian bureaucrats, 
many of them hand-picked for 
their loyalty to the outgoing 
president, Mr Leonid Krav- 
chuk, are only reluctantly 
releasing information to the 


new a dminis tration. Each new 
revelation makes the Kuchma 
team more depressed. The new 
man has inherited a debt-laden 
government with no official 
budget and outstanding prom- 
ised credits - which Mr 
Kuchma says he will try to 
block - which could trigger a 
new round of inflat ion, it also 
has a huge debt to Russia and 
Turkmenistan for oil and gas. 

He still cherishes warm 
memories of the old days when 
heavy industry, including the 
missile factory he managed, 
was the pride of Soviet indus- 
try, but Mr Kuchma appears to 
have decided that market 
reforms are the only solution. 

He hopes to meet Mr Michel 
Camdessus, manag ing director 
of the International Monetary 
Fund, as soon as possible and 
has already met the US ambas- 
sador twice as part of his bid to 
secure the S4bn (£2.6bn) prom- 
ised to Ukraine by the Group 
of Seven industrialised coun- 
tries if it begins reforms. Mr 
Kuchma realises, though, that 
western aid can alleviate no 
more than slightly the pain of 
economic transition. 

“Between 20 and 25 per cent 
of our factories must be closed 
down. They are barely operat- 
ing and what they do produce 
they sell to themselves." Mr 
Kuchma says. “Our main task 
now is to figure out how to 
transfer state factories to pri- 
vate ownership-” 

That sounds promising but, 
as Mr Kuchma himself is the 
first to admit, as the leader of 
the country with one of the 
worst economic records in 
what was the Soviet Union, he 
has a credibility problem. 
“We’ve had so many pro- 
grammes already. I don't even 
want to talk about mine. Now 
is the time just to do it" 

First, Mr Kuchma must 
assemble a government and 
take control of the state. He 
appears to be vetting the 


reformist credentials of current 
and future cabinet members: 
Mr Roman Shpek, economy 
minister and the most progres- 
sive figure in the old govern- 
ment, will stay. Mr Viktor 
Iushchenko, chairman of the 
national bank, will need to 
explain to the new president 
“why he did not more force- 
fully f ulfill His mission to 
defend the national currency” 
if he wants to keep his job. 

Mr Kuchma says he will let 
the new prime minister stay on 
Initially - “I met him and he 
seems to be a reformer” - but 
the president-elect wryly 
admits. “I do not expect pas- 
sionate embraces” from parlia- 


ment, which is dominated by 
hard-line leftists. 

Mr Kravchuk ruled Ukraine 
through an agile series of polit- 
ical manoeuvres, at the 
expense of a clear political 
agenda. Mr Kuchma, accus- 
tomed to the disciplined obedi- 
ence of the Soviet defence 
industry, is by nature inclined 
to a very different sort of lead- 
ership. The first stages of his 
administration will show 
whether his commitment to 
reform Ukraine's economy and 
create an effective, but not sub- 
servient, relationship with 
Russia survive In the often 
brutal and inchoate world of 
Ukrainian politics. 


Compromise offer in Polish strike 

Christopher Bobinski on a dispute between Warsaw steelworkers and Italian employers 


A bitter five-week strike by work- 
ers at the Warsaw steelworks, 
taken over two years ago by 
Lucchini, Italy's largest private steel- 
maker, reached a turning point at the 
weekend as strike leaders dropped 
plans to take control of production and 
offered the Italian management a com- 
promise designed to open talks. 

In a landmark confrontation between 
the 3, 4QO-strong Polish workforce and a 
foreign Investor, Lucchini is demanding 
that the strike end before talks can 
start on their demand for a 30 per cent 
wage increase. But the gap between the 
two sides - which Catholic bishops act- 
ing as mediators are seeking to close - 
is large. 

Lucchini argues that the wage 
demand is too high- The workers, who 
earn an average $250 (£165) a month 
gross compared with $175 a month 
when Lucchini took over in 1992, say 
pay increases have not corresponded to 
either inflation or the 100 per cent rise 
in productivity over the last two years. 

Mr Andrzej Wieczorek, the deputy 
head of the Solidarity union's Warsaw 
region, yesterday threatened to step up 
protests if Lucchini did not accept the 
compromise proposal. He was speaking 
after a church service at the works at 
which the workers and their families 
heard Fr Henryk Michalak, a local par- 
ish priest tell them: “When there is a 
conflict between capital and labour. 


labour always comes before capital." 

The workers’ determination is fuelled 
by the feeling that the new Italian own- 
ers are failing to respect their past 
achievements. Under communist rule 
the plant, built in the 1950s, enjoyed 
prestige as a crucial supplier to the 
defence and engineering industries. 
Then, In the 1980s when the plant was a 
Solidarity stronghold, the authorities 
went out of their way to accommodate 
their requests. Even now it is a key 
supplier to local industries. Including 
Fiat Auto Poland's Cinquecento plant 


sales in 1991 as Comecon markets col- 
lapsed. 

The agreement with Lucchini, which 
has a Polish government golden Share 
giving it veto powers in the joint ven- 
ture, commits the Italians to an 
EculSOm (£115.5m) modernisation pro- 
gramme to cut costs while bringing out- 
put up to lm tonnes a year from pres- 
ent annual sales of 300.000 tonnes. 15 
per cent of which are exported. Last 
year Lucchini’s output In Italy was 
2.4m tonnes and tbe strategy in Poland 
was to position the company to be 


‘You are fighting for control of the nation’s 
right to its means of production/ a priest says 


in Bielsko. 

But a sign on the gate saying "Wel- 
come to the white blacks at Lucchini” 
implies that they feel they have been 
pushed into a neo-colonial situation. 
Workers complain that the foreign own- 
ers show them no respect The mood 
contrasts sharply with the almost 100 
per cent backing for the joint venture 
with Lucchini which the workforce, 
then 4,500 strong, voted in a referen- 
dum two years ago. 

At that time the Lucchini joint ven- 
ture was seen as the only way out for 
the debt-laden works, which was begin- 
ning to recover from a sharp drop in 


ready to supply the countries of the 
former Soviet Union once the area 
recovers. 

However, the modernisation plans 
ran foul of a complex land ownership 
situation. Lucchini says it did not know 
when it signed the Initial deal that 
much of the steelworks was built on a 
former tsarist military training ground 
taken over in 1920 by the newly inde- 
pendent Polish state, which however 
failed to document its title to the land 
The registration of ownership has taken 
IS months to complete. Meanwhile, the 
International Finance Corporation, the 
European Bank for Reconstruction and 


Development and a group of Italian 
banks whose loan is to be guaranteed 
by SACE, the Italian credit agency, 
have held ap the already arranged 
Ec ul 50m in modernisation loans until 
the land deeds were ready. 

The delay infuriated the workers, one 
of whose strike demands is that tile 
modernisation be started immediately. 
Last year the group showed a net loss 
in Warsaw of 27bn zlotys (£780,000), 
against more than 400bn zlotys 
recorded in 1992, the last year of Polish 
management 

Lucchini says it will not abandon its 
initial investment commitment - 
Ecul9m in cash and knowhow tranters 
and Ecu8.3m in promissory notes. 
Actual investment in Warsaw by the 
Italians has been a mere lOObn zlotys. 

The Polish government so far has 
backed the Italians. Mr Wieslaw 
Kaczmarek. privatisation minister, told 
parliament recently the strike was ille- 
gal and the blame for the delay in mod* 
ernisation was to be laid entirely at the 
door of the Polish side. 

But the conflict has a nationalist 
undertone. “Not only are you fighting 
for wages you deserve, you are also 
fighting for control of the nation’s right 
to its means of production," the strikers 
heard Fr Michalak say yesterday. If the 
stoppage is allowed to escalate, it will 
put question marks over the viability of 
foreign investment in Poland. 


A Duchy 
at the 
heart of 
Europe 

By Emma Tucker 
in Luxembourg 


“We get on well witl 
everyone." said a Lnxemboar 
hat-shop owner, In one of th 
narrow, sandy-coloured star , ; 
streets that run steeply dowi . ; 
hill from the city's mol 
square. “We are the very be 
Europeans." 

On Saturday. the morals 
after Mr Jacques Santa, th 
Luxembourg prime minista 
had been chosen to replace V- 
Jacques Defers as president 1 
the European Commission, 
was difficult to find Luxex 
boorgers in the Grand Duchj 

The woman serving in a co 
fee shop In the city centre m 
Belgian. "You won't find an 
Lnxembonrgers round here, 
she confidently predicts 
“You have to go to toe coontr 
to find a pure Luxembourg® 1 . 

The man behind a stall 1 
the fruit market was from Pm 
tugal. "We’re all Europea 
now, anyway," he said grumi 
ily. Two elderly ladies daintd 
eating fruit salad in the shad 
of a tree were Dutch. 

Each day, thousands of com 
sinters travel to the Grant 
Duchy to work in banks 
insurance companies, bars and 


restaurants, the result bring a 
polyglot nation where some 30 
per cent of th: 400,000-strong 
population t — jalf the work- 
force is for^a- 
Luxembourg’s location - 
boxed in by France, Belgium 
and Germany - means that 
the citizens are tri-lingual, 
speaking French, German and ] 
the local language, Letzebuer- 
gesch. A German dialect 
heavily laced with French, it 
has recently been designated 
the official language, although 
government business is still 
mainly carried out In French. 

"There’s no point asking 
what Lnxembourgers think 
abont something, because 
there is virtually no such 
thing as a real Lmuunboarger 
any more," said a barman of 
French and Luxembonrger ori- 
gin, who carried a Luxem- 
bourg passport 
"There is nothing here to 
feel really proud of, bat it’s a 
nice, convenient place to come 
from," he adds, with a mod- 
esty indicative of the country. 


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FINANC XAL^TM^MqNPAYJ ULY 18 1994 

— - NEWS: INTERNATIONAL 

Undisputed leader backs down 

Microsoft finally decides to take a more pragmatic approach, writes Louise Kehoe 







M icrosoft, undisputed 
leader of the per- 
sonal computer soft- 
ware industry, has done what 
it vowed it would never do by 
signing a consent decree to 
antitrust charges levelled by 
the US Justice Department and 
the European Commission. 

Still proclaiming its inno- 
cence, Microsoft took a prag- 
matic approach when faced 
with the imminent prospect of 
being dragged through both 
the US and European courts on 
charges that it erected barriers 
to competition, bullied PC 
manufacturers into buying its 
products and tried to impose 
restrictive agreements on other 
software developers in order to 
maintain its dominant role in 
the PC operating system soft- 
ware market 

“We had very much in mind 
what happened to IBM," said 
Mr Bill Neukom, Microsoft 
chief counsel, referring to the 
computer company's decade- 
long struggle against antitrust 
charges in the US which, when 
finally dropped, were picked up 
in the European courts. 

“This could have been a 10 - 
or 12-year battle," he said, 
“costing millions of dollars per 
year." 

Instead, by settling the com- 
plaints on what it called “rea- 
sonable terms”, Microsoft has 
brought to an end four years of 
speculation surrounding the 
antitrust investigations, which 
raised a far broader range of 
allegations than those specified 
in the official complaint 
Notably omitted from the 
official com plaint for example, 
were the allegations of several 
Microsoft competitors that the 
company’s applications soft- 
ware group had unfair advan- 
tages over competitors because 
of internal links -a charge 
which if it had been upheld, 
might have led to a forced divi- 
sion of the company. 

The Justice Department may 
also be relieved to have 
resolved a case which could 


have placed the Clinton admin- 
istration in an embarrassing 
battle with one of the most 
successful companies in the US 
information technology indus- 
try, while at the same time 
promoting high technolgy as 
the “engine for US economic 
growth". 

Thus some may see the set- 
tlement as a let-off for Micro- 
soft, despite the strong rhetoric 
of Ms Janet Reno. US attorney 
general, who charged that 
Microsoft was being forced to 
abandon “illegal monopolistic 
practices” that have “choked 
off competition and preserved 
its monopoly position". 

“Today’s settlement levels 
the playing field and opens the 
door to competition." said Ms 
Reno. PC buyers will have a 
wider choice of operating 
systems and PC manufac turers 
will no longer have to pay roy- 
alties to Microsoft for comput- 
ers not containing its software, 
she said. 

In practice, however, indus- 
try analysts do not expect the 
settlement to have a signifi- 
cant impact on the balance of 


power in the software market 
in the foreseeable future. 

“The operating system wars 
are over - Microsoft is the win- 
ner," said Mr Richard Shaffe r, 
president of Technologic Part- 
ners, a technology research 
company in New York. 

The huge installed base of 
Microsoft operating systems - 
some 120m PCs have MS-DOS 
installed - together with the 
plethora of applications 
designed to run on Microsoft's 
operating systems, virtually 
guarantee that Microsoft will 
continue to dominate the field 
for some time. 

IBM. Microsoft's strongest 
rival in the PC operating sys- 
tem market, sold about 3m 
copies of its OS/2 program last 
year compared with Microsoft’s 
sales of about 2m copies of 
Windows a month. 

The consent decree might 
create a short-lived opportu- 
nity for Novell, one of Micro- 
soft's fiercest antagonists on 
the antitrust issue. 

The Utah company offers an 
alternative version of Micro- 
soft’s DOS, called DR-DOS, and 


has been struggling to per- 
suade PC manufacturers to 
adopt it. 

“We will be knocking on the 
doors of PC makers on Monday 
morning offering them an 
alternative to MS-DOS at com- 
petitive prices," said Mr David 
Bradford, Novell's chief coun- 
sel 

However, with Microsoft 
planning later this year to 
launch “Chicago” - a new PC 
opera ting system that incorpo- 
rates all of the functions of MS- 
DOS, Windows and more - 
Novell’s chances of stealing 
Microsoft custom may prove to 
be limited 

Had the antitrust settlement 
come a year ago. it might have 
hud a greater impact, industry 
analysts said. Now, with Chi- 
cago on the horizon, Microsoft 
has little to lose because none 
of its competitors has a prod- 
uct that can match the new 
operating system. 

The only obvious beneficia- 
ries of the Microsoft settlement 
are PC manufacturers, who 
□ow have the right to demand 
new licensing terms from 


Microsoft. Yet their bargaining 
strength is still limited by 
Microsoft's dominant role in 
the PC industry. 

PC buyers are unlikely to 
notice the effects of the settle- 
ment Operating systems repre- 
sent a very small portion of the 
total cost of a PC - in the 
region of $15450 - so any cost 
savings by PC makers are 
likely to have a minimal effect 
on prices. 

Microsoft is not, however, 
entirely off the hook. The com- 
pany is “wide open to private 
antitrust suits", said one 
industry lawyer. Although 
Microsoft has not admitted 
guilt in the consent decree, the 
Justice Department allegations 
might bolster charges brought 
by competing software compa- 
nies, he said. 

Microsoft also faces a 6'/a 
-year period during which its 
activities will be closely moni- 
tored by the department and 
by EU competition authorities. 

Concerns about antitrust 
infringement are widely seen 
as one of the factors in IBM’s 
fall from industry leadership 
because the company's 
day-to-day management activi- 
ties were for many years rou- 
tinely reviewed by lawyers, 
slowing decision-making. 

“We have been largely suc- 
cessful in avoiding that syn- 
drome," during the antitrust 
investigations, said Mr Neu- 
kom. 

“We have not let it slow us 
down or distract us." He 
acknowledged, however, that if 
Microsoft should become 
“slow -footed or start second- 
guessing ourselves too much 
we could Gall behind the pace 
of the industry." 

Other ffnmpaTiipg have domi- 
nated sectors of the computer 
industry for a period of years, 
only to hide into oblivion when 
new technology overtakes 
them, Mr Neukom recalled. 

It is a fate that Microsoft 
most now work harder to 
avoid. 


CHRONOLOGY 

■ July 93 FTC deadlocks again on whether 


■ 1975 Microsoft founded 

■ 1981 MS.DOS chosen for first IBM PC 

■ June 1990 Federal Trade Commission 
launches “non-public" probe. Initially into 
Microsoft’s partnership with IBM 

■ March 9i Microsoft and IBM acknowledge 
they are cooperating with the FTC’s 
investigations. (IBM subsequently dropped 
from the investigation) 

■ Sept 92 Microsoft denies reports of 
“exclusionary behaviour" 

■ 1993 Steve Jobs, founder of Apple 
Computer, nails for break-up of Microsoft 
into separate applications and operating 
systems companies 

■ 1993 UK Office of Fair Trading Investigating 
Microsoft 

■ Feb 93 FTC deadlocks on whether to act 
on broad antitrust case o g”™* Micr osoft 

■ June 93 Novell files complaint against 
Microsoft with European Directorate General 
for Competition 


to charge Microsoft with antitrust 
infringements 

■ July 93 US Justice Department requests 
documents from FTC 

■ Jiffy 93 Bill Gates accuses rival Novell 
of stirring up trouble on antitrust for its 
own gain 

■ August 93 US Justice Department launches 
its Investigation, taking over from. FTC 

■ Feb 94 US and EU move to collaborate 
on Microsoft investigations 

■ April 94 New industry charges that 
Microsoft uses restrictive non-disclosure 
agreements to limit competition 

■ July 34 US and EU officials meet in 
Brussels to begin working out a settlement 
with Microsoft 

■ July 13 Further meetings begin in 
Washington. Microsoft faces deadline to agree 
to negotiate settlement 

■ July 16 Set tlemen t announced. 


DETAILS OF THE COMPLAINT AND SETTLEMENT 


M icrosoft is alleged to have 
engaged in several restrictive 
practices limiting competi- 
tion in the software market, according 
to a complaint filed in a Washington 
district court by the US Justice Depart- 
ment. writes Louise Kehoe. 

“Virt uall y all major PC manufactur- 
ers find it necessary to offer Microsoft 
operating systems on most of their 
PCs," the complaint states. “Microsoft’s 
monopoly power allows it to induce 
these manufacturers to enter into anti- 
competitive, long-term licences under 
which they must pay royalties to Micro- 
soft, not only when they sell PCs con- 
taining Microsoft’s operating systems, 
but also when they sell PCs containing 
non-Microsoft operating systems." 

The Justice Department alleges that 
by making its MS-DOS and Windows 
programs available on a “per processor” 
basis. Microsoft requires PC manufac- 
turers to pay a fee for each computer 
shipped, whether or not that computer 
contains a Microsoft operating system. 

This arrangement gives Microsoft an 
unfair advantage by causing a PC man- 
ufacturer selling a non-Microsoft oper- 


ating system to pay at least two royal- 
ties -one to Microsoft and one to its 
competitor - thereby making a non-Mi- 
crosoft computer more expensive, it is 
alleged. Microsoft, however, said, that 
the Justice Department and European 
competition authorities had misunder- 
stood the terms at its licensing arrange- 
ments, noting that Tnanirfa fftmrrs could 
exclude specific models from their 
Microsoft licence agreement 

The Justice Department farther 
charged that Microsoft’s contracts are 
unreasonably long. By binding manu- 
facturers to purchase Microsoft prod- 
ucts for years the agreeme nt s make it 
difficult for new competitors to enter 
the market 

Under the terms of the settlement, 
Microsoft will be prohibited, for the 
next six-and-a-half years from: 

■ Entering into any “per processor" 
licensing agreements with PC manufac- 
turers. Instead, Microsoft must license 
its operating systems on a “per system” 
or per computer basis. 

■ Requiring PC makers to purchase 
any minimum number of Microsoft 
operating systems, regardless of how 


many com put ers are sold. 

■ Entering into Tin»n>dng agreements 
with terms inngpr than one year. 

■ Requiring licensees to pay Microsoft 
on a “lump sum" basis, rather than 
according to the number of copies of 
the software used. 

Another significant element of the 
settlement refers to alleged “tying" of 
sales of other Microsoft products to pur- 
chases of operating systems. Competi- 
tors have charged that Microsoft forces 
PC manufacturers to buy other prod- 
ucts to obtain discount prices, a charge 
Microsoft Hag denied . The settlement 
specifically prohibits this practice. 

The Justice Department also charges 
that Microsoft’s “non-disclosure agree- 
ments” with some software developers 
have been unfairly restrictive. This 
issue surfaced recently when software 
developers claimed Microsoft was 
attempting to prevent them working on 
applications programs that would run 
on non-Microsoft operating systems. 

The NDAs required programmers 
granted access to pre-release versions of 
a new version of “Windows" could not 
work on programs for competing oper- 


ating systems for a period of three 
years. When the issue name to light 
Microsoft acknowledged that it had 
“made a mistake" and offered to modify 
the terms of the agreements. 

The antitrust settlement limits dura- 
tion of an NDA to 12 months and pro- 
hibits Microsoft from imposing any 
terms that would prevent a software 
developer from developing products to 
run on competing operating systems. 

Notable missing from the complaint 
and settlement documents is any men- 
tion of allegations raised by software 
industry executives that Microsoft’s 
applications software developers gain 
an unfair advantage because they have 
greater access to the company's oper- 
ating system technology. 

Microsoft has stridently denied these 
and other charges. On Saturday, Micro- 
soft stressed that the settlement agree- 
ment covers “all matters" raised by the 
antitrust investigations, which the com- 
pany acknowledged had “Initially 
included many allegations raised by our 
competitors and began as a very broad 
probe into lots of aspects of the way we 
do business." 


» 


INTERNATIONAL PRESS REVIEW | 

MJP I ^ ‘ I 


David v Goliath over new trade HQ 



pan German response last 


WTO 


By Frances WBQams 
and ftUchad Lindemarm 


If the volume of press coverage 
were the deciding factor. 
Geneva would be the victor in 
the struggle with Bonn to host 
the new World Trade Organisa- 
tion. 

A final decision on the site 
for the WTO headquarters is 
due to be made by members of 
the General Agreement on Tar- 
iffs and Trade tomorrow. 

The Geneva press, stridently 
vaunting the city's case, is por- 
traying Switzerland as a penu- 
rious David battling valiantly 
against the superior political 
and economic might of the Ger- 
man Goliath. 

The Journal de Gen&ue last 
week quoted accusations by 
Swiss officials of unfair Ger- 
man tactics, including 
rumoured promises of extra 
banana and coffee imports in 
return for votes. 

Sniffily decrying such a bra- 
zen appeal to economic self- 
interest, the Swiss press 
argued that this bodes ill for 
the independence of a Bonn- 
based WTO. “You don't choose 
the headquarters of an interna- 
tional organisation like you 
would the venue for the Olym- 
pic Games." 

Most people could be for- 
given for being fooled. To 
tempt the WTO. both Bonn and 
Geneva have put up multi- 
mi 11 ion -do liar packages of 
office acco mm odation and dip- 
lomatic privileges for the WTO, 
its 450-500 staff and the associ- 
ated diplomatic missions. 

But. while Bonn has alleg- 
edly wooed with trade prom- 


ises, Switzerland has appealed 
to the heart Its offer allows 
Moslem diplomats to register 
two wives (Islamic law permits 
up to four), the only ploy so for 
to arouse international press 
attention. 

The Germans refused to rise 
to the bait preferring figures 
to frills. “Diplomats with sev- 
eral wives will be particularly 
well-sited in Bonn where the 
cost of living is one-third less 
than in Geneva." was the dead- 


week. 

It was also calculated to 
raise Swiss hackles. The cost of 
living in Geneva is no more 
than 10-15 per cent higher than 
in Bonn, say Swiss officials 
crossly, citing United Nations 
statistics in support. 

And if there were any far- 
ther hesitation on cost grounds 
“states should know that, in 
Geneva’s services sector, the 
rate of absenteeism for quali- 


fied personnel is 35 per cent 
less than in Germany and pro- 
ductivity is 16 per cent 
higher, " according to the same 
Swiss officials reported by the 
Journal de Genfive. 

The German press has paid 
littfa attention to the duelling 
between the two cities. What 
little coverage there has been 
supported the government’s 
view that an important trading 
nation such, as Germany 
needed an international insti- 
tution such as the WTO but 
otherwise focused almost 
entirely an what Geneva had 
to offer. 

Even Bonn’s own newspaper, 
the General- Artzeiger, which 
has campaigned relentlessly to 
keep the federal government 
on the banks of the Rhine, 
could do no better than a wor- 
thy article compering the two 
offers in terms of free par k ing 
spaces, available office accom- 
modation and tax-free perks. 

The Swiss have taken more 
interest in the wider political 
backdrop. While Geneva has 
been assured of the support of 
France and other francophone 
countries, the position of the 
US is causing some concern. 
To push Washington in the 
right direction, the Tribune de 
Gentve reported, US citizens in 
Switzerland have written to Mr 
Mickey Kan tor, the US trade 
representative, to put Geneva’s 
case. 

Evoking nearly 200 years of 
US-Swlss friendship, the letter 
reminds Mr Kantor of 1SQI 
when a Swiss, Albert Bala tin, 
became US treasury secretary 
and negotiated the purchase erf 
Lo uisiana. 

If this does not impress him, 
there is the more recent role of 


President Woodrow Wilson in 
choosing Geneva for the head- 
quarters of the pre-war League 
of Nations. 

Yet, haring urged the Berne 
government to fight for the 
WTO, 6ome Swiss newspapers 
are beginning to wonder 
whether it has been too gener- 
ous. 

“Are we on course to create 
a class apart of international 
organisations whose privileges 
are disproportionate to the 
costs involved." asks Le Nou- 
veau Quotidian, echoing the 
Zurich-based Neue ZOrcher Zei- 
twig a few days earlier. 

It says officials in the Swiss 
finance ministry are g rinding 
their teeth at the VAT exemp- 
tions, duty-free booze and pet- 
rol, tax-free pensions and the 
like being offered to diplomats 
in Geneva, concessions which 
will apply to all UN organisa- 
tions as well as to the WTO. 

The NQ quotes figures show- 
ing that the international 
or ganisatio ns already cost the 
canton of Geneva SFr500m 
(£245m) a year. 

In return, however, the 
organisations spend SFP3bn a 
year, provide some 23.000 jobs 
(8 per cent of total employment 
in the dty) and fill 40 per cent 
of hotel space. 

As for the little town on the 
Rhine, which is groping for a 
new identity after the federal 
government moves to Berlm, it 
is left with no concrete pros- 
pects If the WTO bid Ms. 

“Then we will have a new 
situation and have to take new 
decisions,” sagely remarks Mr 
Lorenz Schomerus, a senior 
ctril servant in the economics 
ministry, which is leading 
Bonn's campaign. 


3 


Danes attack 
Brussels over 
ship subsidies 


Joint 
effort is 
warning 
to others 

By Louise Kehoe 

The European Commission 
yesterday said its cooperation 
with the US Department of 
Justice In stopping alleged 
anti-competitive practices by 
Microsoft was a warning to 
other large businesses. 

"It serves as an important 
model for the future, as it 
shows how the two authorities 
can combine their efforts to 
deal effectively with giant 
multinational companies," the 
commission said. 

“The success of this joint 
approach sends a strong signal 
to all multinational compa- 
nies. including those in other 
sectors." 

The Justice Department and 
the commission announced a 
joint deal under which Micro- 
soft agreed to stop certain lic- 
ensing practices in exchange 
for the two authorities drop- 
ping anti-competition actions 
against the software company. 
The Microsoft settlement with 
US and European competition 
authorities marks the first 
time that the US and the EU 
have co-ordinated their efforts 
in formulating antitrust 
charges and a settlement. 

The precedent-setting case 
“sends a powerful message. . . 
that the antitrust authorities 
of the US and the EU are pre- 
pared to move decisively and 
promptly to pool resources to 
attack conduct by multina- 
tional firms that violate the 
antitrust laws of the two juris- 
dictions,” said Ms Anne Binga- 
Trtan, head of the US Justice 
Department antitrust division. 

The US and EU treaty allows 
the exchange of information in 
multinational antitrust cases. 
However, that treaty is under 
review by the European Court 
of Justice and was not used as 
the basis for collaboration in 
this case. 

Instead, the department’s 
antitrust division sought 
Microsoft’s approval before 
sharing information with its 
European counterparts. The 
commission said the two sides 
had a number of meetings to 
prepare a co-ordinated 
approach .to dealing with 
Microsoft, then held joint 
meetings with the company in 
both Washington and Brus- 
sels. 


By HRary Barnes 
in Copenhagen 

The Association of Danish 
Shipbuilders has charged that 
the European Commission 
exceeded its powers by approv- 
ing German subsidies to ship- 
yards in the former East Ger- 
many and is attempting to 
bring the issue before the 
European Court 

D anis h shipbuilders contend 
that the German subsidies will 
jeopardise their own shipbuild- 
ing industry. However, the 
association received a severe 
setback late last week when 
the Danish government refused 
to take the Commission to task 
before the European Court. 
Any action will have to be 
taken by the association itself 
without concerted government 
ha cking . 

Requests by the German 
chancellor. Mr Helmut Kohl, to 
the Danish prime minister, Mr 
Poul Nyrup Rasmussen, not to 
pursue the shipbuilding issue 
have been reported by the Dan- 
ish media as a factor in the 
government's decision. 

The Danish shipbuilders’ 
case is driven by grave concern 
that their shipyards will be 
rendered uncompetitive. The 
history of their complaint 
dates back to 1992 when Ger- 
man subsidies to four ship- 
yards in the eastern provinces 
were approved in principle by 
an EU directive - the seventh 
shipbuilding directive under 
which several conditions were 
attached 

“A genuine and irreversible 
reduction" in shipbuilding 
rapacity was one of the condi- 
tions. Another was that the 
subsidies should not exceed 36 
per cent of a shipyard's “nor- 
mal turnover" after restructur- 
ing. 

The Danes claim that far 
from being reduced, capacity 
at the four German yards will 
be dramatically increased. The 
Danish shipbuilders also con- 
tend that the German yards 
are being restructured to com- 
pete in precisely the type of 
ships - supertankers, and Pan- 
amas contalner-carrrying and 
bulk carriers (the maximum 
size for passing through the 
Panama canal) - in which two 
of the largest Danish yards, the 


Burmeister & Wain Shipyard 
in Copenhagen and the A.P. 
Moller shipyard near Odense, 
are specialists. 

At the MTW Shipyard at 
Wismar. say the Danes, the 
yard will be able to build up to 
six supertankers a year, of 
300,000dwt each, compared 
with vessel up to a maximum 
of 30.000dwt before restructur- 
ing. 

The Kvaerner Warnow 
yard’s new drydock at Warm?- 
munde will allow it to build 
vessels of up to ISO.OOOdwt 
compared with its present four 
slipways each for vessels up to 
7,000dwt. Yearly potential 
capacity will be much more 
than doubled, according to the 
Danish association. 

Similar changes in capacity 
are planned at Volkswerft 
(Stralssund). and Peenewerft. 
according to the Danes. 

The Danish shipbuilders fail 
to see how this complies with 
the seventh directive's call for 
“ a genuine and irreversible 
reduction in capacity" and 
point to an apparent discrep- 
ancy between the seventh 
directive and the Commission's 
wording when in May this year 
it approved the subsidies for 
the MTW Shipyard. In the case 
of MTW, the Commission 
declared that “The German 
government is requested to 
ensure that the volume of pro- 
duction is limited for five 
years." which is not the same 
as an irreversible reduction. 

The Commisson. say the 
Danes, has agreed to subsidies 
to the MTW Shipyard equal to 
about 70 per cent of annual 
turnover, not 36 per cent 

The MTW Shipyard is a test 
case, as it is the first of the 
yards for which the Commis- 
sion's approval has been 
received. The Danish ship- 
builders argue that the Com- 
mission's decision “will legal- 
ize a smilar practice” for the 
three other yards. 

Under the seventh directive, 
all operating subsidies were to 
be paid out by December 31, 
1993, but the latest tranche of 
operating subsidies was 
authorised by the Commission 
on May ll this year, which 
makes the payments illegal, 
according to the Danish argu- 
ment. 



RIUNIONE ADRIAMCADI SICURTA’ 


SjiA - Head Office in ftfihn- Shut Capinl Li 27lj623.72lj000 - RcgoKialutheCbanorMau No. 5750J RtpaCToTCumpanies 
AnteriKd manner coapanj' nxcntng 10 D_M_ 26. 1 L 1984 


155th FINANCIAL YEAR 

On 29tb June 1994, the General Meeting of Shareholders of Ras S.p~A_ approved Com- 
pany’s Accounts for 1993, and resolved the payment of a dividend of Lit 340 per ordinary 
share and of Lit. 400 per savings share. 

The Shareholders' General Meeting appointed as members ofthe Board of Directors: Mario 
Arcelli, economist and rector of Libera University Internationale degii Studi Social i 
(LUISS), Rome; Francesco Cesarini, President of Banca Fbpolaredi Milano, economist and 
university professor Nicola Costa, President of Costa Crodere; Leonardo Del Vecchio, 
President of Luxottica, and Renato Ri verso. President of Alitalia. Subsequently, the Board of 
Directors appointed Angelo Marchib as Chairman of the Board. Giulio Baseggio, Atlilio 
ientari and Angelo March# were conGrmed as Managing Directors. 

Furthermore, the extraordinary General Meeting of Shareholders resolved: 

—the power to convert, at par and with regular entitlement, one savings share to one 
ordinary share for every group of ten savings shares owned; 

—the authorization to the Board of Directors, for a period of five years, to increase the share 
capital up to a maximum of one thousand billion lire, in one or more stages and even free 
of charge, through the issue of ordinary and/or savings shares, and to issue bonds, even 
convertible and/or cum warrant, in one or more stages, up to a maximum amount equal 
to that of the share capital and reserves of the last approved financial statement, with 
power to reserve pan of the above mentioned issue to the Group's employees. 

The main figures of the Company's and consolidated accounts are reviewed below. 


HIGHLIGHTS OF RAS 1993 ACCOUNTS 

AS COMPARED WITH 1992 

fin Wlion lire) 


1992 

1993 

Premium income 

3.720 

4.219 

Claims, maturities etc. 

2,157 

2.406 

General business technical reserves 

4,149 

4386 

Life business technical reserves 

4,823 

5,651 

Investments 

8.961 

9,961 

Share capital 

271 

271 

General reserves 

2358 

2377 

Profit for the year 

95 

187 

HIGHLIGHTS OF RAS GROUPS 1993 
CONSOLIDATED ACCOUNTS 

(in billion lire) 


1992 

1993 

Gross aggregated premiums 

7337 

8.46S 

Consolidated premiums 

6.793 

7,728 

Investments 

16.478 

19.404 

Net shareholders’ equity 

3332 

3.725 

Profit for the year 

117 

354 


V J 




FINANCIAL TIMES MONDAY JULY IS 1994 


4 

NEWS: INTERNATIONAL 


Saddam offers olive branch to Arab neighbour states 


By Mark Nicholson in Cairo 

Iraq yesterday offered “peace and 
security” to neighbouring regimes which 
had “misbehaved" towards Baghdad, in a 
speech by President Saddam Hussein 
apparently aimed at Kuwait, Saudi 
Arabia, Syria and Egypt 
Hr Saddam's remarks, in a televised 
address on the 26th anniversary of his 
r nllng Baath party’s ascent to power, are 
among the most direct since the Gulf war. 


aimed at mauling relations with Arab 
states which opposed Iraq dozing the con* 
fflct 

Without naming any countries, Mr Sad* 
dam said he was offering peace to all 
neighbours, including “rulers who misbe- 
haved towards us”. He went tan “TO him 
who would heal the disease of his soul, 
and has firmly determined in mend what 
has been spoiled. . . Iraq is ready to react 
positively." 

Mr Saddam’s speech is a farther 


attempt to rehabilitate Iraq both among 
its neighbours and In the west, though it 
contained characteristically belligerent 
proclamations that Iraq remained 
unweakened and unbowed by its post-Gulf 
war isolation. “It has become known to 
everybody", said Mr Saddam, “that we 
fear no one but the Almighty." 

The apparently placatory remarks, how* 
ever, follow concerted lobbying by Iraq 
for the lifting of the four-year-old sanc- 
tions against Baghdad, which have 


increased in intensity as economic condi- 
tions is the country have continued to 
deteriorate. 

The United Nations sanctions commit- 
tee meets today to review the embargo 
against Iraq, and diplomats and UN offi- 
cials say they expect the restrictions to be 
kept in place. Mr Tariq Aziz, Iraq’s deputy 
prime minister, has been in New York 
lobbying Security Council members for 
the past week, arguing that Iraq has now 
fulfilled Gulf war ceasefire resolutions 


colling for the destruction and monitoring 
of Its weapons of mass destruction. 

However, the UN special commission on 
Iraq's weapons of mass destruction says it 
has not yet completed Installation of its 
monitoring regimes for biological, chemi- 
cal, ballistic and nuclear weapons. These, 
officials say, should be in place by Sep- 
tember and would require at least six 
months' testing before the commission 
could conclude that Iraq was meeting the 
terms of the monitoring regime. 


But diplomats in New York add that 
Iraq could effect a substantial improve- 
ment in the Security Council’s attitude 
towards Baghdad if Mr Saddam's regime 
were to make a public and unequivocal 
commitment to the recognition of 
Kuwait’s sovereignty and to its newly UN. 
defined borders - something at which yes- 
terday’s remarks perhaps hinted. 

"If they came forward and did this, 
there would be an immediate effect,” said 
one DN official. 


Water and borders key to 
Israel- Jordan peace talks 



Religious Jews pray at the Wailing Wall in Jerusalem yesterday. Thousands 
gathered at Judaism’s holiest site for the day of mounting which marks the 
destruction of the first and second temples. n*«r 


W inston Churchill is said to 
have pencilled out the bor- 
ders of Transjordan after 
lunch on a Sunday afternoon. As colo- 
nial secretary of a troublesome Brit- 
ish Empire in 1928, he meant his 
sketch as a quick fix for mounting 
problems between Jews and Arabs liv- 
ing under the British mandate for Pal- 
estine. 

Sixty-six years and three Arab-Is- 
raeli wars later, Jordanian and Israeli 
negotiators meet today along their 
disputed border hoping finally to 
agree on the demarcations laid out by 
Churchill. 

These talks will set in chain a series 
of unprecedented meetings as the two 
sides edge towards a settlement Qn 
Wednesday, Mr Shimon Peres, Israel’s 
foreign minister will be the first 
Israeli politician publicly bo enter Jor- 
danian territory, where, accompanied 
by US secretary of state Warren 
Christopher, he will meet Mr Abdel 
Sal am al-Mqjali, Jordanian foreign 
minister, at a Dead Sea resort 
And next Monday in Washington, 
King Hussein is to meet Mr Yitzhak 
Rabin, Israel's prime minister, for the 
first time in public in a summit 
described by Mr Peres as mar king 
"the end of a state of war and the 
beginning of peace". 

Although no final Jordanian-Israeli 
peace treaty will be signed in Wash- 
ington, both the king and Mr Rabin 
are seeking tangible benefits to take 
home to critics of the peace process, 
many of whom are looking for ways 
to exploit the lack of momentum. 

The gap between the two countries 
is not large. Today's talks focus on 
two key issues, borders and water. 
Israel has already agreed in principle 
to redrawing the border and Jordan is 
claiming 360-382 sq km along the 
Arava desert, which would entail 
moving Israeli barbed-wire fences 
back to Churchill's line of 1928. Israel 
is likely to concede a substantial part 
of this claim and seek other arrange- 
ments, such as a lease-back, for a 


strip of disputed land now being 
formed by an Israeli kibbutz. Both 
sides are also likely to agree quickly 
on a maritime border. 

The water issue is a little more diffi- 
cult Jordan, with one of the world's 
lowest per capita rates of water con- 
sumption, is demanding an increased 


Both sides are eager for 
a pact which would 
embody a post-prandial 
sketch made by Winston 
Churchill 66 years ago, 
James Whittington and 
Julian Ozanne report 

water share from the Yarmouk and 
Jordan rivers, which it accuses Israel 
of diverting. Israel opposes a redistri- 
bution of water and favours the devel- 
opment of joint projects such as desa- 
lination plants to meet Jordan's water 
needs. 

The future status of Palestinian ref- 
ugees, a third thorny issue, is to be 
decided in a quadrilateral committee 
of Jordan, Israel, Egypt and the Pal- 
estine Liberation Organisation. 

Resolution of borders and water 
could be resolved by next Monday’s 
Washington summit. Details have 
been under negotiation for at least 18 
months now, and the past month has 
involved numerous clandestine meet- 
ings. Israeli officials say the outline of 
a treaty is largely in place. Mr Peres 
said last week the border and water 
issues were “technical problems 
which can take time or be resolved 
quickly”. 

Israel can hardly hide its impa- 
tience to sign anything close to e 
peace treaty with Jordan. Such a 
move would be widely popular among 
the Israeli left and right A second 
peace treaty -with a hostile Arab 
neighbour since the Israeli-Egyptian 
agreement of 1979 would lessen 


Israel’s sense of fear and isolation and 
would considerably bolster support 
for the peace process and for the 
Rabin government. Israeli officials 
believe it would also pile pressure on 
Syria, and hence Lebanon, to be more 
flexible in talks. 

However, Middle East experts have 
said King Hussein, always a cautious 
risk-taker, is reluctant to move too 
quickly towards an official signing 
-which would leave his powerful 
neighbour Syria exposed and margin- 
alised- 

On the other band, he is anxious to 
win concessions foom Israel on bor- 
ders and water and present his deal to 
domestic critics as a victory for Jor- 
dan's territorial integrity. 

The king is also keen to take sev- 
eral economically beneficial steps 
such as opening borders to tourists 
and trade and developing joint pro- 
jects in the Dead Sea and Jordan Val- 
ley to boost bis economy's flagging 
fortunes. 

In Jordan the king’s change of gear 
has been met with surprise and criti- 
cism. Less than two months ago offi- 
cials and the state-run newspapers 
were talking of a comprehensive 
peace and praising Jordan's co-ordi- 
nated stance with Syria and Lebanon. 
Now they are trying to explain why 
the kingdom has broken ranks and is 
sprinting towards the finishing line. 

One explanation, is the weight of US 
pressure on Jordan to reach an agree- 
ment with Israel and the other is the 
king's frustration over the collapse of 
any common Arab stance and the 
lack of co-ordination with the PLO 
and Syria. The king is also anxious to 
maintain some influence on the 
embryonic Palestinian state emerging 
on bis border. 

In a weekend television appearance 
to sell his peace moves King Hussein 
mixed the promise of benefits, includ- 
ing a US promise to cancel $950m 
(£625m) in debt, with a blunt warning; 
“This country, under pressure from 
all sides, may collapse." 


Although the pessimism may be 
overstated, there is cause for concern. 
The kingdom's Moslem fundamental- 
ists have condemned the latest peace 
moves. The Islamic Action Front, 
which holds the largest parliamentary 


bloc, said a Rabin-Hussein meeting 
was "forbidden by history". Unless 
the king is able to deliver real 
changes on the ground his Jordanian 
critics may wonder whether this new 
flurry of activity was all worthwhile. 


Peres takes softer line on 


By Julian Ozanne 

With encouraging signs in 
peace talks with Jordan, Israel 
has also softened its position 
towards Syria and the vexed 
question of the return of the 
Israeli-occupied Golan Heights. 

Mr Shimon Peres, Israeli for- 
eign minister, said last week 
that Israel now recognised Syr- 
ian sovereignty over the strate- 
gic Heights, which the Jewish 


state seized in the 1967 ArabJs- 
raeli war. 

“The government of Israel 
has recognised Syrian sover- 
eignty over the Golan Heights 
and the concept of peace based 
on International borders sub- 
ject to the security needs of 
Israel,” Mr Peres said. 

Mr Peres also referred in a 
Foreign Ministry communique 
to a 1967 secret cabinet resolu- 
tion which called for negotia- 


tions with Syria on the basis of 
withdrawal to the “interna- 
tional border” in return for full 
peace, demilitarisation of the 
Golan and guarantees of the 
flow of water to the Jordan 
Valley. 

The foreign minister also 
spoke of the strong precedent 
of the 1979 peace treaty with 
Egypt which had seen the 
return of all Egyptian territory 
occupied by Israel. 


returning Golan Heights 


Foreign Ministry officials 
said the formal recognition of 
Syrian sovereignty effectively 
relegated Israel's annexation of 
the Heights in 1981 and that Mr 
Peres’ “for reaching" remarks 
were the broadest hint so for 
that Israel would yield all the 
Heights up to the 1967 interna- 
tional border in return for full 
peace and security guarantees. 

The Israeli-Syrian peace 
talks have been deadlocked as 


Israel refused to specify how 
much of the Heights it would 
return to Damascus until Syr- 
ian President Hafez al Assad 
made a commitment to full 
peace including open bonders, 
trade, tourism and the estab- 
lishment of embassies. 

Until now Israel has only 
spoken of a withdrawal “on" 
not “from” the Golan meaning 
a "significant" but not com- 
plete withdrawal. However, 


despite Mr Peres' apparent 
hints, Israel has still not met 
Syrian demands that Jerusa- 
lem formally declare it will 
withdraw to 1967 borders and 
return the entire Golan. Syria 
said Mr Feres' statements 
added nothing new, as Israel's 
recognition of Syrian sover- 
eignty over the Heights was “a 
recognition of foot” in accor- 
dance with United Nations res- 
olutions. 


China snubs UK minister 


Investment in SE 


By Our Beijing Correspondent 

Prospects for a smooth 
transition by Hong Kong to 
Chinese control in 1997 
dimmed at the weekend when 
the goodwill visit to Beijing of 
a UK Foreign Office minister, 
Mr Alistair Goodlad, ended in 
debacle. 

China refused to let Mr 
Goodlad visit the mainland's 
top official responsible for 
Hong Kong affairs. Mr Lu Ping, 
in the third snub to Mr Good- 
lad during his visit. 

The visit to Mr Lu. director 
of the Hong Kong and Macau 
Office, would have given the 


UK an opportunity to suggest 
new approaches to the long list 
of technical issues - Includ in g 
financing of Hong Kong’s new 
airport and Chinese ratifica- 
tion of a raft of treaties and 
Laws on such essential matters 
as air safety and the validity of 
business contracts - which the 
UK wants sorted out before the 
handover. 

Instead, Mr Goodlad tried to 
convince Hong Kong journal- 
ists that his visit had been 
“most useful" and that rele- 
vant issues had been discussed 
thoroughly and courteously 
with other Chinese officials. 

After the press conference. 


China’s Ministry of Foreign 
Affairs issued a terse state- 
ment suggesting that the meet- 
ing was "not necessary" 
because of the SinoBritish dis- 
pute over Hong Kong Governor 
Chris Patten’s programme of 
political reform. 

On Friday, Mr Goodlad had 
made a public appeal to China 
that the two countries should 
put this dispute behind them 
and get on with other unre- 
solved issues. 

Two hours later, Mr Qian 
Qichen, China's foreign minis- 
ter, rejected this plea. In a 
stinging snub delivered as they 
met 


By Victor Matat m Bangkok 

Foreign investment in 
south-east Asia is rising 
sharply after two slow years 
and domestic investment 
remains robust, according to 
figures from national invest- 
ment promotion agencies. 

Governments had feared 
that investors were lasing 
interest in their countries and 
concentrating principally on 
China, where the market is 
exceptionally large and labour 
costs are low. 

But statistics show that com- 
panies from Japan, the US and 
other developed economies 


continue to commit billions of 
dollars to south-east Asia for 
everything from electronics 
and vehicle components facto- 
ries to new power stations. 

Indonesia's Investment 
Co-ordinating Board said it 
had approved $5.33bn (£3 Jbn) 
in foreign investment for the 
first six months of this year, 
up 23 per cent from the same 
period last year. 

Malaysia reported approved 
manufacturing Investments of 
MSlQJjbn (£2-Sbn) in the first 
half of the year (MS4.6bn from 
foreign companies), compared 
with M$J.3hn tn the first half 
of 1993. 


Asia up 

In Thailand, the Board of 
Investment (Bol) said it had 
received applications for 
$&8bn in foreign investment 
in the first four months of the 
year, only slightly below the 
sum for the whole of 1993. 

The Philippines, where Hong 
Hong and other foreign compa- 
nies are investing heavily in 
new power stations, said its 
Bol approved projects worth a 
record P239bn (£S.75bn) in the 
first half, more than quadru- 
ple the amount at the same 
time last year and more than 
double the target for all 1994; 
both foreign and domestic 
investment rose sharply. 


Technocrats wait in North Korea’s wings 

Kim faces a test of his ability to promote a new generation of reformers, writes John Burton 


T he postponement of the 
funeral of North Korean 
leader Kim tl-sung from 
yesterday to tomorrow has 
prompted speculation whether 
his son and designated succes- 
sor, Mr Kim Jong41, is focing 
unexpected apposition to his 
assumption of complete power. 

Some analysts looking for 
clues to possible shifts In 
power in North Korea have 
interpreted the postponement 
as a political setback for Mr 
Kim Jong-il, who is expected to 
take formal control of the 
country after the funeral. 

However, a more important 
indication of Mr Kim’s political 
strength will be his ability to 
promote a new generation of 
technocrats soon. 

North Kura has been ruled 
since the 1950s by members of 
the late president's extended 
family and a small group of 
ex-guerrillas who fought with 
Mr Kim against the Japanese 
In the 1930s. But since the late 


1960s, a new generation of 
reform-minded officials, many 
related to the conservative rul- 
ing elite, have achieved promi- 
nence under the patronage of 
the younger Kim, according to 
analysts. 

“North Korea has seen a 
generational struggle among 
the ruling elite in the past few 
years over the direction of the 
country’s economic and diplo- 
matic policy,” says Mr Michael 
Breen, editor of Korea Count- 
down, a Seoul-based newsletter 
on North Korean affairs. 

The reformers first came to 
the fore in 1988 under former 
prime minister Yon Hyong- 
muk. North Korea began a ten- 
tative opening to the outside 
world by joining the UN. Mr 
Yon held meetings with his 
South Korean counterparts 
that produced non-nuclear and 
non-aggression pacts between 
the two Koreas In late 1991. 

But a conservative backlash 
became apparent in late 1992, 


reflecting frustration that 
North Korea’s actions had not 
gained diplomatic recognition 
or economic aid from the west 

Mr Yon was dismissed and 
several key technocrats were 
subsequently demoted. The 
shake-up occurred shortly after 
disputes with the US and 
South Korea over inspections 
Of the North's nuclear pro- 
grammes first emerged. 

North Korea’s threat to with- 
draw from the nuclear non- 
proliferation treaty (NPT) in 
March 1993 may have been an 
attempt by the younger Kim to 
appease the conservative fac- 
tion while achieving the goals 
of the reformers by forcing the 
US to grant concessions. 

“If Kim Jong-il secures fttil 
power, he is likely to bring 
back those favouring changes 
in economic and foreign pol- 
icy,” says Mr Breen 

Analysts are closely watch- 
ing the fate of two prominent 
technocrats, Mr Kim Yang-sun 


and Mr Kim Dai-hyon, to deter- 
mine the future direction of 
North Korea. Both fell out of 
favour in the past year to 
appease conservative critics, 
but appear to be making strong 
comebacks following the death 
of President Rim. 

M r Kim Yong-sun was 
formerly the ruling 
party's secretary for 
international affairs and trav- 
elled widely, even attending a 
congress of the Welsh national- 
ist party. Plaid Cymru. In 
December 1992, he became 
party secretary for South Kor- 
ean affairs in what was 
regarded as a slight demotion. 
He also lost his position as 
alternate Politburo member in 
December 1993. He favours ties 
with the US, Japan and South 
Korea, and expressed opposi- 
tion to the North's threatened 
withdrawal from the NPT. 

Mr Kim Yong-sun is believed 
a close confidant of the North’s 


new leader. He was seen com- 
forting Mr Kim Jong-il's sister 
during mourning ceremonies 
last week and is playing a 
prominent role in arranging 
the president's funeral 

He also received a delegation 
from the pro-Pyongyang feder- 
ation of Korean residents in 
Japan and was responsible for 
notifying South Korea that the 
planned inter-Korean summit 
would have to be postponed, 
but not cancelled. His recent 
activities indicate that he will 
assume an important post in 
the new leadership. 

Mr Kim Dal-hyon, the late 
president's nephew by mar- 
riage, was in charge of promo- 
ting foreign trade and visited 
South Korea in 1992 to tour 
industrial plants. He impressed 
South Korean officials with 
frank discussions about North 
Korea’s economic problems. 

He was appointed economic 
planning chief in December 
1992. but was dismissed a year 


later and demoted to managing 
a synthetic fibre factory. 
Although he may have been a 
scapegoat for the country's 
economic failings, there have 
been reports In Seoul that one 
reason for his foil was that he 
allegedly accepted bribes from 
South Korean companies seek- 
ing factories sites in North 
Korea. But he has reappeared 
in the past week. In spite of his 
low ranking o! 140th in the 
party hierarchy, he was among 
100 selected to attend mourn- 
ing ceremonies last week. 

Mr Kang Song-son, the prime 
minister, is also regarded as in 
the reformist camp since he 
pushed for inter-Korean con- 
tacts in his first term as pre- 
mier in 1984-86 and later pro- 
moted cross-border trade with 
the Soviet Union when he was 
governor of the north-eastern 
province of North Hamyong, 
now the site of the country’s 
first free trade and investment 
zone. 


INTERNATIONAL NEWS DIGEST 

Germany joins 
moves to send 
aid for Rwanda 

The German government yesterday provided an aircraft to 
carry humanitarian aid to central Africa, the first sign that 
Germany will join the international humanitarian effort for 
refugees flying fighting in Rwanda. However, a Bonn official 
said there were no further plans for the Bundeswehr, the 
German armed forces, to take part in efforts to put an end to 
the bitter fighting in the African republic. 

In the Rwandan capital Kigali. UN officials said up to 2m 
Rwandans were on the move in southern Rwanda and a mass 
exodus there could become a crisis. In Geneva, the United 
Nations High Commissioner for Refugees (UNHCR). Sadako 
Ogata, appealed for an immediate ceasefire to avert a disaster 
as rebel forces drove tens of thousands of refugees and the 
defeated army across the border into Zaire . 

Germany’s move comes days after a decision by the consti- 
tutional court in Karlsruhe allowing German troops to join UN 
operations outside the Nato area. The government has taken 
part in a number of humanitarian operations in recent years, 
including Cambodia and Somalia, but the court ruling pre- 
vents opposition parties from contesting the decision ns they 
had in the past Michael Lindemmn. Barm 

Hope for future of coal 

The European Commission's drive to eliminate subsidies and 
deregulate markets will greatly improve coal's long-term 
chances of survival as a fuel for power generation and as a 
replacement for unpopular nuclear power, according to a new 
energy forecast by DRL the energy specialists. Dftl says coal's 
share of the fuel mix will decline between now and the end of 
the decade because of the growth in popularity of natural gas. 

But the shift to market-driven prices, as well as the growth of 
clean cool technology will raise its attraction as a fuel in the 
next decade. 

DRI expects coal to show relatively small increases In real 
cost between now and the year 2015 as expensive indigenously 
produced coal is replaced by cheaper imports. David Lascelles, 
Resources Editor 

Envoys missing in Algeria 

There was no sign the ambassadors of Oman and Yemen to 
Algeria who were reported missing on Friday. The burnt-out 
car in which Mr Kacem Askar Djebrane and Mr Hllal Ben 
Salem were travelling was discovered lOkm from Khemis SI 
Kechna, at the heart of a region known as the “death trian- 
gle”, south east of Algiers, The area has been over the past 
year the scene of bloody encounters between the security 
forces and supporters of radical Islamic movements who have, 
on and off, controlled some of the town and streches of the 
countryside. Violence has risen in recent weeks although the 
strict media censorship makes the task of estimating the exact 
level of violence ever more difficult Last week seven foreign- 
ers were killed in the capital, bringing to 51 the number of 
foreigners who have lost their lives in the past 3% years. Over 
the same period, an estimated 5,00 0 Algerian s have been 
killed. Francis Ghilis, London 

Ban on Shia sect teachings 

The Malaysian government will ban the teachings of Darul 
Arqarn, a radical Malaysian Islamic Shia group led the 
self-styled Abuya Sheikh Imam Ashaari Muhammad. In June, 
officials described Darul Arqam as a threat to national secu- 
rity and the government has accused Ashaari Muhammad of 
claiming to be the (man Mahdi (the second prophet) and of 
building an armed, 313-member suicide squad trained in Thai- 
land. No evidence has been produced on the suicide squads. 

Although the Malaysian constitution espouses freedom of 
religion that has been interpreted to mean the freedom of the \ ' ; 
non-Malay races to practise non-Islamic religions, the govern- 
ment has In the past, detained Islamic radicals. 

Darul Anputo founded in 1969, claims a following of 10.000. 
Group publications say Ashaari preaches returning to life as l » 
the Prophet Mohammed decreed. He demands “undivided obe- 
dience” to his mind and teachings while rejecting armed 
revolutions and western politics and preparing for the day 
when he will be “handed over the administration of the 
country.” Christine Bill, Kuala Lumpur 

UK trade with Malaysia grows ' 

Trade between Britain and Malaysia grew in the first quarter , 
of this year despite a Malaysian government ban on British ’-'sjj': 
companies. Malaysia's exports to Britain rose to 1.26bn ringgit 
(£31Sm) in the first quarter of the year from LGSbn ringgit for 
the same period last year. Mr Rafldah Aziz, Malaysian trade vj 
and industry minister, told parliament that both countries ' ' . 
were taking steps to enhance bilateral trade. The Malaysian 
government banned British companies from government con- 
tracts in February in reaction to what it saw as negative press 
reports in Britain. Mr Rafidah said that during the first quar- 
ter of the year, nine projects involving joint ventures with 
British companies were approved. Reuter, Kuala Lumpur J j i 

IMF backing for Bulgaria 

The International Monetary Fund mission to Sofia approved j| 
Bulgaria's reform performance and said it would ask the IMF 1 
board for additional funds to support its debt reduction deal 
Mission leader Mr Russel Kinkaid said $100m (£65.7m) would 
be released upon approval by the IMF board later this sum- - i ! 
men A further $200m is expected to become available after the 
next review mission, in October. The World Bank has also been , . 
asked for extra loans to fund Bulgaria’s initial payments on j- 
the deal it recently signed with the London Club Commercial 
Bank Creditors. The agreement provided tor 47 J. per cent 
reduction In Bulgaria’s $8.lbn debt to a group of some 300 
banks. _ t <; 

The IMF mission reviewed the implementation of Bulgaria's 
third standby arrangement with the Fund, approved last April ( 
The IMF loans for this year includes ?97m in standby credits t j 
and Systemic Tranformation Facility, to tailing $320m. Theo- 
dore Troev, Sofia 

Afghan hostages to go free 

Pakistan yesterday confirmed that an Afghan warlord is doe 
to release 11 Pakistani and two Chinese hostages today or 
tomorrow in a Saudi-brokered deal. Mullah Abdul Salaam 
"Rocketi”, as the warlord is popularly known, ordered the 
kidnappings In retaliation for a Pakistani security forces 
operation at his stronghold in Afghanistan's south western 
Zabul province, almost three years ago, in which three US- 
made Stinger missiles were recovered. 

The anti-aircraft missiles were supplied under a CIA covert 
operation to back the Afghan mujahideen against Soviet occu- 
pation. US officials have been trying to recover them aw 
western diplomats have been concerned over the possible 
threat to aircraft. It is not known how many missiles have 
been returned Farhtm Bokhari, Islamabad 



FINANCIAL TIMES MONDAY JULY 18 1994 


5 


In every country, some companies, more 
than others, express that country’s culture. 
It’s what makes them unique. In Italy, it is 
names like Girio 
and Polenghi. 

Think about it. 

Gould these 
companies have 
been born in any 
other place? 

Or from 
different people? 

The answer is no, 
and it’s easy to 
see why. 

In 1860, 

Francesco Girio 
had the idea to 
protect tomatoes 
in a safe and 
practical tin - he 
used the typical 
Italian creativity 
and flair 
appreciated all 
over the world. 

Likewise, 
in 1870, 

Mr. Polenghi 
knew that a food 
as important and 
delicate as milk 
needed more 
selection at 
source and better 
protection during 
distribution. 

He applied that 
Italian courage 
and sharpness 
of mind admired 
and envied by 
the rest of the 

world. For over 1 30 years, 
these companies have never 
compromised their ideals about 
preserved food or given up 


their love for the land and its produce. 

They have enjoyed a privileged relationship 
with agriculture since the very beginning. 

Today a great 
project has been 
realised - the 
gathering 
together of all 
the companies 
and brands such 
as Ala, Berna, 
Cirio, De Rica, 
Matese, Optimus, 
Polenghi, Solac, 
Stella and 
Torre in Pietra 
into one Group. 
Today, in 1 994, 
the “Girio” Group 
is born. 

A Group that 
brings together 
the experience 
and resources, 
the traditions 
and innovative 
strengths, 
that are so intrin- 
sically Italian. 

A Group that 
shares a common 
industrial and 
production 
philosophy. 

The “Cirio” Group 
benefits from 
a wealth of tech- 
nology and 
employees with 
their sights set on 
the future. But at 
the heart of the 
“Cirio” Group is 

a heritage tinted with those three 
important colours - the green of 
the fields, the white of the milk 
and the red of tomatoes. 


Kitratto 

Ilaliano. 



CIRIO 

BIANCO, ROSSO E FUTURO. 


The Cirio Group brands are: Ala , Berna , Cirio, De Rica, Matese , Optimus , Polenghi 9 Solac , Stella , Torre in Pietra . 



UVIBMKKVS 




6 


NEWS: INTERNATIONAL 


FINANCIAL TIMES MONDAY JULY IS 1994 


Frosted coffee not so chilly for Brazil 


By Angus Foster 
in Sao Paulo 




T he Brazilian media sped 
down south last week, 
and drove past the main 
story. Television crews were in 
a rush to him snowfalls in the 
southern state of Rio Grande 
do Sul, unusual in even the 
harshest Brazilian winter. 
Residents were shown making 
snowmen (well, knee-high 
snowman) and writing rude 
messages in the snow about 
the new currency introduced 
this month. 

Further north, though, in the 
country three main coffee- 
growing states, frost rather 
than snow was making the 
headlines abroad and raising 
coffee prices in London and 
New York. What with damage 
from a previous frost last 
month, up to half of the har- 
vest next year may be threat- 
ened. London Robusta coffee 
prices have nearly doubled in a 
month, reflecting worries 
about reduced supply. 

The media priorities were 
understandable, even so. Cof- 
fee is still one of the main 
products which the rest of the 
world associates with Brazil. 
But the coffee industry has lost 
its importance within the 
country and, although it has 
always been a popular drink 
among Brazilians, coffee still 
leaves a bad taste with those 


ip* 


B- - ,j£. 




- - ■, , 

m ? 









A harsh southern winter is damaging the bushes worked by these coffee pickers in Brazil 


who link it with inequality of 
land tenure and the economy’s 
reliance on foreign markets. 

Coffee became big business 
in Brazil a century ago, when 
the state of S£o Paulo was 
found to have suitable land 
and climate. Slavery had bear 
abolished nationally in 1888 
and the state filled its need for 
cheap labour by attracting 
immigrants from poor regions 


of Europe, such as southern 
Italy and Germany, as well as 
Japan. 

The fortunes made on coffee 
in the next decades, mainly by 
a few dozen landowners, 
turned S&o Paulo into Brazil’s 
richest state. Accumulated cap- 
ital helped to launch the coun- 
try’s industrialisation and led 
to the decline of coffee’s rela- 
tive importance. 


Brazilian coffee exports, once 
responsible for more than half 

of foreign axnbangn aa rff jog s, 

last year represented only 3 
per cent of total exports, or 
$L2bn (£774n). Site Paulo has 
slowly forgotten its roots. The 
Avenida Pauiista, once the cho- 
icest address in S2o Paulo city 
for coffee barons, has been 
invaded by Brazilian and inter- 
national banks. 


In the countryside, coffee has 
been overtaken, in terms of 
area planted and export values, 
by soya and orange juice. But 
it is still an important crop and 
one of the biggest employers in 
the three main coffee growing 
states - Minas Gerais. Sao 
Paulo and Parana. In these 
areas, the recent frost has 
caused severe problems for 
local growers and workers. 

The Guaxupg co-operative. 
Brazil’s largest, groups 6,500 
producers from the three main 
regions. Mr Joaquim Goulart, 
technical manager, says the 
latest frost spared less than 
half of the co-operative's 
plants. Tin 44 years old and 
remember the frosts of 1965, 
’69, *81 and ’85. This was more 
serious, it hit areas which had 
survived before.’' 

Brazil's winter lasts until the 
end of August, and forecasters 
are already predicting further 
frosts. “It’s already serious, but 
it could become grave depend- 
ing on the weather,” Mr Gou- 
lart says. ‘’About 80 per cent of 
our producers are smalL They 
wzQ feel the effects worse and 
have no other source of 
income. They have suffered 
from low prices In the last 
years, so there has been a lack 
of investment In the worst-hit 
areas, they will not get back to 
normal far three years.” 

This disruption does not 
appear to concern customers in 


Cafe Martinelii, one of central 
Sao Paulo’s smartest coffee 
houses. A group of brokers 
from the nearby stock 
exchange, sipping espressos at 
a price equivalent to 50 US 
cents joked that Brazilians 
may now have the chance to 
enjoy top-quality coffee, which 
is usually exported. “The gov- 
ernment holds 16m bags which 
would normally be sold to 
Europe, bid which win now be 
sold locally to keep domestic 
prices down," according to one. 

This attitude partly reflects 
the popular Brazilian belief 
that the country’s best prod- 
ucts go abroad. The image of 
European superiority, which 
stems from colonial times, is 
also reflected in advertise- 
ments in many bars for “Ital- 
ian roasted" coffee, even 
though the same coffee proba- 
bly grows in Brazil. 

The country’s poorer con- 
sumers, who drink their coffee 
in tiny cups, cafexmhos, often 
with much sugar to change its 
bitter taste, have little time for 
such musdngs. 

In a large supermarket 
beside the Avenida Pauiista, 
one housewife had decided to 
stock up with 500g bags of 
ground coffee awd was advising 
fellow shoppers to do the same. 
“The coffee companies will use 
the frost as an excuse for 
higher prices, whatever the 
government says,” she argued. 


Caracas plans 
tax rise to cut 
fiscal deficit 


By Joseph Mann in Caracas 


The Venezuelan government is 
studying a new economic 
adjustment plan, which would 
incorporate tax increases, in 
an effort to reduce the fiscal 
deficit The programme should 
be completed over the next sev- 
eral weeks, according to Mr 
Julio Sosa, finance minister 
and the government's chief fig- 
ure in economic policy-making. 

The minister’s statement fol- 
lows demands by Venezu el a n 
businessmen for the govern- 
ment to establish a coherent 
economic policy and anti- 
inflation strategy. Since the 
government of President Raf- 
ael Caldera took office in Feb- 
ruary, it has had to cope with a 
host of economic and fi n a nc ial 
problems, most of which were 
inherited. 

Mr Caldera has frequently 
discarded free-market policies 
implemented under the 
previous government 

Venezuela's economic situa- 
tion has worsened recently. 
There has been a sharp devalu- 
ation. inflation has soared and 
the confidence of investors has 


plummeted. 

Mr Sosa stressed that the 
administration was working 
hard to attack a fiscal deficit 
projected at 9 per cent of GDP 
this year, and to lower the defi- 
cit to around 4 per cent of GDP 
in 1995. 

Several proposals mentioned 
by government officials 
recently are likely to be 
included in the administra- 
tion's adjustment programme. 
These are: a rise in domestic 
retail prices for petrol; an j 
increase in a new wholesale ; 
tax (from 10 per cent to 1&5 per 1 
cent); cuts in deductions now 1 
allowed for income taxes; 
reforms aimed at speeding the 
privatisation programme and 
possible use of debt-equity 
swaps in privatisations; passi- 
ble sale of some or the govern- 
ment’s remaining shares in 
CANTV. the state telecommim- 
catious company privatised in 1 
1991: and new efforts to slim , 
the government. 

Mr Sosa expressed the hope 
that recently announced con- 
trols on prices and foreign 
exchange transactions would 
be “temporary.” 


i 




WORLD CUP 


All eyes on the boiling bowl 


JS 


^5 


“It never rains in 
^ southern Calif- 
oroia,” goes the old 
1960s song (Beach 
Boys? Jan and 
Dean? Mammas and the Poppas? No 
matter). That's still true, but the 
ground has been shaking a bit of 
late and these days you can barely 
see the San Gabriel mountains from 
the Rose Bowl even though they 
cannot be more than five miles 
away. Jurek Martin writes from 
Pasadena. 

This lack of natural habitat - 
glowering, mountainous, wet - may 
explain Bulgaria's pathetic perfor- 
mance in the World Cup third-place 
game on Saturday. But it was also 
the setting for the big one - Brazil 
vs Italy - just after high noon. 
Pacific time, yesterday. 

There is something of the Roman 
amphitheatre to the Rose BowL Its 
towers are faintly Romanesque. Its 
plain seating, for all of 102,000. 
offers no relief from the blazing 
sun, apart from that afforded the 
emperor and his court in air-condi- 
tioned sky-boxes. 

The emperor this weekend was 
Alan Rothenberg, head of the World 
Cup operation and lord of all soccer 
in America, though doubtless Fife's 
Joao Havelange claims equal status. 


Certainly never before have so 
many Fifa officials, conspicuous in 
then- smart blue-and-white striped 
shirts and ties, been gathered 
together at one time before; their 
principal task seemed to be to whip 
back into their seats any reporter 
daring to seek relief from the sun. 

The court consisted of luminaries 
beyond number Silvio Berlusconi 
and half the Italian government; 
Henry Kissinger, without whom, 
possibly, the tournament would not 
have come to the US for the first 
time; and what passes for glitter in 
Tinseltown. The senior aristocrat 
Pele, was, however, frying like the 
rest of us, doing Ids Brazilian TV 
commentary. 

The World Cup is still pretty big 
locally - big enough on Saturday, 
in an increasingly Latino city, to 
draw about 95,000 to the Rose Bowl 
to watch a match between one 
country stretching into the Arctic 
Circle and another whose location 
99.9 per oant of Angelenos would be 
pushed to define. 

Fans of Sweden and Bulgaria may 
be getting anxiou% at this stage 
about the lack of reporting on the 
outcome. In journalistic parlance, 
an account of the same should be 
“broken out" - that is, rendered 
distinct and separate - much as the 


FT renders, for example, OECD 
country reports into dozens of vital, 
component parts. There are reasons 
for this obfuscation. The correct one 
is that nobody cares who finishes 
third in the World Cup, and many 
wonder why the match is played at 
alL (Fifa anno unced at the weekend 
that it would not be discontinued, 
so there). The real one is that the 
Bulgarians have given so much 
pleasure that it seems Indecent to 
“break out” their worst peformance. 

It was a perfectly pleasant and 
civilised match which featured four 
goals but had all the life of a left- 
over souffle. Curiously, all the goals 
were scored fay Sweeten and all in 
the first half. 

The first and last goals, by Brohn 
and Andersson, came in the north- 
ern European manner, good headers 
from accurate crosses. Brolin made 
the second, for Mild, with a quickly- 
taken free kick, and Larsson 
ambled through a disconnected 
defence for the third. If Sweden felt 
they had something to prove after 
their negative approach to their 
semi-final with Brazil, they may 
claim vindication. 

But the Bulgars never turned on; 
even the great Stoichkov found 
himself alone in front of Ravelli 
with a few minutes to go and muf- 


fed it This inspired great rapport in 
the waning moments between the 
Swedish goalie and the crowd, com- 
pensating for any disappointment 
Ravelli may feel for not having 
made the tournament All-Star team. 

That honour rightly went to 
another greybeard, Preud’homme of 
Belgium. He may have been beaten 
three times by Germany but mirac- 
ulously saved twice that number 
and looked a cut above a not wholly 
distinguished goalkeeping crew. 
Only Ravelli, accorded “honourable 
mention,” and Mohammed A1 
Deayea of Saudi Arabia, otherwise 
looked the part 

The rest of the list drew no con- 
troversy. Nor should it, since Pete 
and Bobby Charlton were among 
the judges. It comprised Jorghino 
and Marcio Santos of Brazil in 
defence, along with Mairttm of Italy, 
Dunga (Brazil). Balakov (Bulgaria), 
Hagi (Romania) and Brolin in mid- 
field, and Roberto Baggio (Italy), 
Romirio (Brazil) and Stoichkov. 

Six of them, Baggio’s hamstring 
permitting, were due to play in the 
final yesterday and for them, their 
team-mates and what promised to 
be the noisiest and most colourful 
crowd a World Cup final has ever 
seen, the Rosa Bowl, heat and smog 
and all. was a fitting arena. 


V* 

* 








Bulgaria’s Krasimir Balakov skips over a challenge from Sweden’s Tomas Brolin during Saturday’s Third-Place! 
play-off game which Sweden won comfortably 4-0. Both players feature in the tournament's All-Star team «■} 


An uncertain future for US soccer’s $100m promise 


W hen the US soccer 
establishment six 
years ago earned the 
right to host the 1994 
World Cup, it made two promises 
to Fifa. the sport’s governing body. 

First, it promised that the US 
would put on a great World Cup; 
second, that the tournament would 
be so successful that it would leave 
a priceless legacy for the game in 
the form of a sustainable top-flight 
US professional league. 

The US organisers have delivered 
on their first promise - and then 
some. The negatives have been 
few, the positives many, including 
record-breaking attendances, 
impressive TV ratings, peaceful 
crowds, superb organisation and. 
not least, plenty of exciting soccer. 

Deliveriog on the second promise 
is likely to be a much trickier 
proposition, at least if history is 
anything to go by. 

Since 1960, there have been six 
attempts to create a major 


Patrick Harverson looks ahead to the problems to be faced in setting up Major League Soccer 


professional soccer league in the 
US. All failed, mostly because of 
lack of support from fans, sponsors 
and broadcasters. 

The most memorable was the 
North American Soccer League, 
which briefly burned bright in the 
1970s with the help of international 
stars tike Pete and Beckenbauer. 
The NASL, however, collapsed little 
more than a decade later in 
bankruptcy. 

If the new league - named Major 
League Soccer, and due to kick-off 
next April - is to avoid the fete 
of its predecessors, it has to start 
well. But progress so far has been 
unpromising. 

When Alan Rothenberg, head 
of the US Soccer Federation, 
unveiled plans for MLS last 
December, be said he would 
announce at the start of the World 
Cup the names of the cities where 
the 12 league franchises would be 


based. By June 16, however, only 
seven locations had been chosen 
- Boston, Los Angeles, New Jersey, 
Washington DC, Long Island, San 
Jose and Columbus - and only one 
city, Columbus, had met the target 
of attracting deposits from 10,000 
potential season-ticket holders that 
MLS originally required of all 
potential franchises. 

Rothenberg was also unable to 
provide names of any corporate 
sponsors who had agreed to 
contribute to the $100m capital M3i> 
intended to raise to pay for the 
running of the league. Since then, 
MLS has signed up Nike to provide 
kits for half the teams, and Mitre 
to provide the league’s official balL 

Thus, with less than a year before 
the first ball is due to be kicked. 
MLS had an incomplete roster of 
teams and little money from 
sponsors. 

What it did have was a TV 


contract - ESPN, the cable sports 
channel, and the ABC network have 
agreed to broadcast the games (at 
no cost to them, mind you) - and 
an organisational structure 
designed to ensure the league's 
financial survival. 

In most unAmerican fashion, 

MLS is centrally-owned. All the 
teams and players are owned by 
the league, ra ther than indi vidual 
franchises, as with every other 
major US sport To keep the league 
competitive, MLS wifi control the 
drafting and movement of players, 
and set pay levels that are very 
low by US standards. The average 
salary will be $70,000 a year, with 
top players earning little more than 
$100,000 a year. 

This structure might make good 
business sense, but it could deter 
potential owners who would like 
to own an MLB franchise but who 
might balk at reding so much 


control to the league. And fens 
might not like the idea of a sports 
league where a single owner decides 
who plays where. 

The limits on players' salaries 
could be an especially big problem. 
Everyone agrees it is crucial that 
MLB signs up some well-known 
players for its first season, 
especially some of the Americans 
who starred for the national team 
In the World Cup. 

Yet the very success of the US 
team will make that difficult The 
World Cup was such a good 
showcase for US players that many 
foreign clubs have already 
expressed interest in signing them 
to play abroad - at salaries that 
will dwarf those on offer in the 
MLS. 

Pay may not be the only issue 
likely to deter US players from 
staying at home. If the US team 
is to improve its performance at 


the next World Cup, the squad has 
to have a larger contingent from 
the world’s best leagues, which 
are all in Europe. It will be years, 
possibly decades, before the quality 
of the MLS rivals that of the top 
Italian, Spanish German and 
English leagues. 

Although HALS’S chief operating 
officer. Bill Sage, has said the 
league would be wilting to pay top 
rates to attract some stars to the 
US, the money may not be enough 
on its own. It seems that US soccer 
officiate are resigned to seeing most 
of the players in the US squad not 
already employed overseas sign 
with top foreign dubs in the next 
few months. 

The success of the World Cup 
may prove a double-edged sword 
for MLS In another way. American 
sports fens have notoriously short 
attention spans, and the 
enthusiasm for soccer the 


tournament has generated is likely j 
to have dissipated by next April- ; 

And once MLS does start, j 
Americans who were captivated 
during the World Cup by Romdrio's ‘ 
sleight-of-foot dribbling and Roberto 
Baggio's lethal finishes may find 
it a huge let-down when they watch 
a bunch of unknowns battling it 
out in a three-quartere-empty 
stadium somewhere on Long Island.; 

For now, tho u gh the challeng e j 
is to raise enough money to get 1 
the league off the ground. Eager 1 
to use the World Cup as a 
launch-pad. Rothenberg and other { 
MLB executives met potential 
corporate sponsors last week. i 

If they can secure the money i 
to persuade some World Cup stars j 
to join in the debut of MLS, then | 
they may win over enough US \ 
sports fens - plus the weight of ! 
advertising and sponsorship dollars 1 
that are the difference between 1 
life and death for all big-time i 
sports. 1 








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FINANCIAL TIMES MONDAY JULY IS 1994 


NEWS: UK 


Political parties set for change at the top 


By James Blitz 

The battle lines of British politics 
from now until the nest election will 
be drawn this week with sweeping 
changes of top government ministers 
and the almost inevitable election of 
Mr Tony Blair as the new Labour 
Leader on Thursday. 

Mr John Major is likely to 
announce his Cabinet reshuffle on 
Wednesday, one day before the Com- 
mons rises for the summer recess, 
although it could come as early as 
today. The changes will pit a moderni- 
sing Labour leader promising new 
political ideas against a government 


seeking to re-establish its popularity 
after two divisive years in which 
morale and cohesion have been sorely 
tested. 

The new line-up of ministers will 
give Mr Major a chance to reassert his 
authority over a fractious Conserva- 
tive party which has suffered set- 
backs in recent local government, 
European and parliamentary by-elec- 
tions. 

The new ministers will face a recon- 
stituted Labour leadership. Also con- 
testing the party's top job are Mrs 
Margaret Beckett, Labour’s acting 
leader and Mr John Prescott, shadow 
employment spokesman. While Mr 


Blair, shadow home secretary, looks 
assured of victory, there is less cer- 
tainty over the outcome of the contest 
for deputy leader. However, political 
observers believe it is increasingly 
likely that Mr Prescott wQl defeat Mrs 
Beckett for the number two post. 

Commenting on the government 
reshuffle. Sir Norman Fowler, the out- 
going Tory party chairman, said yes- 
terday that the prime minis ter would 
aim to bring in new faces. “I imagine 
there will be quite a number of 
changes," he said. 

However, it is thought unlikely that 
any of the three main offices of state 
wDl chang e hands. 


Mr Kenneth Clarke, the chancellor, 
r emains the standard bearer of the 
government's determination to 
restore the public finances to health. 
Mr Douglas Hurd is expected to stay 
as foreign secretary despite pressure 
from the party’s right wing for a 
Euro-sceptic replacement 

Mr Michael Howard, home secre- 
tary, has hart a difficult year pushing 
the Criminal Justice Bill through par- 
liament, but political observers 
believe that his position is safe. 

Instead, the focus of the reshuffle 
will be the appointment of a new 
party chairman to rally the party 
until the next general election. 


Favourite for the post is Mr David 
Hunt, employment secretary. How- 
ever, in recent weeks Mrs Gillian 
Shephard, agriculture mini ster and 
Mr Jeremy Hanley, armed forces min- 
ister, lave been suggested. Some min- 
isters are also backing Mr Brian 
Mawhinney, health minister, for the 
post 

Those most likely to leave their 
posts are Mr John Patten, education 
secretary, and Mr Peter Brooke at 
National Heritage. Mr John MacGre- 
gor, transport secretary, and Lord 
Wakeham, leader of the Lords, have 
been tipped to quit the Cabinet to 
take up appointments in the City. 


MoD considers 
detailed plan 
for science cuts 


By Bernard Gray 

Britain's Ministry of Defence 
has admitted that it has no 
detailed plans of how It will 
save the £50m to £GOm a year 
from its science research bud- 
get which was promised in last 
week's defence cuts. Nor is it 
sure where the proposed L300 
job cuts will fall. 

In spite of eight months' 
study under its Front Line 
First review, the ministry has 
yet to work out where to make 
most or the redundancies or 
where the proposed new sci- 
ence agency will be based. 

The ministry has acknowl- 
edged that both the savings 
and job cuts figures given in 
the package of cuts last Thurs- 
day are estimates. 

In its report the government 
proposed to set up a Science 
and Technology Agency to 
replace the multitude of 
smaller research operations 
currently spread around the 
country. It will cover all of the 
ministry’s non-nuclear scien- 
tific research and will be mod- 
elled cm the Defence Research 
Agency, which was established 
last year and is based at Fam- 
borough in Hampshire. 

Detailed proposals will have 
to wait until the new agency is 
established, which may not be 
until next April 

The ministry spends £600m a 


year and employs about 20,000 
people on scientific research. It 
also funds about £1.8bn of 
development in private-sector 

companies. 

The STA will have its own 
chief executive and budget and 
will act as a supplier of 
services to the MoD. 

The STA's main divisions 
will be the Defence Research 
Agency with 8,500 staff, a test 
and evaluation centre employ- 
ing 2,825, the Chemical and 
Biological Defence establish- 
ment at Porton Down with 615 
people and a small defence 
operational analysis centre. A 
number of smaller groups will 
be consolidated Into one of 
these divisions. 

The DRA conducts most of 
the ministry’s basic scientific 
research, while Porton Down 
studies chemical and biological 
warfare. The test and evalua- 
tion centre verifies weapons 
performance and runs some 
missile test ranges. 

The operational analysis cen- 
tre evaluates potential threats 
and projects what weapons 
systems ought be needed to 
counter them. 

The market-based efficiency 
improvements which were 
introduced to the DRA last 
year will be extended to the 
rest of the science divisions, 
and the minis try thinks that 
this will save £12m a year. 


s»r7=xr: XZET*r 



PMby (right) with East German intelligence chief Markus Wolf (left), in East Berlin in 1982 rm 

Philby under the hammer 


British master spy Kim 
Philby, who betrayed western 
intelligence to the Kremlin for 
30 years, narrowly missed 
exposure as a committed Com- 
munist, documents to be auc- 
tioned on Tuesday show. 

Books, papers and personal 
belongings of Philby, who died 
in 1388 in Moscow aged 76, are 
expected to fetch np to £90,000 
for his widow Rufina at a Lon- 
don auction by Sotheby's. 

One of the 128 lots includes 
Phflhy’s trade union pass from 
an early trip to Austria and 
papers documenting his links 


with the Viennese Socialist 
Society, which would have 
raised suspicions if they had 
been discovered by British 
intelligence. 

Philby, part of a spy ring 
formed by leftwing Cambridge 
University intellectuals in the 
1930s, became a double agent 
working for British intelli- 
gence and supplying military 
secrets to the former Soviet 
Union. 

Named as “The Third Man" 
after suspected traitors Guy 
Burgess and Donald MacLean 
fled to the Soviet Union in 


1951, Philby himself fled to 
Moscow in 1963 when he was 
on the verge of being exposed. 

Among a collection of about 
50 photographs there is the 
only known photograph 
(shown above) of Philby and 
Markus Wolf, the famous head 
of East German Intelligence. 

PhUby’s wallet, containing a 
press clipping from Izvestia 
announcing his defection, is 
also for sale, as are many KGB 
tributes to him, as well as a 
trophy for his 75th birthday 
depicting a globe circled by a 
Soviet spy satellite. 


Liquidators 
in $1.8bn 
BCCI move 


The liquidators of the 
collaps ed Bank of Credit and 
Commerce International have 
moved a step further towards 
partial repayment to creditors 
by completing a formal agree- 
ment bringing in USSl.Sbn 
from the bank's major share- 
holder, Simon Davies writes. 

The legal agreement with the 
government of Abu Dhabi 
requires approval from the 
BCCI creditor’s committee and 
then ratification by courts in 
the UK, Cayman Islands and 
Luxembourg. The creditors 
committee is expected to meet 
this week. 

The latest proposal will see 
Abu Dhabi waiving rights to 
pursue US$2.2bn of assets, 
which it says were stolen by 
the bank, and it wfil make a 
direct contribution of 
USSLSbn. 

In exchange it will win an 
agreement that the liquidators 
win not take any legal action 
against Abu Dhabi, while the 
government has given a simi- 
lar assurance to the liquida- 
tors. The legal document was 
based on heads of agreement 
between the two parties last 
March. 

This is the second time that 
the liquidators have reached 
this stage. A previous agree- 
ment was blocked in the Lux- 
embourg appeal court last 
October, on technicalities. 

The earlier agreement gave 
only a range of compensation 
Cram USjl-2bn to US$2.2bn. 
depending on the realisation of 
assets. 


Britain in brief 





Mercedes in 
bus deal with 
Leeds maker 

Optare, the Leeds-based bus 
maker bought from receivers 
by its managers and 
employees last December, has 
entered a joint venture with 
Mercedes-Benz to make and 
market large single-decker 
bases for the UK market. 

Under the agreement Optare 
will produce 51-seat 
aJaminimu-bodied buses on 
chassis supplied by 
Mercedes-Benz, the world’s 
largest commercial vehicle 
maker. 

The buses are to be sold by 
both Optare and 
Mercedes-Benz. The first 
deliveries are scheduled for 
later this year. 

Optare, employing 310 
people, says that it is 
profitable and on course for 
a £27m turnover in its first 
year of independent 
ownership, ft expects to 
deliver about 75 
Mercedes-based buses in the 
first year, representing about 
20 per cent of its output of 
buses and coaches. 


Investor watchdog 
up and running 

An extensive programme of 
consultation with the financial 
services industry is being 
planned by the Personal 
Investment Authority, the 
UK’s new watchdog to protect 
the private investor which 
becomes operational today. 

hi the coining months the 
PIA will ask for views on a 
range of issues, such as the 
registering of all individuals 
who work in retail financial 
services, and training and 
competence requirements. 

The PIA is starting work 
against a background of 
suspicion and reluctance even 
among some of the 3,500-plus 
organisations which have 
applied to join. It will consult 
in the autumn on extensions 
to the new regime for giving 
customers much greater 
information about financial 


products. This new disclosure 
regime will come into effort 
on January l. 


NHS drug savings I 
of £50m identified 

Britain's National Health 
Service hospital trusts coubl 
save more than £50m a year 
by changing their drug 
purchasing practices, 
according to a report 
published today. 

Hospitals should maxfodse 
their use of drugs that have 
strong competitors and those 
widely prescribed by general 
practitioners, says the report 
from the London office of 
German management 
consultancy Roland Berger, 
ft says that drag discounts 
average 45 per cent from the 
list price, but that discounts 
of np to 95 per cent are 
possible for drugs that bee 
heavy competition. 

The survey of mare then 
100 of the UK’s trust hospital 
pharmacists finds that the 
companies that offer the " 
biggest discounts are the two 
largest UK manufacturers, 
Glaxo and SmtthKUnc - 
Beecham. Those that offer the 
lowest are BOC, a supplier 
of anaesthetics, and Abbott 
Laboratories of the DX 

NHS hospitals spend about 
£600m a year on drags and 
influence much of the test or 
the NHS which has a total 
drags budget of about EHhl 


Asthma inquiry 1 
follows outbreak 

The British government Is to 
launch an inquiry into last 
month's unprecedented \ 

outbreak of asthma attacks! ■: 

Department of Health | 

officials will this week begin \ 
writing to all health 
authorities in England 
requesting information on 
patients who suffered acute 
asthma attacks on June 24 
following violent 
thunderstorms. 

The move follows reports 
by hospitals, particularly in 
London and the south-east, 
of large numbers of people 
attending accident and 
emergency units in the 12-houi 
period after the storms. 

Hospitals expect on average 
to treat between two and eight 
asthma-attack victims a day. 
However following the 
thunderstorms several 
reported that up to 100 people 
had come in for treatment. ; 


FINANCIAL TIMES 

LONDON ■ SMUI ■ f HANK FUftT NfW TO UK TOKYO 


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UNITED STATES BANKRUPTCY COURT 
SOUTHERN DISTRICT OF NEW YORK 

METAJLLUKG, INC, and 
SHIELD ALLOY METALLURGICAL 
CORPORATION, 


Cbpcr I f Case Not,: 
93 B 44468 (JUG) 

93 B (JLG1 
(Jointly Administered) 


NOTICE OF ENTRY OF BAR ORDER FIXING LAST DAY 


TO All PERSONS AND EMT iTIESt TOH CLAIMS AGAINST OS 

est> nv MFEAixmc. inc. or shielpaiioy METAUxntracAi. I 


PLEASE TAKE NOTICE, tat the United 
Set* York idee "BmltrtipKy Court 1 ! 


M Bankruptcy Ccun for ibe Southern Dionct i 

an (Kderdanf Mays. 1994 Id* "Bar Older" 

iotto n. jndtv idnafa. partnerships. (OO 

li. EXCEPT THOSE PERSONS AN1 

A TBMXJU0 C BELOW, that nscrtacLnmtr 

SUekbOay Mcnlluipcal Co 

“■ ‘ «n»* proctor 


wooT of dan 10 die United Stole* Banbmcy Court for die Southern tjinria of New Yodcu 
Mecdlur*. Lx- or Sfaiettalloy McttJ a^alCorpofaioo, Bowfag Green Station. Post Office Bo 
S3. New York. New York Iu274-OQS5arliD mo band delivery or cornier Kmx to the Clerk I 
the Uniied Suies Bankrtfiicy Comt far the Southern District of New York. Alexander HrumKo 
Custom House. One Bowling Green. fifth Floor. New York, New York 1 0004-1408. J ‘ 



toriJr) right ujneqn/crirleietnah far tmabfr of p 

ach rives rise to a right to payment, whether or no* such right 10 on equitable 
» judgement, fixed. ooaringeoL matured, unnatural, d Upw i ri . undis pu t e d. 1 



A. ANY PESSUiV Oft ENTITY THAT HAS ALREADY PROPERLY PILED WITH TH 
CLERK A PROOF OF CLAIM AGAINST TOE DEBTORS UTILIZING A CLAW 
FORM WHICH SUBSTANTIALLY COWORMSTOOFFtOAL BANKRUPTCY KW 
NO. (0. NEED KOI PILE A DUPLICATE PROOF OF CLAIM. 

K ANY PERSON OR ENTITY til WHOSE CLAIM IS NQELISTED AS “DISPUTED. 
-CONTINGENT." OR TJNUQUlD ATEIT IN THE DEBTORS' SCHEDULES O 
LIABILITIES PREVIOUSLY BLED WITH THE CLERK OF THE BANKRUPTC 
COURT (AS MAY BE AMENDED) AMD (K) THAT AGREES WITH THE CLASSIC 
CATION AND AMOUNT SET FORTH IN SUCH SCHEDULES NEED NOT FILE , 
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G THE CLAIMS DESCRIBED IN ITEMS 1 -4 BELOW ("EXCLUDED CLAIMS") ARJ 
NOT AFFECTED BY THIS NOTTCE OR THE BAR ORDER AND. THEREFORE, AFT 
PERSON OR ENTITY THAT HAS AN EXCLUDED CLAIM NEED NOT FILE t 
PROOF OF CLAIM ON OR BEFORE THE BAR DATE FOR SUCH EXCLUDEl 
CLAIM ALL OTHER PROOFS OF CLAIMS MUST BE FILED ON OR BEFOR) 
AUGUST 15. 1994 THE BAR DATE: 

1. Any Debtor boLflug m intereaumny drim uaimi mother Debtor. 

2. Any noo-defctor sabsk&vy or uTBuie hoVfiqg an in te trompatny claim agunst in 
Debtort 

3. Any hidden ofcfaim allowed by JnonfcraftheCdBnetnoBd on or before the Bar Dale 
ore) 

4. ^A n^p CTKn mCTthy (i) utoe name b li ned on the Ly of Equity holders filed with dt 

as amended on / — 

stock or other eqi , 

of eqnty securities theroa listed lor sich person or i 


.. . ... — , — — . however, ihsl an 

equityboUer who wishes to assert a claim aranuteMwoT die Debus asaoeditor of sue 
entity that is not based solely upon owtsadbip of m equity interest in dte MctaUun. Inc 
mat file a proof of claim on or prior id the Bre Dale unkss II) another exceotkm provide, 
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5. Any failtlei of a dami arising (tout the rgecdon of m executory craina or uneaniiB 
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Debtor notwithnawSae die fact that utchdahm tor the btiuriei on wMchttev arc taxed imavb. 


that inch damn tor the hijunc on wMctt they arc bawdj 1 
or may not hatw occurred, manned or become fixed or BonidaM prior ta *ud 

Therefore, any creditor having a claim or potential claim against ■ Debtor, no tndUf how mot 

oravHJMePL naal flic j proof of claim 00 at before tfae An pBl 15 . IQftj Bar Date. 

PLEASE TAKE FURTHER NOTICE THAT each proof of cfcuin romi fUediraui cnnfonj 

vubKintiaUy _to Official Bankruptcy Form No. lOcoctes ol whidl are on fit with the GfJke Of d» 

Cfcrt of die Court. Praatfs of clum mant fifed er(ner(a)by mailing each tneft proof of rfann a 
deal it k RECEIVED oa or before August IS. IWlO: 

United Stales Baikrapfot Court 
lor Iht Southern Dfatrkt of New York 
cfa Metafarc. Inc- or 
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BtmRnz Green Statfon 
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orlMt^taidu^vtmrcetcinalprtxirorcksimviahMaidenvieryorcairierMavKe u> the Office o 
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PLEASE TAKE FURTHER I 


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of New Yotk. One Bowling Green, fifth Roar, New Yorit. New Yoik ioo(H-|JdS. 

Doled: Art* Yortt New York BY ORDEK OF THE COURT 

May&IPW 

T HE HO NORABLE JAMES L. CARR1TV, Jr 
UNITED STATES BANKRUPTCY JUDGE 
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M A N A GEMENT 



Sfr Terry Bums: Bun the Treasury's functions to those of a company head office 


Cultural revolution 
in Whitehall 

Following last week’s White Paper, Peter Norman 
looks at the Treasury’s plans for reform 


S ir Terry Burns, permanent 
secretary to the Treasury, 
feels rather like a harassed 
home-owner who started 
some necessary repairs and has 
found more and more problems that 
need solving. 

What began in early 1992 with an 
internal enquiry into the style, 
workload and external image of 
Whitehall's pivotal ministry has 
burgeoned Into a drive for manage- 
ment reform and a crusade to 
change the Treasury's culture In 
readiness for the 21st century. 

Reform is in part externally gen- 
erated. The Treasury, which over- 
sees the government's economic 
and budgetary policy, is having to 
adapt to decentralisation and dele- 
gation among its “client” ministries 
in Whitehall. Even before last 
week’s White Paper for restructur- 
ing the Civil Service, the creation of 
more autonomous bodies such as 
next step agencies, and the ques- 
tioning of traditional civil service 
activities were resting the Treasury 
to change its ways. 

More subconsciously, the Trea- 
sury is trying to put five difficult 
years behind it 

It has been blamed for policy fail- 
ures such as the early 1990s reces- 
sion and Britain's exit from the 
European grahAngB rate mechanism 
In September 1992 and accused of 
failing to understand the needs of 
British business. 

It has problems of sagging 
morale. Earlier this year, an atti- 
tude survey of its 1,400 staff 
revealed deep unhappiness. While 
senior officials complained of long 


hours whan these were spent on 
unnecessary work, staff lower down 
feared for their jobs in the event of 
contracting out activities to the pri- 
vate sector and market testing. 

Add to all this, the launch of the 
fundamental review of the Trea- 
sury's spending and running costs - 
announced in the November 1993 
Budget - and the scene is set for a 
large-scale, internal shake up. 

Change at the Treasury “is like 
starting work on part of your house 
where you can see it needs a signifi- 
cant effort, and finding that is just 
the beginning," Sir Terry says. 
“You start wanting a new kitchen, 
and you suddenly discover you need 
new wiring. Change becomes more 
difficult because the scale of it 
increases.” 

Sir Terry likens the Treasury’s 
functions to those of a head office in 
a company. Spending decisions, for 
example, are decentralised in other 
departments, leaving the Treasury 
to hold the ring and ensure that 
policy is coherent. 

But if management practices 
change elsewhere in the system, 
then the role of head office also has 
to change. 

The em phasis in other ministries 
on setting objectives against which 
the management of agencies ran be 
judged is difficult to reconcile with 
a detailed “command co n trol" 
style of management of public-sec- 
tor activities by the Treasury. In 
the present review, Sir Terry says 
the Treasury "is looking quite fun- 
damentally at the sort of jobs we do 
and asking ‘Should we be doing 
them?". 


He wants to place more emphasis 
on setting the a genda and getting 
the framework for policy rigbt so 
that the department Is less involved 
with detail and second guessing 
others. 

Because of the breadth and depth 
of the department's self examina- 
tion. the Treasury has adopted a 
gradualist approach to change. It is 
not following the example of the 
Bank of England, which recently 
started and completed its biggest 
management restructuring since 
1980 in just six months, at the cost 
of some bruised feelings in Thread- 
needle Street. 

B ut change is under way in 
the form of management 
delayering and pushing 
down responsibility to 
lower levels. Late last year, the 
Treasury effectively took out a 
layer of top management immedi- 
ately below permanent secretary 
level. 

Its top mandarins are now known 
as directors. They have greater 
responsibility for their budgets than 
before and their dudes are more 
clearly defined in their job titles. 
This is partly to emphasise the very 
different tasks carried out inside 
the Treasury and to create clearer 
entities in the department in the 
belief that this also can help push 
responsibility downwards. 

Further detailed work on the 
organisation of directorates and the 
allocation of resources inside the 
Treasury is being carried out as 
part of the fundamental review. 
This task hag been handed to Jer- 


emy Heywood, a young higb-flyer 
and formerly principal private sec- 
retary to chancellors Kenneth 
Clarke and Norman Lamont 

However, change at the Treasury 
is not just about organisation 
charts. Inspired partly by the atti- 
tudes siuvey and his own experi- 
ences since entering the Treasury 
in 1980 when he came to fill the post 
of chief economic adviser from the 
London Business School, Sir Terry 
also wants to change the Treasury's 
culture. 

‘I’d always been slightly worried 
about the general relations that the 
Treasury had with the outside 
world," he says. On becoming per- 
manent secretary in 1991, he gained 
a greater insight into the nature of 
the Treasury’s relationships with 
other parts of Whitehall. 

“People who were really quite 
quiet would write the most strident 
letters backwards and forwards to 
each other,” he recalls. “When I’d 
say. let’s have something more 
polite that makes the point, they 
would often turn round and say 
■fine’. They weren’t always happy 
writing strident letters either. That 
was just the way it was. 

"That's what culture is. It is 
where people inherit styles and 
ways of doing things and it often 
turns out that each individual in 
the process is not really very happy 
with it. 

“That is when a change of culture 
is needed. What we are doing now 
is trying to bring about a lot of the 
changes that people themselves 
actually want to make, but which 
have not been properly articulated.” 


In search of female mandarins 

Gillian Tett reports on attempts to promote a women-friendly image 


T en years ago Alice Perkins 
was trapped on a typical 
working woman's treadmill 
As mother of two small children, 
she was holding down a high-flying 
civil service job - and spending, 
she says, “every waking hour 
feeling completely exhausted”. 

Now, as one of the top three 
women in the Treasury, Perkins 
is a walking advertisement for 
management change. She is now 
working a four-day week, having 
recently moved to head of defence 
policy and materiel. 

Her story is rare in an institution 
still largely dominated by sober, 
workaholic men. But if Sir Terry 
Bums, Treasury permanent 
secretary, is to be believed, it could 
become more common. For after 
decades of being perceived as a 
bastion of male mandarins, the 
Treasury has embarked, as part 
of a wider mnnagpmpnt shake-up, 
on an initiative to promote a new 
“women-friendly" image. 

The programme has already 
challenged some hallowed 
traditions, hr an attempt to change 
the workaholic culture, the 
Treasury’s “sin list” that used to 


name officials who had faiiwi to 
meet deadlines is fading from view, 
at another, the Treasury has joined 
the government's pro-women 
"Opportunity 2000" programme 
and has drawn up targets to 
monitor the gender balance at 
different levels of the organisation. 

But the changes are also raising 
a broader question relevant outside 
the Treasury’s walls - namely how 
far can an institution use a wider 
management shako-up to further 
the cause of the women in its 
ranks? 

The starting point of the 
Treasury's initiative is 
embarrassment over its own 
statistics. Women currently make 
up 43 per cent of the Treasury staff! 
But they hold only 9 per cent of 
the top 124 jobs. And though this 
percentage is growing, it remains 
for lower than the proportion of 
women entering the "feeder" ranks 


below. 

Chute why women should be so 
under-represented is a matter of 
some dispute. As nffiriais point 
out, the proportion is not 
dramatically worse than in most 
other dvfi service departments. 
Indeed, many believe that the real 
problem lies in the outside world 
and the low proportion of female 
students who study economics. 

M oira Wallace, a senior 
official in the general 
expenditure policy group, 
says: "One problem is getting 
women to apply - people do tend 
to assume you need a degree in 
economics to work here which is 
not true.” 

But those women who have 
arrived - often from other civil 
service departments - admit the 
institution itself Is also to blame. 
There is little sexual harassment 


or overt prejudice, they say - with 
the offices largely staffed by earnest 
men, the atmosphere has none of 
the aggressive banter that marks 
some City banks. But this British 
reserve conceals more subtle factors 
that have left some women uneasy. 

One practical problem has been 
the workaholic culture which can 
penalise women with childcare 
commitments. 

Another factor is the sheer 
atmosphere of a building d ominated 
by long, gloomy corridors. Carol 
Scott a personnel assistant for 
example, arrived from an open plan 
office in the Department of Trade 
and Industry - and suffered a 
distinct culture shock. The 
Treasury, she found, was a world 
of dosed office doors where “no 
one ever said hello to anyone". 

But alth o ugh these gripes are 
widespread, finding a consensus 
about how to tackle them has not 


been easy. Although a women's 
network was set up last year, it 
initially provoked some imraw 
As one w oman admits: “Women 
are not keen to be seen sticking 
out their necks here." 

A fter the network held a series 
of discussions with Sir Terry, 
the initiative generated more 
enthusiasm. Nevertheless most 
women remain a damant that it 
should not carry any "women only” 
tag and that "positive 
discrimination" in the form of. say, 
a quota system for office jobs 
should be avoided. 

“We are not wanting to focus 
just on women's issues - this 
affects both men and women." says 
Caroline Slocock, head of Treasury 
personnel policy. “In the past men 
thought you had to work all hours 
to prove your commitment Now 
that is being challenged. Families 


are not just about women but men 
too." 

In practice, this means that 
targets for flexible working 
practices are to be introduced 
across the building. A new, 
friendlier office culture is to be 
promoted in special “awareness" 
courses - although not compulsory 
they have been attended by 75 per 
emit of the mate and femali* staff 
so for. 

And to ensure that the men do 
not feel excluded, they have been 
invited to selected mp^tinpo of the 
women's network - to discuss, 
among other thing s thp issue of 
“image”. 

The acid test of these low-key 
tactics will be whether they 
actually result in any more female 
mandarins. But so for, at least, they 
appear to have defused any 
backlash. 

Muttering? persist about a few 
middle management “dinosaurs”. 
Senior - male - managers say 
publicly they are enthusiastic. But 
rank and file male officials appear 
to have responded in true Treasury 
style - with a polite, albeit 
cautious, nod. 


TECs - the perfect after-dinner topic 



D id you know that last week 
was the TECs’ annual con- 
ference? Do you know what 
TEC stands for? Can you name two 
British figures who are important 
in training? Can you say anything 
cogent about the training debate at 
all? Do you care? 

Good for you if you can confi- 
dently answer yes to all of the 
above. I do not usually advertise my 
ignorance, especially on a subject 
that we are told is the key to the 
country's competitiveness/to all our 
tomorrows etc etc. But I have done 
some soundings and found that my 
blind spot on training Is shared by a 
large number of otherwise wen-in- 
formed people. At the first mention 
of TECs (Training and ■ Enterprise 
Councils). NVQs or DP, we go 
hiank And by the time the conver- 
sation swings round to CENs. let 
alone EBS. or FCWG. we have 
unplugged ourselves altogether. 

If this crucial subject is not 
treated as a yawn, it is regarded as 
a laugh. My husband recently gave 
an after-dinner speech to a group of 


personnel managers in the City. He 
started with the usual jokes, which 
met polite laughter, moving along 
rapidly to the serious part of the 
speech he mentioned TECs. This 
brought the house down. 

The poor old TECs have been val- 
iantly trying to raise their image. 
They have retained Des Wilson, the 
most fanatical campaigner of them 
all, and a team of highly paid FR 
people at Burson-MarsteDer. Bat so 
for. the only big publicity they have 
had was a television programme 
a l leg in g that some TEC money had 
been handed out to dodgy tramere. 

The problem is partly one of pre- 
sentation. The general talk about 
training is frill of platitude and 
hyperbole. Take David Hunt's senti- 
mental speech last week about how 
training matters because it is the 
future of his 13-year-old daughter. (I 
have a h unch that his daughter will 
be OK whatever the TECs are up to 
in the year 2000.) Everyone knows 
that training is vital, to go on say- 
ing that is not interesting. But once 
yon get to the meat of the discus- 


sion, it quickly becomes technical 
and complex. The subject is dry, 
inmranpptfll and full Of initials- a 
crashing bore to an but the faithful 

And the faithful themselves don't 
help. There is a missionary zeal 
about them: a chance encounter 
with a training expert full of talk of 
“competences” and I start feeling 
like the wedding guest in Rime of 
the Ancient Mariner. 

Maybe none of this matters. It 
couldn’t be less important whether 
the chattering classes are preoccu- 
pied with training. What matters is 
that someone is getting on with 
doing it And the news from last 
week's conference that 12 per cent 


of the British workforce is Involved 
in Investors in People sounds 
encouraging. I still don't really 
know what IIP is, but so long as the 
companies involved are enthusias- 
tic that is what counts. 


Returning to the subject of speeches 
that do not go quite according to 
plan, a management consultant 
friend recently addressed a group of 
senior managers on the subject of 
partnership sourcing. He felt he had 
acquitted himself with credit and 
was therefore a little put out to get 
a letter a couple of days later 


informing him that his audience 
had rated him seven out of 10 on 
content and five out of 10 on presen- 
tation. 

Ibis is performance measurement 
run riot The craze for appraising 
and grading employees on every 
aspect of their jobs is bad enough, 
but the idea of ranking guest speak- 
ers is dotty. Maybe the conference 
organisers feel it is necessary in 
order for them to know who to ask 
back next time. But why on earth 
would the speaker want to hear the 
verdict, especially one expressed in 
a TTiftHTvingiegs number? Next tim e 1 
have a dinner party I shall ask my 
guests to grade their fellow eaters, 
and give marks for the food. too. 
And then we’ll all know in a handy 
modular way what others think erf 
our small talk and of our cooking. 


The traditional macho manager will 
be extinct by the year 2001. He will 
be replaced by a natural team 
leader who is loved and respected 


by colleagues. He - or just as likely 
she - will be a class communicator, 
responsive to change, a whiz at 
strategic planning, good at coaching 
and delegating - a true hero or her- 
oine. 

I can't help feeling there is some 
wishful thinking in this picture, as 
presented in today's survey from 
the Institute of Management. The 
number of women managers is, if 
anything, falling and it is hard to 
believe that an explosion of num- 
bers is on the way. Moreover, the 
changes being forced on managers 
are just as likely to turn them into 
nervous wrecks as into rounded col- 
legiate players. So for, restructuring 
has meant executives taking more 
load on themselves, going through 
the nasty business of firing others 
and worrying about their own jobs 
at the same time. 

The IM survey thinks manage- 
ment tr aining will shap e the brave 
new boss. But as 1 read about the 
MCI, about transferability/accredi- 
tation of skills. 1 find my mind 
going regrettably blank . . . 



DESERT ISLAND 
MANAGER 


Sir John 
Harvey-Jones 

Sir John Harvey-Jones. former 
chnjrman of Imperial Ch emical 
Industries and now a leading 
management consultant, is 
undaunted by the prospect of life 
on a desert island. His years in 
the Royal Navy as a submariner 
and latterly as a solo yachtsman 
have taught him how to cope 
with being alone. 

What would you need to run 
your business life? 

I would need a computer with a 
modem to collect E-mail I would 
sign on to the Internet and that 
would give me access to 
virtually any area of debate 1 
wanted to get into. 

I came to computers fairly late 
in life. One of my great regrets is 
that I never learned to type 
properly; I am still a two finger 
man. 1 could do a lot Df business 
by phone but I really prefer to 
meet face to face. All my work is 
about persuading people. For 
that you need direct contact to 
be able to read someone's body 
language. 

Would you miss the hub-bub of 
an office? 

lam quite good at being on my 
own. 1 an Interested in nature, 
particularly birds. We have a 
Noah’s Ark of animals at my 
home. 

From being at sea I get an 
almost sensual pleasure at 
changes in the seasons. ButI am 
not introspective. I need to reach 
out to relate to others. 

Would you become a beach 
bom? 

1 am pretty self disciplined. 1 
would not just fall into apathy 
under a palm tree. For many 
years I have woken at between 
5J0am and 6.00am. 

1 would continue to do that, 
although I can sleep at anytime, 
fee anytime. So I can lie down 
for 2D winks and be out for hours 
unless someone wakes me. 

Bow would you keep fit? 

My life has been dedicated to 
being unhealthy. Hie business of 
cleaning and tidying up would 
be enough to keep me in trim. 

The one characteristic which 
successful people have in 
cnrnmrm is that they are robust, 
physically and mentally. 

You could have one book and 
one film. 

The book would be Loom of 
Language by Frederick Bodmer 
about philology. The film would 
be a CD-Bom guide to the 
National Gallery in London. 

Yon can have one type of food. 
Vegetarian curry with rice. 1 am 
very nearly a vegetarian and 
always eat vegetarian curry 
when we are in India. 

One person could accompany 
you. Who? 

It would have to be my wife. We 
have been married for 47 years, 
bat one cost of the kind of life I 
lead is that we have not spent as 
much time together as we would 
Hke. There are atiU so many 
ranges of experience we have not 
explored. 

Wlmt would be the fr u stration 
of being stranded? 

Not befog able to contribute to 
tire debate about business in 
Britain. It is old fashioned 1 
know but I was brought up to 
believe that duty was very 
important, that you should 
contribute something to your 
country and that if you did not 
you were not much of a person. 

Charles Leadbeater 


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"•I’tftacftttaai 


FINANCIAL TIMES MONDAY JULY 18 1994 


BUSINESS TRAVEL 


trsdSc 

co n t ra Bera 
areto ftofcfa 
ana day 
stritoM 
ftMaft aflucft i a iwahwal 
and international ftghts. 

The strike, caRed fay 
Raty's three Hg trade 
onfamvidBUepbce 
from 7am (0300 GOT) to 
3pm (1300 GOT), the 
■ CG&L, CJSL and lift, unions 
saH fat a Joint statement. 

TtesMesBcnw 
farther proMe welbralr 
finUmlnlbh. 

J o w ney s were fenipted 
by a Sartos of strikes at 
state airtine Afitafia at the 
oc^mntng of me inonuv 


ftaKan strike 



Russi a to Japan 

AsroSot, the 
Russian 
Wematiorta] 
atfiie, opened 
anew route 
from the for 
eastern cSy of Vladivostok to 
tf» central Japanese town trf 
Toyama last Friday. 

AeroSct w9 ffy the route once 
a week, using Tupolev Tu-154 
ajrtnors, which can cany about 
160 passengers. 



Australian fares 

Gone are the teatty days cf 
iUnrchnep tarn tm . 
Australian domeofie fBgfets, 
mritas fOtt T&t to Sydney. 

Btortsto a d«Bgdata* 
fire nation 1 * abttno industry 
awtwww^gac aiiipdWuH 
(ran aw carriers have 
(Mowed largely abortive, and 
S» market hay ntmwd to 
a duopoly, aH) Arnett and 
^w Ue fcaaffcicotporatfag 
AustraBan Afafinm) as the 
two nationwide carriers. 
Average teesedged ap fay 
&6 per cart far the year to 
Hand*, and now staid 
about 25 per cent fadwr 
9m pre-deregu*aBon levels 
0(1990. 


Air news bi brief 

Long decays at Athens airport 
utf continue^ because of a big 
season al increase in IBJits, Mr 
Theodoras Rangetos, ©race's 
t ransport minister sad last 

i irrtnir 

«rwW\. 

A Palestinian airline wffl stat up 
in mid-August to link the 
ssB-nied Gaza and Jericho with 
Caro. The eafne wffl start wfth 
hefcoptera and foen switch to 
jets. 


The Baste 

tyrtt 

H li mUi WIHUI 

baajiattMn 
renovated, 
has d nrip aa rf 
■even of Its 
214 rooms to meet the 
special needs of afiergy 
sufferers, the taO, the bOnd, 
flw deaf; the ehfortr and 
other hancBcapped people, 
writes Ian Rodger to Zorich. 

This loadable effort is not 
b efa oo d to bo rotated to 

the fact that the batetfe 

frequently used by central 

bankers allwidl ug nieetiuos 

of Ifae Bank for l u te* nationa l 

Settlement next door. 

ba lira four r o om for 
afieiyy sufferers, petpet 
Poore replace rags, special 


Allergy suffe 



varnishes hare been need, 

and u o u oU e rgoidc 
waBpap e re , aaMpaper 
pastes and beddin g hare 
been cho sen . AddtthMiat air 
ffitars mb Waa dust. 

For the bend, there are 
bragfe ne wspap er s and 
mean*. For those with weak 
sight or bearing, an 
under-pfflow vt na tw r a—res 
as an alarm dock. The tail 
cm* find extra Iona beds 
£23m) and high desk* 

These s endees come at 
no premium to the 
double-room rates of . 
SFrZTO to SFr390 (£130 to 
£188} a night, and the hotel 
undertakes to fibre SFrS to 
charity for each night the 
rooms are occupied fay a 
hamfieapped person. 


Likely weather in the 



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Peter Wise offers tips on getting around and staying in Lisbon - and the etiquette of doing deals 


Both sides of car 


City for explorers 



Lisbon's yellow trams are fan but slow - taxis are a more reliable way to travel to appointments 


T he Portuguese, with self-de- 
precating humour, like to 
describe Lisbon as a city of 
the developing world, rather 
than a European capital The coun- 
try's historical involvement with 
Africa. Asia and the Arab world is 
evident in the city's architecture, cul- 
ture and cuisine - but on a technical 
level, it functions almost on a par 
with the most modem of its European 
counterparts. 

Doing business in Lisbon is rarely 
arduous and the hospitality of the 
Portuguese usually makes it a plea- 
sure. The city from where discoverers 
such as Vasco de Gama and Femdo de 
Magalhdes (Magellan) set out in the 
15th and 16th centuries enjoys being 
discovered by newcomers. 

Lisbon will be welcoming more and 
more foreign businessmen over the 
next few years, as the host to Expo 'OS 
and the promoter of important infra- 
structure projects, including new road 
and rail crossings over the Tagus 
river. 

Visitors will discover that taxis are 
the best way to travel. They are 
cheap, reliable and plentiful in the 
city centre. Except at rush hours, 
nowhere is much more than 20 min- 
utes away. Unless you are travelling 
to the country’s interior, it is not 
worth hiring a car (but if you do, it is 
often cheaper to book outside Portu- 
gal). 

There are good reasons for hailing a 
cab. First, it is virtually impossible to 
park in Lisbon. Second, public trans- 
port is crowded and uncertain. The 
yellow trams are fun but slow. Third, 
driving in Lisbon can be frightening. 
Portugal has the highest road-acci- 
dent rate in Europe. US soldiers at a 
Nato base on one of the most danger- 
ous roads out of Lisbon have had 
T-shirts printed saying *1 survived the 
Marginal". 


The few sharks among Lisbon taxi 
drivers wait around the airport The 
most frequent trick is to clear the 
meter when you reach your destina- 
tion and ask for a higher fare. There 
is a 50 per cent surcharge for heavy 
luggage, but it should be registered on 
the meter. Tolls are not shown, and 
are charged double to cover the driv- 
er’s return. 

Company headquarters, banks, 
financial markets and government 
departments are scattered around Lis- 


bon. But most are within easy reach 
of the main hotels. 

The Tivoli, Rita, Meridien and Sher- 
aton offer tb e best five-star accommo- 
dation. However, businessmen are 
increasingly staying at new three- and 
four-stars hotels. The Sol Lisboa, 
Amazbnia and Dom Rodrigo Lisboa, 
which offers self-catering apartments 
for longer stays, provide good service 
and ample space. 

Most Portuguese businessmen 
speak English and frendL A single 


Lydia van thr Unt 


foreign visitor is enough for a meet- 
ing of 20 Portuguese executives to be 
held entirely in En glish, a few words 
of Portuguese from a foreigner are 
taken as a compliment, but not expec- 
ted. It is not advisable to try out your 
Spanish. The Portuguese do under- 
stand it, but pride themselves on the 
individuality of their own language. 

Punctuality is prized in Portugal, 
but rarely practised. As a foreigner, 
however, you are expected bo be on 

frinrfl. 


The Portuguese are not overly for- 
mal But the Anglo-Saxon habit of 
quickly adopting first names can 
affront some sensibilities. Women 
wear skirts; men wear suits or jackets 
and ties. 

Lunch is a vital part of doing busi- 
ness. It begins at 1pm or 1.30pm and 
lasts a minimum of 90 min utes, more 
often two hours. The city is teeming 
with good restaurants, but a few are 
especially favoured for business meet- 
ings. They include the Veranda at the 
Hotel Rita, Gambrinus, Hotel da Lapa, 
Casa da Comida and Chester. The lat- 
ter attests to the penchant of Lisbon 
businessmen for traditional British 
styles, from oak-panelled rooms to 
tweed jackets. The Portuguese do not 
take a siesta and dinner starts no 
later than 9pm. 

Breakfast is a non-event, and it is 
unwise to organise business meetings 
around it. 

The most frequent business journey 
out of Lisbon is to the northern city of 
Oporto. The aircraft is faster and 
more reliable than the train. Portu- 
gSlia. a small private airline, tends to 
be more efficient on this route than 
the national carrier, TAP-Air Portu- 
gal 

On a free day. visit the romantic 
palaces of Sintra or the rolling plains 
of the Alentejo. 

Lisbon is this year’s European Capi- 
tal of Culture, making it a fertile city 
for night life. The medieval Bairro 
Alto is a lively district of Fado music 
houses, boxing clubs, boutiques, bars, 
restaurants, discotheques and bordel- 
los. Over the past three years, the 
clubs along the Avenida 24 de Julho, 
beside the Tagus, have become the 
most fashionable. The action goes on 
until dawn. No one has yet worked 
out when the young professionals 
who dance the night away there actu- 
ally sleep. 


hire in Geneva 

By Paul Abrahams 


Geneva’s Cointrin airport is 
truly international. A small 
escalator tucked on the left 
just before Swiss passport con- 
trol can whisk you to the air- 
port’s little-known French side. 

The canny business execu- 
tive can take advantage of tins 
by hiring a car on the French 
side for for less than in Swit- 
zerland. But, as in all things, 
there are problems. 

The theory is simple. Last 
month, Hertz's Europe on 
Wheels was offering prices of 
£196 for an eight-day hire of a 
Peugeot 106 on the French 
side, compared with £247 for a 
vehicle of the same class in 
Switzerland. 

Renting in France does take 
a little effort You have to pass 
through Swiss immigration, 
pick up your luggage, nip back 
past passport control, take the 
escalator, walk past the French 
authorities and then down to 
the car hire desks. Instructions 


are provided on how to take 
the short road corridor to 
France and then back into 
Switzerland. The whole process 
takes about 20 minutes. 

One irritant is that Hertz’s 
French cars do not have Swiss 
motorway tax disks. I recently 
got lost on the French side of 
the border and ended up on a 
Swiss motorway. I was then 
promptly forced by a humour- 
less bureaucrat to acquire a 
SFr30 (£14.60) disk in cider to 
drive less than 15km. The feet 
the disk lasted a year was Uttie 
compensation, given the car 
would be handed back to Hertz 
20 minutes later. 

Travellers need to check the 
rates on each side of the air- 
port from month to month. The 
latest figures offered by Hertz 
on its Europe on Wheels 
scheme is £192 for France and 
£210 in Switzerland. But this 
excludes file Swiss 8 per cent 
airport tax. 


Avis cuts expat rates 


Avis, the car hire company, is 
offering low car rental rates for 
expatriate Britons returning to 
the UK for holiday or business 
trips. 

Under the year-round offer, 
expatriates will get special 
rates when they hire a car for 
seven days or more. Examples 
of rates - inclusive of unlim- 
ited mileage, legal liability 


insurance, collision damage 
insurance, theft protection and 
value added tax - include: 
£149.50 a week for a Group A 
(small) car. £175 a week for 
Group B (mid-sized manual 
1.4L); and £349.50 for Group I 
(large manual 2.0L). 

Reservations are required 48 
hours in advance and driven 
must be at least 23 years old. : : 


Feel 

An exclusive 

the 

floor for 

Regency 

business atop 

Club 

the city. 

at 

State of the art 

Grand 

facilities for those 

Hyatt 

in high office. 

Hong 


Kong. 

Complimentary 


breakfast 


and cocktails 


to elevate 


the spirit. 


Impeccable service 


that everyone 


looks up to. 


Feel the Hyatt Touch. 



ARCHITECTURE 


Let’s start blowing things up 

Colin Amery backs John Gummer's move on the man-made environment 



J ohn Guinmer. the UK 
environment secretary, 
last week launched a 
debate on how Britain's 
man-made environment 
can be improved. His 
speech to the Royal Institute of 
Chartered Surveyors was 
accompanied by a discussion 
document, in which he promise 
to demolish his own depart- 
ment's hideous three-towered, 
1960s concrete office buflding 
in Marsham Street in Westmin- 
ster. 

Is this the outward and phys- 
ical sign of an inner conver- 
sion away from the horrors of 
modernism to the values of civ- 
ilised architecture? Is Mr Glim- 
mer a latter day Pugin? We 
know he has converted to Cath- 
olicism. but is he also poised to 
be as passionate and polemical 
as Pugin in the pursuit of qual- 
ity? 

It is worth looking hard at 
the document because it bears 
the marks of the minister's 
own hand and, if that same 
hand succeeds in demolishing 
the 1960s horrors of Marsham 
Street, we have to take the 
minister seriously. 

In his preface to the consul- 
tation document he rightly 
says that architecture is the 
only art form that is inescap- 
able. He also points out that it 
is not architecture alone that 
shapes our world but other 
important factors like air qual- 
ity, noise, roads, open spaces, 
street furniture, trees and 
walls. But it is architecture 
and design that creates many 
of the visual boundaries of our 
world and there is a responsi- 
bility on all who build to 
improve the Quality of that 
world. 

There is a strong moral tone 
in much of what is written hi 
this document and it has a 
note of the new political cor- 
rectness about it. The key 
words are ‘'quality” and “sus- 
tainability" - both of them 
subjective and both of them 
hard to define and achieve. 

The miracle is to see any 
minister using these words at 
all, and Mr Gummer uses them 
with the pleasurable anticipa- 
tion. He always reminds me of 
"The Water Babies". His phi- 
losophy is, “do as you would be 
done by". This minister eats 
the beef to prove there is no 
such thing as mad cow disease. 
This minister will demolish his 
own offices to encourage oth- 
ers to do the same. 

There are key points in this 


document which are hard to 
resist The idea of sustainable 
mixed development is not just 
jargon - It does make sense to 
provide for local needs locally 
and to encourage a sense of 
local community by putting 
houses near jobs and making 
use of new technology to 
encourage home working and 
less time wasting travelling. 

The recent rail strikes in the 
UK have only helped to 
encourage people to find ways 
of working at home and have 
obviously had no effect on 
communication by fax or 
modem. It is no longer neces- 
sary to move people about so 
much, nor to build giant offices 
frill of commuters. 

Mr Gammer is keen on revit- 
alising town centres, although 
I notice he says nothing about 
excessive rents or the swinge- 


ing business rate. Small shops 
simply cannot afford to be in 
town centres - even in areas of 
central London there are hun- 
dreds of empty of shops. “Nur- 
turing vitality" is a much more 
subtle and complex process 
than Mr Gummer seems to 
realise. Why does his docu- 
ment appear to encourage 
more suburban development 
by its admission that it is hard 
to raise the quality of inner- 
city housing to the level of 
comfort of the suburbs? Plan- 
ning, lack of traffic control, 
high rating and conservation 
rules still make it too difficult 
to build enough good inner-city 
houses. 

New urban villages - a 
charming idea - have a long 
way to go before they are 
much more than a pipe d ream 
In fact, there are plenty of 


older urban villages in exis- 
tence already - they need the 
help and support of govern- 
ment improvement grants. If 
this government under Mar- 
garet Thatcher had not fallen 
in love with the illusion of 
London Docklands, London's 
infrastructure would not have 
suffered such a terrible decline 
and money would have been 
available to help communities 
in all the inner cities. 

The new urban regeneration 
agency, known as English 
Partnerships, has been given a 
responsibility to promote high 
standards of development and 
diminish the bureaucracy of 
planning. But does it really 
have any teeth? 

T he object of the docu- 
ment is to encourage 
discussion about good 
design and it is an 
opportunity for FT readers to 
foie part in the debate. Send 
for a copy of, “Quality in Town 
and Country” from the Depart- 
ment of the Environment, 
Room Cl 3/ 10a, 2, Marsham 
Street, London, SW1P 3EB, and 
complete the response form- 
Filling in the form and sug- 
gesting Ideas for the minister 
to think about is this year's 
holiday task. You have until 
September 30 to reply. 

As a brief guide to help both 
responders and Mr Gummer, 
why not add a few suggestions 
to his demolition list Why stop 
at the Department or the Envi- 
ronment? The tin sheds that 
litter the edges of almost every 
town to promote the worst 
aspects of DIY should all go. In 
the capital, that parody of an 
art gallery, the Hayward Gat 
lery on the South Bank, should 
be blown up as should the Hil- 
ton Hotel, the Knightsbridge 
Barracks, the Home Office in 
Queen Anne's Gate and all 
other hotels and excrescences 
on the skyline that ruin the 
Royal Parks. They should all 
be selectively exploded. A par- 
ticularly offensive example is 
the Royal Garden Hotel that 
blights the entrance to Ken- 
sington Palace. Most of Victo- 
ria Street should go and I sufF 
pose there is no hope of 
abandoning that pointless erec- 
tion Canary Wharf and letting 
it become a picturesque ruin. 
As part of my own initiative » 
encourage quality la town and 
country, I am shortly siting 
up a school of creative vandal- 
ism - Mr Gummer Is my first, 
pupil 







11 


jlNANCtAX. TIMES MONDAY JULY IS 1994 


WORKING LIFE/SPORT 



DRIVING 


Top cars to 
hire for that 
special occasion 

For those special hire car occasions 
In the UK, you have to admit that 
a Ford Escort will not really do 
Weddings, birthdays, self-indulgent 
weeks off - these demand 
something a little more 
demonstrative than the average 
smal l family hatchback that is meat 
and drink to the usual car hire firm. 
Having said that, of course. Hertz 
are running a special offer of a Ford 
Escort cabriolet - not a car to be 
sneezed at in these summer months 
- for £99 per day, inclusive. You 
must, however, be at least 80; and 
the offer closes at the end of 
September. To be frank, it's a start, 
but only a start - especially when 
you consider the alternatives. 

Wykehams of South Kensington, 
for instance, will hire you 
something altogether more 
adventurous; a Morgan Plus 4, Tor 
only £49687 per week, insurance 
not included. And if this true Brit 
fails to excite you, they also do 
Alfa Romeo Spyders at the sanw 
price. 

At the other end of the ggaip. 

Alan Day Car Rental, based in 
Swiss Cattage. will let you have 
an awesome Mercedes S300 for a 
mere £1280 per week (phis £19 per 
day insurance supplement), or the 
even more desirable SL280 sports 
model lor £1575 per week. And fin: 
the determinedly eccentric, a Land 
Rover Defender TDi can be 
borrowed from 4x4 Motors of 
Bromsgrove, for only £320 per week, 
if you absolutely must drive up 
a corrle or negotiate a peat 
bog. 

If you have a full motorcycle 
licence, of course, fopn the place 
to go is Scootabout, on the Albert 
Embankment, its list of rentable 
motorcycles is too long to explore 
in detail but if you need to look 
like Mickey Roorke for a few days 
and have no regular machine, they 
can hire you anything from a 
Kawasaki GT550 for £150 per week, 
up to a Kawasaki GER 1000 (with 
appropriately mind-blowing 
performance) for only £280 per 
week. 

If the truth be told, however, 
the doyen of exotic car hire must 
be Modena Car Rentals of 
Bir mingham. Its hst Of r entatilas 

includes everything from a BMW 
7-series, to a Ferrari Testarossa 
and a Bentley Turbo. In between 
lie such startling pieces of 
machinery as a TVR Griffith, a 
Honda NSX and a Porsche 911 
Carrera. 

The prices naturally reflect the 
rarity of these vehicles, and while 
the cheapest weekly rate is £50 (for 
a Mitsubishi Shogun, of all things), 
the top rate (for the Testarossa) 
is £3783.50, inclusive. 

like all the other car hire firms, 
of course, Modena will quote you 
a daily rate, but at just under £600 
for the Testarossa, this may be 
something of a false economy. 

Given that it costs considerably 
more for a day than a Morgan for 
an entire week, you can see that 
the Testarossa is not to be 
undertaken lightly. If, on the other 
hand, it gives your bank manager 
a seizure when he catches you in 
it, it can only be money well spent 

Hertz Rent a Car. 081 679 1799: 
Wykehams, 071 589 6894: Alan Day 
Car Rental 071 435 1133: 4x4 Motors. 
0527 576777; Scootabout, 073 582 0055; 
Modena Performance Car Rentals. 

021 7730470 

Charles Jennings 


Every little beat 
of your heart 

If employees are exposed to 
asbestos, noise pollution or bad 
office conditions at work, 
companies are expected to take 
responsibility for resulting health 
problems. But even if a company 
removes all risks from the 
workplace that Is no guarantee 
it will suddenly have a healthy 
staff! 

As far back as 1990, National 
Power, of the UK, decided to launch 
“Get Healthy Stay Fit”, a voluntary 
health screening programme for 
its employees. 

It is one of several companies, 
including Marks and Spencer, 
Zeneca and Cable & Wireless, that 
provide voluntary testing for health 
risks. Such programmes are 
designed not only to Identify 
specific health problems hut to 
alert employees to future risks as 
a result of practices such as 
smoking, drinking alcohol and 
eating certain kinds of foods. 

At National Power, the 
management and the occupational 
health department decided a 
screening programme could provide 
potential financial benefits to the 
group. They hoped to reduce the 
incidence of premature retirement 
or long-term absence from work, 
and boost company morale by 
projecting a “caring company” 
philosophy. 

The programme is open to all 
employees, who are seen by 
occupational health nurses based 
at each company site- Before a 
screening appointment, an 
employee is sent an extensive 
lifestyle questionnaire. 

At the appointment, nurses 
review the questi onnaire and offer 
advice on how an individual might 
improve his or her health habits. 

During the check-up the nurses 
analyse 14 biochemical indices 
pinpointing the likes of cholesterol 
and glucose levels and bone 
disorders. They also test the 
patient's vision, lungs , hearing 
and blood pressure. 

If the employee agrees, the results 
are sent to the patient's GP. Nurses 
are advised to send any employees 
who test positive for diabetes, high 
blood pressure or visual defects 
to their GPs for immediate 
consultation. But not every 
abnormality detected will be 


referred to the GP. 

“We are trying to make a 
judgment as to whether someone 
is sick or not.” says Dr John 
McCaul, chief medical officer at 
National Power. “We do not want 
to pass people willy-nilly on to the 
GP if they are healthy.” 

Each year McCaul compiles the 
results of all screenings completed 
within the company and distributes 
the statistics to executives and site 
managers. No employee can be 
identified in the statistics. 

But the effectiveness of a 
screening programme - the actual 
improvement in the health of the 
employees - is difficult to measure, 
because employees who volunteer 
for screening may be health 

REST \ W ftMT VoUtoN 
<<400 THE G)WflW l S 
GRATEFUL YoUTOQK. 
PART IN last WESC !s 

J 

VPROCCAwiME. / 



conscious and considering lifestyle 
changes anyway, while those who 
stay away may have the most 
severe problems. 

“If you are going to try to get 
people to improve their lifestyle, 
you are probably going to have 
do something more than just send 
out a general invitation for people 
to come in and find out about their 
health,” says Dr Anne Cockcroft, 
director of occupational health at 
the Royal Free Hospital. “In order 
to provide screening programmes 
in the best possible way we need 
to think about how we target 
them.” 

Motoko Rich 


EATING OUT 


At the Louvre 

If there is one thing Paris probably 
does not need it is another cafe: 
but there Is always room for 
somewhere special such as Cafe 
Marly, the new brasserie in the 
heart of the Louvre Museum. 

Cafe Marly is the brainchild of 
Gilbert Costes, whose Philippe 
Starck-designed Cafe Costes in Les 
Halles was one of the hottest places 
in Paris during the mid-1960s but 
has since deteriorated into a tourist 
trap. His new venture boasts one 
of the best locations in the city; 
buried in the Richelieu wing, the 
part of the Louvre that once boused 
the French finance ministry but 
reopened last autumn as a 
spectacular new extension to the 
museum. 

Through a window looking into 
Corn* Marly, the diners in the Marly 
restaurant have a stunning view 
of the sculpture liberated from the 
royal palace gardens by the 1789 
revolutionaries. The Cour Marty 
is one of the palatial glazed 
courtyards created by IM Pei. the 
Chmese-American architect 
responsible for the Louvre 
renovation scheme. 

The brasserie windows overlook 
Pei's Louvre Pyramid, while the 
18th century interior has been 
restyled In an micompromisingly 
contemporary combination of black, 
red and gold. 

The best views, however, are 
from the terrace which looks out 
over the whole Cour Napofean, 
from the Fritz Uingesque tourists 
lining up by the Pyramid to the 
TuDeries Gardens. 

As for the menu, the Marly offers 
the standard, if unspectacular fere 
dished up at other fashionable Paris 
brasseries, such as Cafe de Flore 
or Brasserie Lipp an Boulevard 
Saint-Germain the other side of 
the Seine. 

The price of the food is 
surprisingly reasonable with lunch 
for two totting up to around FFr400 
($76). 

But drinks mi the terrace are 
as absurdly expensive as anywhere 
else in Paris - even if the Marly 
is, of course, the only place to throw 
in a bird's eye view of the Pyramid 
for free. 

Cafi Marty, Cour Napol&on, 75001 
Paris. Tel (331) 4926 0660 

Alice Rawsthorn 


READING MATTER 


Paperback writers 

So you're off cm holiday this week 
and you haven't had a moment 
to think about the paperbacks you'll 
need for the beach. And, truth to 
tell, for most of the year you don’t 
have much time for fiction. 

Nothing too ambitious, then. No, 
not Tolstoy again this year, and 
yuuU resist the present craze for 
George Eliot after the success of 
Middlemarch on TV. Nor can you 
face the new young Tolstoy of India, 
Vikram Seth, whose A Suitable 
Boy at 1,474 pages would fill at least 
a fortnight (phoenix £8-99). 

Something more like fun? One 
solution would be John le Carte’s 
The Night Manager ( Coronet £5.99), 
the spy-master's latest novel and 
very good indeed with its 
globetrotting tale of the hotelier 
who sets out to track down “the 
worst man in the world", an 
interna tional arm s -d ea ling tycoon 
straight out of the pages of this 
newspaper. 

If you are a Wilbur Smith fan, 
in company with countless millions , 
think twice before you grab the 
latest Rmer Cod (Pan £5J99) - not 
because it's no good, but because 
it is a total departure from his usual 
te r r ito ry erf African bush and 
sundowners. This is Ancient Egypt, 
Am and games among the 
Pharoahs. The switch may not be 
as s ur prising as It sounds when 
you remember that Rider Haggard 
wag an Egyptologist in his spare 

Httip 

The last-but-one Barbara Vine 
is also at the airport - Asto S Book 
(Penguin £439). Vine is of course 
another name for Ruth RendelL 
and is a leisurely saga based on 
a S candina v ian woman's diary 
throughout the century. It is rather 
slow and fairly long, which may 
not matter by the pool 

Last year’s Booker Prize winner, 
Paddy dark Ha Ha Ha. is now out 
in paperback ( Minerva £539). A 
small boy in Dublin, wonderfully 
done - but it won't last you more 
than a couple of days. 

So tty Bill Clinton's favourite, 
Walter Mosley. The President is 
right on this one: Mosley is a 
splendid addition to the American 
private eye tradition established 
for all time by Raymond Chandler. 
Mosley's hero is Easy Rawlins, an 
amateur black gumshoe returned 
from the Second War to the Los 
Angeles ghetto. So far there have 
been three books: Deoil m a Blue 
Dress, A Red Death and White 
Butterfly (available from Serpent's 
Tall, Pan or both) Utterly 
distinctive; well worth frying. 

And if you've finished them all 
by Tuesday week? You could move 
back into serious literature - 
Picador have brought out as 
paperback batch of the modem 
“Westerns” of Cormac McCarthy, 
who scored In this country with 
AM The Pretty Horses. But don’t 
confuse him with Zane Grey - the 
comparison in this case would be 
with William Faulkner. 

Does that sound a bit alarming? 
Then all praise to Penguin which 
has just issued The Adventures of 
Dickson McGurm by John Buchan 
(£&99), a sequence 70-years-old and 
so much less known than the 
ubiquitous adventures of Richard 
Haxmay. Here are the Gorbals 
Die-Hards bom again, with their 
patron, the retired and romantic 
Glaswegian grocer Buntingtower, 
Castle Gay and The House of the 
Four Winds in one volume. Pure 
bliss! The perfect escape from the 
office, and from 1994. 

J D F Jones 




STYLE 

Wherever I 
lay my hat 

The problem with men's hats, is 
that it's hard to wear them without 
seeming ironical. Hats, like bow-ties 
and mustard-coloured waistcoats, 
aren't so much clothes as items 
from the dressing-up cupboard; 
things which make a self-referential 
statement, rather than just keep 
the sun off your head. 

Which is probably why the classic 
Panama and the baseball cap are 
the two most popular hats around 
at present: you can just about get 
away with one or the other, without 
having to explain your motives. 

As is usually the case with hats. 
Lock's of St James has some of 
the nicest items. Its broad-brimmed 
planter’s Panama costs £67: this 
is both functional and stylish and 
a change from the traditional 
folding Panama with its ridge (or 
optimo) crown and narrower brim. 

Christy's of London also make 
a very decent selection of Panamas 
and Panama variations, many of 
which are can be found at 
Selfridges and Austin Reed, at 
prices between £30 and £60. 

But what if you want to break 
free from the masses and make 
that big statement? What if you 
want to look larger than life? Well, 
back at Austin Reed, there is a very 
fetching Burma Bush bat (made 
by Austin Reed itself), in muddy 
olive felt and with a kind of 
fisherman’s fly feather tucked into 
the band. It looks indestructible 
and it costs £79. 

Even better, perhaps, is the RJM. 
Williams Australian Outback 
rlnt-hing store, a little way up 
Regent's Street from Austin Reed. 

It has a terrific range of tough-guy, 
outdoors headgear, including the 
Pastorahst (which looks a bit like 
Lester Young's pork pie hat, but 
is none the worse for that) and the 
splendid Cattleman, which is built 
on an heroic scale and should 
outlast its owner. Both cost £65. 

Or, back at Lock's, there is 
something for the truly 
self-dramatising, a vast white 
sunshade job, wide-brimmed and 
with a coral-coloured band, made 
by BorsaUno of Italy. Admittedly, 
it has more than a whiff of Cosa 
Nostra about it, but it is a beautiful 
object - and the fact that Lock’s 
is prepared to stock it is a 
guarantee of its quality. Sheer 
extravagance, for £97. 

Charles Jennings 


FINANCE 

Why AVCs should 
be a low 
priority for a 
number of 
senior executives 

Pensions are one of the most 
tax-efficient ways of saving, which 
is why many employees who have 
□ot made full contributions to their 
pension scheme are encouraged 
to top them up. 

The two main ways of doing so 
are with additional voluntary 
contributions (AVCS), which form 
part of the main company scheme 
and free-standing AVCS (FSAVCs). 
sold independently by life offices 
and some unit trust groups. 

AVCS and FSAVCs are the most 
tax-efficient method of increasing 
your company pension, because 
they attract foil tax relief on 
contributions. The fund also enjoys 
tax-free growth. However. John 
Shuttleworth, an actuary at 
accountant Coopers & Ly brand, 
says that for senior executives 
earning over about £100,000 a year 
who joined their company scheme 
before March 17 1967, AVCs should 
be low on their list of choices. 

Their AVCs either buy a taxed 
pension or allow the executive to 
take cash from his AVCs. so 
avoiding commuting - taking cash 
from - his company pension. But 
either way, the tax-free lump sum 
is not increased. Directly or 
indirectly, the AVCs buy a taxed 
pension. So the advantages of AVCs 
for these executives, are exemption 
from Income and capital gains tax 
on the underlying investments and 
any fall in the executive's marginal 
rate of tax in retirement. 

However, Shuttleworth says that 
the risk of tax rates increasing 
before the executive comes to take 
his pension is too high to be worth 
taking, if higher-rate tax rises from 
the present 40 per cent to 60 per 
cent, the executive will have 
received tax relief at 40 per cent 
but will be taxed on the pension 
at 60 per cent. 

“In the present low tax 
environment, it is better to take 
cash now rather than to be in a 
cash deferral plan such as an A VC. 
For many pre-March 17, 1987 
executives, the potential gain 
relative to other investments in 
paying AVCs is low, but the 
downside can be high. Other 
investments which do not carry 
the risks of a potentially poor 
return as well as giving greater 
accessibility in the case of a need 
for funds, can give a return as good 
as that with AVCs.” These include 
Tax Exempt Special Savings 
Accounts. Personal Equity Plans 
and some National Savings 
products. Other investment, such 
as unit trusts also compare well. 

AVCs still remain a potentially 
good deal for two groups: those 
below senior management level 
who are higher-rate taxpayers but 
expect to retire as lower-rate 
taxpayers. They are receiving tax 
relief on contributions at 40 per 
cent but their pension win be taxed 
at the lower rate (assuming that 
any future increase in basic rate 
tax is below 40 per cent). 

Most employees who joined their 
company scheme after March 16, 
1987 should also benefit, says 
Shuttleworth, since as a rule of 
thumb, about a quarter of 
AVC emerges as tax-free cash, on 
which there is a genuine tax saving 
of up to 40 per cent 

Scheherazade Danes hkhu 


SPORT: LAURA THOMPSON 



Pavarotti in 


the ballpark 


S o the two glamour teams 
finally got it together, ser- 
enaded by the three heav- 
enly voices. This was as It 
should be. This was the 
perfect conjunction - the one, per- 
haps, that was dreamed of on the 
day, more than four years ago, 
when a prophetic soul at the BBC 
decided that nothing less than Luc- 
iano Pavarotti singing Nessun 
Donna was good enough for the 
World Cup. . . . . 

How ridiculous it seemed, at the 
beginning of Italia '90, that such a 
voice should be swelling our emo- 
tions to such a pitch in preparation 
for a qualifying match between 
Ireland and Egypt. What was the 
BBC playing at? Had it never heard 
of INKS? Who was this rogue 
romantic, this complicated person- 
ality who knew about football yet 
knew about opera, and who 
believed that Puccini could provide 
an anthem for the terraces? 

Whoever they were, they toe* a 
bold and beautiful decision. They 
may have only taken it because the 
World Cup was being held in Italy. 
Whatever the reason, the decision 
expressed a belief that football 
could be something majestic and, 
unlikely as that then seemed, foot- 
ball became something majestic: it 
lived up to its signature tune- By 
the end of Italia ’90, Nessun Donna 


was no longer inappropriate. It was 
the only accompaniment possible. 

Even when the football let the 
music down - as it did, inevitably, 
and nevermore so than in the nasty 
little final between Germany and 
Argentina - that did not matter. 
The soft, liquid sensations aroused 
by the music had massaged and 
oiled the uptight emotions of the 
football fan, and reminded him of 
the greater gratifications that the 
game can give. Such as those that 1 
felt on the evening before England 
played in the World Cup s emi -fin al, 
when 1 sat in a pub and felt an 
unspoken kinship with every per- 
son there; if the sound of Nessun 
Donna had filled the bar I think we 
might all have dissolved together in 
tears. 

The music revealed an image or 
the game beyond the narrow, banal 
thing that rgngtigh football so often 
is. This image had been forgotten 
during the door, violent years of 
Heysel and Hillsborough, and was 
lost again during the tense, farcical 
years of Graham Taylor. Now, how- 
ever. it can be found fer moreeas- 
ily, because it has been identified 
forever with the sound of a beav- 


jera factor did not 
an image of football. 
i ang ft its image. If, in 
jf 1990. Gary Lineker 



Encore Nessun Donna: (left to right) Domingo, Carreras, Mahta and P a varotti at Dodger Stadium this weekend 


and Paul Gascoigne brought the 
game to a wider audience, so too did 
Pavarotti and Puccini: they took 
football into the world beyond 
itself, a place where it had not been 
for some time. 

So many people then thought of 
football as something that could 
never be important to them, only to 
people a a ™iifca them as possible - 
obsessives, hooligans, sickos, men. 
But the fact that this musk, some- 
thing which was part of their world, 
could be proudly heralding the way 
into the world of football, helped to 
sanction their emotional engage- 
ment with the World Cup. Who is to 
say that they would have wept with 
Paul Gascoigne If Pavarotti had not 
already cleared a path through their 
tear ducts? 

These people have not all stayed 
with football, but however brief 
their love affair with the game, it 
has had its effect Who. just over 
four years ago, would have imag- 
ined that intellectuals would want 
to deconstruct the linage of a daft, 
over-hyped Geordfe? Or that guests 
at upmarket dinner parties would 


desribe the eruption of Ian Wright 
onto a football pitch with the verve 
that they had previously used to 
conjure the image of MacBeth upon 
an RSC stage? Or that bright young 
women would be proclaiming their 
passion for Ryan Giggs across the 
pages of quality newspapers? 

This didn’t all happen because 
Pavarotti sang. But the moment, 
sometime during Italia '90, when 
Nessun Donna ceased to sound out 
of place and began to sound magnif- 
icently right, was, I believe, the 
moment that it all became possible. 

And yet, for all that, the image of 
football as something splendid, styl- 
ish and emotionally unifying 
remains a dream. The dream took 
on life in 1966, it came to half-life in 
1990, and last season Manchester 
United gave it some life again: but 
stffl the English seem never quite to 
believe in it For all their love of the 
game, they seem to thmk of football 
as a source of perverse, not pure, 
pleasure. 

They are passionately defensive 
about it, but in truth they have a 
low opinion of it, low expectations 


from it Is that why England don't 
play like Italy or Brazil? 

In those countries, nobody would 
think it remarkable that clever 
types, smart types, female types, 
have decided to fell in love with 
footbalL The only thing that would 
surprise them was that such people 
had not done so earlier for in Italy 
and Brazil, everybody loves football, 
and this is because they see their 
game differently. 

The English dream of football is 
their reality. It makes no difference 
how badly their teams play; nothing 
can make the game anything less 
than naturally majestic. The feces 
of the Italian and Brazilian fans 
reflect the feet that football is part 
of the whole of their lives. Com- 
pared with the strained, inhibited 
expression of the En glish fan, they 
look frill of emotion, free with it, 
just as they would be if they were 
hearing Nessun Donna. And they 
do hear it, every time they see a 
football passed around the pitch: 
the two glamour teams and the 
three heavenly voices inhabit the 
same world. 


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12 


FINANCIAL TIMES MONDAY JULY IS 1994 


PEOPLE 


Checking in, and 
not checking out 

Robert Peel, the head of Britain’s second 
largest hotel chain, tells Katharine 
Campbell why he has stuck with it 



I d what lice of business 
would a suave and suc- 
cessful Old Etonian be 
labelled "a rough dia- 
mond” and “a Gerald Ratner 
who can count"? The British 
hotel business, apparently, 
where the four star hoteliers 
speak only to the five star 
hoteliers, and the five star 
hoteliers speak only to God. 

Robert Peel, chief executive 
of Mount Charlotte Invest- 
ments, has no patience with 
such nonsense. Hating “preten- 
tiousness and bullshit”, this 
chain-smoking, workaholic 
iconoclas t, who tucks Tiimseif 
away most of the week in 
Leeds, and relaxes equally hap- 
pily at the Savoy and Tramps, 
is a bit of a puzzle to his stuf- 
fier rivals. 

With a portfolio of 112 hotels 
ran g in g from the no star to the 
five star. Mount Charlotte 
Thistle is Britain’s second larg- 
est chain after Porte. Yet it is 
hardly a household name, not 
least because Peel, 47, sees no 
need to court publicity. “You 
get a fair hearing if no-one 
knows you." 

Peel is likely to be forced 
into the news rather more in 
the next few years. The group 
has just embarked on a sweep- 
ing modernisation programme, 
concentrating on the four star 
business market; its boss is 
confident that finances will 
improve as Britain emerges 
from recession. Rumours of a 
stock market flotation will con- 
sequently never be far away. 

An intuitive hotel-keeper 
who betrays a passion for ser- 
vice while brandishing a sharp 
knife in the direction of the 
most modest outlay, Peel is an 
eccentric existing outside both 
the hotel establishment and 
the City - his pukka upbring- 
ing notw ithstanding . 

It was at home that he first 
learned to love the business. 
Early childhood was spent in 
Egypt, hut the family lost its 
cotton fortune in the aftermath 
of Suez and his father returned 
to London, turning his hand 


variously to the restaurant 
trade, pig fanning and 
antiques. 

After Eton, Peel beaded, for 
Paris, and a series of menial 
jobs in grand hotels. Back in 
London, his formative appren- 
ticeship was at the Hyde Park 
Hotel, acquired in 1968, while 
he was there, by Trust Houses 
(which merged with Forte in 
1970). 

Passing through the Gros- 
venor House Hotel as confer- 
ence and banqueting manager, 
and the old Quaglinos restau- 
rant as general manager, Peel 
was pois ed to go to Johannes- 
burg for THF when his elder 
brother made a suggestion. 

Then at stockbrokers Field- 
ing Newson-Smith. Charles 
Peel was acting for a group of 
institutions acquiring Mount 
Charlotte Investments from 
the rubble of the Slater Walker 
empire. Originally established 
to mine gold in Rhodesia, the 
company was by 1976 a curious 
collection of seaside hotels, 
pubs nightclubs in search 
of a manager. Peel liked the 
idea, and swapped his luxury 
hotels for the “serious shock" 
of a headquarters in Leeds and 
some months living in a group- 
owned old people's home. 

From there he embarked on 
just over a decade of hel- 
ter-skelter expansion, turning 
a loss of around £lm to profits 
of £38 -8m by 1989. Then he 
made what many would claim 
was his biggest mistake: he 
bought Thistle Hotels from 
Scottish & Newcastle. 

The attraction was a branded 
chain to bolt on to the mish- 
mash of properties already 
accumulated. “1 effectively lost 
my company because of that 
deal." Peel acknowledges, but 
reminds me that he was under 
“enormous pressure" from his 
banks and shareholders to 
make a move because they 
tho ught, his ge aring too low. 

“With the benefit of hind- 
sight. 1 bought at the top of the 
market yes." he says. A year 
later, however, up to his ears 


in debt Peel was forced to sell 
out to Brierley Investments for 
just £644m; the New Zealand- 
ers later sold on 30 per cent to 
the Singaporean government 
Did he consider leaving? “It’s 
the same as if you consider 
leaving your family; it’s a big 
decision," muses Peel, who has 
never married. 

As it happens, he gets on 
famously with Paul Collins. 
Brierley's chief executive, and 
feels a seat on die main board 
in Wellington has expanded his 
horizons. Reaching for the pos- 
itive spin on having a boss, he 
says New Zealand has proved 
an important new market, too. 

But the Gulf War and deep 
recession put a severe strain 
on the relationship. Even now 
the group's financial perfor- 
mance is tar from impressive. 
Peel dismisses recently 
released 1993 post-tax profits of 
£10.4m. on sales of £214m, as 
“peanuts” compared with what 
he thinks the group is capable. 

T hat is why he denies per- 
sistent rumours that 
Mount Charlotte is ripe 
for flotation. Collins adds, in 
cricketing style: “What we 
need is runs on the board. Any 
price at which we might float 
now would severely under- 
value future prospects.” It also 
needs to attend to gearing; 
even in last year’s favourable 
rate environment, 88 per cent 
of trading profits were 
absorbed in interest payments. 

Financial travails delayed 
until early last year plans to 
upgrade many of the Mount 
Charlotte properties into This- 
tles, but by 1996, the aim is to 
have almost two thirds of the 
hotels with that branding. 

Even Peel realised be would 
need to make a bit of noise 
about this “repositioning", so 
he hired the well-regarded 
Peter Bates, previously at the 
Savoy, as his new sales and 
marketing director. “He needed 
more people who could stand 
up to him .” remarks one 
observer. Bates, who arrived 


last November, says there are 
regular clang in g matches. 

Yet the entrepreuneurial 
gifts that carried him through 
the 19S0s will not be enough to 
take the group much further. 
With Us 1L300 rooms, Mount 
Charlotte needs more struc- 
tured management. Instead, 
Peel still carries most of the 
company around in his head, 
and, aside from his senior 
operations director Norbert 
Petersen, there have been very 
few he has really trusted 

He will still get involved in 
the tiniest detail. “1 like to 
know this pipe goes from there 
to there. I’m annoying like 
that,” he agrees. He has even 
taken to tape-recording staff as 
they negotiate discounts so 
that he can improve their tech- 
nique. 

But there are limits even to 
ins energy, and his extraordi- 
nary involvement has its 
impractical side. “He com- 
plains that he can’t keep up 
with me. 1 tell him. you don’t 
have to keep up,” Bates 
observes. Peel has, of course, 
heard the criticism many 
times. 1 see margins go with 
every act of delegation. If I can 
do it quicker, Fd rather do it," 
he says simply. 

One can see he frets about 
his much-prized cost-control- 
ling abilities being compro- 
mised by building an infra- 
structure. In his personal life. 


be “never has a clue” what he 
spends, but at Mount Charlotte 
he signs every cheque over 
£300. and worries about such 
thing s as whether he ran natrh 
his own water on those acres 
of roofing. Necessary though 
he knows it is, he winces when 
be mentions that the salesforce 
has doubled from 40 to 80 in 
the past six months. 

As and when Thistle Hotels 
pic - as it is likely to be 
renamed in the next year or 
two - comes to the market, 
investors will look for greater 
manag ement depth, and strate- 
gic brain. They will ask ques- 
tions both about the debt and 
Peel's unsinkable optimism 
that business spending will 
bounce back more or less to 
pre-recession levels. 

And, while they will applaud 
the feet that Peel recognises he 
lacks the infrastructure to 
expand into European hotels, 
they will point out that that is 
where his competitors think 
the growth will come from. 

He will not pass comment on 
last year's rumour that Rocco 
Forte offered him the position 
of chief executive at his former 
stable. But he would presum- 
ably just hate having to 
knuckle under in a huge organ- 
isation of that kind. That is 
why the Tnan who at 30 wanted 
to run the biggest hotel chain 
in the world is not the next 
Charles Forte. 



Ear to the 
ground at CS 
First Boston 

it has been clear for some time 
that Allen Wheat was not 
going to let himself become 
another casualty of CS First 
Boston's notorious in-fighting, 
writes Richard Waters. Last 
year, this newspaper was rash 
enough to question whether 
Wheat had been sidelined in 
the latest upheaval at the 
Swiss-owned investment bank; 
interpreting the politics inside 
CS First Boston has always 
been like Kremlin-watching 
in the days of the Soviet 
empire. Wheat's blunt response 
was to point out who malms 
all the money in the bank. 

These days, it looks like 
Wheat’s staying- (and earning-) 
power are carrying him closer 
to the top. In May, he was 
given a seat on the board of 
CS Holdings, the investment 
bank's ultimate parent At the 
same time. John Hennessy, 

CS First Boston’s chairman, 
relinquished his board seat 

No one in the securities 
industry questions Wheat’s 
professional skills He was 
largely responsible for building 
Bankers Trust's derivatives 
business before jumping ship 
in 1990. Since then, he has 
created another leading 
derivatives firm in CS 
Financial Products, which is 
half-owned by CS First Boston 
and Credit Suisse, another part 
of the group. And last year 
he moved from London to New 
York (the new seat of power 
at the investment bank, which 
used to be run as separate US 
and European fiefdoms) as 
president and ceo. 

Modern-day Kremlin 
watchers should beware of 
writing off Hennessy too soon, 
though. Last year, he mounted 
an amariTjg internal coup to 
take full control of CS First 
Boston. Casualties along the 
way included Archibald Cox 
(his former number two in 
New York) and Hans-Joig 


Rudloff (the bank’s fanner 
London head.) 

CS First Boston warns 
against reading anything into 
the reshuffle of board seats 
at the bidding company. The 
presidents of each of the 
group’s operating companies 

- rather than the chairmen 

- are represented on the board, 
it points out. So when 
Hennessy handed over his 
president's title to Wheat, it 
was only natur al that the new 
man get the board seat as well 
Perhaps, But experience shows 
few things at the bank are ever 
as simple. 

Schacht fulfils 
his long-term 
strategy 

The decision last week by 
Henry Schacht to hand over 
the reigns of Cummins Engine 
to his long-time friend and 
colleague James Henderson 
is just another example of the 
vision that has characterised 
Schachf s 21-year term as ceo, 
writes Laurie Morse. 

Once described as a “prairie 
patrician" because of his 
Harvard MBA-style of 
management at the Indiana 
company, Schacht opted for 
long-term solutions as he 
battled against foreign 
competition, loss of domestic 
market share, and a hostile 
takeover bid (from Hanson) 
daring the 1980s. 

His strategy, which included 
a costly investment in engines 
for mid-size and smaller 
trucks and in technology that 
allowed Cummins engines to 
exceed US clean air standards 
for automotive emissions, 
resulted in long years of 
losses. 

However, the long-term 
investments began to pay off 
in 1991 and last year Cummins 
earned $1 77.1m on sales of 
$4.25bii. Ihe company has a 
much more diversified product 
base than it had a decade ago, 
has formed strategic 
international alliances, and 
is profiting from a surge in 
truck orders as the US 
economy recovers. What better 
time, said Schacht, than to 
take care of a most important 
duty - an orderly leadership 
transition. “I started talking 
with our board in 1992. We 
realised that in 1994 both Jim 
and I would be 60, and that 
we needed to avoid a double 
transition.’' 

Henderson, wbo has 
managed side-by-side as chief 
operating officer with Schacht 
for two decades, will take over 


as Cummins ceo. Be Intends 
to retire at 63, so has 5 yean- 
to put bis mark on the 
company. Schacht intends to 
continue in his post as 
chairman, and Theodore 
“Tim" Sotso, who is 47, will 
become chief operating officer. 

In the meantime, Schacht 
has no plans to stew down. 

“I will be pursuing foil-time 
the strategic affiances we*ve 
been building overseas," be 
says. 

Fiat snaps up 

Renault’s 

Caperan 

Fiat Auto has wooed Laic 
Caperan. formerly Renault's 
commercial director for - 
France, to Turin, whae he will 
become the Italian carmaker's 
overall commerdal director 
from January 1 , writes Andrew 
HUL 

This could be a good time 
to join Flat Auto; it has just 
launched the Punto, to wide 

nfff-Iaini , ftrwf fO 

produce 18 new models by 1998. 
The Fiat group, after heavy 
losses in 1993, expects to break 
even in 1994. 

Caperan’s decision to leave 
Renault was announced to 
May. after nearly 25 years . 
there. He had spent five years 
as commercial director for - 
France, and was reported to 
be frustrated that Renault 
could not make room for him 
to develop within the company. 
During his career with 
Renault, he worked in 
Germany, Austria and for a 
time was director-general of 
Renault UK. 

In the highly competitive 
automotive sector, the move 
is certainly not as dramatic: 
as the now notorious 
job-switch of Jose Ignacio 
Lopez de Arriortua. the fanner 
General Mo tore director who 
joined Volkswagen of 
Germany. 

But analysts have 
interpreted Caperan's 
appointment as a further ago 
of the internationalisation of 
Flat, which has seen its share 
of the domestic market decline 
over the last decade and is 
seeking to increase its share 
abroad. 

At Fiat, Caperan, 51, will 
initially work alongside toe 
current commercial director. 
Gugtielmo Chlarle, who is to 
move on within the Fiat group 
at the end of the year. Caperan 
will then take on full 
responsibility for the Flat, ‘ 
Lancia and Alfa Romeo 
marques around the world. 






Fujitsu lines up trials 
across a range of services 


NBC financial 
video network 


WPP 

backs 

US 

study 

By Raymond Snoddy 

Martin Sorrell's WPP has 
joined the million dollar 
Electronic Assess Study in the 
US - one of the most 
significant attempts so fer to 
find out what the electronic 
highway is actually going to 
be used for. 

WPP. the world's largest 
advertising group, whose 
agencies include Ogitvy & 
Mather and J Walter 
Thompson, is the only 
marketing communications 
company to sponsor the study, 
which should continue beyond 

1994. 

“We believe our stock in 
trade is a deep understanding 
of the consumer. And our 
exclusive access to toe findings 
of the study - exclusive, that 
is. in our line of work - ought 
to further sharpen our focus 
on consumers." Sorrell said 
last week. 

The study, other sponsors 
of which include US West , 

Bell South, British 
Telecommunications, Fidelity 
Investments and the US Postal 
Service, will look at both 
supply and demand. 

Seventy companies am be 
asked about the services they 
would like to supply down an 
electronic highway. 
Researchers will also talk at 
length with 1,400 households 
to learn everything they can 
about what people are likely 
to want and how much they 
will pay for it. One port of the 
research will be specifically 
about advertising. 

Sorrell believes that 
whatever form the information 
superhighway takes, 
interactive marketing - any 
baefe-and-forth communication 
between a buyer and a seller 
- will be in there some- 
where. 

The WPP chief executive 
believes that, no matter how. 
or at what speed, the 
technology develops, 
consumers will in the end be 
sitting in front of computers, 
television sets or videophones 
ordering, receiving and paying 
for a wide range of 
information, entertainment 
and other services. 


By MicMyo Nakamoto on Tokyo 

Fujitsu, the computer and 
telecommunications 
manufacturer, plans to start 
trials of what it claims will 
be Japan's first comprehensive 
multimedia services. 

In December, it will launch 
trial services such as near 
video-on-demand, games and 
karaoke software delivery, 
local community information 
services and telephone, 
facsimile and PC 
communications services. It 
will do so in co-operation with 
five Japanese CATV companies 
in which it owns equity 

stakes. 

The aim of toe trials is to 
evaluate what kinds of services 
consumers want, how much 
they would be willing to pay 
for such services and how such 


services can be made to 
become viable businesses, says 
Fujitsu. 

While the company has 
recently been putting emphasis 
on its service businesses, the 
latest venture takes it into new 
territory. 

Fujitsu, which has one of 
the most well-defined 
strategies for multimedia 
among Japanese electronics 
manufacturers, says it hopes 
to use the trial to gain 
experience in the management 
of urban CATV companies. 

The increased involvement 
in cable TV management and 
in rolling out multimedia 
services through cable TV 
would also support the 
hardware business of the 
company. Fujitsu is a 
significant manufacturer of 
much of the equipment that 


goes into providing multimedia 
services, from central 
computers that control the 
systems, to transmission 
equipment and PCs, which 
could act as the home 
terminals. 

However, if toe trials lead 
to a fully-fledged multimedia 
service, it could put Fujitsu 
in direct competition with 
NTT, the telecommunications 
company which has scheduled 
its own multimedia trials and 
which is a major customer of 
Fujitsu. 

For the trial services, Fujitsu 
plans to use equipment that 
already exists at the studios 
of the cooperating CATV 
companies, with additional 
equipment introduced as 
necessary. 

The company stresses 
though that it plans to use toe 


T he recent fortunes of 
IBM in Europe have 
ranged from mixed to 
dire, but Hans-Olaf 
Henkel, president o! IBM 
Europe, believes that the liber- 
alisation of telecoms networks 
offers a “tremendous opportu- 
nity”. 

Henkel was a member of the 
Bangemann group of Industry 
leaders which reported to last 
month's Corfu EU summit on 
the essential steps to create an 
“information society" in 
Europe. His view of the future 
is black-and-white. With open 
networks architecture and 
strong telecommunications 
competition. Europe will forge 
ahead. Without them, it will 
languish. He takes it for 
granted that high tech is the 
key to competitive advantage. 

“Information technology will 
change the way we Europeans 
work, and fast," he says. “We 
still have 12 telecoms markets 
in Europe: they are fragmented 
mainly for protectionist rea- 
sons - in terms of companies 
and standards. We have to 
c h ange that" 

“Governments have a key 
role to play, they can put 
Europe at the head of toe infer- 


best equipment available, 
regardless of manufacturer. 

Near videoon-demand will 
be provided by using several 
channels with staggered 
starting times for programs. 
These will be shown 
simultaneously across a 
number of channels. 

Video games and other 
Information software can be 
offered through repeated 
transmission for users to 
download as desired an home 
terminals. 

The trial services will be 
available to up to L0Q0 
subscribers to cable TV during 
an evaluation period of 
between 6 months and a year. 
If these trials prove successful, 
Fujitsu says it will launch a 
second phase of trial services 
in which it will offer full 
video-cn-demand. 


mation society or they can 
make us a follower behind the 
US.” Pressed on the precise 
role of government, Henkel 
sees it mainly in terms of liber- 
alising markets and harmonis- 
ing standards. 

Should governments set tar- 
gets for connecting public sec- 
tor institutions, such as 
schools and hospitals, to the 
new networks? “We did not 
consider that specifically/ 
responds HenkeL They would 
have to be reasonable targets. 
The main role of government 
in this area is to set an exam- 
ple.” 

He is an enthusiast for tele- 
working, and believes it will 
soon chapge working practices 
radically. “The EU should use 
teleworking as the principal 
mode for its translation ser- 
vice. Why can’t most of them 
work from home?” 

Henkel accepts that there is 
a “certain amount of hype" 
around. “We have got to find 
applications. Videoun-demand 
will be one of the first but It is 
proceeding slowly.” 

He is nonetheless convinced 
that the future ties in net- 
works, not in disc technologies 
such as CD- ram. “If the tele- 


By Raymond Snoddy 

NBC, toe US network 
television company, plans to 
launch a new desktop video 
services for the financial 
community in September. It 
will do so through its business 
television division, 

CNBC. 

The new services will use 
normal terrestrial TV to 
deliver to personal computers 
news stories that might affect 
the markets. 

The new services, NBC 
Desktop Video, will also 
provide on-demand video 
retrieval of items already 
broadcast, and enable 
subscribers to send their own 
multimedia information to 
other subscribers on the NBC 
network. 

Trials have already begun 
in the US before the September 
launch. The service will be 


corns networks were not so 
costly, CD-rom would not be 
attractive. From a global eco- 
nomic standpoint. CD-rom is 
an outdated means of trans- 
porting data.” 

What is IBM doing to hasten 
the information age? He cites 
the company's flagship project 
to provide “superhighway” ser- 
vices between Bonn and Ber- 
lin, allowing Berlin to function 
as Germany’s capital while a 
large proportion of the coun- 
try's bureaucrats remain in 
Bonn. 

Other, smaller scale, projects 
include putting the entire Vati- 
can library on-line, and an 
on-line video trial with the 
University of Geneva. He 
claims IBM is leading the 
industry in the adaptation of 
ATM technology for the next 
generation of hardware. 

On standardisation, Henkel's 
recommendation Is for more 
“user groups and consortia to 
develop market-oriented speci- 
fications”. 

“Take Internet with its 25m 
users. Whether you [ike it or 
not it is a standard. It needs 
improving in terms of privacy 
and security - but let's say it 
is a de facto standard, and 


introduced to Europe in the 
fourth quarter of this 
year. 

NBC already delivers 
specialist desktop information 
to the financial services 
industry, with the launch last 
year of Private Financial 
Network. 

Tom Rogers, president of 
NBC cable and. business 
development, says that since 
the launch of PFN "the need 
for live video coverage of 
market-moving events, linked 
with a retrieval component, 
has become even more 
important to our customers 
in the financial market- 
place.” 

In the UK, Rentes, the news 
and Information group, has 
recently launched a service 
of breaking news to City 
terminals, although without 
retrieval capability so 


make sure it fulfils the indus- 
try’s needs " 

Henkel sees the UK as a 
model for the EtTs telecoms 
industry. “On the Bangemann. 
group we all felt the UK was 
getting ahead of the rest of the 
continent The first thing is 
competition which will result 
in lower rates, and the compet- 
itors will also find the capital 
for the new infrastructure.” 

Who will provide the compet- 
itors to established telecoms 
operators on the continent? “It 
is obvious to me that utility 
companies are the most natu- 
ral competitors in the telecoms 
market They already have net- 
works. and the rights of way- 
needed to lay new ones,” says 
HenkeL 

For IBM, increasing PC pene- 
tration in Europe is the key. It 
estimates that in toe US there 
are 34 PCs per 10D citizens, is 
Europe 10 per 100. “That is the 
key business opportunity.” 

Whether IBM is best placed 
to exploit it is, of course, 
another matter. “The whole 
playing field is being changed. 
It will be increasingly difficult 
to separate IT from telecoms. 
But we are the pioneers," 
Henkel insists. 



Blue-print for IBM in Europe 

Hans-Olaf Henkel outlines his view of the future to Andrew Adonis 


Sikes sees 1 
electronic 
pie in 
the sky 

By Raymond Snoddy 


ed Sikes, former chairman 
tie Federal Communications 
amission, last week 
ounced most of the talk 
ut electronic super high- 
r s as hype, fantasy and 
tal ball gazing, 
e told a Financial Times 
ti media conference In Lon- 
that, as a re sulL. maay 
ipanies were defying 
of gravity “by having mul- 
ls of earnings before there 
any earnings, or even well 
ceived predictions of 

le former FCC chairman, 
r president of Hiearst New 
Lia and Technology, said 
as far as the eye could see 
vision revenues would mo- 
te to be spread across 
ideasting, cable, video ana. 
some countries, satellite ^ 
rery. 

am also convinced toac, 
r the long run, today^ 
Here will capture the butt 
lome- shopping revenue^ 
the network providers, 
ssaid. 

range would almost ear- 
ly be evolutionary and 
to of television woam 
tin the same - atthoogn 
haii y much more would be 

table through the create® 
ivanced networks- 
fees forecast - 
vanned networks 

sastagfy come along 
[tally unlimited capacity, 
ported by consumer®' 
idly search tools. Toe 
re r will be master." 
iere could be thoasaw® ® 
information providers. 


e ground and others 
remain niche 
Wdicted that 
i and programme con- 
pdvalents of compart* 
s Apple and Mfcwsdt 
also develop. v _ 

n’t tell you for one bow 

ed networks are god® 
top or how mmrjgg 

’’safe Sykes, who adoeo 

night there would « 
turn one. . ^ 

, tow that tan***® 
el capacity) wffi “J 
and that the days of 






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FINANCIAL TIMES MONDAY JULY 18 1994 


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some of her pop hits and a song ft a 
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13 


THE 

BARBICAN 

They took trendy end 
promote new 
tashtoos in music. 
The Kronas Quartet 
is among the 
brightest advocates 
©fcomacnporwy 

classical musk: and 

the group's threw 
recfatstitoe 
Barbican HaB this 
weekhdudeUK 
premterw e# new 
worts by Dan Byron. 
Peter Scutthorpe and 
Terry HBey. The 
second of them on 
Wednesday is 
devoted tingle- 
mlndecfly to the four 
quartets of Attred 
Schnittke. 


Sikes s 
fiectro: 
[tie in 
the skj 


100 not out, or are they? 

Richard Fairman on the start of the Promenade concerts 


T he BBC allowed Itself one 
or two extravagances at 
the start of this year’s 
season of Promenade con- 
certs. Most noticeably, an 
array of banners high up in the roof 
of the Royal Albert Hall proclaims 
“Proms 100" just in case anybody 
has missed the publicity campaign 
In fact there Is a bit of a problem 
here, as people planning the celebra- 
tions for the mffleniuni have already 
found. Should the Proms' centenar y 
be said to fall this year, which is the 
100th season, or next which is 100 
years since they started (at the 
Queen's Hall on 10 August 1895)7 
Doubtless reckoning that a Proms 
audience is more often than not in a 


celebratory mood, the management 
has decided to have it both ways, in 
1994 looking back over 100 years and 
in 1995 putting the emphasis on the 
future through new music. 

The other notable extravagance 
was the opening concert. Schoen- 
berg’s Ourrelieder. far six soloists, 
double or treble choir and huge 
orchestra, is about as lavish a work 
as one could choose. Apparently, 
Henry Wood always wanted to 


schedule Ourreheder at the Proms 0 
note in pnagfng that the title "Henry 
Wood Promenade Concerts” is grad- 
ually being usurped by “BBC 
Proms") but the chance never cam** 
his way. 

When Ourreheder was performed a 
few years ago it was played (very 
capably) by a huge youth orchestra, 
but far this occasion the BBC dug 
into its pockets and produced a fully 
professional performance. (Sven the 


importance of the Proms as a show- 
case for the BBC’s own orchestras, it 
is timely that the most important of 
them - the BBC Symphony Orches- 
tra - should be playing better now 
thaw at any point in the last 20 to 30 
years. That is thanks to Andrew 
Davis, whose reign as Chief Conduc- 
tor has seen a consistent improve- 
ment in the sharpness of tbe orches- 
tra's playing. Even with a score as 
massive as Ourreheder he made sure 


that every detail told, never allowing 
the music to degenerate into an 
overblown, post Wagnerian wallow, 
as it can. 

The soloists were a well-chosen 
group. Karrta Mattila floated beauti- 
ful but rather wordless sounds as 
the ultra-romantic Tore. Ann Mur- 
ray and Philip Langridge brought 
vivid characterisations to the Wood- 
Dove and Klaus tbe F00L Unfortu- 
nately, I heard little of Neil Bree- 


den's Waldemar, who was on the 
wrong side of tbe conductor from my 
seat. On an evening so heavy with 
history it was fitting that Hans Hot- 
ter. tbe eloquent Speaker, should be 
making his Proms debut at the age 
of 85. 

At the second Prom on Saturday 
history took over. The programme 
was a replica of that on 6 September 
1900, a three-hour pot-pourri of light 
pieces which we would only expect 
to encounter these days as encores, 
if at all. If this is what the Proms 
used to be like, they have changed 
beyond recognition. Who said we are 
at risk of over-popularising classical 
music in tbe 1990s? On that score the 
1890s won hands down. 



The decline and 
fall of elegance 

Dress standards at the Royal Opera House 
reflect a national malaise, argues Clement Crisp 


I n February 1946, after 
six years wartime ser- 
vice as a dance-hall, the 
Royal Opera House, 
Covent Garden, once 
again bad ballet in residence. 
On that opening ni ght our 
natio nal ballet wan its laurels 
with The Sleeping Beauty. As 
an occasion it seemed a public 
recognition that peace was 
truly back in London, despite 
the bombed buildings, the 
unrelieved greyness of auster- 
ity. The gloss and bri ghtness of 
Beauty's design told us that 
whatever else had rhanga d — 
and hare was our own ballet 
rather than some Ballet Russe 
troupe - our greatest theatre 
was alive ag»rn 
The first ni g ht, redolent of 
such hopes, was also redolent 
of moth-balls. The audience 
had dug out long dresses, din- 
ner-jackets and tails , from war- 
time hibernation. It was a 
show of faith and social man- 
ners that the war might have 
eroded, but which still sur- 
vived. “Going to the Opera 
House" was once more an occa- 
sion. 

A half-century has changed 
many things, and not least that 
attitude towards Covent Gar- 
den. Is it wrong to expect some 
effort to dress up to an Opera 
House visit rather than dawn? 
In recent months I have been 
astonished at the dimness and 
sometimes dinginess of the 
way people outfit themselves 
for what must be an expensive 
night out at opera or ballet. No 
one today expects dinner-jack- 
ets and long dresses, except for 
important galas. But should 
not me n some attempt at 
neatness? Are a rumpled top 
anri ga p pin g ’ claries (the “Sit- 
ting Up All Night in a Train" 
Look) the best a woman can 


contrive? 1 record with some 
disbelief that latterly 1 have 
seen men in shirt-sleeves, 
grubby jeans, trainers; women 
in tee-shirts, those fearsome 
leggings which expose far too 
much thunderous haunch on 
all but tiis dimmest, and boots 
that would not disgrace a des- 
patch-rider. And a faux-fur 

pmv-hn 

Grunge may be a style for 
the very young - and anything 
the yotmg wear at opera or bal- 
let is right, because the impor- 
tant thing is that they should 
be there - and Vivienne Wes- 
twood may make Hallowe’en 
outfits and thgm fashion, 
but going to our grandest thea- 
tre should Impl y some idea of 
dressing for an event. Of 
course people come on from 
offices and work-place. Of 
course they are there to see 
and not be seen. Yet is there 
not a reciprocal exchange 
between stage and audience, 
where tbe public expects art- 
ists to do of their best, and 
performers are entitled to 
believe that we treat their 
activities with a respect which 
includes, perish the thought, 
the courtesy of neat attire? 

There is, implicit in all this, 
sametiling about Co vent Gar- 
den as it is today. In other 
opera houses, there seems a 
perceptible audience response 
to the look and ethos of the 
building itself. The public has 
a special identity - in behav- 
iour and appearance - at the 
Palais Gamier or the Opera 
Bastille, at the Mariinsky, or 
the Met and the State Theatre 
in New York, or in big German 
houses. Opulent or smarthut- 
relaxed, grand or a bit bour- 
geois-stuffy, they match their 
surroundings. As they always 
have, if historical record is 


anything to go by. 

Covent Garden offers little 
guidance to manners today. 
The fault is not entirely of the 
theatre’s making, but is owed 
to national pofi e fa ; that believe 
that great music, great rfanra. 
must be paid for through the 
nose by the consumer, and that 
a state owes no dnty to its 
members to make such art 
available, approachable, afford- 
able. Hence the ever-present 
seme nowadays at Covent Gar- 
den that every penny must be 
squeezed from tbe audience. 
Hence the profusion of bars - 
the foyer now more like a pub 
than the eptnmre* to an opera 
house — and tha omnipresent 
tables for tbe cold marit bri- 
gade. Is there another nation 
in the world that eats and 
drinks so relentlessly as the 
British as an adjunct to watch- 
ing opera and ballet? There are 
even people picnicking on the 
main stairs, spreading glasses 
and paper plates around them. 
Munch, munch, munch! Sip, 
sip, sip! Pay, pay, pay! 

This is the policy of a theatre 
which, in trying to be 
“approachable" - witness the 
egregiously vulgar Opera 
Bouse magazine that Is its lat- 
est PR exercise - has become 
more like that hell-hole. Termi- 
nal l at Heathrow, than a great 
opera house in a capital city. 
Small wonder, then, that some 
of the audience dress far 
Heathrow rather than Covent 
Garden. It is time, as the pro- 
posed Covent Garden closure 
looms and thoughts of the 
National Lottery give arts 
administrators Golconda 
dreams, far the Royal Opera 
House to rid itself of its dowdy 
air, and its cafeteria ideals. Its 
public might well respond in 

kind 



Siren Song 

A near 
perfect 
operetta 

Dave Is a sailor - a nice boy, 
innocent, a bit lonely on ship- 
board. In a magazine, be sees a 
letter. “Diana, 20, from South- 
ampton, would like to corre- 
spond..." He writes to ber ear- 
nestly and gets a warm reply. 
Things proceed swimmingly. 
Soon they are exchanging gifts 
and plans for their future, 
though unfortunately Diana 
has a persistent illness - 
throat? chest? lungs? - which 
frustrates their intended meet- 
ings. 

TTme and again, he finds her 
friendly brother Jonathan 
waiting at the quayside 
instead, full of apologies and 
bonhomie... Here I apologise 
for going no further. As pro- 
duced at London’s Almeida 
Theatre by Ian McDiarmid 
with much ingenuity. Siren 
Song seems a near-perfect little 
operetta, or musical comedy, 
and one doesn’t want to know 
too much beforehand. 

The original idea came from 
a novel by Gordon Honey- 
combe, and before that (I 
believe) from real life. Nick 
Dear made a libretto of it, wry, 
dry and extremely npat. The 
equally professional Jonathan 
Dove has set it to easy, sing- 
able music, backed by mini- 
malist figurations but essen- 
tially in neo-impressionist 
mode: imag ing Ravel’s “Une 
Barque sur 1‘ ocean" ACT’e* 
stretched gently over 80 min- 
utes. The denouement 
ACTlst’e’ might have been 
explored in depth, but Dove 
has preferred to leave well 
enough alone; our thoughts 
can fill out the situation. 

It is not easy to guess what 
the future of Siren Sang might 
be. Too long for a curtain- 
raiser, but it is a natural cur- 
tain-raiser; best to see it now 
in this bright staging, and not 
worry about where it could go 
next Fresh-faced, fresh-voiced 
Niall Morris makes an ideal 
Dave (and surely, one of these 
days, a West Side Story hero 
too). Tertia Sefton-Green sings 
Diana meltingly, and Omar 
Ehrahim has a whale of a time 
with sleek, evasive Jonathan. 

Smaller roles are filled to the 
same standard; Paul McGrath 
is the judicious conductor. 
This is delightful summer fare. 
In a single act that seems 
shorter than it really is. Last 
performances tomorrow. Fri- 
day and Saturday; whether 
before a lateish dinner or after 
an early one, Siren Song would 
be equally tasty as an amuse- 
gueule or a bonne bouche. 


David Murray 


1 1 International 1 1 



ARJ 

rs 

GlJT 

TE 




■ BERLIN 

Schiller Theater Crazy for You, 
the musical based on Gershwin’s 
GW Crazy, runs dally except Mon 

tiB July 31 (2548 9241) 

Theater des Westons Cole Porter’s 
musical Anything Goes is in Its final 
week (882 2888) 


■ COLOGNE 

PhHharmonle The Gershwin musical 
My One and Only can be seen daily 
from tomorrow till Sun. Alvin Alley 
American Dance Theater is In 
residence from July 26 to Aug 7 
(0221-2801) 


■ GENEVA 
The dty of Geneva organises a 
series of concerts throughout the 
summer, some of them free open-air 
events. The international music 
series at Th6Stre continues with 
the gypsy group Camargue on Wed 
and Latin American jazz star Arturo 
Sandoval on Fri. The Monday 
evening jazz series at Cour de 
fHfltel de Vi lie features legendary 


American pianist Hank Jones and 
his trio tonight, and tenor 
saxophonist Johnny Griffin next 
week The classical music series, 
also at Cour de PHfiteJ de ViUe, 
brings the Nash Ensemble in a 
Strauss, Mozart and Schubert 
programme on Wed, followed by 
the Geneva Chamber Orchestra 
on July 28 (022-786 5545/022-312 
4353) 


■ FRANKFURT 
Oper New York Harlem Theatre 
presents Gershwin’s opera Porgy 
and Bess daty except Toes till July 
29(069-236061) 


■ HAMBURG 

• Maximilian Schell stars as 
professor Higgins in My Fair Lady 
at the Deutsches Schauupteffiaus, 
daily till Aug 7 (040-248713) 

• Katharine Thafbach’s production 
of Brecht’s The Threepenny Opera, 
with music by Kurt Weill, runs daily 
except Mon HI July 30 (040-322666) 

• Hamburg's international jazz 
festival, known as West Port, opens 
tonight and runs daily tflf Sat. The 
festival tent is located beside the 
old Hamburg Fish Market Hall In 
the middle of the harbour area. Mos t 
performances start at 9pm. Tonight 
Sweet Honey in the Rock and 
Ladysmith Black Mambazo. 
Tomorrow: Gflberto Gil and Caetano 
Vetoso. Wed: Dee Dee Bridgewater. 


it Zubin Mehta 
den’s new 
th&jser, with 
>tiin oorvI Wei Id. 


Nadine Secunde and Wattraud 
Meier. Tomorrow: Un baJIo In 
maschera with Dennis O'Neill and 
Julia Varady. Wed, Sun: Cosi fan 
tutte with cast headed by Amanda 
Roocroft and Rainer Trost Wed 
(Prinzregententheater): Thomas 
Moser song redtaL Thurs: Giufio 
Cesare with cast headed by Ann 
Murray. Fri: Bavarian State Ballet's 
American programme, 
choreographies by Lucinda Childs, 
Robert LaFOsse and Twyla Tharp. 
Sat, next Tubs and Fit La traviata 
with Cheryl Studer. Sun morning: 
Hermann Prey song recital. The 
Opera Festival continues till July 
31 (089-221316) 

Gasteig Tomorrow, Wed, Thurs, 

Fit Lorin Maazel conducts Munich 
Philharmonic Orchestra and Chorus 
in Matter's Second Symphony, with 
Sharon Sweet and Linda Finnia 
Sat Claudio Abbado conducts 
Gustav Mahler Jugendorehester 
in works by Beethoven and Dvorak, 
with piano soloist Yevgeny Kissin. 
Sure Joe Henderson Quartet. Next 
More Lionel Hampton (089-4809 
8614) 


■ NEW YORK 

THEATRE 

• Three Tafi Women: a moving, 
poetic play by Edward Albee, 
dominated fay the huge, heroic 
performance of Myra Carter. She, 
Jordan Baker and the drofl aid 
delightful Marian Sektes represent 
three generations of women trying 
to sort out their pasta (Promenade, 
Broadway at 76th St, 239 6200) 

• Angels m America: Tony 
Kushner's two-part epic conjures 
a vision of America at the edge of 
disaster. Part one is MBenium 


Approaches, part two Perestroika, 
played on separate evenings (Waiter 
Kerr, 219 West 48th St, 239 6200) 

• Laughter on the 23rd Floor 
Neil Simon’s 27th Broadway play, 
about a group of writers trying to 
come up with a new show, is one 
of his finest comic efforts. Directed 
by Jerry Zaks (Richard Rodgers, 

226 West 46th St 307 4100) 

• Tommy: a musical written and 
composed by Pete Townshend, 
based on toe 1969 rock opera by 
The Who, about a withdrawn young 
boy who becomes a Pinball Wizard 
(St James, 246 West 44th St, 239 
6200) 

• Guys and Dolls: a top-notch 
revival of the 1950 musical about 
gangsters, gamblers and good-time 
girts around Times Square (Martin 
Beck, 302 West 45th St, 239 6200} 

• Crazy for You: the musical 
based on Gershwin's Girl Crazy 
recently passed Its second 
anniversary on Broadway. A 
highlight of this glitzy entertainment 
is Susan Stroman's choreography 
(Shubert, 225 West 44th St, 239 
6200) 

• Tony 'n' Tina's Wedding: a 
wedding at St John's Church, 81 
Christopher Street followed by a 
reception at 147 Waverty Place, 
with Italian buffet champagne and 
wedding cake (279 4200) 

• Carouse!: Nicholas Hytneris 
bold, beautiful National Theatre 
production from London launches 
Rodgers and Hammeratein towards 
the 21st century (Vivian Beaumont 
Lincoln Center, 239 6200) 

• Damn Yankees: the big musical 
hit of 1955 is back in Its first 
Broadway revival, with Victor Garber 
as the Devil and Bebe Neuwkth 

as Lola. The director, Jack O’Brien, 


has extensively re-written the story, 
about a baseball fen who sells his 
soul to rescue his favourite team 
from a losing season (Marquis, 
Broadway at 45th St 307 4100) 
MUSIC 

Lincoln Center’s Mostly Mozart 
Festival runs daily except Sun tiB 
Aug 20 In Avery Fisher Hall. 

Emerson String Quartet gives 
tonight’s alLBeethoven recital. 
Tomorrow, Wed: Christoph Prick 
conducts Mostly Mozart Orchestra 
in Beethoven and Mozart, with 
soloists Jeffrey Kahane and Sabine 
Meyer. Thurs: Plnchas Zukerman 
and Tokyo String Quartet play 
B ee th oven, Mozart and Brahms. 

Fri and Sat Jane Glover conducts 
two programmes, including Mozart's 
Piano Concerto In C K467 with 
Marta Tipo (B75 5030) 
JAZZ/CABARET 

• A musical revue entitled Tingle 
Tangle opens tomorrow at the 
Ballroom, 253 West 28th St (244 
3005) 

• Vemel Bagnww continues her 
salute to Jelly RoB Morton at 
Michael’s Pub. where Woody Allen 
plays clarinet in hte Dixieland 
orchestra on Mondays. 211 East 
55th St (758 2272) 

• The fabulous Kurt Vfieting 
presides at the piano in Bemeknans 
Bar at Carlyle Hotel, Madison Ave 
at 76th St (744 1600) 


■ PARIS 

• Carman runs dafly till Sat at 
the Bastille, with Marta Senn/ 
Kathryn Hames/Beatrioa 
Uria-Monzon In the tide role, Sergey 
Larn/Aberto CupkkVDaniel 
Gatvez-VaRejo as Don Jos6 and 
Alain Vemhes/Gfrto Qutficc/Hany 


Pesters as Escamillo. Jose- Luis 
Gomez’s staging is conducted by 
Serge Baudo/Cyrfl Diederich (4473 
1300) 

• American jazz singer Spanky 
Wilson Is in residence from 
tomorrow tiB Sal at Lionel Hampton 
Jazz Club. Music from 10.30 pm 
to 2 am. July 26-Aug 6: French jazz 
pianist Laurent de Wilde and Eric 
Barret Quartet (Hotel Meridian Paris 
Etoile, 81 Boulevard Gouvion St 
Cyr. tel 4068 3042) 


■ STUTTGART 

LUDWIGSBURG FESTIVAL 
The next event is a Jessye Norman 
recital on July 28. Highlights of next 
month's programme Include a 
concert on Aug 7 with eeflo soloist 
Mstislav Rostropovich, the Cleveland 
Orchestra on Aug 25 and toe 
Pittsburgh Symphony on Aug 28 

(07141-939610) 


■ VIENNA 

• The Roman ruin in the park 

of Schonbrunn, the former residence 
of the Hapsburgs, provides an 
open-air venue for Vienna 
Kammeroper's summer productions. 
Lb nozze dl Figaro runs daily except 
Wed and Sun till July 30. Don 
Giovanni fellows from August 9 to 
27 (513 0851) 

• Vienna’s summer concert series, 
Klangbogen Wien, runs tfll the end 
of August. This week’s events 
Include an orchestral concert on 
Thurs at the Rathaus Arkadenhof 
conducted by Johannes Wfldnw, 
and a recital at the Augustin erkJrche 
on Fri by Groupe Vocal de France 
conducted by John Poole (4000 
8410) 


ARTS GUIDE 

Monday: Performing arte 
guide city by dty. 

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FINANCIAL TIMES MONPAY JULY 18 1994 


14 


Myths of the British 
labour market 



PERSONAL 

VIEW 


Much o I the 
discussion re* 
lating to unem- 
ployment in 
the UK places 
heavy empha- 
sis on the 
growth in 
part-time, tem- 
service-sector and 


porary, 

female employment The popu- 
lar argument is that “good” 
jobs (well paid and full time) 
are being replaced by "bad" 
jobs (Tow paid and part time) 
and that unskilled men in par- 
ticular are put at a disadvan- 
tage by these trends. 

Many observers have argued 
that men without significant 
educational qualifications 
could in the past secure 
full-time Tpamiai jobs at rea- 
sonable levels of pay, but that 
the demand for such employ- 
ment has declined sharply. 

Employment growth has 
come in either professional or 
managerial occupations, which 
demand significant educational 
q ualific ations, or in lower-level 
service jobs, which demand 
few gtriUs or qualifications but 
which are low paid and often 
part time. In general, there is a 
worry that economic recovery 
will fhil to benefit many disad- 
vantaged groups In the labour 
market 

Much of this debate is based 
on false assumptions. Either 
the purported trends are not 
taking place at all or have been 
ongoing over the whole post- 
second world war period. 

Consider the following 10 
facts which the data* do estab- 
lish: 

1) Women have been entering 
the labour force and increasing 
their share of employment at a 
steady rate for more than 40 
years. Female labour force par- 
ticipation rose fastest in the 
1960s. 

2) Part-time work in the UK 
has also been on an upward 
trend for more than 40 years 
and in the last decade grew 
more slowly than in the previ- 
ous three decades. 

3) There is no evidence at all 
that temporary employment is 
increasing in importance. 

4) Unemployment rates for 
men and women were very 
similar during the 1980s. Only 
after 1990 did male unemploy- 
ment increase sharply relative 
to female unemployment This 
was due mainly to a sharp fall 
in male self-employment dur- 


ing the Major recession. 

5) Unemployment among 
young people and the ethnic 
minorities is very sensitive to 
the cycle: unemployment for 
these groups rises most 
sharply in recessions but foils 
most sharply in recoveries. 

6) The loDg-term unemployed 
appeared to benefit at least 
proportionately from the Law- 
son boom in the late 1960s, 
even taking into account the 
effects of programmes like 
Restart 

7) The relative labour market 
position of less well-qualified 
men did not deteriorate 
sharply when looking at the 
whole period 19756a 

8) The proportion of manual 
jobs has been declining for 
four decades, but the decline 
for both men and women did 
pick up in the 1980s. 

S) These jobs are being sup- 
planted in importance by gen- 

Unemployment is 
high because of an 
absolute shortage 
of jobs, not the 
changing nature 
of jobs on offer 

eraliy high-paid. tri gh-sktlL pro- 
fessional and managerial jobs. 
10) The proportion of low-paid, 
low-skill, service-sector jobs is 
not increasing. 

These last three facts are 
replicated in the US labour 
market The US economy has 
not been disproportionately 
creating low-paid, low-skill, 
service-sector jobs; it is high- 
sltill, professional and manage- 
rial jobs that have been gener- 
ated. 

So one explanation for the 
US having a lower unemploy- 
ment rate than Britain in the 
last 10 years - that the harsh 
American benefits system 
forces people to take the jobs 
which are mainly being cre- 
ated In establishments like 
McDonald's - is not borne out 
by the evidence. 

This suggests the UK welfare 
state does not need to be dis- 
mantled in order to generate 
lower unemployment, though 
the details of how the tax and 
benefits system could be 
improved should continue to 
be examined to enhance 
employment opportunities. 


The strong growth of profes- 
sional and managerial employ- 
ment puts the focus on 
whether the British education 
system is producing enough 
qualified manpower. The 
answer, at least since the late 
1980s, seems to be yes. 
Between 1988 and 1993 the 
enrolment rate for young peo- 
ple into higher education in 
Britain doubled from 18 to 31 
per cent 

Through the 1990s this ought 
to ensure that plenty of quali- 
fied manpower is available to 
meet the needs of the UK 
labour market 

So why is UK unemployment 
so high? It is not because of the 
changing nature of the jobs on 
offer, but is the consequence of 
an absolute shortage of jobs. 
The growth in employment has 
been held back by tight macro- 
economic policy, conditioned 
by fear of inflation. 

Changes in the institutions 
of pay bargaining, including 
greater decentralisation and 
the abolition of incomes policy 
in the private sector, have 
probably contributed most to 
the worsening of the inflation 
constraint on employment 
growth. 

This, then, is the irony. 
Labour market deregulation 
has exacerbated the free-for-all 
in pay bargaining and, along- 
side tight financial policies, 
this has left Britain with high 
levels of unemployment as the 
price for containing inflation. 
The key problem facing the 
British economy is that of 
ensuring that steady growth in 
aggregate demand and employ- 
ment is not brought to a bait 
by fear of an accelerating spi- 
ral of pay and prices. 

We should not be diverted 
from this debate by a focus on 
trends In the structure of 
employment or unemployment 
which are either not occurring 
or have been occurring for 
decades. 

Peter Robinson 


The author is research officer at 
the Centre for Economic Perfor- 
mance, London School of Eco- 
nomics. *The British Labour 
Market in Historical Perspec- 
tive: Changes in the Structure of 
Employment and Unemploy- 
ment, discussion paper. Centre 
for Economic Performance 


THE FT INTERVIEW: Lewis Preston, World Bank president 



Visiting the 
World Bank at 
its 19th Street 
headquarters 
in Washington 
DC. you would 
never guess 
that questions are being raised 
about its long-term future. You 
have to negotiate a building 
site strewn with cranes and 
earth-moving equipment. With 
both the bank and the IMF, its 
sister institution across the 
street, racing to complete lav- 
ish extensions to their already- 
extensive offices, the area 
resembles a development zone 
in southern China. 

The World Bank has been 
expanding rapidly for years. 
There are now about 11.000 
people on its payroll, compared 
with 8,000 in 1989 and 7,000 in 
1984. The number of "higher 
level" professional staff Is now 
6,039 (including L291 "consul- 
tants") - an increase of a third 
in five years, and more than 50 
per cent in a decade. Since 
1991, when Mr Lewis Preston 
took over as president, the 
bank's administrative budget 
has risen 44 per cent to 8L4bn; 
staff costs (excluding consul- 
tants) have risen 43 per cent to 
8876m. 

To his credit, Mr Preston has 
no apparent interest in empire 
building. He welcomes the 
Group of Seven's call in Naples 
for a review of the role of inter- 
national institutions. "IT there 
is any duplication, overlap or 
waste, let's get it out," he says. 

Questioned about the bank's 
future, he states repeatedly 
that it must intervene more 
selectively and become more 
cost efficient. It would be 
"absolutely wrong" to continue 
lending to countries that could 
easily obtain capital from pri- 
vate sources. “We shouldn't 
interfere where the private sec- 
tor is prepared to invest." he 
says. 

Having spent 40 years at 
J.P. Morgan, the premier New 
York bank. Mr Preston seems 
untroubled by the notion of 
transferring bank functions to 
the private sector. “Over time 
the shift that is called for will 
occur, should occur and must 
occur,” he says. He has an 
admiration for private enter- 
prise that is perhaps not 
entirely shared by senior col- 
leagues who have never experi- 
enced life outside the public 
sector womb. 

Yet although he seems per- 
sonally convinced that the 
bank should contract, this 
theme does not come across 
clearly in the bank's “vision 
statement", to be released 



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Private view of a 
public motivator 


tomorrow in a 50th anniver- 
sary attempt to redefine its 
goals and defuse growing criti- 
cism. And it is unclear 
whether he has the stomach 
for serious “downsizing". At 
times he gives the impression 
he is fighting a losing battle 
against the bank's permanent 
bureaucrats. 

What is the main difference 
between r unnin g the World 
Rank and running J.P. Mor- 
gan? At Morgan, he says, stra- 
tegic change was readily 
accomplished. He simply dis- 
cussed a plan with four or five 
colleagues and then imple- 
mented it. He was able to 
“incentivise people" and. make 
thing s happen. 

The situation is entirely dif- 
ferent in a large public-sector 
bureaucracy. "Here it is a mat- 
ter of building a consensus." 

But surely, since you are 
president, you can just order 
the changes you want? He indi- 
cates that life is for more com- 
plex. People at the bank, he 
says, "hare seen presidents 
come and go". They can “wait 
you out", he adds. 

Since 19S9, private flows to 
developing countries have qua- 
drupled to about Si20bn, dwarf- 
ing the bank’s total commit- 
ments of about S20tm. Didn't 
this vast increase in private 
development capital mean the 
bank had to contract? 

"Absolutely," he says. He 
notes that tbe bank's loans 
have fallen off sharply in 
recent years, partly because 
countries such as India are 
awash with private inflows and 
no longer need its adjustment 
loans. He hopes there will be 
“a significant number of gradu- 
ations in Latin America" - in 
other words, countries that 
become too rich to qualify for 
World Bank support. 

But the Hank- has to move 
carefully, he warns, because 
the recent jump in private 
flows mi g ht not be sustainable. 
It was spurred by interest rates 
in developed countries that are 
“at their lowest level since the 
second world war". And most 
of the capital is being absorbed 
by about 20 countries with the 
best prospects. 

He says there are two rea- 
sons why the bank's staff and 
headquarters’ expenses have 



£ .v; W 

4*1 .V 



Preston: Tbe idea of charging for advice is totally alien here' 


Tarry KM 


risen so rapidly, despite the 
reduced demand for loans. The 
first is the need to meet the 
historic challenge posed by the 
transition to capitalism in east- 
ern Europe and the former 
Soviet Union. He cannot cut 
back elsewhere, because 
“members were very insistent 
that we didn't dilute services 

He is proud of 
‘changing the 
emphasis from 
initiation to 
implementation’ 

to the gyisHng customer base". 

He has also needed to fill 
gaps in the bank's skills mix. 
He has created new vice-presi- 
dencies covering areas in 
which the bank expects to play 
a larger role in the future: the 
environment, private-sector 
development, and human 
resources such as health- 


care and education. 

The hank now employs 200 
environmental experts, com- 
pared with a handful when it 
embarked on the much-critic- 
ised Namada dam project in 
Ind ia in the mid-1980s. Lending 
for human resource develop- 
ment now accounts for 17 per 
cent of all loans, against 5 per 
cent in the early 1980s. 

While favouring a larger role 
for the private sector In devel- 
opment, he says some ideas for 
expanding the International fi- 
nance Corporation, the bank's 
private-sector arm, are fcetie. 
The bank proper cannot trans- 
fer resources directly to the 
IFC, because they have differ- 
ent owners. In any case, the 
IFC has sufficient capital to 
expand its investments at 12 
per cent a year until 2005; fos- 
ter growth might be impru- 
dent 

The biggest change facing 
the bank is a likely increase in 
its advisory role in developing 
countries and a corresponding 


reduction In its importance as 
a financier. With private capi- 
tal more readily available, the 
challenge is to help clients 
restructure their public sec- 
tors, so as to create a climate 
in which private business can 
flourish. 

But if the bank becomes an 
adviser rather than a tender, 
shouldn't it charge directly for 
consultancy services? 

Mr Preston likes the idea. "| 
think selectively we should try 
it” If the bank charged fees, he 
muses. It would be able to test 
the strength or demand for its 
services. And it could see how 
it measured up to private-sec- 
tor competitors. "If Laxard and 
Warburgs can give it cheaper, 
and it's better, there will be an 
even more rapid diminution in 
staff,” he says. 

But then be frowns, remem- 
bering that he is at the World 
Bank, not JJ. Morgan: "But 
the idea of charging for advice 
is totally alien around here. 
They don’t like it," be admits. 

H e says bis greatest 
achievement at the 
bank is “changing 
the emphasis from 
initiation to Implementation*. 
He is referring to recent 
attempts to alter hinfc culture 
by judging staff not by the vol- 
ume of loans they initiate, but 
by the performance of the pro- 
jects they help finance. The 
emphasis on loan volume 
rather than project success is 
said to reflect the “production 
line" mentality of Robert 
McNamara, the influential 
World Bank president in the 
1970s - and a former head of 
the Ford car company. 

Mr Preston is also proud of 
introducing the bank to the 
mysteries of cost accounting. 
Incredible though it may seem, 
he says, the bank did not have 
a means of measuring the costs 
of different activities. “How 
can you be selective if you 
don't know what your costs 
are?" he asks. 

Looking back, he admits he 
may have adopted too low a 
profile as bank president “It’s 
important now that 1 respond 
to our critics,” he says. 
Although some parts of Asia 
are developing enormously 
quickly, he is concerned by foe 
"desperate” plight of sub-Saha- 
ran Africa. “So I don't think 50 
years is enough, “ he says 
firmly, referring to strident 
demands from leftwing envi- 
ronmentalists for the World 
Bank's closure. 


Michael Prowse 



LETTERS TO T HE ED ITOR 

Number One Southwark Bridge, London SE1 9HL 

Fax 071 873 5938. Letters transmitted should be clearly typed and. not hand written. Please set fox for finest resolution 

Referendums: principle must be binding 


Prom Mr Gabriel Stem. 

Sir, Charles Leadbeater and 
Andrew Adonis (“Power to the 
people", July 15) argue that 
established democracies could 
be rejuvenated by introducing 
“voter vetoes" in the form of 
referendums on legislation. 
But they then state that 
these referendums should be 
purely advisory. They would 
then be meaningless, as the 


Swedish example shows. 

In the 1920s, Sweden voted 
against prohibition. Severe 
rationing was introduced. In 
1953, it voted to retain left-side 
driving. In 1967, Sweden 
changed to driving on the 
right In 1968, Sweden voted in 
favour of voluntary-funded 
additional pension schemes. 
Two years later a mandatory 
pay -as you -go system was 


introduced (which is now, inci- 
dentally, breaking down). In 
1980. the alternatives were less 
than clear, but the result was 
definitely a decision to abolish 
the use of nuclear energy in 
Sweden by the year 2005. 
Result extremely unlikely to 
occur. 

This year, there is a referen- 
dum on joining the European 
Union. Once again politicians 


of all parties have pledged 
themselves to honour the 
expressed will of the people. If 
the result is a “no”, they are 
likely once again to Ignore it 
The principle of a referendum 
can be discussed. Bat if you 
use them, the result must be 
legally bi n ding. 

Gabriel Stein, 

7 Eagle Place, 

London SW7 3RC 


Apprenticeships not just 
replacement for training 


Disabled bill seeks equal, 
not special, treatment 


From Mr Mike Nixon. 

Sir, We were interested io 
read your survey on modern 
apprenticeship schemes 
(“Apprenticeship scheme 
sparks scepticism", July 13). 1 
chair the London Modern 
Apprenticeship Group and 
would like to address some of 
the points raised. 

Modem apprenticeships will 
give young people who wish to 
pursue training through a 
work-based, rather than an 
academic-based route, core 
skills. However, modern 
apprenticeships are meant to 
exist as an alternative to. and 
not as a replacement for, edu- 
cational opportunities. 

The article states that there 
is scepticism over employers' 
willingness to support the pro- 
gramme. In north London, we 
are beginning to work in part- 
nership with other industry 
training organisations (ITOs) 
to develop a framework for the 
programme. The fact that there 


are already strong links 
between employers and ITOs 
means that Training and 
Enterprise Councils will be 
able to communicate with a far 
larger group of employers than 
before. It is these links which 
will make modern apprentice- 
ships work, and all the employ- 
ers J have spoken to are very 
keen to get involved in the pro- 
gramme. 

While the modern appren- 
ticeship scheme will indeed 
help gain work-based skills, it 
is important it is looked at as 
one part of the programme to 
raise the skills base of the pop- 
ulation - a programme which 
includes many other projects 
designed to complement each 
other. 

Mike Nixon, 
chief executive. 

North London 

Training dr Enterprise Council, 
Dumayne House, 1 Fox Lane. 
Fulmers Green, 

London N13 4AB 


From Mr Stuart Etherington. 

Sir, Having recently returned 
from Glasgow, where I stayed 
in one of the few hotels in the 
UK which has facilities for deaf 
people. 2 was pleased to read of 
Lord Tebbit's comments 
encouraging hoteliers to 
improve facilities for disabled 
customers (“Tebbit fires salvo 
for disabled”, July 14). For too 
long, disabled people have 
been viewed as "problems" 
rather than as valued custom- 
ers and a source of revenue. 
Deaf people have a great deal 
of loyalty to those hotels which 
they know have adapted facili- 
ties. A lesser-known fact, how- 
ever, is tbe low cost that such 
adaptations involve, and how 
easy they are to install. In the 
US. where there is legislation, 
deaf and hard of hearing peo- 
ple no longer have to plan 
their trips around where these 
facilities are to be found 

Lord Tebbit expressed con- 
cern over the potential coats of 


the Civil Rights (Disabled Per- 
sons) Bill. Many erf the costs in 
the government's analysis of 
the bill are inaccurate, and are 
based on a five-year implemen- 
tation timetable. Tbe bill pro- 
vides for the times cale to be 
approved by the secretary of 
state and includes both a test 
of reasonableness and provi- 
sions to exempt businesses 
where adaptations would cre- 
ate undue hardship- , . 

The essence of the bill w 
equal treatment not special 
treatment What is needed fc 
frill discussion by all . sides - 
business, gover n ment disabled 
people and their organisations 
- to ensure that all the UK= 
disa bled rfHams have access to 
reasonable accommodation in 
hotels and elsewhere. 

Stuart Etherington, 
chief executive. 

Royal National Institute 
for Deaf People, 

105 Gower Street, 

London WCIE6AH 


Criticisms ignore key elements of US growth and 


From Prof Wynne Godky and 
Mr William Milberg. 

Sir, Robert Solomon (Letters, 
July 9) asserts that the 
Improvement in the US bal- 
ance of payments between 1986 
and 1992 disproves our state- 
ment (Personal View, July 6) 
that the “underlying” US trade 
deficit has been deteriorating, 
claiming that we ignore the 
effect of relative growth rates. 
But Mr Solomon is himself 
Ignoring the fact that, between 
1986 and 1992, the balance was 
improved because US growth 
was exceptionally slow relative 
to that in the rest of the world 
and because the trade- 
weighted dollar fell by 37 per 
cent between 1985 and 1991. Mr 
Solomon is thus guilty of the 


enoi he attributes to us. 

Our article was based on an 
analysis of the US balance 
which treated oil, agriculture, 
transfers and property income 
separately, and adjusted every- 
thing else for relative growth 
rate* and the large fluctuations 
in the dollar which occurred in 
the ia&Os. Our conclusions are 
thus grounded in a ■‘struc- 
tural'' analysis of just the kind 
Mr Solomon aspires to. 

Mr A v mash Persaud 
(Letters. July 12) suggests that 
receiii increases in US exports, 
particularly to South America 
and Asia, call our disquieting 
conclusions into question. Mr 
Persaud only concerns himself 
with exports, ignoring imports, 
for whLh the US has a mighty 


dynamic potential; total US 
imports of goods and services 
have risen in volume by 30 per 
cent in the last three years. 

He should be worried (for 
instance) by the foct that US 
imports from China doubled 
between 1990 and 1993, rising 
by $16bn. while exports to 
China only rose $4bn. And 
imports from Japan are still 
looking dynamic, causing an 
?l8bn deterioration in the 
{bilateral) trade balance. Even 
US success in exporting to Asia 
as a whole, to which Mr Per- 
saud attaches such Impor- 
tance, has not been enough to 
prevent the trade balance (with 
Asia) from deteriorating. 

Dollar weakness may indeed 
threaten the “fragile economic 


trading pattern 

recoveries in Europe ^ 
Japan". But the conclusion we 
draw is that, if Europe 
Japan really want sustain^ 
recovery, they should do sjjf 
thing about it for themselves, 
by adopting more espwfj; 
ary policies. Why stemw 
US continue to actfj “ 

engine for export 4ed growtn 

the rest of the wot id, at 
cost of building up fowjf 
Indebtedness on a scale raj 
if unchecked, will “** 
extremely damaging 
quences, not just 
but indirectly for. the rest « 
the world as well? 

Wynne Godley, 

William Milberg, 

The Jerome Levy Ihsomte, 

AJn*n Vnrtr NV 12504 . US 




FINANCIAL TIMER MONDAY JULY 18 1994 


IS 


FINANCIAL TIMES 

Number One Southwark Bridge, London SEI 9HL 
Tel: 071-873 3000 Telex: 922186 Fax: 071-407 5700 

Monday July 18 1994 


Reform and a 
new union 


The results of the elections in 
Ukraine and Belarus, where 
broadly pro-Russ lan politicians 
were elected to the presidencies of 
both countries, pose more shar ply 
than before a choice Cor Russia: 
should it seek to capitalise on the 
new presidents' preferences for 
integration of their economies into 
Russia? Or continue to treat them 
as separate countries? 

The temptation of the first way 
is large. President Boris Yeltsin of 
Russia is continually under fire 
for destroying the Soviet Union. 
To bring Ukraine and Belarus 
back within the Russian fold 
would at a stroke give half of the 
expatriated Russians a “home” 
again. It would. In short, be a mar- 
vellous diplomatic coup. 

Most Russians believe, in any 
case, that these countries cannot 
construct their own statehoods. 
Belarus has evidently failed. The 
politicians who stood for a 
(mildly) Independent and demo- 
cratic path for the state gathered a 
little more than 20 per cent of the 
votes in the presidential elections: 
the front runners were these who 
offered a variant of national abne- 
gation. In his first appearance, Mr 
Alexander Lukashenko, the Bela- 
rus president-elect, went out of bis 
way to stress his country’s depen- 
dence on - almost prostration 
before - Russia. 

Mr Leonid Kuchma, the new 
Ukrainian president, has given 
significantly different signals. He 
revealed, for example, that his 
first meeting was with the US 
ambassador rather than the Rus- 
sian. He does not wish to intro- 
duce a separate currency, neither 


will he neuter the central hank , 
nor welcome back Russian sol- 
diers in Ukraine. Though he won 
on a pro-Russian ticket, his role 
may be to disappoint his support- 
ers - by making than fore up to 
the hard fact that, once the Soviet 
Union has been pulled asunder, it 
is very hard to reassemble it with- 
out the help of the Communist 
party, Caspian and the KGB 

Mr Kuchma knows, and Mr 
Lukashenko will discover, that the 
arguments against a tripartite 
Slav Union are strong - especially 
for Russia, which would be landed 
with two of the largest industrial 
restructuring problems in the 
world, beside its own. Belarus, 
especially, believes that once back 
in the Russian fold it would be 
taken care of as before: but those 
days have gone. 

No Russian government can 
afford such a burden. It is conceiv- 
able that Belarus would assent to 
become a north-western province 
of Russia again. But it would still 
be subjecting its Industries to the 
colder winds of Russian reform, 
which is for in advance erf its own. 
Ukraine will not accept a similar 
status. And it would, in any case, 
have to face the reforms it has 
avoided for three years. 

There is much that can and 
should be done on tariffs, customs 
and payment arrangements. But 
these are as much part of the 
needed market reforms In each 
country as the subject of special 
treaties. A union cannot be viewed 
as a substitute for reform, either 
for Russia, or for the other two. 
Once that is realised, much of the 
enthusiasm for it may ai«o vanish. 


Puzzles over jobs 


Encouraging it may be. Crystal 
clear it Is not The UK economy 
last week breezed through another 
month's price, wage and employ- 
ment data, entering the weekend 
with the added windfall of an 
endorsement from the OECD. Lit- 
tle has changed in the general pic- 
ture of the recovery which previ- 
ous months' figures have revealed. 

But no change, either, in the 
murkiness of some of the details. 

The OECD's comments on the 
UK economy might be by Mr Ken- 
neth Clarke himse lf. Overall, the 
organisation judges the UK to 
have made “major strides" in 
restructuring its macroeconomic 
policy framework. Barring mis- 
haps, the authors expect the UK at 
the end of next year to be exhibit- 
ing much the same mix of above- 
trend output growth, low inflation 
and foiling unemployment, “albeit 
with the latter still above its 'nat- 
ural rate’ ". 

The OECD parts company with 
Mr Clarke when it comes to the 
longer term: not least over his 
ability to deliver the government’s 
ambitious targets for public spend- 
ing. But last week’s economic data 
will have given the organisation 
few reasons to revise the optimis- 
tic shorter-term prognosis. 

Producer and consumer prices 
continue to rise at a restrained 
pace. For the third month in a 
row, the retail price index was up 
2.6 per cent year on year, well 
within the government's 1-4 per 
cent target range. The underlying 
growth in average earnings was 
also unchanged, at 3.75 per cent 
year on year. 

Rail dispute 


The OECD agrees with the Trea- 
sury that gross domestic product 
win grow by about 2.75 per cent 
this year, although the organisa- 
tion differs in expecting this to 
edge higher in 1985. Both seem to 
think the economy can grow fos- 
ter than Its historical trend of 2.25 
per cent without immediately 
endangering the government’s 
infla tion targets. This seems plau- 
sible after a long recession. 

The labour market also appears 
to be giving good news. Eighteen 
months ago, when the OECD last 
analysed the UK, few predicted 
the steady foil in unemployment 
which started soon after. But, 
even though 329,000 fewer are now 
claiming the dole, earnings and 
employment data show tittle sign 
of an upsurge In the labour mar- 
ket. Average weekly hours in 
manufacturing have now fallen 
for two consecutive months, while 
the number working short-time 
has actually increased. 

Even more striking, the total 
number in employment remains 
37,000 fewer than when unemploy- 
ment started to foil in January 
1993. Indeed, the number of men 
employed, down 138,000 over the 
period, has not registered a quar- 
terly increase since the end of 
1989. Why this recovery has 
proved jobless in this way is not 
easily understood, though part of 
the reason must be that economic 
growth has been little faster than 
the long-term trend. Whatever the 
reason, the failure of employment 
to rise may also deprive the gov- 
ernment of a solid recovery in its 
popularity. 


Britain’s rail dispute is hotting up. 
[he RMT rail union has decided to 
all twtMiay strikes by signal staff 
□ pursuit of higher pay for past 
productivity increases. The efisrup- 
ion suffered by the travelling 
Hiblic - and British Rail's freight 
ustomers - will increase. An 
ippropriate reaction is now 
i ceded from Rail track, the state- 
twned company that runs British 
tail's track and signalling 
iperations- 

One option would be to settle 
he dispute as quickly as possible, 
[he disruption is already costing 
Iritis h Rail many times the price 
if a settlement. It could also 
hreaten the privatisation of the 
ail ways, by exposing the vulnera- 
illity of the train-operating com- 
ianies to action by Rail track staff. 
L wed-run private business would 
irobably settle. It would then 
ecoup the cost through fierce 
ost-cutting and change its 
mployment practices to avoid a 
epetition. 

Rail h-ack does not have that 
reedom, however. The govern- 
aent has already interfered to 
top an earlier settlement. It fears 
hat changing its mind might 
incourage others to challenge the 
tublic sector pay-bill freeze. 

An alternative would be to 
espond to the union escalation in 
and. Those who long for a more 
oacho response recall President 
ionald Reagan's approach to stor- 
ing air traffic controllers: offer 
he strikers personal contracts, 
ack those who refuse to accept 
hem and train replacements as 
[uickly as possible. Seductive 


though that would be, it would 
dose the rail network for months 

- especially if other rail staff came 
out in solidarity with their signal- 
ling colleagues. 

The most promising approach is 
a combination of carrot and stick. 
Rail track needs to do much more 
to talk directly to its signal staff 
and to point out the damage the 
strikes are doing to their future. 
The opening of the Channel tun- 
nel, with the opportunities it 
brings to export by rail. Is no time 
to be reminding customers of the 
past unreliability of the railways. 

The company must also make it 
absolutely clear what is on the 
table for each of its signalling staff 

- and what it hopes to offer in 
return for further productivity 
improvements. And it could sensi- 
bly make a concession to the relief 
staff who are the main losers 
under the current offer. Given the 
high turnover of relief staff, it 
would cost little to allow existing 
staff to retain their current pay 
and apply the new tarns to new 
recruits only. 

At the same time. Rail track 
should be firm in dealing with 
attempts to disrupt the network 
by tactics such as next weeks 
two-day strike. The strike will run 
from noon on Tuesday to noon on 
Thursday, effectively disrupting 
the rail network for three days. 

Those staff who join it should lose 

three days’ pay. 

There are no quick solutions to 
strikes such as this. But a combi- 
nation of persuasion and firmness 
is the most likely way to bring it 
to an early end. 


T his week Mr Tony Blair 
wifl be anointed leader 
of the Labour party. 
That much is certain In 
the unpredictable world 
of British politics. 

Those on the unreconstructed left 
who believe the party might redis- 
cover, even now, its collectivist 
dreams by choosing Mrs Margaret 
Beckett or Mr John Prescott have 
until Thursday's announcement to 
cherish their delusions. 

Mr Blair's election will change 
the character of his party - and the 
landscape of British politics. Her 
Majesty’s loyal opposition mil have 
a leader preoccupied with the 
future, not shackled by the past 
Let's not get carried way. It is no 
use trying now to predict the out- 
come of a general election which 
might not happen until 1997. Mr 
John Major h a s defied pundits 
more than once. The economy looks 
better by the day. Mr Blair may be 
brimming with ideas but the 41- 
year-old former public schoolboy 
lacks experience. 

And if no one can doubt the direc- 
tion in which he intends to take 
Labour, it Is for less certain how 
fast he can travel in replacing 
socialism with social democracy. 

After four election defeats, the 
party seems to have realised it is 
time to grow up. How else could it 
have come to the conclusion that 
the standard-bearer of its so-called 
modernisers' tendency was the only 
realistic choice to succeed Mr John 
Smith? 

But many in Its ranks are still 
reluctant to give up the simplicities 
of political childhood. As the candi- 
dates have trudged around the 
country seeking the support of 
party and trade union activists, Mr 
Prescott’s call for a return to full 
employment has struck an emotive 
chord. Mrs Beckett has reasserted 
the leftwing principles most 
thought she had buried long ago. 

The smart betting at Westminster 
is that Mr Prescott will displace her 
as deputy leader. Either way, the 
lm party members and trade union 
levy payers expected to participate 
in the contest will vote with their 
heads for the leader and their 
hearts for the deputy. 

Mr Blair has remained publicly 
neutraL The truth, probably, is that 
he would prefer neither candidate. 

Mrs Beckett Is too much a crea- 
ture still of the hard left. Mr Pres- 
cott is for more intelligent than he 
sometimes sounds; and he is loyal 
But his traditionalist bluntness jars 
with the soothing rhetoric of the 
modernisers. 

Mr Blair Is tough. IBs youthful 
good looks and the B amb i jibes 
belie the inner certainty which dis- 
tinguishes political leaders from 
those they lead. He has the support 
of the vast majority in the shadow 
cabinet and of the party’s MPs. 

Th anks to the grip on the party 
machinery established by the then 
leader, Mr Nell ifinnnr-lr , during the 
late 1980s, he will command also a 
large majority on the National 
Executive Committee. 

He is already planning his own 
changes to the way the party 
shapes its policies. He sees the cum- 
bersome policy cnmmisHiftng driven 
by the party headquarters in Wal- 
worth Road as introspective and sti- 
fling of innovation. 

He intends to provide room in the 
machinery for the more original 
ideas of left-leaning think-tanks, 
such as the Institute for Public Pol- 
icy Research, and of free-thinking 
backbench MPs like Mr Frank Field. 

So his deputy's power will be lim- 
ited to a capacity to make life occa- 
sionally uncomfortable, rather than 
seriously to obstruct Mr Gordon 
Brown, the modernist shadow chan- 
cellor who stood aside to allow Mr 
Blair a dear run at the leadership, 
will have more influence than 
either candidate. 

But first the new leader must 
define his project 
The campaign has told us more 
than his critics allow about his 
ambitions. He has not provided a 
blueprint for the party’s general 
election manifesto. Nor has he 
answered the persistent questioning 
of those who insist he should spell 
out, at least two years before the 
election, just who might or might 
not pay more In tax if be reaches 10 
Downing Street 

Instead Mr Blair has stuck reso- 
lutely to elaborating a set of basic 


Blair as leader would revive the UK Labour 
party, but tensions would remain just 
below the surface, says Philip Stephens 


Ne'er the rose 
without the thorn 



principles. In six speeches since the 
start of the campaign, he has added 
a series of policy signposts rather 
than specifics to the philosophical 
framework. 

The approach has irritated those 
who believe that politics Is about 
detail rather than direction. It has 
worried some of Mr Blair’s own 
admirers, who think he has been 
more cautious than necessary in 
sketching out the modernist 
agenda. He is unrepentant. He 
acknowledges the caution but has 
told close colleagues there is also 
careful calculation. 

Labour has spent the dec ad e 
chasing the Conservatives. The 
piles of ideological baggage left 
behind by repeated accommoda- 
tions with the government have not 
been replaced with any fresh analy- 
sis of Labour’s purpose. 

During the 1980s, it promised not 
to renationalise, admitted half- 
heartedly there was something to 
be said for the market economy, 
stripped its manifestos of pledges to 
soak the rich. It then added in afew 
random commitments to spend, say, 
a few billion pounds extra on child 
benefit and pensions. 

Mr Blair's contention Is that 
Labour needs a coherent prospec- 
tus. The electorate above all wants 
to know where it is coming from. 
That means being comfortable with 
a set of its own ideas, not combin- 
ing grudging accommodations with 
the Tories with a clutch of pledges 
drawn from rose-tinted images of a 
socialist past 

He regards building enough credi- 
bility to win the next election as a 
three-stage process. Labour must 
first redefine its core principles. It 
needs then to construct a policy 
agenda rooted in that intellectual 
framework. Finally, it must offer 
the electorate a series of “flagship" 
policies to illuminate the link 
between principle and practice. 

Ms aim during the campaig n has 
been to concentrate on the first task 
while panrilting in the outlines of 
the second. The detailed policies 
can wait until much closer to the 
general election. 

Hence the constant repetition 
now of the central Blair message: 
that Labour’s purpose is to recon- 
nect individual aspiration with the 
actions of government The party 
must reposition itself as one con- 
cerned not to constrain but to pro- 
mote individual opportunity by rea- 
wakening faith in the notion of 
society. In Mr Blair’s own phrase: 
“The simple case for democratic 
socialism rests on the belief that 
individuals prosper best within a 
strong, active society.” 

That means Labour cannot any 
longer be about offering fixed eco- 
nomic prescriptions or old-style col- 
lectivism. Nor can it apply to the 
rapidly changing world of the 1990s 
the ideology of the 1960s or 1970s. 

The speeches have carried a 
series of more particular messages. 
Labour must embrace the “dynamic 
market economy”. It must forget its 
old bang-ups about state ownership 
and abandon the notion that gov- 
ernments can pick indus trial win- 
ners. It must understand that it is 
impossible to insulate Britain from 
the realities of global competition. 

In education, the priority should 
be to raise standards rather than 
Indulge the political correctness 
which allows schools to blame 
social deprivation for poor perfor- 
mance. Labour must understand 
the purpose of the welfare state is 
not to create dependency but to pro- 
vide escape routes. The unemployed 
have responsibilities as well as 
rights. The role of the state is to 
help them find work through train- 


ing or childcare provision, not pay 
them to be idle. Criminals, mean- 
while, should expect to be punished 
rather than excused. 

In Europe, the British have no 
choice other than to be positive and 
committed about closer European 
co-operation. The government must 
maintain strong and credible 
defences. 

Less controversially tor memb ers 
of his own party, Mr Blair has put 
constant emphasis on the role of 


His strategy has been 
derided by the 
Conservatives. The 
Labour-Leader-in- 
waiting has been 
renamed Tony Blur 


education and training in promo- 
ting both foster economic growth 
and Individual opportunity. He has 
promised to dose existing loopholes 
to make the very rich pay at least 
some tax. He has pledged to over- 
haul and eventually replace the 
House of Lords and to devolve polit- 
ical power to Scotland, Wales and 
the English regions. 

The strategy has been derided by 
the Conservatives. The Labour-lesd- 
er-in-waitlng has been renamed 
Tony Blur. Ministers are prepared 


to demand answers to a barrage of 
detailed policy questions the 
moment his election is confirmed. 

But, overall, the Tory response 
has betrayed the government’s own 
uncertainties. The initial instinct 
has been to attack Mr Blair as 
another of Labour's chameleons, 
willing to twist and trim to win a 
few more votes but at heart an 
unreconstructed socialist He is said 
to be a man of sound-bites not sub- 
stance, a creature of the sharp- 
suited media men who tried to hide 
Mr Kinnock behind the party's Red 
Rose image. 

But there is private acknowledge- 
ment that the easy points which 
could be scored off Mr Kinnock’s 
policy U-turns are no longer on 
offer. Sure, Mr Blair stood in the 
1983 general election on a platform 
of withdrawal from the European 
Community. Sure, there are quotes 
to be found which reveal he has not 
always been quite so modern about 
nationalisation or trade union 
power. And doesn’t he even now 
support the minimum wage? 

The problem is that this fresh- 
faced Oxbridge graduate simply 
does not look or sound like a closet 
Trotskyist. He has never been one. 

Nor does Mr Major's government 
appear confident of where it should 
position Itself to win back the disil- 
lusioned voters of middle England. 

The prime minister told his sup- 
porters at Westminster earlier this 


month that their priority must be to 
dispel the impression of conver- 
gence between a post-Thatcherite 
Tory and a Blair-led Labour party. 
He has not spelt out how. 

Some among his cabinet col- 
leagues believe the government 
must move further to the right to 
give definition to the choice facing 
the electorate. It must sustain the 
Eurosceptic flavour In its approach 
to Brussels, which saved it from 
catastrophe in the European elec- 
tions last month. Above all, it must 
start cutting taxes again well before 
the election. 

Mr Douglas Hurd, foreign secre- 
tary, and Mr Ian Lang, Scottish sec- 
retary, are among others around 
the cabinet table who take a differ- 
ent tack. They fear that vacating 
the centre ground will hand to 
Labour the votes of the discon- 
tented skilled and middle classes 
whose preference will decide the 
election. 

Others still - Mr Kenneth Clarke, 
the chancellor, is the most promi- 
nent - favour a delicate balancing 
act, promising both to address the 
new insecurities of middle England 
and to deliver another burst of 
Thatcherite radicalism. 

M r Blair draws com- 
fort from the con- 
fusion. He should 
not be complacent. 
He, too, has to 
take bis party with him. 

By and large, it has been recep- 
tive, occasionally even enthusiastic. 
After 15 years of opposition, most in 
the shadow cabinet don't want to 
give up again the chance to climb 
each night into one or those swish 
ministerial cars rather than stand 
in the taxi queue for King’s Cross. 

The generation of Labour MPs 
which entered Parliament in 1992 
has changed the political balance of 
the party at Westminster. The new- 
comers, particularly those who won 
marginal seats, are well attuned to 
political realities. The once vibrant 
Campaign Group of hard-left MPs 
discovered last month that it could 
not muster even enough votes to 
nominate its own candidate for the 
leadership race. 

More importantly, the one-mem- 
ber-one-vote system under which 
the election is being conducted, has 
deprived the trade union leaders of 
their influence. The executive of the 
Transport and General Workers 
Union made a fool of itself by back- 
ing Mrs Beckett at the outset Oth- 
ers, more wisely, have kept their 
counsel 

But these are early days. Many In 
the Labour party share the weak- 
nesses of the reformed alcoholic. 
How easy it would be to sup back 
into malting just one or two big new 
tax and spending pledges; to buy 
peace with the party’s union pay- 
masters with a promise to sweep 
away the Tories’ employment law; 
or to spell out just how Labour 
would insulate the low-paid from 
the realities of the marketplace. 

Admirers who have applauded Mr 
Blair’s agenda during the campaign 
often have been unwilling to own 
up to the hard truths that lie 
behind it A reformed welfare state 
means an end to easy generosity. A 
modern economic policy implies 
acceptance that there is no pot of 
gold to be had from putting up the 
top rates of income tax. Some time 
soon, the party will have to own up 
also to the fact that the idea of 
returning schools to the control of 
Labour local authorities is not 
exactly a vote-winner. 

The risk has been evident in Mr 
Blair's own speeches. There has 
been a suppressed tension as the 
prospective leader has sought to 
balance the demand for change 
with reassurance to his party's tra- 
ditionalists. For all his rhetorical 
skills, the joins show. 

Too often Labour has discovered 
too late that Its own concept of 
modernisation lags well behind the 
expectations and aspirations of the 
electorate. 

Mr Blair has done well over the 
post six weeks. So has his party. He 
is right to judge that the voters are 
more interested in ideas than detail. 
But six weeks is a short time in 
politics. This has been the easy bit 
Labour must now show it can lace 
up to the hard truths. Mr Blair will 
discover that leading his party is a 
great deal tougher than being cho- 
sen to lead It 


Observer 


Whizzbangs 
and harriers 

■ Malc olm Rifkind, UK defence 
minister, was sniped at last week 
for some swingeing armed forces' 
cots. So perhaps it's only fair to 
award him a DCM - the 
Distinguished Conservation Medal 
_ fm» iimytog pm* unit untouched. 

Surviving to fight another day 
is the four-strong Ministry of 
Defence Conservation Unit based 
in Chessmgton. Its job is promoting 
and protecting the wildlife and 
ancient monuments inhabiting the 

vast expanses of MoD land - much 
of which gets crushed by tanks 
or blasted by bombs. 

James Baker, the retired colonel 
in charge, was delighted but not 
astonished to have escaped the 
axe: “We have some of the best 
sites for butterflies, reptiles and 
bats in the country . . .we’re at the 
forefront of the conservation drive.” 

Baker argues that artinary 
craters are good for flowers - the 
shell-holes open up the soil - and 
that bullet holes cause trees to ooze 
resin, so attracting lichens. 

The latest issue of Sanctuary, 
the unit’s annual magazine, carries 
articles on birds inhabiting the 
weapons-testing area at Foulness; 
choughs on the Castlemartin tank 
firing range in Pembrokeshire; and 
moths at Porton Down, site of the 


MoD's chemical weapons research 

p lant.. 

A piece on orchids and butterflies 
at the Arpinge Ranges in Kent says: 
“The MoD 1ms preserved a precious 
landscape which might kmg ago 
have disappeared if subjected to 
the commercial pressures of 
modern farming.’’ 

Presumably flying shrapnel 
deters the nest-raldars, too. 


Walking tall 

■ Chasing news stories on a sunny 
Sunday in London, can be a little 
like using noses to push nw*a u phill. 
The great and good of UK corporate 
life are - naturally - far from their 
offices, catching well-deserved rests 
from the weekly travaiL 

Trading the outdoor pursuits, 
one might imagine, would certainly 
be Alan Mattingly, director of the 
Ramblers Association. 

Not a bit of it Yesterday, in the 
sultry great wen, Mattingly was 
at his office desk, ready to field 
questions about government plans 
for the Forestry Commission. Hardy 
types, these hill-dimbers. 


Wholly it 

■ So, God remains a man. A 1 
least, that's how the Church of 
England has decided to regard the 
deity. 



‘We’re refugee civil servants from 

Twnl fW 

duplDer 


The church’s general synod has 
pronounced that, despite the 
onward march of political 
correctness, the correct mode of 
address is “He”. Texts for the 
church's next prayer book will not 
refer to God as “Mother” or “She”. 

The synod has thus endorsed 
a report from its Liturgical 
Commission, which argued God 
should be addressed “in terms 
borrowed from our human 
understanding of fatherhood and 
monarchy”. 

Still, novelty creeps on apace. 
The commission also said new 


forms of prayers, avoiding gender 
references, could be introduced. 
So sometimes God mil be It, after 
alL 


Frosty logic 

■ A new iciness prevails between 
Deutsche Bank and Dresdner Bank , 
Germany’s two- largest credit 
institutions. 

Oddly enough, the chill is 
attributable to a heating equipment 
company called Bud eras, sold off 
by the ailing Metallgesellschoft 
group last month. 

The two banks cooperated to 
place shares in Buderus - raising 
DM1.2bn of much-needed cash for 
MG - but Dresdner subsequently 
played its own wily game. 

Dresdner has now popped up 
as a 10 per cent shareholder - on 
its own account - in Buderus. It’s 
also helped Bilfinger & Berger - 
one of Germany's biggest 
construction companies - buy a 
further 15 per cent 

The Bilfinger move is being 
interpreted as a possible prelude 
to a full-scale takeover. In any case, 
the action seems to have taken 
both Buderus and Deutsche Bank 
by surprise. Deutsche's 
protestations that the placing 
guaranteed Buderus’ independence 
now look, well, somewhat 
fll-informed. 

An added piquancy is that secret 


accumulation of big share stakes 
is shortly to become illegal: under 
the terms of the long-awaited 
financial Markets Promotion Act, 
due to be enacted on August I, 
companies will have to disclose 
stakes when they reach 5 per cent. 

Understandably, Dresdner says 
it's not broken the law, because 
the law was not yet in force. 
Impeccable logic. But perhaps 
faulty public relations? 


Roman sauce 

■ Romans are as fond of political 
jokes as anyone; the arrival of the 
charismatic Silvio Berlusconi as 
prime minister prompts the 
following tale. 

Berlusconi dies and goes to hell. 
But Lucifer quickly finds him 
i m possible and arranges him a 
transfer to purgatory. There he 
creates equal mayhem, with 
multiple takeover bids, 
cross-ownership deals and so on. 
Eventually, for the sake of a quiet 
life, St Peter admits him to 
Paradise. 

Two weeks later, Lucifer rings 
up to ask how it's going. It’s all 
quiet, says St Peter. 

Oddly quiet, he thinks, and goes 
to see what Berlusconi is up to. 

He finds him closeted with God, 
whom he overhears saying; “OK, 
that’s you sorted out But 
me . . . why only ooe-pre^dent?” 






16 


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Specified 
Worldwide 


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FINANCIAL TIMES 

Monday July 18 1994 



Kuchma 
invites 
IMF head 
to talks 
in Kiev 


Bloody clashes cast shadow over peace accord 

Two Palestinians shot 
dead in Gaza rioting 


By Juflan Ozanne, 

Jerusalem correspondent 

The Israeli -Palestinian peace 
agreement came under severe 
strain yesterday after Palestinian 
and Israeli police exchanged fire 
as rioting erupted in the Gaza 
Strip. 

Israeli troops shot dead at least 
two Palestinians and wounded 
more than 70 at the main Gaza- 
Israel checkpoint, after thou- 
sands of workers waiting to cross 
into Israel rioted, burnt 40 Israeli 
buses, set fire to a petrol station 
and hurled stones. The clashes 
were the bloodiest since Mr Y as- 
sir Arafat, PLO chairman, 
returned to Gaza this month. 

Israeli and Palestinian wit- 
nesses said Palestinian police and 
Israeli security forces exchanged 
fire for the first time since Pales- 
tinian self-rule was implemented 
in Gaza-Jericho. An Israeli sol- 
dier and an Israeli border police- 
man were seriously wounded and 
at least 15 others were hurt. 

Israel sealed off the Gaza Strip 
and Lt-Gen Ehud Barak, Israeli 
army chief, blamed Palestinian 
police for falling to prevent the 
riots and for causing some of the 
casualties. 

However, Mr Arafat said the 
Israeli shootings were a violation 
of the peace accord and called for 


the immediate deployment of 
international observers in the 
Palestinian self-rule areas. 

It remained unclear last night 
how the riots started. Palestin- 
ians said Israeli checkpoint 
forces deliberately delayed for 
several hours thousands of 
migrant workers trying to make 
the dawn crossing into Israel. 
Israel said a Palestinian seized 
the gun of an Arab policeman 

Peres takes softer line on 
Golan Heights Page 4 

and fired towards the checkpoint, 
and that Israeli forces fired back 
in self-defence. 

Whatever the case, the incident 
has cast a shadow over recent 
optimism about the success of 
the peace agreement Under the 
accord. Palestinian police are 
responsible for maintaining law 
and order over Palestinians in 
the self-rule areas. Although the 
rioting may have been provoked 
by Israeli delays at the check- 
point, the Palestinian police 
appeared confused and unable 
to control the mob. 

Many of the guerrillas -turned- 
police have had only rudimen- 
tary training in crowd control 
and feel uneasy about putting 
down Palestinian violence 


directed against Israel. 

More seriously, any evidence that 
Palestinian police deliberately 
fired their weapons at Israeli 
security forces would provoke a 
fierce backlash in Israel against 
the accord. 

Israel stopped short yesterday 
of accusing the police of deliber- 
ately firing against Israelis, but 
Mr Oded Ben-Ami, the prime 
minister's spokesman, blamed 
the Palestinian police for most of 
the casualties and said they had 
opened fire in every direction, 
including at Israeli troops. 

Mr Rashid Abu-Shebak, a 
senior Palestinian security offi- 
cial, said that among the 
wounded were 25 police and that 
the police only fired in the air. 
Another official, however, said if 
the police fired at Israelis 
they bad done so because they 
had no alternative but to return 
fire in self-defence. 

Experts on the peace process 
said yesterday's incident was 
“waiting to happen" because the 
joint security arrangements at 
the approach to the checkpoint 
are near-impossible to imple- 
ment Quicker procedures should 
have been put in place. 

The incident will also have 
implications for Mr Arafat by 
fuelling the domestic Palestinian 
opposition to the agreement 


French minister resigns to 
speak out over graft probe 


By John Ridding in Parts 

French prime minister Edouard 
Bahadur's government suffered a 
blow last night with the 
announcement of the resignation 
of Mr Alain Carignon, the com- 
munications minister. 

hi a brief communique announ- 
cing his surprise decision, Mr 
Carignon said he was stepping 
down from the French govern- 
ment because he wanted to be 
able to express himself freely in a 
corruption investigation involv- 
ing a publishing company in 
Grenoble, the Alpine city where 
he is mayor. 

In stepping down, Mr Carignon 
has become the latest figure to be 
involved in a series of corruption 
investigations over the last few 
months into French polit- 


icians and businessmen. 

Mr Balladur said that he 
“saluted” Mr Carignon's decision 
and that he hoped the case would 
allow Mr Carignon to establish 
his good faith. 

The investigation behind Mr 
Carignon's resignation concerns 
Dauphing News, a press group, 
which publishes a magazine near 
Grenoble. In a letter to his staff, 
Mr Carignon said that the affair 
did not Involve any intentional 
concealment or diversion of pub- 
lic funds, nor any personal 
enrichment or tax evasion. 

"In withdrawing from the gov- 
ernment I will become again a 
citizen. In taking my liberty I am 
also ensuring that neither the 
independence of the judiciary nor 
that of the government can be 
compromised,” he said. 


Mr Carignon said he had 
resigned so he could formally be 
charged under the investigation 
and so have access to police files 
for his defence. 

He Is the first minister to 
resign since the Mr Balladur's 
centre-right government took 
office in March last year. 

He submitted his resignation 
yesterday, and it was accepted by 
the prime minister. A statement 
from Mr Bahadur's office said Mr 
Carignon’s functions would be 
taken for the time being by Mr 
Nicolas Sarkozy, the budget min- 
ister. 

Over the past few months, a 
number of political and business 
figures, from both the right and 
the left of the political spectrum 
have been involved in corruption 
investigations. 


Soap wars 


Microsoft anti-trust deal 


Continued from Page 1 


over the Unilever detergents. 
Procter & Gamble said Unilever’s 
comments on the new detergent 
were “pure speculation" since 
none of the new product has yet 
left Us factories. 

Unilever is not sure the Procter 
& Gamble product it is preparing 
to test will be the final formula- 
tion for Ariel Future. 


Continued from Page 1 


the anti-trust Laws of the two 
jurisdictions.” 

Complaints from other soft- 
ware groups that Microsoft used 
unfair tactics to limit competi- 
tion prompted the US Federal 
Trade Commission to launch the 
Investigation four years ago. It 
was later taken up by the Justice 
Department, and the European 


competition authorities launched 
a similar probe last year. 

The Justice Department anti- 
trust suit cites in particular 
Microsoft’s “per processor" licen- 
sing contracts, which require per- 
sonal computer manufacturers to 
pay royalties to Microsoft based 
on the number of computers they 
sell, regardless of whether Micro- 
soft programs are installed on all 
the computers. 


By Chrystia FTOetami, 
recently in Kiev 

Mr Leonid Kuchma, the 
Ukrainian president-elect, has 
invited Mr Michel Camdessus, 
managing director of the Inter- 
nationa] Monetary Fund, to come 
to Ukraine to negotiate an eco- 
nomic re struct ur in g package “in 
the very near future". 

His decision to open talks with 
the IMF even before his inaugar- 
ation tomorrow suggests that Mr 
Kuchma, who benefited from 
pro-Russian and pro-communist 
sentiment in last week’s election, 
intends to pursue a different 
agenda now that he is in office. 

“I hope that in the nearest 
fixture Mr Camdessus will come 
here," Mr Kuchma said at the 
weekend. “He promised me that 
he would come. He said if there 
are concrete proposals far 
reforms he will come to Kiev.” 

Mr Kuchma was swept to 
power in the election by Rnssian- 
speakers in eastern Ukraine and 
Crimea who were won over fay 
his calls for closer links with 
Russia. Now safely elected, Mr 
Kuchma is softening his pro- 
Russian rhetoric. 

He said he favoured “a Euro- 
Asian common market”, but not 
a return to the rouble from its 
present currency, the coupon. As 
for political union, Mr Kuchma 
said that the Commonwealth of 
Independent States was suffi- 
cient, indicating that there 
would be no transfer of power 
from Kiev to Moscow. 

Instead, Mr Kuchma's initial 
overtures have been toward the 
west - he met the US ambassa- 
dor the day after the election - 
and his early statements have 
been pro-reform. He is eager to 
revive stalled negotiations with 
the IMF, and claims to be com- 
mitted to the austere policies the 
IMF could demand. 

The surprisingly pro-western 
orientation of Mr Kuchma, who 
was once director of the factory 
which built the Soviet Union's 
most powerful nuclear missiles, 
extends to nuclear disarmament 

*T will stick to the agreement 
signed by Kravchuk, Yeltsin and 
Clinton,” Mr Kuchina said of die 
tripartite deal made in January 
in which Ukraine pledged to give 
up all the unclear weapons on its 
territory. 

Mr Kuchma said the $350m 
(£230 AuJ Ukraine was granted 
fay the US to help finance dis- 
mantling the missiles is insuffi- 
cient “This is an ecological 
problem and the west including 
Europe, should help us." 

Western aid officials say that 
if the Kuchma administration 
rapidly pulls together a reform 
programme, Ukraine could reach 
an agreement with the IMF for 
an economic restructuring loan 
of 5700m as early as the end of 
August 


Kuchma show bis true 
colours. Page 2 


FT WEATHER GUIDE 


Europe today 

dandy skies and outbreaks of rain and thunder 
will cover France as low pressure moves from 
west to east across the country. During the 
afternoon and evening, rain and thunder storms 
will spread into southern Germany, northern 
Switzerland and Austria bringing a risk of very 
heavy downpours In the Alps. 

High pressure over the North Sea will cause fair 
and mainly sunny conditions in the Low 
Countries, northern Germany and western 
Scandinavia. However, some clouds will bring 
the possibility of a thunder storm in southern 
Belgium and Luxembourg. In the UK, It win also 
be sunny, but In Ireland, it will be cloudy with 
patches of rain. In southern Europe, It will 
remain sunny and warm. Across southern 
Turkey, scattered afternoon thunder storms will 
develop. 

Five-day forecast 

Clouds and rain win spread from northern 
France into southern Germany and Austria, wtth 
a serious risk of local flooding due to 
downpours. Later this week, rain and thunder 
will move towards the south-east. Over the UK, 
clouds will be variable wtth the most sun in the 
south-east of foe country. The Low Countries, 
foe northern half of Germany and western 
Scandinavia will stay sunny. 



TODAYS TEMPERATURES 


Sihatkvi at 12 GMT. Tempeiatues maKknum for day. Iktmcam b/ Uatmi Consult ot the Netheriands 



Maximum 

Beijing 

cloudy 

32 

Caracas 

fair 

27 

Faro 

sun 

29 

Mmfcid 

sun 

35 

Rangoon 

doudy 

31 


Celsius 

Belfast 

CfrZZ] 

20 

Cardiff 

fair 

22 

Frankfurt 

thUKl 

28 

Majorca 

fair 

34 

Reykjavik 

doudy 

14 


sun 

39 

Belgrade 

sun 

32 

Casablanca 

sun 

2H 

Genwa 

found 

20 

Malta 

sun 

32 

Rio 

tdr 

?4 

Accra 

found 

27 

Berlin 

lair 

24 

Chicago 

lair 

31 

Gibraltar 

sun 

32 

Manchester 

sun 

23 

Rome 

fair 

32 

Algiers 

sun 

36 

Bermuda 

fair 

32 

Gdaspe 

fair 

2t 

Glasgow 

doudy 

21 

Manila 

ram 

29 

S. Fraco 


?6 

ArtBttBUam 

lair 

23 

Bogota 

lair 

23 

Dakar 

dowdy 

2t 

Hamburg 

far 

22 

Meftraume 

fair 

14 

Seoul 

far 

34 

Athens 

fair 

33 

Bombay 

fair 

33 

[Mas 

sun 

37 

Helsinki 

rain 

23 

Mexico City 

fair 

19 

Singapore 

doudy 

32 

Manta 

sun 

34 

Brussels 

cloudy 

26 

DeH 

fair 

37 

Hong Kong 

shower 

32 

Miami 

thuid 

34 

StbcWralm 

far 

23 

B-ASrea 

lair 

21 

Budapest 

fair 

32 

Dubai 

sin 

41 

Honohiu 

fair 

31 

MU» 

fair 

31 

Strasbourg 

found 

28 

BJjam 

sun 

24 

CJiagen 

fair 

23 

Dublin 

cloudy 

2t 

teUai&ul 

fair 

29 

Montreal 

doudy 

23 

Sydney 

shower 

16 

Bangkok 

cloudy 

33 

Cairo 

sun 

34 

Diirovnflt 

sun 

31 

Jakarta 

fair 

32 

Moscow 

thund 

24 

Tangier 

sun 

30 

Barcelona 

sun 

29 

Capa Town 

Wr 

IS 

Edinburgh 

fair 

20 

Jersey 

drzzf 

20 

Munich 

thund 

26 

TatAutv 

sun 

30 










Karachi 

fair 

32 

Nairobi 

doudy 

24 

Tokyo 

fair 

30 


Latest technology in flying; the A340 


L Angelas 

fair 

28 

Nassau 

fair 

32 

Vancouver 

fair 

23 










Las Palmas 

sun 

26 

New York 

tfarad 

30 

Venice 

doudy 

31 

S' 









Lima 

doudy 

18 

Nice 

shower 

29 

Vienna 

found 

29 

(y 

f) Lufthansa 




Lisbon 

London 

Lm-bourg 

9U1 

sun 

thund 

29 

26 

26 

Nicosia 

Oslo 

Parts 

fair 

sun 

doudy 

32 

27 

28 

Warsaw 

Washington 

WdSngton 

shower 

doudy 

fair 

24 

33 

9 










Lyon 

drawer 

28 

Perth 

sun 

21 

25 

Winnipeg 

Zurich 

ft* 

26 










THE LEX COLUMN 

Unilever’s soft soap 


This will be a big week for Unilever. 
Having been sent reding by Procter & 
Gamble's assault on the quality of its 
new washing powders, Unilever will 
try to wrest the initiative back 
through a public relations campaign. 
This week’s presentations - rejecting 
the claims that its washing powders 
rot clothes - could prove critical in 
determining whether the detergents 
succeed across Europe. They could 
prove just as important in reestablish- 
ing the reputation of Unilever's mart 
agement, which has been sullied since 
the row began. 

In quantitative terms, the powder 
wars are of limited financial impor- 
tance to Unilever. The group has sold 
£S25m of new powder so far. That is 
<tmaTI jn rela tio n to group annual prof- 
its of well over £2bn. The chief con- 
cern would be if the mud thrown at 
Omo Power and Persil Power were to 
stick to Unilever's other detergent 
brands. But there is no evidence of 
that to date. 

The more worrying aspect is qualita- 
tive. Launching consumer products 
successfully is the lifeblood of the 
company. Shareholders understanda- 
bly grow uneasy when that starts to 
go awry. The company's touch has 
appeared unsure since the accusations 
started to fly. The subsequent refor- 
mulation of its powders and the drop- 
ping of litigation against p&G have 
come as farther pablic relations 
blows. Shareholders will hope the 
affair will prove cathartic. Unilever 
will certainly need to show it has 
regained Its poise before P&G 
launches its own new detergent this 
autumn. At least the scorching 
weather must be doing wonders for 
Unilever's ice cream sales. 

Renault 

French and foreign bankers will 
receive letters tins morning inviting 
them to bid to advise the government 
on its 80 per cent stake in Renault. 
They will be smackin g their lips. Who- 
ever wins the adviser's mandate will 
parade it like a trophy. Though the 
government is not yet committed to 
an early privatisation of the car 
maker, a sale looks increasingly likely. 
Assurances Gdtferales de France was 
originally slated as the next privatisa- 
tion candidate. But international 
investors have recently been so 
stuffed with new insurance issues that 
they probably have little appetite for 
another one just now. Investors would 
welcome Renault, which is In the 
midst of a cyclical upswing, as a varia- 


Unilever 


Shwa price relative lotto 
FT-SE-A Afl-Share Inch* 



70 1 i i i i. j i i »■ « ». » l i ■ i » i < » 

1983 94 

Source; FT Qraphfte 

tion in their diet If France does decide 
on an early privatisation, the time- 
table will be tight. Given trade union 
opposition, waiting until 1995 would 
not be advisable. With presidential 
elections next May, a Renault privati- 
sation in 1995 could get caught in 
political cross-fire. A flotation at the 
end of this year looks a better bet 

A quick sale would help Renault 
draw a line under its unhappy alliance 
with Volvo, which floundered in part 
because of concern over the continu- 
ing involvement of the French state. A 
flotation would be a good opportunity 
for the Swedish motor group to 
exchange most of its 20 per cent stake 
in Renault for the French company's 
45 per cent stake in Volvo Trucks. 
Renault will still need a partner to 
share the cost of developing future car 
models. One of the lessons of the 
Volvo saga is that this too may be 
easier once it is privatised. 

Aluminium 

Aluminium-producing countries 
meeting in Australia this week could 
be forgiven for feeling satisfied with 
their efforts to return the market to 
balance. Since production cuts were 
agreed at the end of January, the alu- 
minium price has risen by about 25 
per cent. It has regained the level pre- 
vailing in 1991 before imports from the 
former Soviet Union caused meltdown. 
Within the last month stocks held on 
the London Metals Exchange have 
finally started to fall 

With 2->m tonnes of metal still held 
in LME warehouses, though, the equi- 
librium looks fragile. Most producers 
are probably operating at a profit and 
will not want to see the metal price 
driven substantially higher. Another 
spike upwards could discourage indus- 
trial users from using aluminium in 


place of other, less volatile, metals. 
But without the prospect of further 
appreciation, investors who bought 
aluminium for capital gains will have 
little incentive to hold on. There must 
be the danger of liquidations and a 
sharp price correction until the stock 
overhang has been reduced. 

Since there seems tittle hope of 
bringing Middle Eastern and Latin 
American countries on side, progress 
in reducing stocks depends on the 
determination of western and Russian 
producers to stick to cuts already 
announced. Even though demand in 
the US ami Europe has picked up fas- 
ter than expected In January, con- 
sumption within Russia is still falling. 
Holding production down now that the 
price has recovered will require great 
discipline. 

Pension funds 

With a statutory solvency standard 
around the comer, pension foods are 
asking whether their assets are a fair 
iwateh for their liabilities. Under the 
detailed rules being drafted by the 
actuarial profession, liabilities relating 
to younger members will continue to 
be matched with equities. Older liabili- 
ties will be measured against - and 
therefore best matched by - gilts. But 
given the reluctance of fund managers 
to lend the government more than is 
absolutely necessary, the search is an 
for alternatives. 

Options contracts which guarantee 
fUnds the better of equity or gilt mar- 
ket returns are one possibility. Such 
contracts would match older iiabPttiffl 
for the purposes of solvency but leave 
open the prospect of equity-style 
returns. Yet even though derivatives 
markets are expanding, there is not 
nearly enough liquidity to allow all 
funds to cover themselves in this way. 
Investment banks also charge high 
premiums for such protection. 

Assets which share some of the 
characteristics of equities and bonds 
could also attract interest. With their 
income linked to retail prices, for 
example, utility shares In theory bear 
some resemblance to index-linked 
bonds. But though utility shares tend 
to track gilts over short periods, the 
similarities are unlikely to be suffi- 
cient to impress the actuaries. Apart 
for the regulatory risks, many utilities i 
are trying hard to look more like equi- 
ties by diversifying away from their 
regulated businesses. Most funds wflL 
find that the solvency regime leaves 
no palatable alternative to buying 
additional gilts. 



A 
: / 



V. 


fi 


v' m 





The Republic of Kazakhstan 

through its affiliates Kazakhstanmunaigaz and 
Tengizneftegaz Production Association 

and 

Chevron Corporation 

through its wholly owned subsidiary 
Chevron Overseas Company 

have formed 

Tengizchevroil 

a limited liability partnership registered in 
the Republic of Kazakhstan 

to develop the Tengiz and Korolev oil fields 


J.P. Morgan Securities Inc. acted as Jina/icial advisor 
to the Government of the Republic of Kazakhstan , 
Kazakhstanm un aigaz . and Tengizneftegaz 


iweefc: 



JPMorgan 

.April mS 





17 





FINANCIAL TIMES 

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HOMES • PROPERTIES 'CONSTRUCTION 

021 711 1212 

COMPANIES & MARKETS 

(©THE FINANCIAL TIMES LIMITED 1994 


IIIIIIIIUIIIIIIIIII 

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■ Monday; Jufyii avi’994 - ' *v • V' : 


MARKETS 


THIS WEEK 



« RICHARD WATERS: 

GLOBAL INVESTOR 
Polltcal Considerations will set the 
tone in some of the biggest 
investment markets In the Americas 
over the next few months. Mexico 
and Brazil are heading for 
presidential elections, while in 
Canada, a regional vote will once 
again raise the spectre of devolution for Quebec 
Page 21 


MARTIN WOLF: 

ECONOMIC EYE 

The US insists that the environment 
be put on the agenda of the World 
Trade Organisation. Martin Wolf 
argues that this is just another case 
of rich country hypocrisy. If they 
want better environmental policies 
In poor countries, they should pay 
for them. Page 21 



BONDS: 

A more optimistic mood seems to have settled on 
the European bond markets. And whDe the factors 
responsible for the bear run remain in place, the 
relief may last for a white. Page 22 

EQUITIES: 

Currency factors have turned positive for UK 
equities, according to analysts, who also note that 
earnings ratios are low compared with other leading 
markets. In New York, investors are eagerly 
awaiting IBM's second-quarter figures due on 
Thursday. Page 23 

EMERGING MARKETS: 

Tun cay Artun, chairman of Istanbul’s stock 
exchange, Is putting a brave face on Turkey's 
troubles. But with interest rates edging down and 
the lira appreciating, the market may now be 
through the worst Page 23 

CURRENCIES: 

if Alan Greenspan can convince markets that the 
Fed Is on top of inflation, this could support the 
bond market rally and hence the doflar. Page 29 

COMMODITIES: 

A scheme to bring the aluminium industry back into 
balance after a period of soaring stocks will be 
reviewed this week at an international meeting In 
Canberra, Australia. Russia is believed to be well 
behind schedule with its promised cuts. Page 21 

UK COMPANIES: 

Mercury, the main UK rival to BT, is set for only 
modest growth in the next few years, according to 
a broker's swvey of the spending intentions of 100 
large business users. Page 18 


INTERNATIONAL COMPANIES: 

Hyundai, South Korea’s largest conglomerate, is 
planning to expand into the steel market, but the 
government fears that the company’s plans to buBd 
a steel plant by 1997 could lead to a glut in steel 
wmm&smx FztwanoF Bxi supplies and threaten the profitability of 

state-owned Pohang Iron & Steel. Page 19 


STATISTICS 


Bass lending rales J29 London recent issues 29 

Company meetings 20 London share service . 30-31 

Dividend payments — 20 Managed funds 25-29 

FT-A World Indices ...21 Money markets 29 

FT Guide to currencies .... 19 New Int bond Issues 22 

Foreign exchanges ....>.....-29 World stock mfct Indices - 24 


Directors quit Standard after bribe inquiry 


By Simon Davies in London 
and Simon HoflMrton in Hong Kong 

Two directors of Standard Chartered’s 
bullion aim, Mocatta, one in London and 
one in Hong Song, resigned after taking 
responsibility for the latest corruption 
scandal to hit the hank, it emerged yes- 
terday. 

This followed an investigation into 
bribes paid by Mocatta employees in 
exchange for business from junior civil 
servants at the central banks of both the 
Philippines Malaysia. 


It is a further embarrassment for Stan- 
dard Chartered, which bag built up a 
reputation for being accident prone. It 
recently announced the resignation of 
the managing director of its Hong Kong 
stockbroking arm, which was found 
guilty of illegal share support schemes. 

Standard Chartered said the bribes 
took place last year, and appropriate 
action had been taken. A spokesman 
said: “We have properly reported our 
investigation to regulatory authorities, 
wherever appropriate.’* 

This included Standard Chartered's 


primary regulator, the Bank of England 
Hong Kong’s Monetary Authority, and 
also Bank Negara. Malaysia’s central 
bank, and the authorities in Manila. 

A Standard Chartered official said 
these authorities appeared satisfied with 
the bank’s investigation into the bribery 
allegations, and it was understood that 
no further action was likely. The Bank- 
of England launches investigations only 
where there is a serious and immediate 
risk to depositors. “We regard the mat- 
ter as dosed,” the official said. 

The revelations come at a sensitive 


time for Anglo-Malaysian relations, 
which were rocked by more allegations 
that Wimpey offered bribes to senior 
Malaysian politicians, in exchange for 
contracts. A ban on handing out Malay- 
sian government contracts to UK compa- 
nies still stands. 

The Malaysian link is also sensitive 
for Standard Chartered, since it has a 
substantial presence there, with 35 bank 
branches. Its south-east Asian 
operations (excluding Hong Kong), 
which are primarily focused on Singa- 
pore and Malaysia, made profits before 


bad debt provisions, of £166m last year. 
It has three offices In the Philippines. 

It is understood that the sums 
involved at Mocatta were relatively 
small. *No one is living an extravagant 
lifestyle as a result." a Standard Char- 
tered executive said, indicating that the 
bribes involved a few thousand pounds. 

He added that the offering of small 
bribes was regarded as normal business 
practice in Malaysia and the Philippines, 
however. Standard Chartered had 
ensured that this attitude should not 
apply to its own operations. 


Alcatel’s chairman is optimistic in spite of a legal investigation and 
difficult European markets, write John Ridding and Andrew Adonis 


A struggle to 
stay on track 


Alcatel Afsthom: a turn for the worse 

f - »•$.- 

sT* V'. "O, •?* 

"r ? >. « 



(FFrbBkwi) 

' 1989 

1990 

1991 

Ptone Suard chairman 

1992 1993 1994 

Sales 

14390 

144.06 

16008 

161.68 

15033 

- 

Capita) expendfture 

aaa 

699 

7.82 

7.00 

6.49 

- 

RIDaicendkn 

10.86 

12.14 

14.74 

15.12 

15J24 

- 

Not Income 

3.90 

5.03 

8.18 

7.05 

7.06 

5£-&4- 


'Company ra warned ot 1 0-20% M In Income We year 
Share Price (FR) 



T hese are critical times for 
Mr Pierre Suard, chairman 
of Alcatel Alsthom, who 
has built his telecoms, transport 
and engineering group into one 
of France’s largest industrial con- 
cerns. 

Earlier this: month, the Alcatel 
chief was placed under investiga- 
tion concerning allegations of 
fraud relating to payments for 
work at his Paris properties. 
Before that, Mr Suard found him , 
self in the unfamiliar position of 
issuing a profits warning. In Jan- 
uary, he forecast that Alcatel’s 
net profits would shrink by 
between 10 and 20 per cent this 
year, the first decline since 1967 
when the company’s rapid expan- 
sion was launched with the 
acquisition of the European tele- 
coms equipment operations of 
ITT of the US. 

The purchase of Elat’s telecoms 
operations, aggressive exports, 
and a joint venture with GEC of 
the UK, which manufactures the 
high-speed Train a Grande 
Vitesse, have since fuelled the 
company's growth. 

Has Alcatel been derailed by 
this year’s events? 

Sitting in the company's smar t 
Paris headquarters, Mr Suard is 
unruffled. “I feel rahn and confi- 
dent,” he says, referring to the 
investigation. As for business: 
“1994 is a difficult year . . . but I 
am more optimistic than I was in 
January," he says, citing the suc- 
cess of the group's technical pro- 
grammes and the economic 
recovery in some of its markets. 
Most industry analysts concur, 
predicting a return to profits 
growth in 1995. 


announcement of a formal inves- 
tigation. “I feel the events are a 
profound injustice,” he says, 
firmly denying allegations that 
he underpaid company suppliers 
for building work worth about 
FFr440,000 ($82,450) at his former 
Paris residence. He says that the 
FFr300,000 worth of security 
work done at his home, also 
under investigation, was 
approved by Alcatel’s board fol- 
lowing express instructions from 
the government to tighten secu- 
rity after the 1966 assassination 
of Mr Georges Besse, rii*m head 
of Renault. 

Mr Suard claims there have 
been irregularities in the conduct 
of his investigation. “Some por- 
tions of the file under the control 
of the investigating judge 
appeared in the press on Wednes- 
day [July 6], which is very 
improper and a gains t the law.” A 
stock exchange inquiry, 
ttemandad by Mr Suard, Is exam- 
ining the way that news of his 
detention was released. Shares 
fell by 8.3 per cent after his 
detention was revealed, although 
tiie losses have since been 
recouped. 

The Alcatel chairman says that 
the investigation has not unduly 
disrupted his management. More 
serious, he believes, is the impact 
of the affair on the imag e of the 
group as it battles for overseas 
contracts. 

This is of particular concern as 
the company struggles to adjust 
to a fall in earnings and a deteri- 
oration in some markets - partic- 
ularly for telecommunications 
equipment, its largest sector. 

“Alcatel, like other telecoms 
equipment groups, is confronted 


1993 

Stance: Alcatel Atetbom Qotp/Daiastreem 

absolute terms and more in mar- 
gin terms," says Mr Evan Miller, 
European telecoms analyst at 
Lehman Brothers. 

Alcatel has not been a laggard 
in new markets, either in terms 
of geography or technology. 
According to Dataquest, it vies 
with Nokia and Motorola for sec- 
ond place in the European infra- 
structure market for new mobile 
phone networks built to the 
international GSM standard. 
Alcatel established itself in 


China, the world’s fastest-grow- 
ing telecoms market, before 
many of its competitors, and this 
year expects to sell China 7m 
lines of switching equipment - 
more than for the whole of 
Europe. 

The company has also made 
notable acquisitions in Europe 
and the US. Three years ago it 
acquired the transmission divi- 
sion of Rockwell of the US, and 

Continued on Page 19 


Mr Suard is aggrieved by the 
legal wrangles, which included 
more than 12 hours of interroga- 
tion on July 4, before the 


by the fact that traditional digital 
Kwi trtimg systems and transmis- 
sion markets have shrunk in 


Opec members 
targetted in 


futures 

By Robert Conrine In London 

International banks and 
commodity exchanges have 
launched a concerted effort to 
persuade big petroleum produc- 
ing countries to use futures con- 
tracts and forward sales of oil to 
hedge against sharp falls in oil 
revenues. 

A number of separate 
approaches are being made to 
producers, with members of the 
Organisation of Petroleum 
Exporting Countries at the top of 
the target hst. 

The International Petroleum 

Rrrhang e in 1 -nnrinn says it has 

been encouraged by recent con- 
tacts with Opec members. Mr 
Peter Wildblood, chief executive, 
says "producing countries want 
to understand better how the 
market can he used.” 

Although no Opec member has 
so far committed itself to a hedg- 
ing programme, Mr Wildblood 
believes it will only be a matter 
of time before one does. 

The IPE is stressing to produc- 
ers that use of the fixtures' mar- 
kets can give them better control 
over their national budgets in a 
period of oil price volatility. 

It cites the example of Mexico, 
a non-Opec exporter which initi- 
ated a hedging programme in 
1990-91- It cost about $20Qm to 
implement but saved the country 
about $800m when world oil 
prices fell. 

Many Opec members have had 
to make sharp budget cuts over 
the past 18 months, as prices fell 
from around $20 a barrel at the 
start of 1993 to a low of about $13 
last February. 

They have since rallied to 
around $18 a barrel, but cumula- 
tive Opec revenues in May, for 
example, were still more than 


drive 

$10.5bn. or 19 per cent lower than 
cumulative reviews a year ear- 
lier. according to the Interna- 
tional Petroleum Finance Com- 
pany in Washington. 

Mr Wildblood concedes that 
officials in some Opec states still 
view futures markets as centres 
of speculation and “the work of 
the devil”. But he counters that 
80 per cent of the IPE volume is 
accounted for by oil companies 
and other industry-related insti- 
tutions. “There is very little spec- 
ulative interest” 

Another scheme which Is being 
promoted in Opec capitals is 
based on the present sale for cash 
of oil for fiiture delivery. 

Mr Ibrahim Kamel, an Egyp- 
tian banker and politician who 
heads the Jersey-based Petro- 
leum Securities Corporation, said 
forward sales would be packaged 
as a negotiable security known 
as a petroleum delivery certifi- 
cate that would carry a fixed 
return. He said the cash raised by 
such sales, in the range of $500m 
to $2bn, would fund energy infra- 
structure projects in the selling 
country. Another national petro- 
leum company would act as a 
delivery guarantor. 

Investment bank Morgan Gren- 
fell and Nomura, the Japanese 
securities house, are understood 
to be considering participating in 

the programme. 

Those advocating Opec's use of 
futures markets or forward sales 
claim they would have little 
impact on long-term prices. 

Officials at Opec's headquar- 
ters in Vienna confirm that they 
are making a detailed study of 
the oil futures' markets. But they 
say the exercise is to evaluate the 
impact of the futures markets on 
real prices, and not to prepare 
Opec producers for using them. 


This week: Company news 


2 


US BANKS 

Mild recovery 
expected in 
trading revenues 

With net interest margins largely 
unchanged, this week's second-quarter 
figures from leading us money centre 
banks will turn in large part on how 
well they have coped with trading in 
unsettled foreign exchange and fixed 
income markets. 

Trading revenues are generally 
expected to recover from the poor first 
quarter, but lag average 1993 quarterly 
income by some 25 per cent. However, 
as JP Morgan proved last week, the 
□umbers remain volatile: even without 
taking any big hits, the bank reported 
tr ading income below the first quarter 
and less than half the quarterly levels 
or 1993. 

The greatest year-on-year earnings 
advances are likely to come from banks 
tha t have continued to recover from 
past credit problems. 

Most analysts forecast earn i n g s per 
share for Citicorp at about $1.22 (up 
from 82 cents) and BankAmerica at 
$L31 ($1.19) - the latter an indication 
that the Califo rnian economy 
has finally begun a recovery from 
its three and a half years of 
recession. 

Region al banks, meanwhile, should 
see stronger earnings growth as a 
group, with accelerating loan demand 
and little chang e in the net interest 
mar g in, despite higher US interest 
rates. 

If rising interest rates have an effect 
it is likely to be on the earnings of 
b anks that have used interest rate 
swaps to boost their margins in the 
past 

Foremost of these is BancOne, which 
in recent periods has boasted a net 
interest margin of more than 6 per 
cent but is expected to see this foil 
fast (in part due to foiling margins 
on credit cards). 

BancOne's second-quarter earnings 
per share are expected to be level with 
the previous quarter and a year before, 
at Si cents. 




Sham prices retsBveto the FT-SE-A 
Phsrmac8Udcefe sector 

160 . ~ — 



SMTTHKUNE BEECHAM/WELLCOME 

Tagamet will be a 
hard act to follow 

Two of the UK’s biggest drugs groups 
report this week. Tomorrow, 
gmlthKHne Beecham announces results 
to June 30. Analysts expect pre-tax 
profits for the second quarter at 
between £272m and £282m ($428.6m), 
against £257m before exceptional. 

Most attention will be given to the 
plight of Tagamet, the anti-ulcer drug 
which was formerly the group’s biggest 
product and whose US patents expired 
on May 17. The progress of newer 
products, such as Paxil, an 
anti-depressant, will be scrutinised. 

Questions anil also be asked about 
problems at the clinical laboratories 
businesses in the US, which have 
traditionally been profitable, but have 
run into difficulties with the more 
cost-conscious healthcare envir onme nt. 

On Thursday, Wellcome reports 
four-month figures to June 30. The 
company is changing its year-end from 
August to December. Analyst s will 
therefore be focusing on underlying 
sales growth. 

Last year, such growth was 
disappointing, including sales of 
Zovirax, Wellcome’s biggest product 
Tbe destocking that affected sales m 
the US should have worked its way 
out Expectations for Zovirax are for 
a 10 per cent rise. 

Analysts will also be looking for 
signs that the sales decline in Retrovir, 
the HIV and Aids treatment may he 
bottoming out 


OTHER COMPANIES 

Cost-cutting may give 
oil majors an edge 

When the US majors report 
second-quarter figures (Amoco and 
Texaco are expected at the end of this 
week, with Exxon and Chevron shortly 
after), it wffl be against a markedly 
different backdrop from three m onths 
before. 

Oil prices have jumped, though 
perhaps too late in the period to have 
a great effect gas prices have slid, 

<md refining margins have tumbled. 

What earnings gains emerge will 
largely come from costcutting. Paul 
Ting, an analyst at Oppenheimer in 
New York, forecasts earnings per share 
declines particularly at Exxon (69 cents 
compared with 87 emits in the previous 
quarter), Texaco (60 cents, down from 
69 cents) and Chevron (falling to 50 
cents from 65 cents, due to poor 
refinin g margins in the US). Better 
news, he says, will come from 
cost-cutting or restructuring at Amoco 
(up from 74 cents in the first quarter 
of the year, to 79 cents) and Mobil (at 
$1.25 a share , a little weaker than the 
$1.31 of the first period). 

■ Finmeccanica: Tbe Italian 
state-controlled engineering and 
defence group today launches what 
amounts to a partial privatisation of 
the company, through a LLTDOtm 
(Sl.lbn) rights issue. The issue - priced 
at IA10Q a share ~ will reduce the stake 
ofIRL the state holding company, from 
85 per cent to less than 60 per cent 
The proceeds will be used to reduce 


US ofla 


S&p oil sector reWhie to the sap 
Composite Index 

WO 



1990 91 ’ 92 98 94 

Source: Oatoatraam 


debts and help pay for the acquisition 
of formerly state-owned defence 
interests. 

■ Waste Management International: 
The UK-based environmental services 
group today reports second-quarter 
figures, which are expected to show 
continued growth despite the impact 
of the recession In continental Europe. 
Analysts are looking for pre-tax profits 
to rise from £37m ($56m) in the same 
period last year to between £4Gm and 
£44m. 

■ David S Smith: The UK-based paper, 
packaging and office supplies group 

is expected to report a continued 
recovery in profits when it announces 
annual figures on Wednesday. 
Althou gh first-half profits were down, 
analysts forecast that the full-year 
pre-tax figure will have risen from 
£27.lm to between £33m and £35m 
($5&2m). But earnings per share will 
show little change. 


Companies in this issue 


Alcatel Atetoom 

17 

Daedong Bank 

19 

Korea Fist Bank 

19 

Amoco 

17 

DavtdSSmm 

17 

KiAereskedelrre Bank 

19 

BET 

ia 

Donghwa Bank 

19 

Marewy 

18 

BancOne 

17 

DongnamBank 

19 

Microsoft 

1 

Bank of Seoul 

19 

Exxon 

17 

Procter & Gamble 

1 

BankAmerica 

17 

Rnmeccarece 

17 

Samsung 

19 

Bayetfeche Land’bnk 

19 

Hand Bank 

19 

Ski ban 

19 

Beverley 

18 

Hopidnsans 

ia 

SmtthKJhe Beecham 

17 

BoramBank 

19 

Hyundai 

19 

Standanl Chartered 

17 

Chevron 

17 

ING 

19 

Texaco 

17 

Cho Hung Bank 

19 

Itafian Renaissance 

18 

UnBever 

1 

Citicorp 

17 

JP Morgan 

17 

Wests Managmtlntnl 

17 

Ccmml Bank of Korea 

19 

Korea Exchange Bank 

19 

Welcome 

17 



Property Index 
Certificates 


' BZW Property Investmoit Management . . 
Limited devised 'and raised £150 million .. 
of Property Index Certificates issued by 
Barclays BahkPLC. Tbe Subscription -Price, 
on 1st July 1994 was £107.49 per £100 
nominal amount of Certificates. . 


BZW Property Investment 
Management limited 


7 ; July. 1994 - • 



3 






18 


FINANCIAL TIMES MONDAY JULY 18 1994 


COMPANIES AMP FINANCE 


Competition may hit Mercury 


Profits of more than £lbn 
seen for Lloyd’s in 1993 


By Andrew Adonis 

Mercury, the main rival to 
British Telecommunications, is 
being “squeezed, from all sides" 
and is set for only modest 
growth in the next few years, 
according to a broker’s survey 
of 100 large business 
users. 

The survey, by James Capel, 
finds that after six years 
of rapid growth at the expense 
of BT in the large corporate 
sector. Mercury has now 
reached a plateau in terms of 
the spending intentions of com- 
panies. 

The 200 companies, repre- 
senting about 10 per cent 
of the large corporate market 
by value, are at the heart 
of Mercury’s existing bus 
loess. 

Their average telecoms 
spending is projected at more 
than £3m this year, with Mer- 


Difficulties 
of buy-outs 
at recs 

Regional electricity companies 
would make suitable candi- 
dates for leveraged buy-outs, 
though thare woald be politi- 
cal and regulatory risks, 
according to analysts at Hoare 
Govett, writes David Lascefles. 

In a report on the prospects 
for LB Os at the privatised elec- 
tricity companies, the analysts 
say they enjoy monopoly prof- 
its on their distribution busi- 
nesses and strong cash flow, 
which would support buy-outs. 

The expiry of the govern- 
ment's golden shares next 
March wfll also aid increased 
corporate activity by the recs. 

But they also question 
whether investment banks 
wonld be willing to arrange an 
LBO for a regulated utility 
which was heavily dependent 
upon regulatory decisions, and 
might become prone to politi- 
cal decisions as the next elec- 
tion approaches. 

In addition, the recs' share- 
holding in the National Grid 
Company would have to be 
unscrambled before any LBOs 
could take place. 

The analysts conclude: 
“Despite their strong financial 
attractions, we question 
whether recs will become the 
subject of LBOs.” 


cury expected to take a 22 per 
cent share, far ahead of the 13 
per cent it is estimated to have 
of the total UK telecoms mar- 
ket. 

The companies surveyed 
were strongly attracted to new 
telecoms operators such as 
WorldCom. MFS and Sprint, 
licensed since the abolition of 
the BT/Mercury duopoly in 
1991, which are focusing on the 
large business sector. 

A year ago, only 14 per cent 
of the companies used tele- 
coms carriers other than BT 
and Mercury. This year 28 per 
cent do so. with a further 18 
per cent claiming to be very or 
quite likely to use another car- 
rier. 

Nearly 80 per cent of 
the companies claimed to be 
Mercury users. Mercury's high- 
est rate to date, with 
another 10 per likely to sub- 
scribe. 


By Scheherazade Daneshkhu 

Carnegie International, the 
securities firm, has postponed 
the launch of the Italian 
Renaissance Investment Trust, 
despite raising more than the 
minimum fund size of £20m. 

The trust, to be managed by 
Fondigest, the Italian miTtnai 
fund manager, would have 
been the UK's first single-coun- 
try investment trust specialis- 
ing in Italy. 

Carnegie said that the plac- 
ing had raised £25m. The 
offer had been capped at 
£100m. but it was realistically 
expecting to raise between 


By Joel Klbazo 

The Hong Kong-based Far East 
Consortium International is set 
to gain a control of Beverley 
Group, the engineering con- 
cern previously known as 
Petrocon, in a deal that will 
give it a stake of more than 70 
per cent in Beverley. 

FEC is to sell its Vicco Devel- 
opment subsidiary to Beverley 
for about £9m to be satisfied by 
the Issue of new shares. The 
Takeover Panel has waived the 
requirement for FEC to make a 
full offer 


But four in five existing 
users said they used Mercury 
mainly for cost savings, 
against only 10 per cent nam- 
ing quality, suggesting that its 
market is highly vulnerable to 
competition. 

“Competition is squeezing 
Mercury from all sides", said 
Mr Martin Mabbirtt, telecoms 
analyst at James CapeL “The 
growth of new operators in the 
business sectors is eroding 
margins in its areas of historic 
strength.” 

He added: “Over the next few 
years the company seems set 
to pay the price for a low level 
of penetration of the residen- 
tial market" 

In spite of rapid progress in 
the past year, Mercnry has 
only about lm residential cus- 
tomers, against BTs 20m. 

A large proportion of these 
users are connected through 
local cable operators, many of 


£35m and £50m in all. 

It cited “adverse market con- 
ditions” as the main reason 
for postponing the launch. But 
the trust's directors “were 
especially concerned that the 
Initial price at which the 
new shares would trade would 
not fairly reflect the prospects 

for Italian mettimn and smaller 

sized companies”, in which the 
trust was to have specialised. 

Records were set earlier this 
year for the amount of money 
raised by new investment trust 
issues, but markets have been 
more nervous since the first 
rise in OS interest rates In Feb- 
ruary. The average discount to 


VIcco's principle asset is a SI 
per cent holding in Guangzhou 
Pegasus, a company based in 
China which is engaged in the 
design, manufacture anri mar , 
keting of boilers for the Chi- 
nese market 

Mr Colin Robinson, chair- 
man of Beverley, acknowl- 
edged that FEC was to gain 
control of the company but 
said its present management 
would remain in place. "This 
gives us an enormous opportu- 
nity for entry into the Chinese 
market” 

News of the takeover came 


whom are prepared to switch 
their long-distance traffic to 
other carriers if they can get a 
better price. 

Mercury has responded with 
initiatives to improve its net- 
work quality and its access to 
residential customers. 

A £2Q0m upgrading of its 
pati on q i network is under way, 
and it is experimenting with 
radio technology as a means of 
by-passing BT and cable opera- 
tors at the local level 

However, some analysts see 
other recent moves as evidence 
of its predicament 

It is engaged in an acrimoni- 
ous battle with Oftei. the 
industry regulator, to secure a 
more favourable regulatory 
regime. 

It also began negotiations 
with AT&T, the largest US 
operator, for an alliance, but 
drew back at a late 
stage. 


net asset value hit its narrow- 
est point in January, but has 
since widened. 

In May, Murray Johnstone, 
the UK ftmd management com- 
pany, postponed the launch of 
a UK smaller company invest- 
ment trust because of doubts 
over the level of investor 
demand. 

However, Schroder’s new 
Japanese investment trust was 
oversubscribed earlier this 
month. 

Carnegie said that “provided 
that interest in investment 
trust new issues recovers" the 
trust would be launched in the 
autumn. 


as the group's report and 
accounts for the year to 
December 1933 were qualified 
by itsauditors before being 
posted to shareholders at the 
weekend. 

Solomon Hare, the auditors, 
said the group had been 
“unable to provide confirma- 
tion that it will have sufficient 
facilities to cover future work- 
ing capital". However, Mr Rob- 
inson said, the deal with FEC 
would “sort that out”. 

Beverley last month reported 
increased pre-tax losses of 
£2-67m. 


BET settles 
pay-off for 
director 
at £450,000 

By wanam Lems 

Mr Bob Mackenzie, who on 
Friday left his post as finance 
director of BET, is to receive a 
pay-off of about £450,000, 
according to sources in the 
business services group. 

The settlement, which is 
substantially higher than ear- 
lier reports, could anger insti- 
tutional investors who are 
beginning to take a tough 
stance on large pay-outs to 
directors. 

Insiders say the size of the 
pay-off was doe mainly to the 
three-year rolling service con- 
tract which Mr Mackenzie 
signed in November 1991- It 
guaranteed him three years’ 
notice from BET. 

Mr Mackenzie's basic flnnnai 
pay was increased to £222,000 
this year, theoretically 
entitling him to a £666,000 
pay-off. However, he appears 
to have settled for a package 
equivalent to two years’ basic 
salary- BET says it will dis- 
close the exact amount in next 
year’s annual report. 

The development follows 
BET’S decision to appoint Mr 
Keith Payne, who joined the 
main board last year as direc- 
tor of strategic planning, to 
the post of director of finance, 
planning and development. 

Mr Mackenzie said on Friday 
that his resignation was 
“mutually agreed” with BBT. 
He wanted “to explore other 
opportunities” but would be 
staying on as a consultant to 
BET until December. 

Last month Mr Alastair Ross 
Goobey, PosTel’s chief execu- 
tive, in an attempt to reduce 
pay-outs to directors, 
announced a policy of voting 
against the reelection of direc- 
tors with rolling contracts lon- 
ger than two years. 

Two BET directors have 
three-year rolling service con- 
tracts - Mr John Clark, chief 
executive, and Mr John Allan, 
marketing director, who earns 
a basic salary of £178,500. Mr 
Payne has a two-year rolling 
contract and basic salary of 
£184,000. 

Mr Clark’s basic salary is 
£396,000. He also has the 
potential to earn a bonus of up 
to £287.600 through a manage- 
ment incentive plan. 


| By Richard Lapper 

Uoyd’s of London can expect 
to make comfortable profits in 
1993 and for the next three 
years and investors should buy 
shares in a number of the 
listed Lloyd’s investment 
trusts formed last year, a secu- 
rities firm argues. 

Mr Nick Bunker, analyst 
with Hoare Govett UK Invest- 
ment Research, predicts pre- 
tax profits of £L02bn in 1983. 
However, the figure will be 
reduced by additional provi- 
sions tor past losses, stemming 
mainly from US asbestosis and 
pol lution related claims. 

Mr Bunker expects “head- 
line” pre-tax profits to decline 
thereafter, to £8i0m in 1994, 
£739m in 1995 and £155m in 
1996, thanks to a number of 
factors Including the Los 


Hopkinsons, the industrial 
abrasives and engineering 
group which in April reported 
a 69 per cent decline in pre-tax 
profits, has sold its England- 
Worths! de drinks equipment 
subsidiary in a £L56m manage- 
ment buy-out. 

The purchasers are Mr Tre- 
vor Hicks and Mr Tony Clark- 
son, managing and sales direc- 
tors of England-Worthside, 


Angeles Mrihguatf in January 
this year, losses from which 
are expected to cost Lloyd’s 
$? 00 m (£460m). 

In addition, losses from ship- 
ping and aviation are expected 
to rise, while premium rate 
competition will intensify. 

The forecasts, the first 
medium term assessment of 
the market’s prospects, were 
calculated on the basis of eight 
computer models. 

The research stresses “these 
forecasts have been struck con- 
servatively, on the basis of 
assumptions which are set out 
explicitly and in full”. In par- 
ticular Hoare Govett does not 
expect any upturn in rates for 
US casualty business. 

The relatively upbeat fore- 
cast follows five years of 
record breaking losses. 

Most recently Lloyd’s 


pany in which they together 
have a majority interest 

The consideration is payable 
in cash. Closerate will also 
assume responsibility for any 
bank overdrafts of England- 
Worthside. Inter-company 
indebtedness of £432,000 will be 
repaid on completion. 

The buy-out is backed by 3i. 
the investment capital group. 
The managers have raised £6m 
for the buy-out and to meet 


announced a deficit of cubn 
for the 1991 underwriting year 
bringing its total losses 
since 1988 to more than 
£7bn. 

Losses are also expected for 
the 1992 underwriting year, 
when results are reported next 
year. 

Hoare Govett says that in 
some sectors of the market, 
notably in marine business, 
returns will be very high by 
historic standards, and that 
therefore, “signs of rate reduc- 
tions in some areas tins year 
should not be surprising or 
necessarily worrying". 

The forecasts assume that 
Lloyd's can finance the cre- 
ation of NfewCo, toe reinsur- 
ance company into which it 
aims to transfer all liabilities 
stemming from 1986 and ear- 
lier. 


on-going funding require- 
ments. 

England-Worthside makes 
hand pull beer pumps and dis- 
tributes drinks dispensing 
equipment. It produced a pre- 
tax profit of £858,000 in 1993, on 
turnover of £5.17m. 

The disposal is being mad* 
to allow Hopkinsons to concen- 
trate on its abrasives, engineer- 
ing. plastic injection moulding 


operating as Closerate. a com- 


CROSS BORDER BI&A DEALS 

BTDDeVWVESTOR 

TARGET 

SECTOR 

VALUE 

COMMENT 

Ontario Quinta 
(Camda/CMe) 

Edefaw (Peru) 

Bectrtoty 

£l38m 

Part of Peru 
privatisation 

Mattel (US) 

JW Spear (UK) 

Toys 

C62m 

Beats off 

Hasbro 

John WaddZngton (IRQ 

Itnca (Netherlands) 

Packaging 

£42m 

Pan -European 
move 

Kitty Uttta (UK) 

Grocpe L'Arny (France) 

Optical 

equipment 

£8.9m 

Further 

expansion 

possible 

Electrolux (Sweden) 

Refripar (Srazfl) 

Bectricd 

appkances 

£6.5m 

Taking 6% stake 

Metroptax (Malaysia] 

Subic Bay Resort 
(Hong Kong) 

Hotels 

C6m 

Raising stake 
to 85% 

Forte (UtQ/Repaol 
(Spate) 

JV 

Catering 

C3m 

Little Chef 
venture 

Select Appointments (UK) 

Relance Resources 
(Canada) 

Business 

services 

£ 2 .6m 

Continuing 
overseas growth 

ITT (US) 

CfQ8 (ttaltf 

Hotels 

n/j 

Taking 

effective 

control 

tnmatal (Franco) 

Lonza Graphites 
(Switzerland) 

Chetntcafs 

n/a 

Afusufase-Lonza 

disposal 


and drainage businesses. 


Italian trust launch postponed 


HK company reverses into Beverley 


Hopkinsons sells subsidiary to managers for £4.56m 



liinu' 1 

fjn ii 

\J‘ • 

a" ’ 

f 


FINANCIAL TIMES 

LONDON • PMll - WRAMKPURT - VtiM • TQKtQ 


3 


MANAGEMENT REPORTS 


AUTHORITATIVE 

MARKET 

REPORTS 

Accountancy • Automotive 
• Bunking Finance - Energy 
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Pharmaceuticals • Property - 
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INFORMATION CALL: | 

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Daehan Korea Trust 

International Depositary Receipts 

NOTICE IS HEHEBY GIVEN to Unrttiotdera that Daehan Korea Trust, has 
dedared a dMdend in The RepuMc of Korea amounting to Wan 3S3 per unit 
payable on or attar August S, 1994. 

Payments of Coupon No. t of (he International Depositary Receipts wHl be 
made on or attar August B, 1994 against presentation ot the Coupons to the 
Depositary or to one of the Depositary Agents fisted below, fin the case of 
Holders ot bearer IDRs), or (In the case of Holders of registered IDRs) to 
Holders (hat the Depositary is satisfied were on the Register on the Record 
Date -June 30. 1994: 

OEPOSTTARY 

Chase Manhattan Bank Luxembourg &A. 

5 Rue Plaetis. Luxembourg Grund. L233S Luxembourg 
OEPOSTTARY AGENTS 

The Chase Manhattan Bank, NA Chaaa Manhattan Bank (Switzerland] 
Vfeotgata House. Coleman Street 63 Rue du Rhflne,CH-l 204 Geneva 

London EC2P 2HD Switzerland 

Amsterdam-Rotterdam Bank N.V. 

FoppingaOraef 22, T102 BS Amsterdam Z-O 

The amount ol dollars payable In respect of Coupons presented to an Agent 
ot the Depositary by the Close of Business on August 4. 1994 9hal be the net 
proceeds ot the sale of the amount ot Won for US dollars at the prevalftng 
telegraphic transfer setfing rate of US doHare for Won as quoted by a foreign 
exchange bank in Korea on the day on which the relevant transfer « made. 
The dividend proceeds w« be distributed to IDR Holden! in proportion to thed 
respective entitlement and attar the deduction of alt taxes and fees, charges, 
duties and expenses of the Depositary. 

AU Certificate holders are required to submit the name and address of a bank 
in New York and a US doBar account number for paymenL or an adekess tor 
which payment should be sent by US dedtar cheque. 

AH hold ere resxing in a country having a double taxation treaty with The 
Republic ot Korea may obt a in payment at a lower rate ot the Korean non- 
resident wrthhofcing tax, on condition they furnish to either the Depositary or 
through one of the designated Depositary Agents, a certificate showing their 
residence, together wfth a copy of the Certificate of incorporation, or. for 
Individuals, a copy of their passport These documenls are requested by the 
Korean National Tax Administration Office as evidence of residence. 

Without such proof ol residence, the full tax rate of 26 875 percent Korean 
nofl-resMam withholding tax wfll be retained. 

It arty holder falls to request the efevtbutioo by (he end of five years from the 
dais on wfucfr this distribution first became payable, the unclaimed amount 
shall be returned » the Trust at the expiration of the five years. 

Chase Manhattan Bank Luxembourg S-A. 
as Depositary 


d$M 

ASAHI BREWERIES, LTD. 

flweqa ata alga irift finteriSahOfy) 

¥304)00,000,000 
Floating Rate Notes 
1996 

In accor dan ce wfth tha 
Terms end Conditions ot the 
Notes, notice is hereby given 
that the rate of iittentgr for the 
period 18th July. 1994 to 18th 
January. 1995 h» been fixed at 
3.95 percent, per annum and 
that the coupon amount payable 
on the 18th January, 1995 will be 
¥199,123 per note of ¥10,000.000. 

♦ 

THE SUMITOMO BANK, 
LIMITED 

tAflencBanfcl 


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Japanese Yen lOJJOOJKXWJOO 
Bad end Floating Rw 
Guaranteed Notes 18&6 
Notice Is hereby given thet to 
accordance w»r Conation 5(C) ol 
Vie Tams and CondMoni* Holden 
of Notes wishing to exerctea me* 
cpfior to redeem Ihefr hofeangs on 
21st October, 1965 must deposit 
such NotBSwtdi any Paytog Agent 
between 22na August, 1894 and 
21st September, 1994, both dales 
Induwve. togtohar with a (My 
completed redemption rxXJee In the 
toim avaiable hom any Paying 
Agent 

By ORIX Ireland Finance pic 

lath July, 1994 


SCUDDER GLOBAL OPPORTUNITIES FUND 

Socititd tf Invastissamant a Capital Variable 
Compartments Multiples 

Si dge soc a/: 4 7. Boulevard Royal, L-3449 Luxembourg 
R.C. Luxembourg B 43.017 



NOTICE OF MEETING 

Dear Shareholder. 

We> have the pleasure of inviting you to attend the Annual General Meeting ot 
Shareholders, which win be held an July 25, 1994 at 10.00 a.m. at the offices at 
Stole Street Bank Luxembourg S.A.. 47. Boulevard Royal. 1-2449 Luxembourg, 
with the following agenda: 

AGENDA 

1. Presentation ol the reports oflhe Board of Directors and ot the Auditor. 

2. Approval ot the balance sheet, profit and loss accrual as at March 31. 1994 
and the allocation of the net profits. 

3. Discharge to be gramod to the Directors and lo the Statutory Auditor tor the 
financial year ended March 31. 1994. 

4. Action on nomination for the election of Directors and Auditors for the 
ensumg year. 

5. Any other business which may be property brought before the meeting. 

Tha shareholders are advised mat no quorum for the items of Mw agenda is 
required, and itwt the decisions will be laken at the majority vote ot ihe shares 
present or represented at the Meeting. Each share la entitled to one vote. 
A shareholder may act al any Meeting by proxy. 

Should you not bo able to attend this mooting, please return your form of proxy 
by tax and by mall before July £0. 1994 lo the attention of Petra Ries, tax number 

+352-470204. gy Qffef „f u, e Board of Directors 


Republic of Finland 

US$1,000,000,060 
Floating rate notes due 

1997 

Notice is hereby gioen that the 
notes wiU bear interest at 
5.375% per annum from 
18 July 1994 to 17 January 
1995. Interest payable on 
17 January 1995 trill amount 
M USS373J3 per USS 10,000 
note and USS6.830. 73 per 
USS250.000 note. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


CaJsse Centraie de 
Credit Immobilier 3CI 

< ^ 

£116,000,000 
floating Rate Notes 1998 

Notice is hereby gwen that for 
the interest period 14 July /5JW 
to 14 October 1994 the notes 
wil l carr y an Interest rate of 
5.4375% per annum, interest 
payable on 14 October 1994 
will amount to 513. 71 per 
51.000 note. 

Agent: Morgan Guaranty 
Trust Company 

JPMorgan 


SGASOCETE 


ACCEPTANCE N.V. 
FRF 300.000.000 
REVBISE FLOATING 
RATE NOTES DUE 
OCTOBER 15, 1997 
For the period 
July 18, 1994 
to October 17, 1994 
tne new rate has been 
fixed at 18,25 % P.A. 
Next payment date : 
October 17, 1994 
Coupon nr : 9 
Amount: 

FRF 46131,94 for the 
denomination of 
FRF 1 000 000 

THE PRINCIPAL PAYING 
AGENT SOGENAL 
SOCETEGENSWlf GROUP 
15, Avenue Emile Reuter 
LUXEMBOURG 


GBP 10,000,000 

YORKSHIRE 

BUILDING 

SOCIETY 

Floating Rate 
Subordinated Notes 
due 1999 

Interest Rate 536875% p. & 

Interest Period July 13tft, 7994 
October 13m, 1994 

Interest Amount due on 
October 73m, 1994 per 

GBP 100,000 GBP 1,504.45 



Agent Bank 


Tenneco Inc 

HOUSTON. TEXAS 



1094 
Is our 48th 
consecutive 
year ot cash 
dividend 
payments 


The 1994 third quarter tfiimfend of 4Qe per share 
on the Common Slock will be paid September 13 
to shareowners of record on August 26. About 
102.000 shareownare wfll share in our eantings. 

Kari A. Stewart Vice President and Secretary 


' Fafure Source- Nov/ available.... New FX service'. 

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'Comprehensive explanations of the of! markets' 

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CALL MOW '-&• :';jr::~i 9 r setars f 44 7 i ; 35 '-; 5732 


I 


Daehan Asia Trust 

International Depositary Receipts 

NOTICE IS HEREBY GIVEN lo Unitholders that Daehan Asia Trust, has 
declared a dvidend in The Repubfcc of Korea amounting lo Wton 105 par unit, 
payable an or after August 8, 1994. 

Payments will be made on or after August 8, 1994 lo aH Hokieis of registered 
IDRs that the Depositary is satisfied were on Uw Ragtitsr on the Record Date 
- June 30. 1994: 

DEPOSITARY 

Chase Manhattan Bank Luxembourg SJL 
5 Rue Plaetis, Luxembourg Grund. L2338 Luxembourg 

DEPOSITARY AGENTS 
The Chase Manhattan Bank. KA. 

Wtoolgate House, Coleman Street Chase Plaza. 34-35 Cbung-dong 
London EC2P2HD Choong-Ku, SeouL Repubfcs of Korea 

Corporate Trust Administration, 4 Chase Metrotecft Center 
3rd Floor. Brooklyn. New York 11245. U-S.A. 

Chssa Manhattan Bank (Switzerland) 

63 Rue du Rhone, CH-1204 Geneva. Switzerland 

the amount of dollars payable lo the Holders on the Register on the Record 
Oats shall be the net proceeds of the sale of tha amount of Wbn for US dates 
at the prevailing telegraphic transfer selling rate of US dollars for Wan as 
quoted by a foreign exchange bank In Korea on the day on which Ihe refavard 
transfer is made. 

The dtvfdend proceeds wifi be efistributed to IDR hofdera' accounts to 
Eurodaar and Cede) In proportion to their respective entitlement and after 
(he deduction of ail taxes and fees, charges, duties and expenses of tha 
Depositary. 

AiT holders resitting In a country having a double taxation treaty wfth The 
Republic of Korea may obtain payment at a lower rata of the Korean 
non-rasidem withhofcfing tax, on condition they furnish to Eurodear or Cedel. 
a certificate showing thei r residence , together with a copy of the Certflcale of 
incorporation, or, tor Individuals, a com of tfiefrpas6port. 7hese documents 
are requested by the Korean National Tax Administration Office as evidence 
of residence. 

Without such proof ot residence, the full tax rate ol 26.875 par cent Korean 
non-resident withhokfing tax wfll be warned. 

II any holder tails to request the distribution by the end of five years from the 
date on which this dotribuhon first became payable, the unclaimed amount 
dun be returned to the Trust at the expiration of the five yearn. 

Chase Manhattan Bank Luxembourg SJL 
as Depositary 


Alaska Housing Finance 
Corporation 

U.S. $ 125 , 000,000 

FJoaling Rate Notes due July 2001 

Notice is hereby given that the Rate ot Interest has 
been fixed at 5.35% p.a. and that the interest 
payable lor the current Interest Period 19th July, 1994 
to 19th January. 1995 on the relevant interest Payment 
Date 19m January. 1995 in respect of U.S.S10.000 
nominal of the notes wiU be U.S-$Z73.44. 

Agent Bank 

Bank of America International Limited 


18th July; 1994. 



11* mq wflf report on the Important eonbtotlan mb t» IN 
by gome nSnortty b w la nm b the IWtett Kteatem. It wB 
tbob taturo prospects wte be effected by conpeUtton j it bam 
atmad, and new they ora mpoodb« ts tbs of scoMtato * 

tbs UK. 

For more information on editorial content Mid detxM of nfvirthlti*. 
oppwbxJUas ratable bi tfds survey, pleas cw i tsct 

ANTHONY <1 HAYES 

Tec 021 4840922 Fa: 021 4S5 08BS 

FT Surveys 









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COMPANIES AND FINANCE 


Full branch in Beirut for ING Ch % se 


By Mark Nicholson In Cairo 

Internationale Nederland en 
Bank ONG). baaed in Amster- 
dam, has won authorisation 
from Lebanon's central hank to 
establish a full branch in Bei- 
rut - the first such approval 
granted in 25 years and a sign 
of Lebanon's desire to revive 
the country’s lost role as a 
banking and financial centre. 

ING promises to be only the 
first of several new interna- 
tional arrivals In Beirut, with a 
number of French and British 
groups also pursuing licences 
to open either representative 
offices or branches in Lebanon. 

Mr Mad Salame, the central 
bank governor, described the 
decision to accord authorisa- 
tion to ING as a “major change 
in crar policy”. 

Foreign banks were previ- 
ously told they must buy a 
local institution to participate 

Munich bank 
expands in 
Hungary 

By Nicholas Denton 
in Budapest 

Bayerische Landesbank, the | 
Munich-based regional bank, is I 
paying Ft5.8bn ($56m) for a 
stake In Kulkereskedelmi 
Bank. Hungary’s fourth largest 
bank 

RT.R is fcaMwg a 25 per fient 
stake with the London-based 
European Bank for Reconstruc- 
tion and Development taking a 
further 17 per cent 
The Munich bank is the first 
western bank after the Dutch 
ING to take part in a signifi- 
cant east European hank priva- 
tisation. ING took a stake in 
Bank Slaski in Poland but 
most international banks pre- 
fer s tand -alone branches in the 
former communist bloc. 

The acquisition of a Hungar- 
ian bank accords with BLB's 
drive to expand in central 
Europe. In the past two 
months, it has emerged that 
BLB is forming a joint-venture 
building society in the Czech 
Republic, taking a stake in. a 
savings bank in Bolzano in 
northern Italy and exploring 
an investment in Austria’s 
troubled GiroCredit 
JP Morgan, the US invest- 
ment bank acted as adviser to 
the Hungarian government 
and Kulkereskedelmi Bank 


fully in the domestic market 
But In a drive to attract new 
foreign institutions, the centra] 
bank is now permitting hnni?o 
to open a branch in the coun- 
try, provided they meet a capi- 
tal requirement of $5m and re- 
invest 3o per cent of locally-col- 
lected deposits domestically. 

Foreign newcomers will be 
restricted to a single branch, 
but otherwise will have no con- 
ditions on their operations. 

ING's authorisation is the 
first granted since well before 
Lebanon's crippling 17-year 
civil war and was made despite 
strong opposition from its 50 
domestic commercial banks, 
which believe they ahnnin be 
given time to recover from the 
war’s ravages before new 
entrants are allowed into the 
local market 

ING Bank will join 15 or so 
foreign banks long estab lished 
in Beirut, including Citibank 


American Express Bank and 
Chase Manhattan Bank 

A spokesman for ING in 
Amsterdam said he expected 
the branch to begin operations 
within a couple of months. It 
will become ING's sole Middle 
East branch and would concen- 
trate on international payment 
transfers, corporate banking 
and trade finance, the spokes- 
man said. 

Lebanon’s central bank tins 
week also authorised UBAF, 
the Loudon-based group owned 
by Arab and French banks, to 
set up a representative office 
in Beirut 

In addition, Basque Paribas, 
the French merchant hank . hqs 
submitted a request to open a 
branch of its London-based 
Paribas Capital Markets unit 
in Beirut, which the bank says 
will seek a seat on Lebanon’s 
re n ascent stock market 

This is presently limited to 


trading in Treasury hflta and 
shares of Solidere, the property 
development company created 
to rebuild central Beirut - 
itself part of the government’s 
ambitious plan to regenerate 
Lebanon as a financial centre. 

Robert Fleming, the British 
investment bank, is apply- 
ing for a licence to open a Bei- 
rut representative office. 

The bank says it is looking 
to establish a regional base in 
Lebanon eventually to serve 
also Jordan and Syria, but with 
a more immediate eye on the 
development of Lebanon's 
stock market, the creation of 
local mutual funds and corpo- 
rate finance. 

Robert Fleming says that it 
hopes a Beirut operation would 
complement its 10-year-old 
branch in Bahrain, which the 
bank says Is the sole British 
merchant banking branch in 
the Gulf. 


South Korean banks lift profits 


By John Burton 

The combined net profits of 
South Korea’s 24 commercial 
banks rose by 16.4 per cant to 
Won533bn {$860m) during the 
first half of 1994, according to 
the Office of Bank Supervision. 

The advance in profits was 
mainly due to the sale of secu- 
rities, but a 123 per cent 
increase In bad loan provisions 
to Wonl.483.5bn limited the 
rise. 

Cho Hung Bank reported the 
largest net profits, with an 
increase of 150 per cent to 
Wonl205bn. 


Korea First Bank, which has 
recorded the biggest bank prof- 
its for the past three years, had 
net earnings of Won^bn, a rise 
of only L4 per cant 

The Bank of Seoul had the 
sharpest rise in earnings, to 
Wan24.7bn from WanfiOOm, fol- 
lowing the sale of its securities 
subsidiary. 

Commercial Rawir of Korea, 
which also sold its securities 
operations, recorded a 59.6 per 
cent earnings increase to 
Wonl5Bbn. 

Hanil Bank reported a 8.3 
per cent increase in net profits 
to Won69.3bn, and Korea 


Exchange Bank achieved a 64JJ 
advance in earning to 
Wan68.2bn. 

Among the smaller national 
banks, Shinhan, which has the 
banking indukry’s largest 
profit margins, reported a 28.7 
per cent growth in net profits 
to Woo70.4bn. 

Donghwa Bank suffered a 71 
per cent downturn in net prof- 
its to Won2Dbn, while earnings 
for Boram Rank also showed a 
decline, by 21.3 per cent to 
WanShfibn. 

Dongnam Bank reported a 
loss of Won94bn, and Daedong 
Rank had a deficit of WanSSbn. 


Canadian wheat pool to go public 


By Bernard Simon in Toronto 

The Saskatchewan Wheat Pool, 
the biggest of Canada's prairie 
farm co-operatives, is to con- 
vert to a listed public com- 
pany. 

The Fool, with 1993 revenues 
of C$1.62bn (USJLISbn), plans 
a share offering early next year 
and will be listed on the 
Toronto Stock Exchange. 

Its 60,000 members wQI ini- 
tially convert their equity into 
shares, some of which may be 
offered to the public. However, 
farmer-members will continue 
to control the pool by h«rng the 
sole holders of class A voting 


Shares. No Single shareholder 
will be allowed to own more 
than io per cent of class B non- 
voting shares. 

The Pool was formed in 1924 
to handle Saskatchewan's 
grain crop. But about 40 per 
cent of last year's C$28 ^m 
profit came from non-grain 
businesses. The Pool's recent 
diversifications have included 
natural cosmetics (with a size- 
able export market in Japan), 
pie fiTlings and a food-preserv- 
ing process. 

The move to go public has 
been a controversial ana Crit- 
ics have noted that the Pool 
was formed to makn formers 


more independent of commer- 
cial grain companies. 

But members have recently 
been swayed by arguments 
that the Pool needs to 
strengthen its resources to 
respond to far-reaching struc- 
tural changes in North Ameri- 
can agribusiness. For example, 
the North American free trade 
agreement and the Uruguay 
Round are expected to open 
the Canadian grain market to 
competitors. 

Almost half the Pool's mem- 
bers are over 55 years old and 
are expected to withdraw their 
equity as they retire over the 
next 10 to 15 years. 


accounting 

causes 

concern 

Fewer than half of the 
companies listed on China’s 
nascent stock exchanges are 
said to have presented accept- 
able annual reports for 1993, 
with some submitting inaccu- 
rate accounts to regulators, 

| Reuter reports from Beijing. 

A spokesman for the China 
Securities Regulatory Commis- 
sion said only 75 of 169 reports 
received from listed companies 
met the commission's stan- 
dards. 

Even though the deadline 
for submitting 1993 accounts 
was June 30 this year, 14 com- 
panies still have not done so 
and risk punishment, China’s 
official Xinh ua news agency 
reported. 

The commission warned that 
companies submitting false 
accounts could be suspended 
from doing business. 

Many foreign investors 
eager to take part In China’s 
economic boom by buying into 
listed companies are worried 
about lax accounting stan- 
dards that it difficult to 
evaluate properly an enter- 
prise’s profitability. 

The commission’s report on 
the companies' annual 
accounts appeared to bear out 
the worries. Some of the com- 
panies failed to account for 
funds raised through their 
public offering, Xinhua said. 

“Some public companies* 
reports lacked important 
information stub as the opera- 
tion of their capital," the 
China Daily newspaper said in 
a weekend report 

Some reports gave no expla- 
nation of big gaps between 
their profit forecast and actual 
business performance. 

“A limited number of com- 
panies gave inaccurate state- 
ments in their reports,” the 
newspaper said. "Some 
changed their profit forecasts, 
while others gave deceitful 
financial indices." 

Boards of directors of com- 
panies with suspect reports 
must provide answers to the 
commission within a set time, 
Xinhu a said. 

The 14 companies who foiled 
to present reports at all most 
make pnblic self-criticisms, 
and may be punished further 
if they still do not submit i 
accounts. I 


Hyundai plans Won600bn 
investment in steel plant 


By John Burton to Seoul 

Hyundai, South Korea’s largest 
conglomerate, is planning to 
enter the steel sector with the 
construction of a plant by 1997. 

The project, however, is 
being opposed by the govern- 
ment, which fears it would - 
cause a glut in steel supplies 
and threaten the profitability 
of state-owned Fohang Iron & 
Steel, the country’s dominant 
steel producer and the world's 
most profitable steel company. 

Hyundai Pipe said it planned 
to invest Wan600bn (S743m) in 
a steel plant to produce 1.3m 
tonnes of cold-rolled coils 
annually for Hyundai car, ship- 
building and transport equip- 
ment subsidiaries. 

Production of the plant, 
which will be built in either 
Ulsan or Pusan in south-east- 
ern Korea, will be later expan- 
ded to 2.3m tonnes- 

Hyundai plans to purchase 
production facilities from 
Japan or Germany, with plant 
construction to begin in 1996. 


The government believes the 
announcement is only the first 
stage of a bigger Hyundai proj- 
ect to build facilities that could 
produce 10m tonnes of steel, 
resulting in an oversupply. 

The ministry of trade, indus- 
try and energy says Korea will 
suffer a steel demand shortfall 
of 1.5m tonnes by the year 
2001, which could easily be cov- 
ered by imports. 

But Hyundai says the gov- 
ernment has underestimated 
domestic demand for steeL It 
predicts that the growth of the 
manufacturing and chemical 
industries and increased use of 
steel for the construction of 
buildings and bridges will 
increase steel demand. Any 
excess steel supplies could be 
sold to China, it adds. 

The government may try to 
block Hyundai’s steel project 
by denying a land acquisition 
licence for the steel plant and 
barring the impart of steel pro- 
duction facilities. It may also 
rule against Hyundai on envi- 
ronmental grounds. 


• Samsung, the South Korean 
conglomerate, has acquired 
control of Korea Fertilizer, the 

state-controlled fertiliser and 
specialty chemicals company, 
in one of the country’s biggest 
privatisation sales. 

Samsung bid Won23Qbn, 
almost twice the expected auc- 
tion price, to increase Its stake 
in Korea Fertilizer to 67 per 
cent from 32.4 per cent by 
acquiring the shareholding of 
state-owned Korea Develop- 
ment Bonk. 

Samsung retained a minority 
stake in the company after 
being forced to give up man- 
agement control of Korea Fer- 
tilizer to the then military gov- 
ernment in 1967. Korea 
Fertilizer reported net profits 
of WonSbn on sales of 
Won211.6bn last year. 

Samsung said it hoped to 
increase the company's turn- 
over to Wonl^OObn by 2000 by 
expanding its specialty chemi- 
cals business through a 
Wonl.OOObn investment pro- 
gramme. 


A struggle to stay on track 


Continued from page 17 

claims now to be the second- 
largest supplier of telecoms 
cables in the US. 

The groups’s undersea cables 
division has been boosted by 
last year's acquisition of STC, 
the UK-based submarines 
cables division of Northern 
Telecom of Canada. 

“We are maintaining our 
research and development 
effort to be competitive in 
tomorrow's products.” says Mr 
Francois de Laarge de Meux, 
chief operating officer. He cites 
the companies leading-edge 
technology in land and subma- 
rine fibre-optic cables, in SDH 
- the next generation of line 
transmission technology - and 
in broadband telecoms 
switches. The big pay-off. 
claims Mr Suard, will come 
with the development of multi- 
media networks and fibre-optic 
superhighways. “We have been 
preparing for several years, for 
example in the areas of broad- 
band transmission. It is at the 
centre of our strategy." 

However, weaknesses are 
also evident, even in leading- 


edge markets. In the cellular 
infrastructure market, Alcatel 
is not only behind Ericsson, 
the Swedish supplier, but is 
regarded by many analysts and 
operators as inferior to Nokia, 
the fast-growing Finnish com- 
pany, in terms of products and 
customer-responsiveness . 

In its traditional switching 
and transmission markets, its 
prime weaknesses have been In 
Italy, Spain and, in particular, 
Germany. Mr Jozef Cornu, 
Alcatel's technical director, 
accepts that the German 
operations will suffer a loss in 
1994, although he believes a 
return to profit can be 
achieved in 1995. 

“There has been a radical 
change in the German mar- 
ket.” says Mr Cornu. Demand 
has contracted, with invest- 
ment in eastern Germany no 
longer offsetting the downturn 
in the western regions. 
Another aspect of the malaise, 
says Mr Cornu, is a policy shift 
by Deutsche Telekom, the Ger- 
man state telecoms operator, 
In the direction of interna- 
tional specifications and ten- 
ders for its supplies, leading to 


increased competition and 
reduced prices. 

Alcatel has responded with a 
series of restructuring efforts, 
including the closure of a plant 
in Stuttgart. But even if cable 
demand picks up on the back 
of “superhighway's”, the more 
open procurement policies 
which are costing Alcatel 
dearly in Germany can only 
extend further to the compa- 
ny's disadvantage. Deutsche 
Telekom is about to be priva- 
tised; France Telecom and 
other European operators are 
bound to follow. In every case, 
cosy relationships will break 
down - and the main losers 
are likely to be established 
suppliers such as Alcatel and 
Siemens of Germany. 

Much rests on Alcatel's abil- 
ity to build the superhighways 
and supply the other artefacts 
- from advanced switches to 
mass mobile phones - which 
will be integral to 21st century 
communications. 

Can they do it? “In terms of 
product lines, they are second 
to none," says Mr Miller of 
Tubman “Their frustration is 
that it isn’t happening yet” 


FT GUIDE TO WORLD CURRENCIES 


The table below gives the Mast w aiatofo rasas at eacchenge (rounded) agafost tour toy cunwtdee an Friday, .My IS, 1894 . In earn cases the rate is nomfciaL Market rotes are the average of buying end sedng nun except 
where they are shown to be othnnwlae. In some cases marital rates have been cafcukaed from those of foreign curandee to which they are Bed. 


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toy (Ural 

Jamai ca (ImaKanS 
Jtowi OTarj 

Jotter (JoRkntei Otora) 
Kenya (KanyeBMntf 
Ktrtoao (Anniston $ 

Korea North (Mm) 

Koran South (Word 

Kueett (Kum* dims) 

Laos fftourK*) 

laMa Bale) 

Lebanon lebanoeq 
Lesotho fUtent 

Ltootta OJborirefl 

Ubya (Ltoyan Dtorat 

Usdtermeto (3-tee ft) 
UttMBto vm 

UDoomboug lux ft) 

Macao paiaest 

Madagascar QJBR) 
Madeira [Par Escudo! 

Mtenri (teactu] 

Mttnsta 

Msfcfeela Ftftf*) 

Mel Hop (CFAFr) 

IMa OMteeeUa} 

ManWoua (LblteFr) 

Mutants (Ouguye) 

Moulton WrarRupool 
Merten pManPaacO 
Miquelon (Uteri Ffl 

Monaco fftenefi Fr) 

Mongolia £71*7*3 

Mermen- ( EOrarft 
Morocco (DKhanJ 

McnranMflua (Metta* 

Nemtoia PA Rand! 

Nani le (AuenWnSI 
Nan* ( Ho pteeee Wte 
NaCrodonda (&***) 

N'ndMflee (Mktetai) 
Naw Zealand ptZB 
tons (QoUContoba) 
Mger top (CFAFr) 

Mgerfe ftek* 

Norway (Nor. Krone! 

Oran (RUOmanQ 


tol d attn (pek. toped 

toneme (Betood 

Pepite New Gdnea fOnal 
Ptnguey (tourariO 

tom (New Sot 

ftdfctoee (Peed 

Pattern ta £ Started 

Petted {Zloty) 

Pn«t ptettto? 

Puerto Woo fJB » 

Od» (R*>4 

Rawiiai Is. d» la flfi) 

*3 

SlChMeptNr (ECrarf) 

81 Helena (0 

StLude (E Car*) 

StPlena (Haul) Fr) 

8t Vtooent pearl) 

San Mortao *aSsnUd 
Ban Tome Pobrai 

Saurf /traite (WysSj 

Bteagd (CFA ft) 

Beychstea (RmooJ 

Beni Leone Mand 

Bteggxee (S) 

SknaHa (Kona—) 

Bkawte {ntef] 

Solomon la 01 

BomM top (SMng) 

SnuthAblcs (tond) 


apeki peseta) 

at-nteh Para In 
N Mica (8p Peseta) 

SriLenka (toped 

Sud an Hep (Dinar) 

Surinam Buftfer) 

B weri te nd | ttngiait 


8-fceeriand 

Syria 


Ttagotop (CFAFr) 

Tonga le (psAnga) 

TiMdaOTobage ft) 

Totela (Diner) 

Takay _ 

Turks & Caicca (us» 
Tutel (Auarzteon S 

Ugraxte Mew SfcBnQ) 

Utoafen fcabomnetB) 
UAE patter) 

Unfead tOngdrm fl) 

IMM auusa (USD 

Ungear 0toHUruguq«! 

Vanuuu (Vatu) 

Vatican gjid 

Vnazurin (Botem) 

Vtotnam Pend 

Vhgki b-BrnWi (UGS 
VfcgtotoLO (US S) 

Woetem Samoa (Tala) 
Tam— t (Rap oil m 

Vrarrai flap oq fttte) 

Yugoslavia (New Dta) (T) 
2dm top (Zdra) 

Zambia (Kmhd 

Zlnbabam (t) 


maoidd 

9.71*3 

12X034 


Spared Doming F*ghta -say i*. HUM imms Klnpdom EOJKISOM LMiec 
AttorwtBPone: » Free aria; A) Bartenu raw (n) Commarek e naa Md C 

rate; fef pratoranud rate; fed conuraitito raw H Pdwrrtli " 
nma lor Acrt ZBilL (*) Naw tog nea ad by OounMiM. Soma dan i 


, DM22H7B7 J«an Y1 *4.038 Euopaan Cureoey U* Rmaa Jdy 15. 1904 Udraf Ktogaam eareOBW Untad Swes 81.23277 Oamrev DUiai757 Japan Y120 l«D 




ree U Fferandd raw M Eaperec II Non oommefdd M ■ Bualnesa roSKM Buying ntti H Luaay goods: 0fl) Mrairat rate in) Pdde ranaacuen rate to) OBnU 
nwrtagdrte toalStMraMHDratoaate;*ceiW)— fomaiaalnaiBflatofeaane. niYuoodte Olnrafflteitte.(Z| Hworidte into tor Ifadi 31 st ttYamenl 
i CLOSMQ SPOT ftATES 1 Bank of Amarlce. Bxnomfca Depertroirt. Undsn Troanp Centre. Envddsx 071 834 430015. 

Friday, Jdy 15. 1884 


Know your MBOs 

Acquisitions Monthly’s Management Buyout Conference 
Tuesday 18 th/Wednesday 1 9th October 1994 
The Marriott Hotel, Grosvenor Square, London W1 


$ f$:i\ 


is 

fell 

mm 


■% \V\ 

i iifl 

s iM 




Case Studies: 

Bell Freight Transport Group • Peoples Limited 
Bristow Helicopter Group Limited 

Speakers mduda 

Roger Brook re, C mdowr [m-eamcnit • tan Forrest, Montagu Prwatt Equity 
Robert Smut t, Morgan Grenfell Development Capital 
pbtt speakers from; Ashunt Moms Crisp • Nor West Ventures • Bankers Trust Company > CINVen 
Murray Johnstone • Barclays de Zotte Wedd • Crabam Trust • Foreign £■ Colonial Ventures 
Coopers & Lybrand • Intermedin* Capital Group • Ernst 6 Young * Alsap Wilkmson * Lloyds Development Capital 

To book a place or receive further details, please contact: 

Vanessa Foss, Acquisitions Monthly Conferences, 11 Gloucester Road 
London SW7 4PP Teh 071-823 8740 Fax: 071-581 4331 
Acquisitions Monthly is the leading mergers, acquisitions and buyouts magazine in Europe 
For a sample copy please contact: 

Peggy Sma l l, Tudor House PoMicarioas Ltd Fiances Harvey, Tudor Hoasc Publics do ns Lid 

Lonsdale House, 7/9 Lonsdale Gardens or PO Box 48429 

Tunbridge Wells, Kent TNI 1NU Washington, DC 20002 - 0429. USA 

Teh (0892) 515454 Fa* (0892) 51 1 547 Tel: (202) 396-1052 Fax: (202) 396 - 1053 


Acquisitions 

“ Monthly 


T!* ^ 


Japan is now 
IO inches further away. 

We've increased our Executive Class seat pitch to 50 inches on flights * from 
London and Paris to Japan. For further details call your nearest JAL off.ee. 



Japan Airlines 

A WORLD OF COMFORT 



Correction of our last 
notice 

Bondholders arc hereby 
informed that the Coupon 
n°2 payable as from 
July 18th will have a 
pace of FRF 188.- for the 
FRF 10,000.- Notes 
and of FRF 1,880.- for the 
FRF 100,000. -Notes. 
The rate is thus not fixed 
at 1.8699% but at 1.88%. 


The Primipal Pa yin 
and Calculation . 


ALLIANCE INVITED 

A leading Merchant Banking Company, registered 
with Securities & Exchange Board of India (SEBI), 
intends to set up a state of art CUSTODIAN 
DEPOSITOR Y in Bombay. Alliance is invited 
from leading Banks or Finance Institutions / 
Organisations. 

Please Contact : Mr, Sunil S. Rathi - Jt M. D. 

# RATH1 MERCANTILE OtDUSIEES LTD, 

12 - A, Ground Floor, Chemox House 
7 Barrack Street, Bombay Hospital Tjm.- 
Bambay - 400 020 (INDIA) . 

TEL: 20*7156 (D)» 2031024-32 ♦ FAX : 91 22 *088056 

Mardiam Banking * Lease and hfire-Purchase * Project Consuftadon 




FINANCIAL TIMES MONDAY JULY 18 1994 


axa-'iv ns* 


THE WEEK AHEAD 


■tf.A'-'A 



flHHpP 




k JH 





JULY 22 

GROUPWARE FOR 
ACCOUNTANTS IN PRACTICE 
AND COMMERCE 
Institute of Chartered Acamnunu/Loraa 
Developmeoi strategic technology 
conference, with expert speakers from CSty 
University Business School. KPMG. Levy 
Gee andTaJe Bnmald. The coofaauc will 
address how accountants and consultants 
can apply gio upw ar e to their business or lo 
practice managmem. 

Contact: Nicky Cooper Tet (TH 920 8476 
LONDON 

JULY 28 
TOURISM - 

A WEALTH OF ATTRACTION 
CBI Confetence on the Thames brings 
together practicionets 2 nd strategists from 
all sectors of tourism to consider ways to 
create a competitive, world darn product. 
Contact Georgina Kingahy. 

CBI Conferences 

Tct 07 1 770 7400 Fax: 071 497 3646 

LONDON 

AUGUST 4-7 

THE NEC AUGUST FAIR 

With a theme of ‘Antiques For Everyone 1 

this fair will consist of 600 Exhibitors 

showing a broad range of antumes. fine art 

and objet d'art. AM exhibits will be 

examined by the Honorary Vetting 

Committee. 

Open 2pm- 9pm (4 Aug) 1 lanrtipm 
(5/0 Aug) I i ora-dpta (7 Aug.1 

Enquiries: Linda Caftan - 
Centre Eshttntora Tel: 021 767 2760 

BIRMINGHAM 

AUGUST II 

SUCCESSFUL ACQUISITIONS - 
NEW STRATEGIES IN THE *90n 
CBI/Fcraiec Conference in asso ci ation with 
Schroder Ventures at Williams Grand Frix 
Centre considers formula for sw c c es a and 
management techniques required hi m ak ing 
successful acquisitions worldwide. 
Includes speakers bom FanteU Electronics, 
Scoff Bader. OKI Systems sad Smiolil 
Group- 

Contact Georgina Kingaby. 

CBI Conferences 

TeL 071 379 7400 Fa*: 071 497 3646 

DIPCOT 

SEPTEMBER 7. 8 & 9 ’ 

STATISTICAL ANALYSIS FOR 
THE INSURANCE INDUSTRY 

□ay One: Los* Forecasting ft Reserving 
Analysis (liability risksL Day Two: Lob 
F orecasting & Retention Analysis 
(Property risk*). Day Three: Advanced 
Case studies; Demonstration of computer 
models. 

gssentisl for risk & Insurance managers, 
underwriter* and ac t u a ri es 
Contact Sangita Patel or 
Margaret O'Brien, Antsocs Lid. 

TtL 071 621 9W Fat 071 626 1 173 
LONDON 

SEPTEMBER 11 -23 
RETAIL AND WHOLESALE 
BANKING 

2 week residential seminar for bankers 
from the emergurg markets. Week l - retail 
hanking, payment# systems, credit 
assessment & trade finance- Week 2 
wholesale treasury, PX and MM and 
derivative markets. Highly participative 
Paining, ind- educational visils 10 financial 
iOjllWlums in both weeks. 

£5JKD 4- VAT. folly indusrec. ! 15* tSsoxxs 
2+)Lywood Daril Into national Lai 
Reservations by Fax: 0959 565821 

LONDON 


SEPTEMBER 12-13 
UK CABLE, TELEPHONY & 
FINANCE: LEADING THE WORLD 
TO THE INFORMATION 
SUPERHIGHWAY 

An in-depth conference on the 
convergence, coo p era tio n and ewape Alien 
m the UK cable A telephony industry. 
Contact Patricia Baynion. Kagan World 
Mcdife limited. 

Tet 071 371 8880 Fax: 071 371 8715 

LONDON 

SEPTEMBER 14 & IS 
FT NUCLEAR INDUSTRY 
This high-level foratn will examine the 
outlook for nuclear power in North 
America and Western Europe, assessing 
the impact of current government 
montcria and review growth potential in 
the Asian- Pacific region. 

Enquiries: Financial Times 

Tel: 081 673 9000 Fax: 081 673 L335 

LONDON 

SEPTEMBER 26-30 
RUSSIAN BUSINESS LAW 
COURSE 

Extensive pro gr amm e covering Draft Qvfl 
Code, Land Law Jt Lease. Settlement of 
Disputes, Foreign Investment Legislation. 
Ownership A Privatisation to Russia and 
Kazakhstan. Faculty: Academician W B 
Butler, VinogradoEf Institute University 
College London. Professor AA Rubaoov, 
Institute of State A Law, Moscow. CPD 
Accredited. 

[nterforam Tel: +44(0)71 386 9322 
Fax: +44 (0j 71 381 8914 

LONDON 

SEPTEMBER 27 & 28 
EMPOWERING FLEXIBLE WORK 
TEAMS IN ASSOCIATION WITH 
MANAGEMENT TODAY 
Special emphasis will be given to the 
analysis of information from the 
practitioner's point of view. Each speaker, 
many appearing with team members, has 
had direct Involvement in implementing 
andfor opera ting teams. 

Contact Rachel Thomas or Sarah Peace 

tBC Technical Services 

Tet 071637 4383 Fax: 071 6313214 

LONDON 

SEPTEMBER 28-30 

TAKING RISKS IN LEADERSHIP 

ROLES 

For CHIEF EXECUTIVES and 
EXECUTIVE DIRECTORS to explore 
ways of working constructively with the 
risks they experience personally in seeking 
losduew corporate aims and objectives. 
Ccnocc Jaapnc Gibson, The Grubb tosnurte 
T«L- 071 2788061 E*c 07! 2780128 

LONDON 

OCTOBER 4 & 5 
RE-ENGINEERING PAY & 
REWARD SYSTEMS FOR TEAMS 

Tcamworlring is proving to be (he core 
competence to drive radical performance 
improvement Remuneration sfS lens In ibe 
90s must reflect and reinforce this. The 
conference will focus ok Refocusing pay 
to reflect success, reinforcing and driving 
flexible teamwork, aligning pay and 
rowan) to strategic performance indicators 
and developing new reward approaches 
Hi® line managers, 

Goriacc RrtdUmai 
tBCTedmical Services 
Tet 071 637 4383 Fas: 071 631 3214 

LONDON 


OCTOBER 4-6 
FREKxHTCONNECTION 94 
CONFERENCE & EXHIBITION 
The third annual exhflmkm and conference 
far logbtira profegfo n ah. Keynote speaker 
Secretary of State for Transport, pins Sir 
Alastair Morton. Eurotmuel and 15 other 
leading industry speakers and four d eb ates. 
Accepted wisdom will be challenged and 
CDQtnnvnal ideas advanced 
For further details, telephone: 

0543 419600. Fax: 0543 419299 

LONDON 

OCTOBER 12 & 13 
STRATEGIES FOR HIGH- 
INVOLVEMENT LEADERSHIP 

This programme is designed to help 
leaden manage successfully in a changing 
environment. (I will allow you to control 
refocus oo high pay-off activities; 
create partnerships: strengthen trut; 
motivate and enhance team performance; 

Contact Rachel Thomas or Sarah Peace 
IBC Technical Services 
Tet 071 637 4383 Fax: 071 631 3214 
nmns nov. uatt 

ASHDOWN PARK 

OCTOBER 12. 13 & 14 
THE LEARNING ORGANISATION 
Strategic Learning la proving to be the only 
real sustainable competitive differentiator 
in today's increasingly turbulent 
environment. This conference will be a 
deliberate step back from theory. Delegates 
wiB be taken dnuagb a stnKtnred (saining 
programme, using practical case studies, to 
show how to develop a STRATEGIC 
APPROACH TO LEARNING. 

Contact: Rachel Tbomsa 
IBC Technical Services 
TeL 071 637 4383 Fax: 071 631 3214 

LONDON 

OCTOBER 17 & 1 8 
EMPLOYEE & UNION 
PARTICIPATION FOR CHANGE 
Management and anion representatives 
will share the pbtfonn to pro the delegate 
a frank and honest insight into the 
successes and failures of working 
partnerships in their companies. Tom 
Bariwm of (be GMB and Tom Sawyer of 
UNISON will give their views on 
progressive working jrlatkHnJiipS. 

Contact: Rachel Thoms or Sarah Peace 

IBC Technical Services 

Tel: 071 637 4383 Fax: 071 63X3214 

LONDON 

OCTOBER 18 

PLANMNG & IMPLEMENTING 
STRATEGIC ALLIANCES & 

JONT VENTURES 
This conference is one of tire Corporate 
Strategy Series arranged by IBC Legal 
Studies and Soviets Limited. Key area of 
disuesrion iodndc: Why Joint Venture?; 
Pre-Alliance Stages and; Law. Tax and 
At rranrin g C u u flj dcrariniB. 

Contact: Julia Dopfreidc. IBC Legal 

Studies and Services Limited 

TeL- 071 6374383 Fax: 071 631 3214 

LONDON 

OCTOBER 19 
ACQUISITIONS 

This conference examines the principles 

involved in making sactsscfo] acquUdona. 

Topics include: Why Acqulre7; Pre-deal 
stages: Conducting an effective due 
dilligence; Anti-trust issues; Public bids; 
Private sales; Compiling watertight legal 
documentation; Minimising tax liability 
and; New Accounting Sandarda. 

Contact: Julia Dophcide, IBC Legal 

Studies and Services Limited 

Tel: 071 637 4383 Far 071 631 3214 

LONDON 


OCTOBER 26 -27 

BPR 94: RE-ENGINEERING, 
PROCESS MANAGEMENT AND 
PERFORMANCE BUPROVEMBiT 

Europe's h»Sag uou l aita it sad esiribitior 
devoted to exploring bow to apply kmamoss 
re-engineering strategies to achieve 
quantum leaps in corporate performance. 
Designed to meet the needs of your whole 
re-engineering (cam, from executive 
sponsor to those involved in planning and 
imp leme nti ng projects. 

Contact: Business hueffigencs 
Tet 081 544 1830 Fax: 061 544 9020 

LONDON 

NOVEMBER 7 

MAXIMISING THE VALUE OF 
YOUR LT. SUPPLIER 
A one day conference. Major l.T. 
customers, suppliers and consul tana will 
demonstrate how to ensure your l.T. 
budget is well spent; what is possible 
technically and contractually- Speakers 
include Digital UK. DHL. Reed 
Tetepnbtiahmg and OTL 
For details cull 071 434 371 1. 

LONDON 

NOVEMBER 14 
TAXATION OF FINANCIAL 
INSTRUMENTS FOR MANAGING 
INTEREST RATES* CURRENCY 
RISKS 

Key Topics at this conference include: 
Historical development; Overview of new 
rales; Group structure* and reorganising for 
the new regime; Transitional rules/ 
excess loss rotes; AtHwald rema A —o d amd 
potty rules and; Matching elections. 
Contact: Jnlia Dophcide, IBC Legal 
Studies and Services f imtifti 
Tel: 071 637 4383 Fax: 071 631 3214 

LONDON 


INTERNATIONAL 


SEPTEMBER 27-29 
DA/DSM EUROPE 94 
Competition in combination with open 
access wQ] fa t e iirflirb— co introduce m ore 
advanced technologies such sk TODA/DSM/ 
SCAD A/AM/FM/GIS/ AMR At this 
conference & exhibition the latest 
devefcpmeaawin be dfeonaed and shown ty 

Craaattft^eflCAE 
Tet *31-30-650.963 Fax*31-SWSIL928 
PARIS 

DECEMBER 7-9 
SADC - EUROPEAN UMON 
UMBKa FORUM 

Organised by the Southern African 
Development Community and (he 
European Commission. 200 investment/ 
exploration projects from 10 African 
countries to be presented, pins country 
updates oa mitring ucaor, trade, investment 
and policy issues. Participation free of 
charge by invitation only. Private business 
meeting to be programmed on basis of 

niuii hwi interests. 

Teh AGORA ■3000: *3963241719 
IDOM: +32 2 7326366 
Mena Sofia: +44 81 6885535 

LUSAKA 

JANUARY 1995 — “ 

BUILD 

PRAGUE EXHIBITION & CONFERS'ICE 
- Coastniaion • Metal Trades - Building 
aad Mechanical • Engineering » Local 
Government, la accordance with 
EBRD/World Bank funding, the Czech 
Ministry for Industry and Trade require 
companies who can supply services for the 
reconstruction and development at the 
Csceb Republic. For more infontutras and 
British repres e n tati o n at BUILD, contact; 
Miroslav larch. CENTEC 
Tel: 071 925 1232 Fax; 071 306 0750 

PRAGUE 


DIVIDEND & INTEREST PAYMENTS 



On Wednesday, July 27 the Financial Times will publish a special survey to 
mark the 300th birthday of the Bank of England. 

It examines the history of the bank, its role in determining monetary policy 
and its responsibility as a regulator. 

There will also be an assessment of changes at the Bank under the new 
regime of Eddie George and Rupert Pennant-Rea and articles on similar institutions 
in other countries. 

So if you want a reliable source of information on the Old Lady of Threadneedle 
Street, you can bank on the FT. 

Fhandal Times. Europe^ Busmess Newspaper. 


CONFERENCES & EXHIBITIONS*"! 


■ TODAY 

Abbey Nafl. Trass. Services ?JS% 
Gtd. Notes ‘S3 CS75 
Airflow Streamings 2p 
Assart Brew FRN *96 Y151.247 
Bettemare 1j95p 

BP America Inc. 9Y* GW. Notes *99 
A$te50 

Bradford 8 Single y Bldg. Sec. FRN 
*93 £130.89 

Gen. Motors Acceptance 996 Nates 
*968038 

Grt. Port. Ests. 55p 

Halifax Bldg. Soc. FRN -95 £130.83 

Hydro-Quebec 8% Dual Currency 

YBOflOO 

Lend Securities 17.40 

NatWest Bank Non-Cum Dofer Ptef. 

SCL532 

Do. No n-Cum Dtffar Pmf. Series 
B $0.4375 

Do. Exchangeable Cap. Secs. 
S0.49218S 

New Zealand lOVfctt Bds. 2000 8105 

Parkland Group 3p 

Suzuki Motor 6% Bds. 1996 

Y60O000 

Tarmac 2£p 

Texas Instruments SQ5S 

WickeaOJBp 

WPP Group 055p 


UK COMPANIES 


■ TODAY 

COMPANY MEETINGS: 

Enaor HIdgsn The Post House 

Hotel, Palatine Road. Northendert. 

Manchester. 1030 

Fore ig n & Colonial Smaller Coe, 

8ft Root Excange Hse^ Primrose 

Street, EC.. 1230 

Sterling Industries, Cayzar House. 

1 Thomas More Street. EL, 1250 

BOARD MEETINGS: 

Finals: 

Unlpatm Grp. 

Interims: 

Bnrwtn Dolphin 
Inspirations 
Leslie Wise 
ML Laboratories 

■ TOMORROW 
COMPANY MEETINGS: 

ArgyB Grp- Savoy Hotel W.C.. 11.00 

Btegdsn Imfs-Butchere Kafl. EC., 

12.00 

Ceffyns, Hydra Hotel, Mow it Road, 
East b ourne, Sussex, 3.00 
Cassidy Bros- Mitcham Road, 
Mmton. Btadqiooi, Lanc&„ 3.00 
Cohen (A), 2&T27 Oxendon Street. 
S.W.. 12.00 

Courtauidx, London Marriott Hotel, 
Duka Street. W.. 10.45 
Drummond Grp, Benkfatd Hotel. 
Bradford. West Yorics., 12.00 
Jarvis, 57 Great Eastern Street 
EC., 11.00 

Moorgata Smaller Cos, Income 
Trust, 20 Fantngdon Road, EC.. 
11J0 

PoweB Duffryn, Grasvoner House 
Hotel WJ_ 12.00 

WMtbraed, The Brewery, Chiswefl 
Street. EC.. 12JO0 

BOARD MEETINGS: 

Finals: 

AIM 

Batleys 

Branny 

Bucknall 

Creightons Naturally 
Nobo 


■ TOMORROW 
Albert fisher 1.BSp 
Angfo Matt Bank IRtJSp 
Barings Gtd. Fltg. Rate Cap. Notes 
■01 S251L39 

Brit Funds E »*. , 98 EA87S 

Da 296 1L Trees. ‘08 £2.03 
CaffynsE5p 
Fiscrts $0.0752 
Flour Corp. S0.13 
GA HokSngs 22^p 
Henderson Admin. Group 31.5p 
Union Park lESp 
MEPC 52Sp 
Ptysu 5p 
Tate & Lyle 4£p 

Wefts Fargo Fltg. Rate Sub. Notes 
*97 SI 09.01 

m WEDNESDAY JULY 20 

Atkins Group 425p 

Bradford & Bindley Bldg. SoC. Perm. 

Int Bearing £58125 

Brit Steel 11VM6 Deb Stk. ‘16 £5.75 

Oewhurst Oent Unsec Ln. *80-2000 

£350 

Bys (Wimbledon) 9V96 Unsac Ln 
95/99 £4.875 

Mezzsxne Cap. & hit Tst 7 J25p 
M & G Income Irrv. Tet Ip 
Da Geared Ord. Ip 


VHE 

Victoria Carpet 
Interims: 

Carlete 

Centra! Motor Auctions 
Lazard Smaller Equities ktv. TeL 
Trust of Prcqjerty Shares 

■ WB2NBSOAY JULY 20 
COMPANY MEETINGS: 

Acal, Plasterers' HaB, 1 London 
Wafl, EC- 12-DO 
Drayton Engfoh A I n ternational 
Trust, 11 Devonshire Square, S.W., 
12.00 

aiott (BJ, RSA. 8 John Adam 
Street W.C- 12-00 
Ffoming Mgft Income hrv. Trust, 
The Chartered Accountants' Haft, 
Moorgata Place, EC- 2 J30 
Me rc han t Retail Grp- Taflcw 
Ctundtere’ Haft, 4 Dowgate HB. 
EC. 11.00 

Osbome & Little, 304 Kings' Road, 
S.W- 11.00 

UK Land, RAC Club, Pall Mafl 3.W., 

12.00 

Vo da fone Grp- The institute of 
Bectiical Engineers, Savoy PLace, 
W.C- 11^0 

West Trust, The Chamber of 
Stripping, 12 Carthusian Court EC- 
11. 00 

BOARD MEETINGS: 

Finals 

Cofotex A Fowler 

Eve 

Holes 

McKay Securities 
Oceortics 
Smith (DS) 


Yeoman hrv. TeL 

■ THURSDAY JULY 21 
COMPANY MEETINGS: 

Babcock brtL Grp-Merchant Taytors 
Hal, Threadneede Street EC., 

12.00 

Boots Co- Queen Bkabeth II 
Conference Centre, Bnud 
Sanctuary, Westminster, EW„ 11.00 
Bristol Water Hidgs- The HoSday 


Package Units ip 

Mid Kent HWgs. 6.5p 

Northern Rock Bldg. Sec. FRN *98 

£134.01 

Ferma3p 

■ THURSDAY JULY 21 
Badays Bk. Undated Rtg, Rate 
Prim. Cap. Notes. £3583.90 

Brit Funds 1016% Exch. W £5.125 

Otester Water 170p 

Drayton EngSsft & Inti. Tst Q.4p 

Finsbury Tst 2p 

Da A Non Vtg 2p 

For. & Catem Smaler Cos. l^7p 

NatWest Bank Undated War. Rata 

Nta. SI -27853 

Okobank QguuspankWan K. Var. 
Rate Sub. Nts 2000 Si 21 . 33 
Royal Bk. Scotland 4p 
Sanwa Australia Fin. Gtd. Fltg. Fixed 
Rate Nts. *04 SI £29.41 
Sketchiey 22p 

Throgmorton Preferred Income Tst 

2p 

Wrexham & East Donb. Water Co. 
4.9% 141.45p 
Da 3-5% Ptg. 140.75p 

■ FRIDAY JULY 22 
Amersham Inti, ii.lp 


Inn Crowne Pteza. Vtetraia Street. 

Bristol, 11.00 

Broc kha mp to n 

Htdgs-Broddtampton Springs, West 
Street Havant, Hants- 1250 
Buskiess Post Gtp^ 30 Ftvnivai 
Street. EC- 1050 
City of London PR Okp-HAC., 

City road. EC., 12.00 
EMAP, Butchers Hafl. EC- 12-00 
Eton b rook Pro p erttss, ChtseWDs. 
Mount Pleasant, W.C.. 1050 
Finsbury Trust, Alderman’s House, 
Alderman's Walk, EC- 3.00 
Hanly 08 & Qn, Pferisterare’ HaD. 

1 London WaS, EC- 1150 
London Merchant Securities, 
Carlton House, 33 Robert Adam 
Street, W., 12.00 
MeMHe Street Investments, 
DunerSn House, 2S Ravebton 
Terrace. Ecflnburgh, 1250 
M 8 G Second Dual Trust, Three 
Quays. Tower HB, EC.. 3.00 
PQktngton, Present Road, St. 
Hrfens, Merseyside, 11.45 
negrJa n Propertie s , Chestertidd 
Hotel 35 Charles Street. W., 1150 
Scape Qip- Moat House Hotel 
Preston, Blackburn. 12.00 
Sgnet Gip- New Connaught 
Rooms. Great Queen Street, W.C., 
1250 

Sketchier. The Founders' Hah. 1 
Cloth Street, EC., 12-00 
Smith New CourLSmtth New Court 
House, 20 Farringdon Road EC- 
1150 

Southnews, 326 Station Road. 
Harrow. Mdteesex, 12.00 
Stoddard Sahara ML. Glanpatrick 
Road, BdarsUe. RentrewaNre, 1250 
Tex HMgs-21 New Street 
Btehopsgate EC- 1200 
VSEL, Forum 28, Barrow In Furness. 
750 

BOARD MEETINGS: 

Finals: 

BUM 

First Technology 
OoodeDurrmt 

Na tw e at Smaller Co's bw.TsL 
Property Tst 


Brit. M 1296 ExA 99Q0Q2£6 
Do. 411% IL Treas, sqm £21817 
Da 13K% Trees. Ln. 1997 £6.625 
Da 11%% Trees. 2003/07 £5.875 
Da 14% Tress. *96 £7 
City of Lon, PR Group 273p 
Domino Printing Sciences 3^p 
East Transvaal Cons. Mines R0.C8 
FgWne Boats 5p 
FBzwBtm IR0511 
Govstt hfigh income inv. Tst 208p 
HighUifldS & Lowlands MS057 
Lyons Utah HWgs. R354p 
Da IR3.7lp 
McKechnieSp 
North ch ar tlnv8.ZS0.03 
Osbome & Uttia 4p . 

Ptot frn«. Tst Ip 
SmithKDne Boecham axlr 30583 
Sweden 13% In 2010 £875 
Time Products ESp 
TtinstaD Croup T55p 
Yotksrtre-Tyna Tees TV Mp 
Zandpan GoU Minfog RX146 

■ SUNDAY JULY 24 
Burmah Costral lip 


Savffie Gordon (J) 

Stsnetco 
Tlnsfoy CBiza) 

YRM 

Interims: 

Brawn & Jackson 
CLM insurance 
Edinburgh Java Tst. 

HM A Smith 
Hokfara Technology 
Tulemetrtx 
WaBcoma 

■ FRIDAY JULY 22 
COMPANY MEETWGS: 

East Surrey HMg&, London Road, 

FtedWR. Surrey, 1250 

Bectrocompona n t s . The 

Laneeboraugh, 1 Lenesborough 

Place, aW„ 12.00 

Hobson, 1 Ugh Timber Street. EC- 

1050. 

North West Water Grp- O-Max 
Centra. Lower Mosley Street, 
Manchester. 1050 
Oxford Instruments, Old Station 
Way, Eyrtstam, Witney. Oxon, 250 
Raadlcut IntL, Institute of Director*. 
116 Pall Mail. aW- 1250 

BOARD MEETINGS: 

Finals: 

Ascot 

Black Arrow 
Interim s : 

AMrust High Ino. Tst. 

Baring Tribune inv. Tst. 
GraanMarkw. 

Selective Assets Tst 
Smaller Co’s Inv. Tat 
sycamore 

Company m e e t in g s are annual 
general meetings uniass otherwise 
stated. 

Please note: Reports and account* 
are not normafly available until 
approximately six weeks after the 
boarei meeting to approve (ha 
preliminary results. 


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INTER-AMERICAN DEVELOPMENT BANK (1DB) 




The Inter-American Development Bank (Bank), is inviting expressions of interest from international 
accounting firms wishing to be considered to conduct the financial audit of the Bank, the funds 
under its administration and its pension-related funds, for the fiscal years 1995 through 1999. 

Expressions of interest must include statements concerning the following requirements, in the 
order requested: 

1. The firm: a) is a public accounting firm headquartered in a Bank member country and has been 
operating for a minimum of 10 years; b) has an international operating infrastructure; c) 
operates under common standards and policies worldwide; d) has formal continuing education 
and peer review programs; and e) has the ability to render accounting services in all major 
financial centers ofthe world. 

2. A general background of the firm including a description of ownership and structure 
encompassing its national and international operations. 

3. The firm has the ability to conduct audits under US generally accepted auditing standards and 
issue audit opinions on financial statements which have been prepared in conformity with US 
generally accepted accounting principles. 

4. The firm is experienced with ail filing requirements established by the US Securities and 
Exchange Commission (SEC) (provide a list of the firm's largest audit clients requiring filings 
with the SEC). 

5. The firm has the ability to: a) service the needs of the Bank at its headquarters in Washington, 
DC, USA; b) provide services in cities where the Bank has its country offices; and c) provide 
professional support in connection with bond issuances in capita! markets worldwide. 

6. The firm is experienced in auditing multinational banks and/or similar institutions. 

Replies (6 copies) must be addressed to the attention of Ms. Marilyn Hickson, Procurement and 
Contracts Section, Inter-American Development Bank, 1300 New York Avenue, NW, Washington, 
DC 20577 and must be received at the Bank no later than Wednesday, August 17, 1994 at 5:00 
pm. It is the responsibility ofthe firm to ensure timely delivery of the pre-qualification materials. The 
Bank will take no responsibility for late or missing deliveries. Responses received after the 
prescribed date and time will not be considered and will be returned. Incomplete or inadequate 
responses, lack of response or misrepresentation in responding to the above requirements will 
disqualify the firm from any further consideration. The Bank, at its option, may take the necessary 
steps to verify any of the information provided in response to these pre-qualification requirements. 

This does not constitute either a Request for Proposal or an offer to contract and does not create 
any obligation on the part of the Bank. 




Monday -tr n v is 1994 


H 0 fllj |g ft 


INGAt)BANK 

•AU • «« MS.JIMIM »a : a(l 


FINANCIAL TIMES 


MARKETS 


THIS WEEK 


21 


Best Emerging 
Markets Bank 


ingJ&bank 

tel- jj n fix ** 'i 


Global Investor / Richard Waters in New York 

Elections set the tone 


Canada: the real dollar crisis 

Aflalrat thie US doflar . Can. 10yr bond yield Can. lOyrbondyMd 

CSperUSS - - . mkttnUS lOyr bond , % minus Inflation , % 



Total return In local currency to 14/7/94 
■ % ctnns* ow j 



US 




Italy 

UK 

Cash 

week 

008 

0.04 

0.09 

0.-H) 

0.15 

003 

Month 

026 

0J8 

0.42 

0.46 

0.65 

0.41 

Year 

346 

3.06 

448 

6X4 

844 

5.75 

Bonds 3-5 year 

Week 

026 

-0.02 

1.18 

041 

1.03 

1.59 

- Month 

-0.31 

0.18 

1.51 

062 

-0.45 

1.86 

Year 

-043 . 

447 

&03 

425 

9.15 

34S 

Bonds 7-10 year 

Week 056 

-4X17 

2.06 

147 

3.01 

2.75 

Month 

-023 

-040 

228 

1.00 

047 

3.18 

Year 

-3X8 

448 

420 

211 

1148 

2X8 

EquKSss 

fftJm 

14 

-02 

OX 

2.5 

22 

24 

Month 

-1.8 

-24 

-04 

-1.1 

-22 

04 

Year 

32 

34 

13.1 

5.5 

24.8 

12.0 


SoumcCcati & Banda - 
ThS FT-Act 


Lehman Bitnn. 


OoMnaa Santa a Co,. and iWNm Sana Hw Umfed. 


EnuHoB-e NomMi SaeurtMa. 
by TTm Franck* Tims Unfed. 


* Over the next 
three months, 
political consid- 
erations will 
set the tone in 
some of the 
biggest invest- 
ment markets 
in the Ameri- 
cas. Leave aside, for the 
moment. President Clinton's 
little local difficulties with 
healthcare reform and mid- 
term elections: voters to the 
north and south will make 
their own procession to the 
polls to make decisions with 
the potential for large effects 
on markets. 

It starts with presidential 
elections next month in 
Mexico, a country stricken by 
political uncertainty for much 
of this year. It then shifts to 
Canada at the end of Septem- 
ber, the likely date for a 
regional vote which once again 
raises the spectre of Quebec 
devolution. 

It moves to Brazil in October, 
for the voters' verdict on the 
administration's latest eco- 
nomic stabilisation plan 
To varying degrees, inves- 
tors in each of these countries 
have demanded a risk pre- 
mium to maintain their 
involvement. And in nanh mar , 
ket, foreign investors, nor- 
mally a substantial part of the 
investment scene, have been 
notable by their absence. 

In Mexico and Canada, at 


least, a return of overseas capi- 
tal seems likely later Mils year. 

The political zlsk premium 
implicit in Mexico and Brazil is 
probably clearest in the valua- 
tion bases of their stock mar- 
kets relative to other Latin 
markets. 

Half-way through this year. 
Mr Geoffrey Dennis at Bear 
Stearns estimated that Mexi- 
can shares were on a multiple 
of 131) times this year's earn- 
ings. with Brazil at 1Z3 times. 
For 1995, this falls to 10.8 t imes 
projected earnings for Mexico 
and 10.4 times for Brazil, about 
a point less that the regional 
average. 

For the Latin stock markets 
as a whole these sort of multi- 
ples make for a better invest- 
ment case than at the peak lev- 
els reached by the end of 
January. 

From there share prices fell 
on average by a third, courtesy 
of Mr Alan Greenspan, chair- 
man of the Federal Reserve, 
and then foiled to sustain a 
rebound in June, a gain w-hning 
the pattern of US markets. 
Unless the US bond market 
goes into another spasm this 
autumn, the stage seems set 
for a more stable second half. 

Mexico could soon be doe for 
a respite from the political 
uncertainty which has fol- 
lowed the Chiapas uprising 
and Colosio assastnation. 

The August 21 election will 
no doubt be a messy affair 


Souok Dfltmtraqm 

with perhaps the loss by the 
ruling PRI party of its two- 
thirds majority in Congress. 
But the PRI is expected to 
maintain its hold on the 
administration. 

If the foreign capital flowing 
into Mexico picks up after the 
election, it could help to bring 
its own reward. Renewed 
investment would take the 
pressure off the peso, allowing 
interest rates to ease tack and 


bolstering economic growth, 
which in turn will support 
share prices. 

The outcome of Brazil's 
autumn presidential elections 
seem far more open to doubt, 
implying greater volatility In 
Brazilian financial markets 
over the criming months. “Vol- 
atile" and “Brazil" are words 
which fit neatly together. 
Shares soared 60 per cent early 
this year, fell almost as much, 


and then rebounded further 
than most other laHn markets. 

The latest Brazilian cur- 
rency, the real, was introduced 
only on July 1, with a commit- 
ment by the administration to 
put a sizeable chunk of the 
country's foreign currency 
reserves to defending its parity 
with the dollar. 

It is a giant game of poker. 

Will thic wnH-inflatinnnr y mes- 
sage produce the desired 


effect? Or will the markets call 
the government's bluff? 

The aut umn election, the 
first round of which is on Octo- 
ber 3, could hang on the result 
Holding the country's hyper- 
inflation in check would do 
wonders for the political credi- 
bility of Mr Fernando Cardoso, 
the ffnanea minister, as con- 
sumers experienced the nov- 
elty of stable shop prices, well, 
stable relative to past experi- 


ence. at least 

Recent opinion poll advances 
by Mr Cardoso, from a very 
weak position, have already 
put some zest in share prices. 
Whatever doubts hang over the 
long-term picture, there seems 
plenty of room for a short-term 
rebound later this year. 

Mr Dermis predicts a return 
of the stock market Index to 
3,100 by the end of the year, 
while Ms Tamzin Hobday at 
Barings is estimating a more 
modest bounce to 3,900. 

■ 9% real yield? 

Canada's own political uncer- 
tainty has contributed to a 
remarkab le turn of events in 
its financial markets. The pos- 
sibility of a real yield of nearly 
9 per cent on ten-year govern- 
ment bonds 

The Intimate connection 
between the future or Quebec 
and the country's massive bud- 
get deficit explain this seem- 
ingly bizarre position. 

The debt levels are the 
immediate cause of the mar- 
ket’s concern. Taken together, 
federal and state debts amount 
to more than 100 per cent of 
the country's GDP. Higher 
interest rates have made the 
situation worse, adding to fin- 
ancing costs and pushing the 
debt level higher. 

Concern about Quebec has 
set a match to the concern. If 
the seperatists gain power in 


September, they have promised 
a referendum on devolution 
within a year. Who. then, 
would be liable for the federal 
debt? 

This is not the First time the 
Quebec Question has led to a 
foreign investor strike and 
thrown the Canadian markets 
into a tizzy. The reality, 
though, may be less alarmist. 
Opinion polls suggest that a 
referendum would not bring 
support for a free-standing 
Quebec. And even if it did, the 
Parti Quebecols has expressed 
its willingness to take on a 
share of the federal debt. 

The realisation that there 
has been an over-reaction in 
the Financial markets has 
already driven a recovery in 
the bond market in the post 
fortnight. The spread between 
ten-year US and Canadian 
bonds, whicb shot up to more 
than 220 basis points towards 
the end of June, has since 
dropped back to about 160. The 
steady flow of Canadian dollar 
eurobonds over the past week 
testifies to the renewed inter- 
est of foreign investors. 

With headline inflation at 
zero, though (and underlying 
inflation not much over 1 per 
cent,) the real yield still looks 
remarkable. Assuming the gov- 
ernment does not reverse 
course and inflate its way out 
of its debt hole, there are likely 
to be buying opportunities 
ahead. 



Labour stan- 
dards, dis- 
cussed here 
two weeks 
ago, are not 
the only con- 
tentious issue 
foisted oat the 
World Trade 
Organisation by pressure from 
industrial countries, princi- 
pally the US. Thfi gre ening of 
trade is already on the 
agenda, following the ministe- 
rial meeting in April. 

The introduction erf environ- 
mentalism into the trading 
system is a serious worry: 
trade measures, however con- 
venient, are never the first- 
best instrument for achieving 
environmental objectives; the 
environmental cause is 
exposed to capture by protec- 
tionist interests; and an esca- 
lation of trade disputes in this 
area could undermine the 
multilateral trading system. 

As explained by Daniel Esty 
of the Institute for Interna- 
tional Economics in Washing- 
ton, in an admirably balanced 
book, the environmentalist 
agenda for trade is based on 
four concerns: that trade liber 
alisatlon causes economic 
growth, which harms the envi- 
ronment; that countries with 
lax environmental standards 
enjoy an unfair competitive 
advantage; that trade rules 
may undermine, or override, 
domestic environmental regu- 
lations; and that GATT limits 
the use of trade restrictions as 
a form of leverage upon the 
recalcitrant * 

Where the production of 
goods - such as dean air - or 
of bads - such as species 
extinction - carries no price, 
growth may be harmful. Yet 
this has little to do with trade 
as such. Economic growth is 
also often good for the envi- 
ronment. The most important 
cause of deforestation is fell- 
ing for firewood, which occurs 
when people cannot afford 
commercial energy. Similarly, 
the quality of water and urban 
air improves as countries 
become richer. To the extent 
that higher Incomes are envi- 
ronmentally damaging, the 
advanced industrial countries 
pose the main problem. The 


Economic Eye / Martin Wolf 

Gas from 
greenhouses 

6arb^<Aaiitite«v4iMrib^ ' 

' cenwat manufacturer: 1991 ■ r - 


Total , 

Q* mt rtfto-to t mtm a bUi tfl 


Per head 
■■ '(Mwta t o maaoait Mn ) 





chart shows that US residents 
emit 16 times more carbon 
dioxide (the leading cause of 
the greenhouse effect) per per- 
son than their counterparts in 
low-income countries. 

It is also wrong to assume 
that trade liberalisation dam- 
ages the environment By pric- 
ing energy well below world 
prices, the rate at which 
China emits carbon dioxide 
per unit of gross domestic 
product is 16 times higher 
than Japan's. Kym Anderson, 
the Australian international 
economist points out that in 
the case of agriculture, "coun- 
tries with relatively low pro- 
ducer prices, such as Argen- 
tina, Australia and Thailand 
use less than one twentieth 
the am mints of nhamiral fertil- 
iser per cropped hectare that 
high price countries such as 
Switzerland use." ** 

Equally misplaced is worry 
about ecoduxnping. There is 
no difference between the 
competitive implications of 
di vergent environmental stan- 
dards and the consequences of 
other legitimate policy differ- 
ences between countries. 


Drawing on a study of seven 
advanced economies, Piritta 
Sorsa of the World Bank also 
argues that the Industries that 
spent most on pollution con- 
trol mflinfaiineri their interna- 
tional competitiveness 
between 1970 and 1990. *** 

Since rich countries have a 
comparative advantage in cap- 
ital-intensive process indus- 
tries, this is unsurprising. 

Optimal environmental reg- 
ulations depend on resources, 
geography, wealth and tastes, 
all of which diverge among 
countries. Moreover, a coun- 
try as a whole cannot be put 
at a competitive disadvantage, 
only specific industries. Envi- 
ronmentalists presumably 
wish to see these polluting 
domestic industries shrink. 
They also argue that opposi- 
tion to higher standards, 
induced by fear of foreign 
competition, is a political 
obstacle to the domestic regu- 
lations they desire. Why must 
Mexico adopt standards it 
does not want, merely to 
make it easier for environ- 
mentalists to obtain the acqui- 
escence of US industrialists? 


The argument that trade 
rules and trade liberalisation 
may undermine domestic 
environmental regulations is 
almost equally misplaced. 
Where an international objec- 
tive, such as preservation of 
the ozone layer, is desired, the 
best course is global agree- 
ment It is also questionable 
whether countries should be 
allowed to restrict imports 
merely because they are pro- 
duced in ways rfaWnai unac- 
ceptable. It Is difficult to think 
of a way to retain the cross- 
border assertion of divergent 
priorities. Dolphins are valued 
in the US. How would the US 
feel if India were to argue for 
respect for cows? 

GATT does restrict use of. 
trade restrictions as a leva-. 
Where there is no interna- 
tional environmental over- 
spill, the issue is dumping. 
Where there is such overspill, 
it is whether trade policy is 
the best instrument to bring 
about change. It will not work 
with big and powerful coun- 
tries. Trade restrictions also 
impose costs on those who use 
them and risk cycles of retali- 
ation. The right policy must 
be compensation. At present, 
for example, countries with 
forests are exporting the ser- 
vice of carbon dioxide reduc- 
tion. Because they are not rec- 
ompensed, there is inadequate 
incentive to continue. 

Rich countries are telling 
people in poor countries to 
stop cutting down the trees 
that absorb carbon dioxide 
they emit; to protect animals 
they think valuable; and to 
stop production they condemn 
as polluting. People living in 
greenhouses should stop emit- 
ting hypocritical gas. 

* Daniel C Esty, Greening 
the Gait Trade, E nv ir onment 
and the Future (Washington 
DG Institute for international 
Economics, 1994); ** Kym 
Anderson, “ Economic Growth, 
Environmental Issues and 
Trade, Discussion Paper No 
830 (London: Centre far Eco- 
nomic Policy Research, 1993); 
*** Piritta Sana, Competitive- 
ness and E nvir o nme ntal Stan- 
dards, Working Paper 1249, 
International Economics 
Department, World Bank. 


COMMODITIES 






FT -ACTUARIES WORLD INDICES 


complied by The Financial Times Ltd.. Gokfcnan. Sachs 4 Co. and NeiWest Securities Ud. in conjunction wtti the bwttuta of Actuaries and the Faculty of Actuaries 

TODAY JULY 15 IBM THUMOAY JULY 14 IBM — - DOLLABWDBC — 

LIS Pouxi Local Loral % Grass US Round Loral Year 

DWsr 28 Steriho Yen DM C™****™ “J, ££ '£2? l££t ^ 

tKil0i jivja/re index indeac Index Index 31/12 SB YMd Index Index Index Indra Index Hph Low 



17348 

S.7 

18443 

107.11 

13689 

15687 

-42 


_ 188. 02 

14 

17845 

11640 

15228 

15148 

-84 


17022 

4.7 

162.01 

10641 

137.76 

134.78 

-7.0 


12722 

-52 

121.68 

7616 

103X6 

12743 

-24 


9MtK7 

82 

25671 

187.01 

21628 

224.44 

-1.8 


1S522 

26.0 

14746 

0606 

12845 

16601 

122 


17043 

-22 

16249 

10&78 

13625 

14618 



14320 

2.1 

13827 

8686 

11647 

11547 



-37148 

-24.1 

35328 

22844 

300X0 

36632 

-24.1 


19828 

74 

18644 

12240 

18023 

181X9 




2&B 

6427 

64.70 

71X8 

10247 

16X 


„ 169-94 

304 

161.68 

10617 

137X6 

106.17 

144 



-18.7 

462.00 

294.11 

384X0 

47447 



1833.00 

-182 

183672 

118627 

158648 

718678 



. -904117 

32 

194.88 

12645 

18640 

16324 

-74 


6748 

-04 

6427 

41.89 

54X8 

5672 

-7a3 


ms8 

132 

193.44 

12546 

21141 

164X9 

27648 

187.B4 

23666 

-12X 


292X1 

04 

27615 

16047 

23652 

28521 

13.9 

-63 

02 


14221 

14 

13606 

8748 

11448 

13630 


21245 

61 

20148 

131X2 

171.78 

242,71 


15843 

-22 

14827 

97.12 

12683 

12744 

-13X 

-94 

-2X 

United Kingdom (204) — 
USA (51 9) 

19543 

185X0 

-42 

-2X 

18670 

17636 

12042 

114.74 

15741 

14696 

18670 

18640 



02 

18148 

10618 

137.47 

151.75 

-61 


_2 10.90 

114 

20041 

13042 

17048 

206W 

1.8 

65 


179,80 

212 

16823 

10645 

14346 

114.76 


17322 

12.1 

16634 

10747 

14048 

12679 

191.43 

-2.4 

-74 


„ 18124 

-2.4 

17247 

11243 

14748 


15220 

3.4 

14616 

84X4 

123X3 

13145 

Pacific Ex. Japan (291) ... 

World Ex. US (1053} 

WmWEx.uk 0988) 

247.18 

174.89 

176.46 

-134 

11.1 

7.1 

235.14 

16617 

16841 

15248 

10611 

10640 

19944 

14129 

141.92 

22141 

13343 

14678 

1 JO 
Ofl 


342 

145 

4.10 

142 

084 

3.13 

1.78 

322 

aas 

1.48 

073 

1.72 

148 

348 

*40 

1.78 

1.77 

909 

4.18 

14s 

1.90 

448 

249 


10034 
16023 
17049 
127.61 
28088 
15087 
17227 
141 SI 
35020 
196.08 

87.78 

16827 

47331 

191627 

20448 

65.86 

20340 

33922 

288.04 

143.18 

212.18 
15664 
18426 
16008 


15068 

17038 

161.62 

12087 

26E44 

147.70 
16330 
13443 
34060 
1 65.86 

8021 

18017 

44848 

181017 

18344 

6243 

18242 

32147 

271.18 

135.71 
201.14 
15029 
18445 
17546 


10448 

11745 

10541 

7038 

18748 

8083 

10742 

88.10 

22341 

12142 

AAB9 

10447 

294.17 

118021 

12743 

4081 

12846 

210.74 

177.70 


13141 

8843 

12075 

11448 


13548 

15246 

13740 

10244 

21847 

12025 

138.43 

11346 

28073 

15747 

7064 

133.78 

aa pw? 

163947 

18442 

52.82 

16345 

27240 

229.88 

11544 

17041 

127.40 

168.19 

148.74 


18247 

15148 

13341 

127.73 

22248 

18748 

143.16 

11346 

35041 

17840 

10045 

10447 

47223 

712347 

181.78 

5048 

18076 

23848 

28228 

13826 

24045 

128.17 
18425 
18849 


188.15 

185.41 

17067 

14031 

275.79 
15845 
18527 
14747 
50646 
20923 

97.78 

17010 

62143 

264748 

207.43 

77.59 

20042 

37842 

28241 

155.79 
23145 
17848 
21448 
19844 


13828 

14823 

143.62 

12054 

20748 

96.42 

14080 

11248 

271.42 

15740 

5748 

12444 

32240 

151647 

18449 

5142 

156.74 

24447 

17543 

11033 

168.76 

12446 

17048 

17846 


14840 
12049 
20044 
97.40 
14940 
11420 
281.10 
II 


15084 

32240 

155342 

18459 

5221 

24427 


11945 
17011 
127.72 
17142 
tl 


Ex. So. At (2113) — _ 17650 
I Ex. Japan (1703) — -18050 


84 

-22 


lot .09 11KMW cc 

17445 11346 148X2 17446 -S- 5 


008 

1.45 

144 

147 

248 

2X7 

248 

140 

245 

824 

£33 


168.72 18049 
21085 19947 
175.41 16829 

17249 16349 

181.52 17248 
15246 144.72 
24143 22006 
17070 16446 
174.71 18642 

175.78 16844 
19243 17032 


10544 

13146 

10847 

107X0 

112.77 

84.84 

1501! 

10741 

10844 

10920 

11058 


13648 

18842 

14096 

13943 

14547 

12248 

184.17 

13848 

14040 

14128 

14642 


150.65 

20083 

11420 

12941 

181.15 

13044 

21062 

13228 

145.19 

147.78 

173.88 


17058 

22060 

17848 

17342 

102.73 

157X7 

29821 

17440 

17548 

17056 

19020 


14242 

16088 

134.78 

14088 

17547 

124.77 

18443 

14548 

15646 

15844 

16841 


14268 

161.73 

15082 

14921 

18042 

124.77 

186X5 


15920 

16011 

187X4 


ferid Indra CT72) 17722 oo 


VecAA inflftfl VtOM 14042 43 M 178X6 16728 10942 141 4 0 148.77 17087 1S84S 18081 


Al uminium plan under review 


The aluminium industry will 
be h o pfa g that ni g glin g doubts 
about Russia's commitment to 
Its output cutting programme 
can be removed at an interna- 
tional meeting in Canberra, 
Australia, on Wednesday and 
Thursday. 

Australia, Canada, the 12-na- 
tion European Union, Norway, 
Russia and the US will be 
reviewing progress with the 
scheme they agreed in January 
to reduce output by between 
L5m and 2m tonnes for two 
years so as to faxing the market 
back into balance after a 


period of soaring stocks. 

Prices have risen strongly 
since then and stocks have 
begun to fall, bat there are 
worries that those very tacts 
may weaken the resolve of 
some companies to see the 
plan through. 

Russia, in particular, is giv- 
ing cause for concern as It is 
believed to be well behind 
schedule with the second 
tranche of its promised cuts. 

Further concern has been 
caused by the news that Russia 
Is not sending to this week's 
meeting the same senior nego- 


tiators who represented it at 
earlier talks. It has been 
suggested that one is not com- 
ing because he has been pro- 
moted. Other delegates will be 
hoping that is all there is to it 

There is some disappoint- 
ment that big producers out- 
side the group, like those in 
Brazil Venezuela and the Gulf 
states, have not emulated the 
cuts and that It has not proved 
possible to Induct them into 
the group because of anti-trust 
worries. 

Progress with the cuts is 
being monitored by the Inter- 


national Primary Aluminium 
Institute, which is releasing 
June output figures for its 
members on Wednesday. 

Also on Wednesday, the US 
Department of Agriculture will 
be issuing its latest agricul- 
tural outlook report, and in 
Denver the US Cattlemen’s 
Association will begin its 
three-day, mid-year conference. 

On Tuesday the privatisation 
committee of Minero Peru, the 
state mining and metals con- 
cern, is scheduled to announce 
the successful bidders for three 
big gold concessions. 


*1 am Ttasa Unfed. OMrm. md MJ* tUxa ft Ng*: Pap aa reM 


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N 0 T 1 CB 13 HHtBBY WVBI fet (fa Oder at 
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dated tin OTib Jut 1994 confUminj the 


i of tho Stun: he 


■ of the 


above owned Contour free £3.759433 to 

tortdby the JUgbtarol 

199L. 

1994 


0544492 wmnpdtndl 
anuria* la My 1994. 
DaedSiUtt day ol My II 


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Kaufhof Finance B.V. 

Can$ 100,000,000 Collared Floating Rate Notes 1993/2003 

(tewed under the DM 1 bBHon MuM-Cummey Euro Madhim Tann Not* 
Programme of Kaufhof Hakfing AO) Tranche No: LI 

The Rate of interest applicable to foe Interest Period from July 18. 
1994 to October 17, 1984, Inclusively, was determined to be 6.5 per 
cent per annum. Therefore, on October 18, 1994 . interest per Note of 
CanS 1,000 principal amount In the amount of Can$ 16.38 and 
Interest per Note of Can$ 10,000 principal amount In foe amount of 
Cansi 63.84 is due. Dresdner Bank 

Frankfurt am Main, AMtengesedscfcaft 

July 1994 Ca l qd at i on and Principal 

Paying Agent 


MICHAEL 

LAURIE 

TeL- 071 W 3 7050 
Fax; 071 4996279 


We mage lout up ta VO® Lou to Value. 
Mod cwspeiklvc and flexible iera» [or 
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development! upwards of flu,, 
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FINANCE 

UKCenmenfal 

P roperty 






FINANCIAL TIMES MONDAY JULY 18 1994 


WORLD BOND MARKETS: This Week 


NEW YORK 


Patrick Harverson 


LONDON 


Philip Coggan 


FRANKFURT 


David Waflsr 


TOKYO 


Enu'ko Terazono 


A year ago, Mr Alan 
Greenspan, the Federal 
Reserve chairman, warned 
Congress in his 
Huaphrey-Hawkins testimony 
that interest rates were 
probably too low, and that it 
was likely the Fed would have 
to tighten, monetary policy to 
prevent inflationary pressures 

from buil ding up. 

On Wednesday, Mr 
Greenspan returns for another 
Humphrey-Hawkins session 
and same analysts believe he 
may issue a similar wanting 
about interest rates. Although 
the Fed has raised interest 
rates four times in the past 
year, the strength of the US 
economy continues to surprise 
observers, including those at 
the central bank. 

Consequently, trading on 
the bond market today and 
tomorrow should be cautious, 
with most dealers and 
investors likely to stay on the 
sidelines imHl Mr Greenspan 
heads for Capitol HUL 

Wednesdaywillbe 

particularly tricky for the 


Benchmark ytefc* an* 

1/7/8* Montfiago «= 

8.0 — -— 



0 10 yarn SO 

'fiB yiakfci are mate* cariMinBen 
Some; Mens Lytid) 


market, with two Treasury 
auctions of two-year and 
five-year notes also scheduled. 
If they go poorly, it will bode 
ill for the auctions of 10-year 
notes and 30-year bonds due 
later in the refunding round. 

If Mr Greenspan suggests 
on Wednesday that further 
rate rises are in the pipeline, 
the ground earned last week 
could be quickly given, up, 
sending the 30-year yield - 
currently at 7.5 per cent - back 
above 7.7 per cent again. 


The gilts market enters this 
week In a more cheery mood 
than for some time. Even after 
a setback on Friday afternoon, 
the benchmark 6% per cent 
2001 issue ended the week 
yielding 8.19 per cent, against 
8.47 per cent a week earlier. 

Good economic news had 
spurred the market with 
figures on both average 
earnings and retail prices 
showing little signs of the 
feared Inflationary pick-up. 

This week sees the 
publication of several 
economic statistics which may 
give a clue as to whether the 
rally can be sustained. June 
retail sales numbers on 
Wednesday and a 
second-quarter gross domestic 
product estimate on Friday 
may show that the economy 
is still growing strongly. If the 
market takes such figures in 
its stride, this may show that 
investors are prepared to 
accept the story of a robust 
economy without inflation. 

The Bank's announcement 
on Friday that its next auction 


Benchmark yield curve (W 
i/7/M — Month B0O «= 

10.0 -- 

9JV-— - 

& Q — 


0 5 yew# 20 25 

•AS yfekfe ore ma rket convention 
Source: MerrO Lynch 


would be of conventional stock 
maturing between 2007 and 

2011 indicated that the 
market's appetite for 
floating-rate stock and 
short-dated issues was limited, 
according to Mr Nigel 
Richardson, head of bond 
research at Yamaichi 
International (Europe). The 
Bank had to fund at the longer 
end, in spite of its dislike of 
the high yields prevailing. Full 
details of the issue will be 
revealed tomorrow. 


The Bundesbank's 
policy-making council meets 
on Thursday, the last time 
before the German central 
bank’s summer recess. As is 
traditional, the meeting is the 
occasion for the Bundesbank’s 
mid-year review of the 
development of M3 money 
supply - this year is especially 
important in view of 
ballooning growth in M3 since 
late 1993. 

A dilemma for the 
Bundesbank has been how to 
justify cutting interest rates 
while tolerating monetary 
growth at mote than double 
the 4 to 6 per cent target range. 
The Bundesbank is likely to 
modify the target range on 
Thursday, but there is little 
consensus am o ng economists 
about how this may be 
achieved. 

Traders will be less 
interested in the technicalities 
than concrete signs that the 
Bundesbank will be able to 
resume interest rate cuts in 
the autumn without further 
damage to its credibility. 


Oermny 


Benchmark ytoW curve PW 
Vim — Mcrthogo ■ — » 

Jl 

0 10 yn 20 30 

*AS ylefch are market convention 


Source: Una Lyncti 


In this context a “good” 
figure for June M3, likely to 
be released on Thursday, 
would provide evidence that 
money growth Is subsiding. 
Anything under 12 per cent 
would be considered “good" 
as it would mean a decline 
from May's 13.4 per cent 
annualised, seasonally 
adjusted rate. 

There is a chance that the 
Bundesbank will cat the 
discount rate on Thursday, 
but this is highly unlikely. 


Fears of over-supply are 
expected to weigh on Japanese 
government bond prices. In 
spite of underlying concern 
over fiscal expansion funded 
by government bonds, 
corporate borrower continue 
to tap Into the straight bond 
market for funds. 

This week, Tokyo Electric 
Power, the leading electric 
utility, is expected to launch 
a YISGbn domestic straight 
bond with a maturity of 20 
years. Meanwhile, the increase 
in foreign borrowers on the 
samurai market is also causing 
anxiety among market 
participants. The Greek 
government last week issued 
YllObn in samurai bonds, and 
Greek Telecom is planning 
to offer its first samurai issue 
next month. 

Without a clear indication 
of the state of economic 
recovery, traders expect the 
bond market to move within 
a narrow range this week. 
While the rise in consumer 
spending, due to the hot 
summer weather, and income 


•Japan 


Bendim** yWd cun* {*)* 
mm — Mon* apo c=> 

&£ r 

341 

- 3.3 — _ 



W» 1 L_J _j 

0 G y Mn IS -9D 
*M yMda ara motet cawaratort 
State; Menff Lynch 


tax cuts and supply worries 
continue to undermine 
confidence, the strong yen, 
the steady buying of bonds 
by Japanese institutional 
investors and expectations of 
a weak recovery are 
supporting the bond market 
Life and non-life insurance 
companies in June were net 
buyers of bonds for the third 
consecutive month, and 
traders expect farther buying 
by the institutions if yields 
rise back to 45 per cent 


Capital & Credit / Graham Bowley 


10 year benchmark bond yields 


Signs of a return to fundamentals 


Percent 

12 


UK 

Ger man y 


A more optimistic mood seems 
to have settled on the Euro- 
pean government bond mar- 
kets in recent weeks. Yields on 
German bonds have fallen 
back by almost 0.5 percentage 
points from their peak of 7.3 
per cent in June. Last week 
alone, US government bond 
prices rose by almost 3 per 
cent despite a slight setback 
on Friday. 

Investors may have at last 
begun to realise that judging 
by the economic fundamentals, 
bonds are cheap and current 
bond yields attractive. Infla- 
tion In Europe remains sub- 
dued, even in the UK. which is 
furthest down the road to eco- 
nomic recovery. 

“The fundamentals are at 
last beginning to exert them- 
selves,” says Mr Nigel Richard- 
son, head of bond research at 
Yamaichi "At some stage the 
rally may nip into profit-tak- 
ing. bat reality does at last 
seem to be settling in.” 

“This rally feels different," 
says Mr Ian Shepherdson, 
economist at Midland Global 
Markets. “There is money com- 
ing in from the US and people 
are talking in a different way 


than they did after earlier 
rises.” 

For the first time in many 
months, there is talk of hedge 
funds coming back into Euro- 
pean markets, particularly the 
UK and Germany. It was these 
highly-leveraged pools of spec- 
ulative capital which aban- 
doned bonds so spectacularly 
at the beginning of the year 
and helped trigger the bear 
market 

Institutional investors, it 
seems, sidelined for so long by 
uncertainty and market volatil- 
ity, are also being tempted 
harir into bonds by high yields. 

It is not surprising that the 
strongest performers in recent 
weeks - Italy, Spain and the 
UK - are those markets that 
were hit the hardest by the 
general band price decline, for 
it is in these markets that the 
need for correction is greatest 

Also In investors’ minds may 
be the thought that the rise in 
long-term interest rates caused 
by the increase in bond yields 
may slow the pace of economic 
recovery, forcing a farther 
downward revision to growth 
and Inflation forecasts and pro- 
viding another spur to bonds. 


Germany 


Interest rates, % 

7.5 

lOyr benchmark n 

» 


6.5 --:-sr 


5.5^ -X 


3 north Interbank re to 


Jrei 1994 

Some Dat a g ra m 


Similarly, the recent 
strength of the D-Mark against 
the dollar im plies a ti ghtening 
of monetary policy, further 
reinforcing the low Inflation 
outlook in Germany and in 
Europe generally. Many for- 
eign investors have also been 
attracted into Europe by the 
gains offered by ho lding bonds 
denominated in currencies that 
are rising. 

There was also obvious relief 
in bond markets when the US 
Federal Reserve did not raise 
short-term interest rates in an 


attempt to support the ailing 
dollar at its meeting on July 6 
and following the G7 summit 
in Naples. 

Another, simpler explanation 
of this month’s rise may be 
that many institutional inves- 
tors sold loss-making bonds 
ahead of the end of the second 
quarter, when they tradition- 
ally publish their financial 
reports, and with that hurdle 
passed, they have returned to 
the market 

However, despite the recent 
gains, most activity is still con- 
fined to the futures market and 
trading in the cash market 
remains thin, a sign that confi- 
dence has still not fuBy recov- 
ered. 

Furthermore, the economic 
fundamentals are not radically 
differ ent bam what they were 
in the first part of this year, 
when forecasts of future infla- 
tion were already very km. As 
a result, many commentators 
think this rally will be 
short-lived. 

“We cannot rule out the pos- 
sibility that the rally win con- 
tinue for a few days yet, but in 
fact nothing has changed,” 
says Mr George Magnus, inter- 


mmmmwwmm 



European 

Investment 

Bank 

£185,000,000 9 per cent 
Loan Stock 2001 


S.G.Waxbinx 8c Co. Ltd, 
announces om benalf of European 
Investment Bank that in the six 
months preceding I6sh July, 1994, 
£8,000,000 nominal amount 
of the above Loan Stock was 
cancelled pursuant to die 
provisions of the Purchase Fund 
(dating to the above Loan Stock. 

As of 16th July, 1994 
£161JIQ0JD00 a azmiul ammutt of 
die above Loan Stock 
was outstanding. 

S.G. Warburg 5c Co. Ltd. 

Purchase Agent 

lAt/rij. IW 

jiiiiimiijiimiiiiiim 



JANUARY 14,2003 


For the period 
July 18) 1994 
to January 16, 1995 
the new rate has been 
fixed at 13,145 % P_A. 
Next payment date : 
January 16, 1995 
Coupon nr : 5 
Amount : 

FRF 68455,28. fertile 
denomination of 
FRF 1000 000 


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DEPARTMENT OF 
ECONOMIC DEVELOPMENT 

PROPOSED NEW DOMESTIC ENERGY 
EFFICIENCY GRANTS SCHEME: 
APPOINTMENT OF MANAGING AGENT 

The Department invites tenders for appointment of a 
managing agent to develop and administer a new energy 
efficiency grants scheme for low income householders in 
Northern Ireland. 

The new scheme will replace the existing Homes Insulation 
and Energy Grant schemes and will offer eligible 
householders grams towards insulation and draugh [proofing 
[heir homes, and advice on how to use energy more 
efficiently. 

Tender documents ran be obtained from: 

Department of Economic Development 

Energy Efficiency Service 

Room 81 

Nctherteigh 

Massey Avenue 

BELFAST BT42JP 

Telephone: (02321 529307 

Completed tenders should be received by the Department no 
later than 4.00 pm on 18 August 1 994. a. 



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• 2 *chiin^c* Ttitc !>pCGiniis?y. Jor over ycurs _ . 1 


national economist at SG War- 
burg. 

“The Fed will still raise 
interest rates, the psychologi- 
cal impact of what has been 
happening to currencies has 
gone now, and the problem of 
issuance remains.** he says. 

The rise in real yields has 
been blamed on the large sup- 
ply of new bonds issued fay 
governments to fund their 
huge budget deficits. 

Mr Magnus estimates that 
the G7 leading industrialised 
countries will issue Sl02bn of 
gross government debt in the 
next four weeks. “All we are 
seeing is a te chnical bear mar- 
ket squeeze upwards,” he says. 

As has been the case 
throughout this bear mar ket, 

opinion is divided. 

There may be a real test of 
market sentiment this week 
when the Bundesbank comes 
to the market with an auction 
of 10-year bunds, after cancel- 
ling its last two auctions due 
to lack of demand, and the 
Bank of England announces 
details of its auction of conven- 
tional gilts, the first time it has 
dared to tap the longer end of 
the yield curve for some time. 


8 




— r 






SOurovOrtutiMm 


Discount 

Ovreright 


RATES XT A OUVNCS 

USA 

Japan 

Germany 

France . 

Italy 

3^0 

1.75 

450 

6.40" 

7.00 

4.13 

2.13 

4.75 

K-gS 

737 

lh 436 

2JJ5 

4.75 

5.56 

8.18 

535 

22S 

4 

5.87 

9M 

6JB0 

338 

6.15 

&8Q 

10.43 

7JH0 

■435 

&81 

7A0 

' 10.47 


Ona year 5S5 22S 

Fto year 080 338 

Ton yew 7.20 445 

p) r rvno n ipo ore. C8 VKrS—V wl«. Scuett Wvutre. 


oumaunr bowfbtuibm (cbt>$iwmx» sands at ioq* 


Sap ’ 
Dec 


Sett price CTmnga Wgb 

102-18 . -0-04 ' 103-10 

101-2S -OOS 102*18 

101-02 -0-03 101-24 


Eat vol OpwW ^ 


.535^830 390,132 T: 

M84 , - 86,770--. y 


4.117 


International / Farhan Bokhari 


Small shadow over Pakistan offering 


Pakistan has just begun a new 
fiscal year, with the govern- 
ment of Ms Benazir Bhutto, the 
prime minister, set to continue 
its efforts to improve the coun- 
try’s macro-economic perfor- 
mance and the quality of its 
foreign exchang p reserves. 

A policy of tight fiscal man- 
agement has put much-needed 
brakes on excessive govern- 
ment bank borrowing. The 
budgetary deficit has been 
reduced to less than 6 per cent 
of GDP, down from almost 8 
per cent, last year. Meanwhile, 
official foreign exchange 
reserves have risen to over 
$2.1bn, through a variety of 
short to medium-term borrow- 
ings. A year after last sum- 
mer’s political and economic 
crisis, the country has recov- 
ered from its all-time low 
reserves of below 8300m. 

The recovery of reserves has 
been helped by a three-year 
$L36bn IMF loan agreed earlier 
this year. Next year, it is 
planned to cat the budget defi- 
cit to between 4 and 45 per 
cent of GDP, and to lower infla- 
tion from 10 to 7 per cent 

On the back of the past 
year’s performance, the coun- 
try is preparing to float its first 
Eurobond offering of 8200m 
within the next three to four 
months, to convert some erf its 
short-term borrowings into 


medium-term liabilities. Many 
analysts look upon the offer as 
central to the efforts of the 
government and the private 
sector to raise more funds on 
the Euromarkets. 

Recent rises in US interest 
rates followed by selling pres- 
sures on international bond 
markets have cast at least a 
partial shadow over the future 
of the offering but senior offi- 
cials argue that it’s impossible 
for any country to synchronise 
its domestic conditions with 

lnfaynnEffi f yn^] ^n^ nfligfainCftR , 

"When you go to the Euro- 
bond market, particularly 
when yon are a new entrant, 
you should enter from the 
point of view of what is the 
best timing for you domesti- 
cally, because internationally 
we do not have any control, ” 
said Mr Mohammad Yaqub, 
governor of the central bank — 
the State Bank of Pakistan. 

According to Mr Yaqub, the 
country’s recent performance 
in economic management, 
recovery of foreign exchange 
reserves and a perception from 
the International community 
that it’s moving in the right 
direction stren g then its case. 
Other officials want to relieve 
growing budgetary pressures 
which have continuously 
forced the country to seek 
large capital inflows to narrow 


its current account balance of 
payments deficit. 

Almost one-third of the 
annual budget goes towards 
servicing the $23hn official for- 
eign debt and almost Rs900bn 
($29.5bn ) in public sector debt 
owed to local banks. Officials 
mrhidhig Mr Yaqub are con- 
vinced that a successful launch 
of the bond issue would help 
the country convert some of its 
foreign exchange reserves, in 
the form of short-term borrow- 
ings, into medium-term liabili- 
ties and provide the added 
cushion needed to further 
improve macro-economic per- 
formance. 

“Going to the Euromarket is 
of prime importance to Pakis- 
tan, not only for the govern- 
ment but also for Pakistani 
companies,” says Mr Nasir 
Bukhari, chief executive of 
Khadim All Shah Bukhari, a 
brokerage house. 

This year, Dewan Salman 
Fibre Company, a leading Paki- 
stani group, for the first time 
floated bonds worth $45m 
while at least another two are 
preparing similar ventures. 

Many b usinessmen complain 
about high domestic interest 
rates, running up to 19 per 
cent, and a credit squeeze an 
local banks, which have made 
it hard to raise capital locally. 

However, analysts like Mr 




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Bukhari warn against the pos- 
sibility of a weak investor 
response, especially after 
recent events on the bond mar- 
kets. He wants the government 
to consider trimming the size 
of the offer and making ade- 
quate arrangements to alto 
market support. 

The success of the offer also 
depends on the government's 
ability to cany on its economic 
policies in the coming year, 
which could be a difficult task. 
This year's cotton crop has suf- 
fered badly, lowering the total 
output to less than 8m bales 
from a target of 12m. Cotton is 
among the most important fac- 
tors affecting the economy, as 
it generates almost 60 per cart 
of exports, directly or indi- 
rectly. 

Some business leaders have 
also complained of a widening 
recession, which they say has 
been caused by tight controls 
on government spending. As a 
result, local Industry has suf- 
fered from felling rales since 
the be£nning of the year. 

In spite of such concerns, the 
government claims it is deter 
mined to stay on course. How- 
ever, to the past two years 
national growth figures have 
fallen behind target due to the 
cotton losses, and predicting 
tht» future remains a difficult 
task. 




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Cmanatac 

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FINANCIAL TIMES MONDAY ilir.V 18 1994 


23 


NEW YORK 


p Tnck ‘ !*!'. 


Investors likely 
to focus on 
results season 

After last week, when the stock market 
reacted mainly to bond price 
movements, the dollar, and Nation 
news, investors are now likely to 
concentrate onthe secon<tquarter 
results season, which enters its second 
week today. 

Few corporate earnings will be as 
eagerly awaited as IBM’s, due 
Thursday. Its results have long been 
regarded as a highlight of the season, 
even if its fortunes have waned in 
recent years, and its stock overtaken 
by Merck's as the bellwether of the 
Dow Jones Industrial Average. 

IBM’s shares have been under 
pressure, dropping 12 per cent hi the 
past month due to growing uncertainty 
about what earnings will look like. 
Pessimists fear it will not come close 
to matching the 6 per cent sales growth 
of the first quarter, a view backed by 
a recent meeting between the company 
and analysts in which IBM suggested 
some sales forecasts were overly 
bullish. There is also some doubt that 
IBM has been able to m ake the sort 
of costs savings analysts regard as 
essential to its long-term recovery. 

Consequently. Wall Street oamfog s 
forecasts vary from 50 cents to 80 cents 
a share, although most are at the high 
end of that range. But even if the 
figures are disappointing, the stock 
may not suffer a major sell-off, as the 
recent fall can be seen as a dbavmnHng 
of bad news. If the numbers are good, 
then a rally may be in order. 

It is unlikely the rest of the market 
will take its cue from IBM. The days 
when “Big Blue” led the market op 
- and down - are long since over. 


Dow Jones industrial Average 


3,760 



Other big companies will be producing 
results this week, and among the most 
keenly-watched will be the big 
money-centre banks, starting with 
Chase Manhattan today. 

Citicorp, the largest US bank, will 
report tomorrow, and the consensus 
among analysts, according to the First 
Call service, is for earnings of 81.22 
a share, up from 82 cents a year ago. 
Trading profits are expected to bounce 
back from a difflraiit’- first quarter, when 
turmoil in worldwide bond markets 
hit Citicorp's bottom line. 

Investors this week are also likely 
to keep an aye on the 
Humphrey-Hawkins Testimony, the 
semi-annual appearance of the Federal 
Reserve chairman before Congress 
due to start on Wednesday. 

Everyone will be keen to hear what, 
if anything. Fed nhairman Mr Alan 
Greenspan has to say about the role 
of monetary policy in influencing the 
valuation of the still- weak dollar. 

Analysts expect Mr Greenspan to 
remain silent on the dollar. They say 
he Is more likely to repeat the warning 
he gave Congress a year ago - that 
further interest rates increases might 
be needed to ensure the economy does 
not add too much fuel to the 
inflationary fires. 


EQUITY MARKETS: This Week 


LONDON 


Important role 
for currency 
in share rally 

Currency factors have now turned 
very positive for the UK equities, and 
are playing an important role in the 
market recovery, according to analysts 
at several securities houses known 
to have the ear of continental European 
fund managers. 

Ramin gv ratios on UK stocks are 
now the lowest of any major market, 
points out S.G. Warburg, which puts 
“sustainable" p/e ratios in the UK 
market at 15.15 times, compared with 
16.78 in Germany and 1&2I in France. 
The investment hank says that London 
also offers the best relative cheapness 
to its mid-cycle p/e - the ratio 
generated if the net sales margin 
returns to its average of the last cycle. 

The dollar's rally hna enabled 
investors to turn their attention back 
to the fundamental attractions of 
economic recovery in Europe. But it 
is the relative weakness of sterling 
against the D-Mark that has triggered 
the sudden recovery in UK share prices. 

The current DM/£ rate, now down 
to the lows of last February when the 
UK currency was still in the final 
throes of its exit from the ERM, offers 
overseas funds entry to UK equities 
on premium terms. 

Many European investors are 
believed to have exited the UK market 
at around FT-SE 3.500 at the be ginning 
of this year, taking their timing from 
the DM/£ rate rather than market 
judgment. The fall in the rate since 
then gives overseas buyers of UK stocks 
an effective premium of some 300 
Footsie points over the average UK 
fund manager, according to Strauss 
Turnbull. 


I orry P.ylarvl 


FT-SE-A All-Share Index 

1,540 “ 1 



From the view of market prospects, 
the weighting in favour of overseas 
investment activity is all the stronger 
because, according to most London 
houses, UK institutions are close to 
folly invested and the prolonged period 
of anxiety over the dollar and the bond 
markets has left market-makers with 
flat trading books. 

Hence the powerful squeeze on prices 
at present, with shares responding 
very strongly to the sudden recovery 
in stock index futures which are now 
routinely at a substantial premium 
to the underling cash market, in sharp 
contrast to the discounts to which 
unwary traders had become 
accustomed. 

The most healthy signal from the 
marketplace has been the revival in 
retail, or genuine customer business 
in equities. The total of around £&8bn 
for the past five trading sessions is 
the best the market has seen since 
the skids went under the bond markets. 

The bid for Wm Low from Tesco 
is seen as a welcome indication of the 
weight of corporate activity likely to 
surface as companies with highly-rated 
paper move in on bid targets. Such 
activity is associated with a return 
of investment confidence in the stock 
market. 


International offerings / Tracy Corrigan 

Issuers put deals on hold 
as turmoil takes its toll 


A growing number of inter- 
national equity offerings are 
being postponed, cancelled, or 
cut in size, as the turmoil in 
the world's financial markets 
this year takes its toll. 

The heavy flow of new issues 
in the first half of the year, 
despite the poor performance 
of underlying stock markets, 
has created severe indigestion 
in the new issues market 

According to Euromoney, 
international syndicated equity 
offerings launched to the first 

half of 1994 totalled $31 bn. But 

while the flow of new issues 
continued unabated, despite 
underlying market weakness, 
the demand for paper has 
ebbed steadily. 

The recent poor performance 
of high-visibility deals such as 
Italy's Ina has sapped investor 
confidence, to the point where 
even issues priced at a dis- 
count are not necessarily 
attracting buyers. 

In the last week. Italian 
savings bank Cariplo's 
Ll,650bn offering was indefi- 
nitely postponed and South 
African insurance company 
Liberty Life scaled back the 
size of its $360m to $500m 
global convertible bond to 
$300m. Even then, the Liberty 
Life bonds have performed 
poorly, ending the week at 98 
bid, after being priced at 100. 

Smaller deals are also suffer- 
ing. Ayala Land of the Philip- 


pines last week pulled its 
planned SlOOm offering of con- 
vertible bonds via Morgan 
Stanley. It was the company's 
second attempt to tap the mar- 
ket, having previously failed to 
bring an offering of global 
depositary receipts (GDfisi. 

"There are a lot of deals try- 
ing to sap up a limited amount 
of money, and investors arc 
being very choosy," said one 
banker. “It's not market-spe- 
cific; deals are being affected 
across all the markets." 

In part, however, the prob- 
lem is a seasonal one. 
Although last year, the market 
remained active throughout 
the summer. August is tradi- 
tionally a quite month for new 
issues. This year, many bat- 
tered investors are saying that 
they will not be buying new 
paper at least until September. 

In the last few weeks, invest- 
ment bankers have been spend- 
ing a lot of time on the phone 
to corporate treasurers, 
explaining why deals they 
have been mandated to 
arrange should be put on hold. 

For some companies, which 
may have already made invest- 
ment decisions based on expec- 
tations of tbe fresh funds, 
there is a stark choice between 
postyontog their offerings and 
selling shares at a heavily dis- 
counted price. 

Some underwriters have 
been criticised for promising 


more than they can deliver, in 
order to win mandates. But 
underwriters say companies 
are usually understanding 
when they are told not to bring 
new issues, os tbe fear of a 
failed issue usually overrides 
the need for financing. 

Tbe exceptions are the size- 
able number of European gov- 
ernments which need to raise 
funds through privatisations to 
finance deficits. 

The adverse market condi- 
tions have already been exacer- 
bated by governments no lon- 
ger operating an unofficial 
queueing system, whereby 
they time their Large privatisa- 
tions to avoid a surplus of 
deals at any one time. 

For cash-rich Investors, there 
may be some bargains around. 
For example, India's Dr Reddys 
Laboratories priced un offering 
of global depositary receipts 
viu Baring at a 39-3 per cent 
discount to Friday's close. 

But even apparently cheap 
pricing does not necessarily 
attract buyers: the deal still 
had to be reduced from $50m to 
W0m. 

“The only thing you can say 
(to companies) is let's look at it 
again after the summer,” said 
one investment banker. 'The 
stock markets are showing 
signs of turning around, and 
when the secondary market 
comes back, the primary mar- 
ket usually follows. 


OTHER MARKETS 


FRANKFURT 

A quiet week Is in prospect 
on the corporate front and few 
analysts expect any change 
an Interest rates when the 
Bundesbank Council meets 
on Thursday for its mid-year 
monetary target review. 

Colonia's annual meeting 
on Friday is expected, says 
UBS, to confirm the positive 
underlying trends that have 
been developing in the German 
insurance market so far this 
year. 

Berliner B ank, which earlier 
this year merged with two 
others to form Germany’s sixth 
biggest bank, holds its annual 
shareholders meeting on 
Friday. 


MILAN 

Preliminary details of the 
government's budget plans 
put some life back into the 
market late last week hut 
investors will have to wait 
until after a cabinet meeting 
on Thursday for more 
information. 

The market took the 
government's economic plans 
in its stride hut it will start 
the August account today 
looking decidedly fragile after 
events on Friday, when Mr 
Silvio Berlusconi, the prime 
minis ter, clashed with 
magistrates over plans to limit 
their powers of arrest in 
corruption cases. 

Cartiere Burgo, the paper 
and packaging group, launches 


its rights issue today to raise 
L230bn. Shares in the group 
fell by 4 per cent on July 5 in 
Immediate response to the 
announcement and by Friday 
they had fallen by annthar 3.9 
percent 

BCI will talking to 
shareholders this week about 
plans to raise a total of nearly 
L2,400bn in a two-stage share 
and warrant issue in the 
autumn. 

James Capal said the way 
the issue was being priced, 
at L3.000 a share - a discount 
of more than 40 per cent to 
the price at the time of the 
announcement in May - meant 
that even after the price fell 
over the past six weeks, it 
would still be at a discount 
of more than 30 per cent 


ZURICH 

The market was still reacting 
an Friday to last week's 
disappointing half-year sales 
figures from Roche and the 
somewhat better news from 
Sand ox. 

This week, the focus 
switches from the 
pharmaceuticals to the 
widely-recommended Nestld, 
which provides first 
indications on Friday of its 
performance in the first half 
of the year. 

Analysts are expecting 
slightly negative or flat sales, 
with the strength of the dollar 
depressing the result by 4 to 
7 per cent and outweighing 
improvements in volumes and 
prices. 


JOHANNESBURG 

Having largely settled down 
following the turmoil resulting 
from the unexpected change 
in South Africa's financ e 
minister two weeks ago, the 
Johannesburg SE will focus 
in earnest this week on the 
latest quarterly results from 
the gold mining companies, 
writes Mark Suzman. 

Gold Fields of South Africa, 
which reported last Monday, 
was slightly down on the 
previous quarter, due largely 
to the effect of the South 
African elections and sporadic 
“stayaways”. 

Analysts expect that 
Gengold and Anglo American, 
which release their results on 
Wednesday and Thursday 


respectively, will also have 
been affected. 

A lot of attention will be 
focused on the degree to which 
both companies have managed 
to unwind their outstanding 
forward contracts to take 
advantage of the higher spot 
price. 

Their assessment of the 
current round of wage 
negotiations, which is reported 
to be r unning into some 
difficulties, will also be 
carefully studied. 

Also under scrutiny will be 
Gencor, Gengold’s parent 
company, which is expected 
to announce on Tuesday the 
completion of its long-standing 
negotiations to take control 
of Billiton, the mineral arm 
of Royal Dutch Shell. 


There has been some 
concern that Gencor's probable 
purchase price of around $lbn 
will be seen by the market as 
excessive for the assets 
received. 

However, the current 
tumround in tbe commodity 
cycle is seen to have improved 
the group's longer-term 
prospects. 

TOKYO 

The strength of the yen will 
continue to be the focal point 
among investors, as fears of 
US inflationary pressures still 
prevail among currency 
traders, writes Emiko Terazono. 

Tbe strong yen has prompted 
profit-taking among overseas 
investors, who have been the 


underlying force behind the 
recent strength of the Nikkei. 

The Tokyo Stock Exchange 
last week said that foreign 
investors were net sellers of 
Japanese shares during July 
4 to July 8. for the third 
consecutive week. 

Meanwhile, brokers may 
actively buy up shares ahead 
of an expected allocation of 
public funds to the stock 
market this week. 

Also, reports that the 
Japanese post office plans to 
release Yl,000bn from its life 
assurance assets to hind 
managers during the week, 
has heightened expectations 
of a rise in the liquidity of the 
stock market 

Compiled by Michael Morgan 


EMERGING MARKETS: This Week 


The Emerging Investor / John Murray Brown 

Istanbul strives to regulate its recovery 


Seoul may delay ceiling rise 

The good news is that Seoul's general index this year is likely to 
exceed Its all-time record high in spite of nuclear tensions and 
the recent death of the North Korean President Kim Yotmg-sam, 
writes John Burton in Seoul. 

However, the bad news is that the rise in share prices may 
persuade the Seoul government, worried about an overheated 
market, to delay a proposed increase of the 10 per cent ceiling on 
foreign shareholdings, which has been largely filled. 

Most analysts forecast that tbe market will break its record 
high of 1,007, set in April 1989, within the next few months and 
approach the 1,100 level by the year end. 

The market's strength has been helped by a robust economy 
and the prospect of increased corporate earnings - GNP is 
expected to grow by 8 per cent following strong exports caused 
by the weakness of the Korean won against tbe Japanese yen, 
and a consequent Increase in facility investments to meet the 
increased global demand for Korean cars, ships and semiconduc- 
tors. The only economic worry is inflation, which could reach 6 
per cent by the end of the year. 

But foreign investors are hampered in eqjoying the full bene- 
fits due to the 10 per cent cap on foreign shareholdings in listed 
companies. The government is reluctant to raise the foreign 
ceiling immediately because ft fears that the inflow of capital 
from abroad could stoke inflationary pressure. Instead it has 
promised to raise the investment limit by an unspecified amount 
by the end of 1995. Hie finance ministry also suggested last 
month that it would accelerate the schedule by raising file 
ceiling in gradual stages to 15 per cent by mid-1995. 


Mr Tuncay Artun, the new 
chairman of the Istanbul stock 
exchange, is putting a brave 
face on Turkey's troubles. 
"During strife and plagues, our 
weaknesses are always 
exposed, " he says in a colour- 
fill phrase, in keeping with the 
splendid view from his office 
overlooking the Bosporus. 

With interest rates edging 
down, and the lira appreciating 
there are some who believe 
that the market may already 
be through the worst But the 
signals are mixed. 

Last week, febankasi, the 
semi-autonomous state bank, 
applied to the Capital Markets 
Beard to have its A-type equity 
fund converted back to a gen- 
eral mutual fund. The move 
was greeted with consterna- 
tion, for if Turkey’s second 
largest bank, an institution 
perceived as close to the gov- 
ernment, is seen to be reducing 
its equity exposure, what 
ohntrg has the investor but to 
follow suit and shift funds into 
fixed interest instruments? 


Caution remains the byword. 
The Istanbul roller coaster baa 
been extremely bumpy: in 1993 
the index outperformed almost 
every other emerging market, 
according to the IFC, the 
World Bank's private sector 
lending arm, but so Ear this 
year the collapse of the lira has 
wiped about 50 per cent off 
share prices in dollar terms. 

Mr Artun likes to joke that 
he was “part of the package”, a 
reference to the austerity mea- 
sures unveiled by the govern- 
ment on April 5. Certainly, 
since his appointment, the 
index has recovered ground, 
gainin g 9.3 per cent in dollar 
terms since April 14. and 36 per 
cent since June 14. 

But the market is still driven 
more by short-term liquidity 
considerations than fundamen- 
tals. And with the government 
at one time selling paper at 400 
per cent compounded annually, 
the crowding out effect on 
equities has been considerable. 

In one area, Mr Artun seems 
to be making progress. Last 


week he announced new trad- 
ing rules, extending the settle- 
ment period and doubling daily 
trading hours. By next April, 
all share trading is to be trans- 
ferred. to real-time, a move 
which is expected to boost vol- 
umes. On tbe regulatory side, 
moves are under way to 
change the rules applying to 
the A-type funds. This is 
intended to encourage banks 
and other issuers to bring 
extra liquidity to the market 
rather than shuffling equity 
portfolios and dumping shares 
of less desirable participants. 

The recent currency turbu- 
lence has not been without 
casualties: 12 of the 112 broker- 
age houses are suspended and 
others are under scrutiny. 

The authorities have reacted 
by tightening tbe rules to pre- 
vent the use of repurchase 
agreements which are not 
backed by stock. A draft circu- 
lar has also been prepared to 
curb the use of short selling, 
and stock borrowing and lend- 
ing or margin trading - a prob- 
lem which Mr Artun describes 
diplomatically as “not illegal, 
but unregulated”. 

Attention is now focused cm 
the results season due at the 
pud of this month Operating 
profits may be barfly hit with 
the sharp contraction in eco- 
nomic activity. However, com- 
panies with strong cash flow, 
which have been able to take 
advantage of high interest 
rates to boost financial earn- 
ings, should fare better. 

Much of the recent buying 


has been by foreigners, taking 
advantage of the currency cor- 
rection to accumulate stock 
before a market revaluation. 
Mr Tom Chadwick of London 
brokers Smith New Court says 
there have been “plenty of 
good trading opportunities 
aver the summer”. He warns 
that there may stfll be some 
problems in implementing the 
austerity programme, but 
believes a recovery in 1996 has 
not yet been discounted. - 

Ms Radhika Ajmera, who 
runs the £40m Turkey Trust, is 
more cautious. She feels that 
the market needs some adjust- 
ment downwards after heavy 
buying by retail investors 
which has pushed the index 
up. Buying has been particu- 
larly heavy in stocks such as 
Eregh iron and steel (Erdemir), 
which the government is hop- 
ing to privatise. 

Foretgn investors would 
appear to he the main benefi- 
ciaries of the change in the set- 
tlement system. Because of 
time differences, under the old 
system brokers frequently 
found that the market closed 
before their foreign exchange 
funding requirements were 
known. With high overnight 
Interest rates, this could be 
costly if trades felled to settle. 

There are still some reserva- 
tions. For example, at the end 
of the new afternoon session, 
Turkey’s foreign exchange 
markets are all dosed. “As a 
foreign currency investor you 
don't want to carry a Turkish 
lira position overnight,'’ says 


Kaya Didman of Barings Secu- 
rities. 

Officials are also worried 
that extending trading hours 
may encourage greater share 
volatility and more margin 
trading. The daily limit on 
share movements, for example, 
is automatically increased to 
20 per cent - which represents 
a 40 per cent potential price 
swing within a settlement 


period. One exchange official 
estimated that as much as 40 
par cent of current volume was 
due to margin trading. 

The reforms will help. But 
over the longer term. Istan- 
bul's prospects will depend on 
the government's own 
finances. For only if the gov- 
ernment can curb its spending 
can the market enjoy a sus- 
tained recovery. 


Ten beat performing stocks 


Stack 

Crafty 

15/HM 

S don 

Week on soak change 

S » 

Eczarihari Hac 

TXitay 

0.0985 

0.0271 

37.90 


Turkey 

2.4233 

0.6246 

34.73 

Yapi vs Krad Bankas! 

Turkey 

0.1099 

0.0280 

34.13 


Turkey 

3.5541 

0.8241 

30.19 

Turidys is Bankas! 

Turkey 

0.1971 

0.0413 

26.52 

Migroa 

Ttirkay 

3.3926 

0.5983 

21.41 

Taiwan 

7.0735 

1.0876 

18.17 

Alarko Holding 

Tanayong 

Good Year Tyres 

Twkey 

Thailand 

0.8562 

Z7455 

0.1275 

0.4046 

17.49 

17.28 

Turkey 

0.4804 

0.0670 

17.02 


Sauce: Brnkig SeavUat 



■ Strategy 

The performance of 
emerging markets over the 
first half of 1994 has been 
mixed with only the sub- 
Saharan region showing an 
improvement in local currency 
terms, according to research 
by Kleinian International, 
the US-based independent 
consultants. 

Among the more mainstream 
markets, India saw a half year 
rise of 13 per cent in dollar 
terms, in spite of higher infla- 
tion and lower economic 
growth prospects. 

But in Thailand, Malaysia 
and Indonesia falls ranged 
between 21 and 25 per cent 

In North Africa, Egypt 
advanced by 63 per cent in 
local currency terms helped by 
a pick-up in the country's 
privatisation programme, 
while Tunisia improved by 35 
per cent 

■ Fund launch 

A Russian equity fund is to 
be launched in September by 
Regent Fund Management, the 
Hong Kong-based group. 

The White Tiger Investment 
Company will aim for a size of 
$20m in the first 18 months, 
investing In traded companies 


on the Moscow and St Peters- 
burg stock exchanges, with up 
to 20 per cent going to the Far 
Eastern region centred on 
Vladivostok 

■ Jordan 

Until now. 1994 has not been 
a good year for the Amman 
financial market, writes James 
Whittington in Amman. 

Investors have been jittery 
over progress in the Middle 
East peace talks and the mar- 
ket has so far been stuck in a 
downward slide. 

Last week the index fell to a 
year's low of 14&81 which rep- 
resents an 8 per cent drop from 
the beginning of the year. 

Local analysts believe that 
this poor performance is set to 
change as Jordanian and 
Israeli negotiators meet in the 
region today to push forward 
their peace talks amid real 
signs of progress. 

They say the market has 
reached the bottom of its 
decline and an upward trend is 
now likely, although it will 
still remain highly sensitive to 
any disruptions in the peace 
talim 

• Emerging markets coverage 
appears daily on the World 
Stock Markets page 



Greenspan testimony to guide 


The dollar will stay the focus 
of attention this week, with 
markets focusing on the Hum- 
phrey Hawkins testimony of 
Mr Alan Greenspan, tbe Fed 
chair man, on Wednesday. 

While the US currency 
remains gripped by bearish 
sentiment, it did benefit last 
week from the firmer tone of 
US bond markets- If Mr Green- 
span can convince markets 
that the Fed is on top of the 
battle against inflation, this 
could support the bond ma rk e t 
rally, and hence tbe dollar. 

Although good inflation 


figures and a modest rise in 
retail rates mean policy moves 
will probably wait until the 
next FOMC meeting on August 
16, there is a possibility of a 
pre-emptive strike ahead of Mr 
Greenspan's testimony. 

The Fed chairman is reputed 
to prefer to explain what has 
already been done, rather than 
what lies ahead. 

The Bundesbank council 
meeting on Thursday will also 
be in the spotlight The June 
M3 growth figure will be 
released earlier in the week, 
and with the market expecting 


it to fall to 12 per cent - some 
forecasts suggest closer to 10 
per cent - from 13.7 per cent, 
the way may be open for the 
Bundesbank to cut official 
interest rates. Lower rates 
could help the dollar. 

A raft of statistical releasee 
in the UK could also support 
sterling. The distributive 
trades survey on Tuesday, 
retail sales data on Wednesday 
ami second quarter GDP esti- 
mates on Friday should con- 
firm a picture of a stronger 
growth trend, with inflation 
remaining at a low ebb. 


Subject to the dollar not 
turning sharply lower again - 
this would inevitably drag ster- 
ling with it - the economic 
data could support a move into 
UK assets, evidenced by the 
firmer tone of UK shares and 
bonds at the end of last 
week. 

In Europe markets will be 
watching the tussle between 
Mr Sflvio Berlusconi the Ital- 
ian prime minister, and the 
anti-corruption magistrates 
which last week threatened to 
drive the lira below Ll,000 
against tbe D-Mark 


dollar 

t& Federal funds rate / . 


Peccant 



Baring Securities emerging markets indices 


Index 

15/7/94 

Week on week movement 
Actual Percent 

Month on month movement 
Actuol Percent 

Year to date movement 
Actual Percent 

World (288) 

-.15189 

2.85 

1.82 

2J32 

1.61 

-9.52 

-5.65 

Latin America 

Argentina (20) 

107.78 

4.49 

4.35 

-1.16 

-1.07 

-7.60 

-8.59 

Brazil (22) 

174.81 

3.00 

1.75 

93 9ft 

14.61 

35.16 

25.17 

Chile (12) 

184.99 

4.08 

226 

-&62 

-3.45 

37.45 

2538 

Mexico (26) 

131.93 

-2.50 

-1.86 

-4.58 

-3.36 

-29.34 

-18.19 

FanXIQ 

655.36 

-7.38 

-1.11 

-87.54 

-11.78 

79.27 

13.78 

Latin America (96) 

...14628 

0.85 

059 

2.64 

1.84 

-2.96 

-1.99 

Swope 

Greece (13) 

81.96 

-1.09 

-1.32 

2.90 

3.67 

-1.14 

-1.37 

Portugal (16) 

111.25 

4.70 

4.41 

2.34 

2.14 

-0.88 

-0.79 

Turkey (20) 

87.45 

8 JX 

10.10 

15.74 

21.96 

-74.26 

-45.92 

Europe (40) 

96.00 

3.33 

3.60 

5.26 

5.80 

-16.23 

-14.46 

Asia 

Indonesia (22) 

140.96 

1.09 

0.78 

-8.88 

-5.93 

-30.08 

-17.58 

Koras (23) 

128.75 

-0^3 

-0.18 

5.49 

4.46 

19.05 

17.37 

Malaysia (23) 

212.62 

5.91 

2.86 

-1.47 

-0.68 

-40.43 

-15JJ8 

Pakistan (10) 

11236 

0.42 

0.38 

7.48 

7.13 

Oj57 

0.60 

Philippines (11) 

253.03 

3.16 

1.26 

-29.67 

-10.50 

-69.44 

-21.53 

Thailand (24) 

232.29 

13.69 

6£6 

3.68 

1.61 

-31-26 

-11.86 

7-05 

Taiwan (30) 

164 At 

6.39 

5J7 

12.40 

8.15 

10.03 

Asia (143) 

--200.54 

6.57 

339 

1.55 

0.78 

-20.88 

-9.43 


M totfCM m 9 Dmt, Jftiwy 7ft flKftIM. Source; Bring Securffca 



FINANCIAL TIMES MONDAY JULY IS 1994 




EUROPE 

**TO»MUM5/Sch) 


1,870 

gg '« 

ar*is 

a 4 ’I 

gw»n W 

RaoMt -was 

W Sf 
» 3 

w* 467 
Wtortog 3J05 


-30 2.200 1.750 U 

— imt aas as 

*4 834 638 1.+ 
-36 +.=90 X22S 04 

*1 i.na 1,100 1.4 

— tJB? lJQaa a.4 
+9 744 538 _ 
-3 1.041 #45 1.7 

IJ09O 895 2.1 
_ 498 403 23 
-8 2Sfl 171 28 
422 an 874 _. 
+3 40B 328 1.7 
+s 791 548 25 
-4 800 430 1.7 
+45 4.340 3.411 1J0 


Kit 595 

lvuh tea 

LafCap+1+.SOnl 
Law 12090 
IM 1.170 
Lsgrnd eja? 


S6LfiUVUIXBBtn8S(Jul 15 /ft*) 


«*W 4JtZ5 
Nnu 7.800 
ATOM 4,480 
B8L 4 ncn 
BMAx 18,370 
BGntPI 23.473 
BnqtaB 37,900 
Barca 2230 
Bom 26.450 
GBHcm 12275 
OMB 2330 
Oabeaa 5.710 
CcWf 17B 
COM 7200 
□nan i2G8 
Boob 5,790 
BMC 3235 

firts 2480 
Ot 4.060 
081 afu 4.000 
OBGp 1,354 
Santa) 8,090 
Groart 9230 
GhM 4220 
HUM 3,000 
lOnadi 8.400 
XMAF B.BOO 
Hemrgr 8200 
Mm 12TO 
PmumiXiiKhd 
PtJna 10.150 
Partin 2905 
IMU 484 
5.160 

5270 

SoefinB 2220 
SGnflfV 2150 
Soda 13.739 
Sote* i.4bo 
xr — 14275 
_ 0280 
UC8 23200 
IMCfl 2490 


-26 4250 2705 1.7 
+40 8290 7^50 32 
+40 5.300 4JDQ0 _ 
+10 4^70 1890 42 
-801859016250 27 
+225 aSKSD 2^748 27 
+500 «2IS 35200 52 
+10 2530 2105 
+400 350030250 12 
—79 13279 11276 29 
*86 2700 2180 12 
-705500 5,620 4.1 
+1 302 154 7.4 

+10 8200 5100 1.7 
+18 1.650 12^1 21 
+40 5820 5.450 72 
+39 3.781 3,134 4.1 

^2870 2480 _ 
t8S 4,590 1820 42 
+ 80 4.470 3250 42 
+10 1280 1220 27 
-10 9.180 7200 52 
-110 10200 8200 1 2 
+30 5,550 4,180 r.4 
+40 3,685 2805 42 
10 8200 8200 12 
. 7jW> 0.370 12 
. 6.400 8200 42 
530 1 .450 6 S 
.10818201 — 
+170 10773 9.398 22 
+5 3200 2705 4 2 
+24 588 420 32 
+100 8200 4240 42 
_ 9280 4200 AO 
+46 2630 2125 52 
-25 2538 2105 32 
+225 I5JTO 13, (SD 4.7 
_ 1275 1/402 72 
-75 17250 12750 42 
+90 1 1200 9.400 46 
-200 28.100 2X200 7.5 
+J0 23302440 42 


Sl8 

2«L30 

Mo*k 106 
KMdbt esonJ 
woes iSQad 
Onm 31620 
Mg 385 
Partafi 378 
«SCf«r)4i1Qa! 
taftc 330 
IWI 789 
PLnS SIS 
Praifd 874 
RMfeft 49720 
(VnoM 139.4(tid _ l! 

RUcK 663 — 

SUC 712rt 
“wan 2675 —3 

-S obn SS5 — 
SLLoti 1,636 
Sflhndr 37B 
SebSA 486 
Stating 426d 
JSmeo 506 
SUsR 1340 
Socflan 577 
SownM 20W 

3541 
264 


E*m| 




Tgrtbl _ 
TOrnCSF 18230 
TqtalB 307 JO 
LHP l4flJ30rf 
IfOM 390 
IHM 500 
UMmfr HU 
Voted 2B2 
VOfec 28120 
WitrsQ 27020 


»<- tatai U— « 

709 500 19 
987 881 21 
<9190 377 3J 
167.7010830 _ 
1,395 uao 09 

5,7005,480 0.7 
99671050 - 
82443510 X2 
27439.10 09 
13650 8720 82 
IJ48 928 03 
090 130 10 
280 ido — 
529 BU) 49 
53S3WU0 BZ 
234 >4) 15 

371 29250 62 
936 752 19 
1905 786 _ 
1,150 805 19 
90*39X10 — 
157.40 11320 22 
7E 542 19 
945 691 7.7 
3990 2,300 1.9 
734 876 39 
1.789 1909 99 
44680 337.10 
600 472 2£ 
810 418 8.7 
700*7320 69 
2An 1.790 _ 
792 5S0 32 
zm 1.71 a 2.4 
332 _ 
244 4.7 
23720 18320 — 
3,120 2901 12 
214 153 5-5 

3642023110 3.7 
7242013520 3-0 
494 385 32 
650 <3. 10 52 
000 503 6.1 

307 221 39 
336 240 32 
SS 3*720 49 



- G8WRHT (JullS / Chlk) 




UP* 660 

Bftubn 235 

CmtA 289 

Cuton 5.760 

07S12A 124200 
Odtaert 901 

DertWK 339 

BMW 176 

R5B 386 

GWWd 580 

086 228 

Jystefl 345 

LrtnB 194320 
MCTA/S 316 

MMB GS6 

tafefl 550 

SoptoA 585 

Sofflafl SBB 

Suat* 423 

TdOan 318 

TopOan 675 

UradnA 233 


+15 730 SB# 29 
_ 281 215 2.1 
♦2 1J3 287 12 
7200 S900 02 
_ man inwo 0.4 
+18 1.140 878 03 
+6 427 30930 32 
+2 20029 163 5.1 

+15 B15 397 2.1 
+1133 843 4*6 2.1 

tO " " 

49 

-690 1250 1.140 09 
+10 385 252 39 
♦278321 569 02 
-9 737 530 09 
._ 815 538 0 J 
+1 875 473 0.7 
«1 495 321 2.4 
♦am*6 3oo _ 
+21J72 070 19 
+4 28720726 42 


RM9ND (JJ 15/ MlQ) 


+2 154 10250 19 
— ITS 121 2*7 
105 60 ._ 

+20 4690 3820 1.4 
-1 233 184 29 

+.10 17/40 10 _ 

+20 58 45 29 


+13 2*7 152 12 

+1 2S0 152 19 

— 2S8 200 IX) 
-3 200 190 12 

-11 501 287 08 
-90 102 SO _ 

— 104 SB 12 

+290 102 64.10 12 

+2.10 120 84.60 12 

225 ITS 32 
+90 31 18 _ 

+.10 2080 12 _ 
+2 129 89 


AEG 1 7050 
A Onto S83W 
Ai+InRa 1985 
MR 2.497 
Altana eoi 
Asha 1231 
MkoPf 010 
BASF 23620 
HMI +8890*1 


340 

BMH 432 
BMWBr 82450 
Saysrv 468 
(Tartar "" 
0B*T 
SHF BA 414 
eoad 

1970 

GtalCnP 880 
antt 337 
cadrt 25250 
DLW 42810 
Data* 74750 
Omasa 471-50 
mtoT 232 
□sera 735 
OUVftk 18750 

sss 

Drank 38650 
mm gynn 


HetaZm 1.196*1 
SrttalP 97150 
HrWa 3 to 
I tocnO 948W 
trend 31450 
Htonen 870*0 

217 

29150 
MVHt 380*0 
haKS 140 
Knots 566 5QW 
ICM 50350*0 
KHD 149 

KJockW 14950 
tahmjr 658 
LSUM 700 
Unde 93S 
UnaH 349 
LuWn 19090 
UrtlPI 191.30 
““ 41150 


RKunm Bos 



HIAMX (Jii 13/ Fri) 


ACF 481 

ACOT 648 
Mrllq 773 
AkM BtJ9 
Ana 25450 
BC 1.188 
BMP 242 
BKair 523 

SF "I 

Canal » s?o 
canGcra 1B9 
MRa 167.10 
Crtour 1288 
Cam 14450 
CMn 1.372 
OutMd 378 
CCF 22350 
OfijnF 948 
oua 4fla 
CtltxF 385 
crtlal 489 
Daman 5500 
Oanonn 788 
Dockaf 646 
DHW 431 
fflf 804 

EaaGn 541*8 
6con 873ifl 
BIAoi 38&H1 
EtWO 33290a) 
asan w 
essay B6M 
bbob 7som 
EaaBr 705m 
Eta 3.450 
fiaalr 1599 
EuHSM 847 
EuriJta 1155 
FVnfl 13390 
FoncLy 805 
FrmBsl 5900 
Cm©* 413J»nl 

Cairn 2.050m 

Gouimt 685 
ttpitys 688 
Haas* 448 
biNM 539 
jawft 47050 
immboq 739 
WNk 78 
fetal 443 


_ 879*1920 _ _ 

76B 589 17 _ 

608 731 2.7 — 

_ 913 541 33 _ 

_ 330 217118 _ 

_ 1.435 1.140 25 _ 
...39950 2Z7 13 _ 
_ B834SL20 25 _ 
_ 3.7S0 2,787 3.1 _ 

7B7 561 2J _ 
_ 1.480 1JJS7 tZ _ 
_ 1,155 801 45 — 

„22S5a 166 SO C2 _ 
71120 15630 _ 

_ 2,196 1.711 X2 _ 
_ 20513200 55 _ 

_. 1570 1578 11 _ 
_ 455 348 2.4 _ 
„D0090ai450 15 _ 

881 55 _ 

462 12 _ 

.... 3SIJB _ _ 

_ 737 470 121 _ 
_ 8.180 5.000 0.7 
_ 17X12 762 37) — 

— 830 Q10 — — 

— 430 381 1 -4 _. 
9G0 76Q 25 _ 

_ 749 515 10 _ 

— «93 SCO 7-2 — 

— 435 384 4.9 ... 

„ 332 305 _ _ 

_ 1.127 784 35 _ 
_ 17188 BIO _ 
_B85 733 __ 
_ 630 635 15 .. 
_ 3.487 2,750 25 _ 

— Z5S9 1.755 3.8 _ 
_ 702 S84 25 _ 
_ 1350 B25U 

_ 182 115 65 — 
_ 039 780 27 _ 

z 

_ 2.7W 27110 DO — 
_ 1.020 839 05 „ 
_. B45 535 2.1 ... 

._49S00 388 2.7 _ 
... GOO 458 Z5 ... 
_ 718 *76 57) 

_ 1.078 652 8.1 — 


Stema 68150 

M 64 ! 
55S r s 
**- ^ 

Vtag '471 «W 
«W 47550 
VWPf 376.00 

9*3 

222 


- ltALT{Jiil5/Ur^ 


BCoaun M50 
BNOZAo 1860 
“ torts 2,178 


STET 5580 
SalloA 5580 
Sdpam <575 
SPaoto 9595 


INDICES 


M Jd JU 

IS 14 13 


Omni (39712/77) 1912587 19*7150 1917059 2947050 I8C 


M (Mkuttdl/ITSOI 
M MphglUlflOl 

Austria 

DtAAMmpOnZW) 
Tradrt hrtwznW) 


w«» uu»4ii97S) 
canpowf (1979) 
P0rtM0§§ 14/1«3» 

CMa 

fW GOI (31/7360) 


20585 2007.7 18768 234060 K 

1013.7 9918 9039 1136.10 3/2 

40397 409.49 407287 4006# 2/2 

1057.35 1055.12 1O47J0 12222 1/2 

141604 140*68 139198 15*285 912 

407996 401066 384000 4079600 1517 

3820.49 38*261 378066 387959 18/3 

4193.40 419570 414065 460690 2 » 

1962.19 19804 19*2.19 218269 1/2 

43SU 43868 43316 488760 4Q 


1957/43 7IK 
90460 5/5 


39697 22/8 
101168 GIB 


329968 20/4 
355690 a«8 
186648 2M 


Caps4BWtiECl/1/83) 3B9J52 36649 3B6SS 415.79 m 
HB( &HCE4C8T1 2/9(1) >7636 17569 17566 197200 40 


S6F 250 (31/12/901 
CAC 40(31/13671 


(4 131769 1S9U0 2/2 
» (97469 238L93 32 


128636 4/7 
1906 18 4 f7 


FAZ AMtapl/12/50) 78663 791.03 792.70 6S627 18/5 75MJI 27/B 

Camma3tar*(l/12/S6 22461 22200 2224J 24B560 W 214630 27* 

D/tt(3Vl2/B7]f 209361 2056S2 2054.42 2271.11 16/5 . 198692 20/6 

Own 

Miens 5831/1380) 829.10 824.70 822.19 119160 IB/1 80607 25/5 

Hang Kaog 

K»gSatf31/7JG4 91l7Jn 880866 682691 1220160 4/1 83CB44 4* 


BSEStoHOM) 


4121.4 40336 41316 433260 30* 385400 91 


MOB CfflHMlO/B/83 46163 40020 45321 6126! VI 

Mm# 

ESI OWX4/1/B8) 179154 177649 17G669 206216 2(1/1 

Mr 

Basra Gansu Itf (1373 71 M2 70121 6g?J5 617.17 709 

MB Geneal (4/1/94 1149.0 11320 11000 131600 IDS 

MM SSS (J SV«} 3777Q75 207I&W 364641 2188231 13* 

rate) 300 (1/1W5J 30103 302.47 30061 311.71 IM 

rapK«/TiG9 1686*7 189432 IS54L53 171273 IM 

M SCCtai (*n«0 251293 2505JE2 249404 354205 


5B685 m 

94400 ion 

1730634 4 n 
jam 4/i 
14«07 471 
197133 471 


«UEQnW4/4/IS) 101211 101060 38657 UI44B an 92&33 V4 

- sm Jdv B : Tawan WaWiHd Prteo B18527: Kona Comp 5* BS63a Bom values of a 
Mining - SOfc fcotfe TlMcd, B&20. HEX Oan. M® SSFaSO. CAC*a 6ao 
Ukwnta and DAX - M 1000! JSE Gold - 265.7; J9E 30 WuaMafa - 384Jr NYSE ft 
Manned- 4 rowroj. td OaeacL M UmabM*. 1 SS/ove mtanmn iru*c M (S 


__ sn >2000 +3801190091201 4.1 

~ SntaSP +15 2.7M1J92 10 

_ InmAs 27355 +190*40028100 1.1 

_ TutfT 1O2S0 -ra024JK 16*87 2J 

_. iMcea n^SO -0501670016395 U 


- NEnERUUDS(JuM5/n8j 


+UQ 19830 153 0 9 
+17 635 530 2.1 
+30 1/448 1.12 0 1. 1 
+84 2311 2.250 OJ 
+5 670 575 2.1 
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ACTIVB STOCKS: 


240750 PomCP 
2525 RMfil 

4,8952 SSS 

Rotnmi 
541950 ItagOa 
2332 RetOSl 
24790# BenEn 
31575 moan 
338(9 MOH 
77750 naWg 
247009 RopCmB 
644G32 toreac 
227680 ItoyOM 
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KHsufatshl Ott 

Kubota 

Mitsubishi Hvy 

Toe Corp — 

Sanyo Bactric 


Stocks 

Closing 

Change 


Traded 

Prices 

on day 


12.2m 

1190 

+10 

Toshiba 

0.0m 

748 

+9 

Kumxgai Gumi 

5.7m 

814 

♦5 

Japan Energy .... — ._ 

5.4m 

834 

♦ 15 

Mitsubishi Elec 

5am 

585 

+17 

Nippon Steel — 


Traded 

Clostog 

Prices 

Cheng* . 

an diy 

asm 

782 

-« ■: 

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523 

+m 

3.4m 

490 

;4t ■ 

3.1m 

709 

- 

2.9m 

342 

'.--6 « 


US INDICES 


fCfftor iot ) 

C8S WnGotfnd 83) 
CBSMSrp«8S 


0DtaSan#(27U83l 

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Manta Carp aim 


ses/*-s-paracaw75) 

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(4 2282.78 226497 2881.T7 8/2 


4160 41X9 

2640 362.1 


4110 45430 3in 
2809 29400 3U1 


405X0 21/8 
3790 21A 


201201 1974.10 197002 20X84 312 


108932 10790# 106X17 1211.10 28/2 


30490 236703 


27340 271X7 27203 322X50 1872 


54X45 5*807 54208 64101 4/1 


216*0? 210X0 

83830? 6X70 


21050 233100 4/1 
62660 873700 IM 


174800 1%2 
544500 1W1 


95024 95X72 98197 57420 20! 


Madrid SE (X/1 2/85) 30290 30206 301.40 35B91 31/1 

S^cddR 

ASamentaGen (1/207) 141X5 140*4 13877 160190 31/1 

sHSaWI(3Vla5« 11719* 117805 116002 M2S34 3in 

S8C Gereol (1/4/87) 89X14 981.11 888.10 1D8129 31/1 


DomJOfM 0 0 0 1994 BmaipMl) 

15 1* 13 ■## (tar Btfi low 

UdWtaa 375301 373905 37012# 387X38 358135 397X3# 4102 

(31/1) (4/? (31/1/94) (2/7/32) 

tone Bm» 97JJ 0705 9XT5 10501 9X43 VAJ1 5*99 

(2i n) (id's (la/riws fi/iwi) 

Ttamport 180108 1587.15 158206 18B209 154X02 188229 12J2 

(wj van (2/2/94J mm 

UMMS 15123 18251 17907 22706 17X71 23X46 1150 

<37i) em owm mm 

OJ tad. Day 1 * h)?i 375135 078X53 ) Low 371X37 P607M | (Th+orattcm*) 

0»y. M^I 313381 074808 ) Urm 3731.15 070X31 I (Aclljal*) 

Omjowt* - POB 464.15 463.41 44173 *0201 43802 48=09 4.40 

gm (4/<) vnm ii«m» 

htutatta? 52107 52X01 52323 95009 51005 58009 382 

(2fiJ (21/4) (2/2/9*) (2UB/S2) 

Aorta 4509 4506 4409 4X94 409 4X48 804 

fi*^ m Fa%^3) n narrn 

NYSE Comp. 25108 25056 24705 287.71 24314 JS7J1 4.4# 

CV2) m VSHH* 

ton NM VM 43105 43004 427.73 4O70B 42207 48709 2901 

(2 p»q 0/2/94) 0/12/72) 

MSDM) CB« 72108 72108 71905 88383 50370 80303 5407 

118/3) [24/S (1800*) 01/10/72) 


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Bangkok SET (30/4/751 
Today 

Jstatu Crag+bn 1896) 
MRU) 

MS CtataK {1/1/700 

QtiSMOmB! 
Butt* 100(28/10190) 
&rtfi?-l<W(ZS®90! 
JCtaAta 0U12/B0 
BatopEBtaytr/ifla 


64075) 630401 831X23 8*402 6/1 


1344.17 130107 130221 1703X1 4/1 


230320 222463 3027 2888357 13/1 129007= 240 


RUT 8270 6230 64100 1/2 



Jid 8 

Jr d t 

Jut 24 

Dow Jones Ind. Dtv. Vlald 

2.74 

2.73 

175 


Jii 13 

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Jun 29 

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147 

' 149 

149 

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2203 

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■ STAKPflHD flWP POOBR 900 B6 

Open Son price CtanOP 
Sep 464.10 454.80 >4)00 

09C 456^0 457^5 +a65 

Mar 45850 460.80 +000 

Opon bnomoi l%u«s am tar pmria w day. 


BX FUTIIHCa S 500 ttmea tenter 

Hlgfi low Est.wjt OptalW. 

455.00 45305 85061 208.147 

45700 456.90 708 ft. TOO 

46100 450.75 170 2^88 


Aiuiria GES 5000 France FFR 3040 Nclhcrlaixh DI-1.X75 

Bdgium 8FR 13000 Germany DM730 Norway NOK 3020 

Denmark DKKJ.Xn Italy I. IT 600000 Portupol ESC 604*8) 

Finland FMK2JS7I Luxembourg LFK I33U0 Spain PTX 6.1000 

For subtle ripliite m Turkey. Cyprus. Grecctf. Malm, r+o+sc toman +32 3 SI J !X IX 


Swedca 

Swkycrinml 


SEK 3220 
SFR7I0 


□ B.n I — | Charge my American ExproVDincrx Cluty 

me ‘ — I EikocvotWcsu Arvxsmt 


I'-xpiry Duto 


1349JE 133703 
1 181.47 117307 
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132X94 154X19 31/1 
r«UT 731(01 X2 
30202 395.19 VI 
15X86 18272 14/2 


130148 21* 
114906 21/6 
29028 21/3 
14106 21/4 


■ MOW YORK ACTIVE STOCKS ■ TRADBK3 ACTIVITY 


■ C0C-8O STOCK MODE PUIURES (MATTF) Jul 13 



Open 

S«l Price Change 

HJgh 

Law 

Eat. voL Open bn. 

Jul 

19600 

19780 

+010 

1980.0 

1954.0 

18 JS37 

34,788 

Aug 

iseae 

1987.5 

♦32-a 

1985.0 

1965.5 

- 

303 

Sep 

(977.5 

(095.0 

+315 

1387.0 

18710 

(.784 

25^84 


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• Voiune teflon) 

JU 15 JU 14 Jof 13 
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tan 14.171 1X065 14.168 

R450AO U 34X401 311156 


'CtaftaRf ortrt are ••nly the r.tmtry ,n m/h.4 they we ifwa. J. Sn/n.si/n>ui rru.fi e/f nirmi at tae 

("ta ft* prw. Pricn ore i-.tcAuirr of MT in oK KC rnuHNirr ei.-cnr (mrmjnv and FniK«. FT VAT So. 
OEIHUOIK. 

To subscribe lo the FT in North .Vwrtca cwiact New YurkTd 7524.406, Vi u 3082J97.IV Kta watafToK)? 
TH 324517(1. Fax J245I712. 


Com interest Sgmw lor pmrian day. 


I kidoes an 100 «espc Auurtaa An (Mnary and 
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758 

620 

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2.408,400 

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43 

48 

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f TO* Oi In*. Md tfwonftlcol day's and toe* an Om smya at taa Hgbast and taMoar pneaa raac/Kd amo tan tar try «*cfl 
iwSc wheree Bw actual dafs hlgha and ton tataed by Tdriun) (opmota Oia Nghoor and Uwest taun tarn tae Wa> haa msehea 
during tae ta- {Ida Sgiraa In DtaMa 08 pertaua ta4 ? State « » «*** neatetatelm 





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s 


FINANCIAL TIMES MOMTiav JULY 18 1994 


iBOUND^POT^P^RB . ABf :;CT ~ ~ 


! HI 44 ET n . rr sT T T^ 




DOLLAR SPOT FORWARD AGAINST THE DOLLAR 


: ' i ->. • 

* u 

JU TP 

Owing 

mid-poira 

V ( 

Bmge 



“** - jr 

Austro 

(Sen* 

1705M 


BrigMti 

(BFrt 

50X155 


Denmark 

(DKr) 

9.5307 


Finland 

(FM) 

8.0394 


Franco 

(FFr) 

BX21B 


Germany 

(DM) 

2.4246 

... “■ 

Graoc* 

(Dr) 

366395 


Intend 

(W 

1X134 

I- . 

Italy 

w 

2409X9 

K- « 

Lujuniboug 

CLFr* 

50.0155 

-1 . 

Netheitonda 

P) 

2.7196 


Norway 

(NKr) 

10X088 


Portugal 


249.668 

1 

Spain 

(Pta) 

200X58 


Swedai 

(SKr) 

12X334 


Swritzortand 

(SRI 

2.0448 


UK 

« 

. 

" H f 

Ecu 

- 

13886 

V. 

SORf 

- 

0X38065 


514 - 604 
715-585 
251 -382 
285 - 482 
169-268 
238 - 258 
645-145 
124 - 1*4 
698 - 089 
715 - 595 
183 - 208 
Q2S- 110 
468 - 908 
229 - 487 
245 - 423 
436 - 482 


Mkl On* month Three mo nth* Omjw Bank of 
r»flh law Ftete %PA Rate 96PA Baa gpA Eng. Index 

17J84C 1 68928 17X661 03 17.0485 02 - - 115.0 


(Storing 

mto-potoi 


Qwnga Bto/offcr Days mid Ona month Three month* Om ynr JLP Morgan 
on day spread high kn Rata %PA Rate %PA Rat* KPA Index 


-OX 1-0147 -05 
-32 2429.14 -32 
-OS 500855 -06 
-Ol 2.7185 02 
03 108143 -03 
-4.7 252X08 -4.7 
-20 201.748 -2.8 
-22 121114 -28 
09 20408 08 


679-833 12898 12644 12692 -06 126B6 -03 12722 -03 


- 

• 

11X0 

Austria 

(Sch) 

109460 

+01125 

430 - 470 

109635 108770 

10.9495 

>4X5 

10.9575 

-05 

10395 

ax 

1043 

50.1155 

-03 

116X 

Balgkeii 

(BFrt 

32X900 

+0366 

700- 100 

32.1100 31X400 

32.1175 

-1.0 

32.155 

-as 

3233 

-0.4 

105.8 

9X979 

-0.7 

1162 

DonmcrK 

(DKr) 

01149 

+0X43 

129 - 169 

6.1237 

8X320 

01209 

-13 

01319 

-1.1 

01689 

-09 

1006 

- 

- 

802 

Fkriand 

FM) 

&1574 

+0.0314 

524- 624 

5.1727 

5.1374 

5.1604 

-0.7 

5.1929 

-04 

53019 

-09 

77.1 

8X186 

OX 

109.7 

France 

FFi) 

5X383 

+00415 

375 - 410 

5.3455 

5X195 

5X441 

-1.1 

5X505 

-08 

5X255 

OX 

ioai 

2.4037 

09 

1200 

Germany 


15668 

+0.0101 

555 - 560 

1X588 

1X345 

1.5563 

-0.4 

1.5555 

O.T 

1X458 

as 

106.8 

- 

■ 

- 

Greece 

(Dr) 

235X00 

+1.7 300 - 500 

235.500 234X50 

238.75 

-09 

237.B 

-3.7 

ywn 

-1.9 

ca f> 

1X178 

-OX 

104.7 

Ireland 

TO 

1X380 

-0X063 

366 - 391 

1.5437 

1X345 

1X37 

07 

1535 

as 

1X281 

ox 

_ 

2480X4 

-29 

76.7 

Itriy 

« 

154025 

+15X7 600 - 650 

155025 154133 

1551 

-3.7 

15506 

-05 

159535 

-33 

77 A 

49X5SS 

Ol 

1183 

LiMnbauy 

(LFr) 

32X900 

+0365 

700 - 100 

32.1100 31.8400 

32.1175 

-IX 

32.155 

•4X6 

■1??? 

-04 

T0&8 

2.6883 

07 

1203 

Netherlands 

Ffl 

1.7449 

+0X117 

445 -453 

1.7475 

1.7380 

1.7454 

-0.4 

1.7445 

ai 

1.7359 

OS 

105.7 

10.8003 

Ol 

96X 

Norway 

WKt) 

SIMM 

+00407 043-083 

6X230 

07647 

08088 

-OX 

08133 

-as 

07888 

03 

908 

- 

- 

- 

Portugal 

(Ea) 

160200 

♦IX 

100 - 300 

180300 159X20 

1614 

-9X 

163X7 

-04 

170 

-6.1 

64X 

205X33 

-2X 

BOO 

Spam 


128X50 

+1X7 

500 - 600 

129.940 128.150 

120905 

-3X 

129X3 

-3X 

13136 

-2X 

BIX 

12X389 

-25 

73X 

Sweden 

Old 

7.7207 

+00497 

IBP - 244 

7.6000 

7.7060 

7.7377 

-2.fi 

7.7742 

-2.8 

7X287 

-2.7 

705 

2X17 

IX 

1207 

Switzerland 

BFr) 

1X120 

+0008 

115-125 

1X132 

1X070 

1X116 

0.4 

1X101 

as 

13971 

1.1 

1005 

- 

- 

792 

UK 


1X588 

-00054 

592 - 560 

1X817 

1XS62 

1X58 

0.5 

1X576 

ox 

1.555 

03 

87.5 

13722 

-OX 

- 

Ecu 


13286 

-0008 

282 - 290 

13328 

13Z74 

13272 

1.4 

13249 

13 

13363 

-416 

- 


«" toft 

kho 

1 

OB 





r ww» ftmrt 

orcrroiu 

173 Z-00 

toaohora 50( 

4»l 

)Aca 

» 

t an >+». tawa.iiw**m 

i 4J7lS+ra nuiUk*BHn 

im mu 

7 73 5+375 

1 



Argentina (Peso) 1.5557 -00052 

Braai (W) 1.4526 +0.0044 

Cariada (CS) 2.1450 -0.0158 

Mexico (New Peso! 52001 -0X182 

USA £3 1.6688 -00054 

fadHo/MldcPe Esst/AMcu 
AosiraSa (AS 2.1216 -00084 

Hong Kong (HKS) 120397 -00442 

Intfla (Rn) 408874 -01718 

Japan M 1 KL 595 - 1.111 

Mfeyria (MS 4.0438 -0.0061 

New Zealand (NZS) 2X025 -00135 



U* L 

Saudi Arabia 

(SR) 

5X455 


■ •_ 

Singapore 

(Sfi 

2X574 


' • ' ■ 

S Africa (CofTLj 

(R) 

5.7143 



S Africa (Fh.) 

(fl) 

BXSQ 


. . 

South Koine 

(Won) 

12S8X8 


- • 

Taiwan 

OS) 

41.4245 



Thaland 

m 

38X871 


552 - 562 
507 - 545 
448-489 
946-053 
582 - 580 

203 - 228 
358-438 
680 - 058 

517-673 

420 - 458 
996-053 
248 - 2S3 
437 - 472 
580 - 588 
116 - 189 
340 - 785 
778 - 874 
107 - 382 
815 - 126 


Argentina (Paso) 06982 400001 981 - 982 09382 OBSB1 

Brszfi (Rfl 08990 40006 310 - 330 09330 09270 


nun raw n Jilt maramr snail to to* Pnnl 9pai 
ton m ImpBed by amt moral now. stwfcw Mm cm 

the Ooatr Spot tariaa dam*d torn Tig wfcVHELflBts i 


EXCHANGE CROSS RATES 


Belgium (BFr) 100 1008 1064 4.847 0028 4817 

Dwmartt (DKr) 52X8 10 8.731 2X44 1-063 2528 

Franc* (FFr) 60.10 11X6 10 2X13 1X17 2885 

Germany (DM) 2063 3.932 3.433 1 0418 9908 

fratond (l£) 49.37 8X08 0214 2393 1 2378 

Italy « 2378 0396 0345 0101 0042 100. 

Netherlands (FT) 1838 3X05 3X60 0882 0373 8800 

Norway (NKr) 47.18 0891 7X50 2287 0968 2273 

Portugal (Ea) 2004 3.818 3334 0871 0X06 985.1 

Spain (Pta) 24.97 4.755 4.164 1310 OSQB 1203 

9«Wdm (SKr) 41X7 7322 0917 2315 0842 2002 

Switzerland (SFr) 24.47 4X82 4.071 1.188 0X86 1178 

UK (Q 50.01 9X30 8321 2X24 1313 2409 

Canada (CS) 2331 4X43 3X79 1.130 0X72 1123 

US 32.10 0117 6341 1X56 0X50 1548 

Japan (Y) 3273 62.48 54X6 1530 6X43 15797 

Ecu 38X4 7X16 0562 1312 0798 1800 

Yen per 1X00 Dantoi Kroner. French Franc, Nrawogtan Ktoner. aid Su w toh Kronor pv 


2.1474 

-09 

2.151 

-IX 

2.1747 

-IX 

853 

Canada 

(CS) 

1X768 

-00055 785 - 771 

1XS28 13765 

1X763 

-IX 

1X81 

-IX 

1X965 

-IX 

B2X 

“ 

- 

* 

- 

- 

- 

— 

Mexico (New Feaot 

X4005 

- 

960 - 030 

3.4030 3.3960 

3.4015 

-4X4 

3.4033 

-OX 

04107 

-as 

- 

1X58 

OX 

1X578 

03 

1X55 

OX 

B2X 

USA 

& 

w 

- 

- 

. 

. 

. 

. 




96.3 








PaeSeAEdde Ewt/Aftfca 











2.1215 

ao 

2.1229 

-02 

2.1411 

-OX 

- 

Autonte 

(AS) 

1X812 

-4X0006 

B07 - 617 

1X828 1-3548 

1X814 

-OX 

1X821 

-0.3 

1X685 

-ox 

B8X 

12.0058 

ox 

12X347 

02 

12X417 

OX 

— 

Hong Kong 

(HKS) 

7.7247 

-0X018 

242 - 2S2 

7.7277 7.7242 

7.7245 

ox 

7.7252 

O.0 

7.7402 

-ax 

- 

- 

- 

> 

- 

- 

• 

- 

Irate 

(Ra) 

31X663 

-00025 

625-700 

31X700 31X625 

31X513 

_3X 

31.6963 

-29 



_ 

152315 

3.0 

151.45 

3X 

147X15 

3X 

192_0 

Japan 

M 

87X060 

-0X75 

800- 300 

96X700 87X800 

97.7 

2X 

97X4 

2.7 

94.735 

3X 

150.8 

“ 

- 

- 

- 

- 

- 

— 

Malaysia 

(MS) 

2X945 

+0.005 

940 - 850 

2. 5850 2X900 

2.5B53 

4X 

2.574 

3X 

2X475 

-2X 


2X088 

-2.0 

2X154 

-2X 

2X37B 

-1 A 

— 

Nrw Zealand 

(NZS5 

1X6ST 

-0.0C3 

683 - 711 

1X711 1X656 

1.S7D6 

-0.7 

1.ST2S 

-0.7 

1.6778 

-0.5 

_ 

- 

- 

- 

- 

- 

- 

- 

Phrippkwa 

Ptad) 

26.4500 

+0-1 

000 - 000 

28.7000 26.1000 

. 

- 

. 


- 

w 

_ 

“ 

- 

- 


- 

- 

- 

Sauci Arabia 

(SR) 

3.7505 

- 

503 - 506 

3.7508 3-7503 

3.7S1B 

-0.4 

3.7559 

-08 

3.7745 

-0.6 

_ 

- 

- 

- 


- 

- 

— 

Singapore 

(SS) 

1.5125 

-4X0008 

120 - 130 

1X140 1X120 

1X112 

1.1 

1X093 

ax 

1X025 

a? 

— 

“ 

- 

- 


- 

- 

- 

S Africa (Com) 

w 

3X8S3 

+0.011 

855 - 670 

3.6706 08540 

3. £818 

-5.1 

3.7101 

-IX 

3.7868 

-3.3 

- 

- 

- 

- 


- 

* 

— 

S Africa (Flrv) 

(R) 

4.4625 


600 - 750 

4.4850 4.4500 

+4862 

-8.1 

4X55 

-ax 

. 

. 

— 

“ 

- 

- 


- 

- 

— 

South Korea 

(Won) 

807X00 

+0.4 

200 - 400 

807X00 808.800 

S10X 

-4.5 

813X 

-3X 


-OT 

- 

- 


- 


- 

- 

- 

Taiwan 

(TS) 

26X780 

—0.0+96 

760 - BOO 

2S.S38D 28X760 

m uaa 

-OX 

26.638 

-09 

. 

. 


- 

- 

- 


- 

- 

- 

Tlwfand 

(BO 

24X500 

- 

400 • £00 

24X600 24X300 

25X225 

-05 

25.15 

-32 

25. S3 

-2.7 

- 


I to* leat three dacbmi paces. Forawd M me rax dracfly qtaaed to the maria* 
** o* Engand Beee oarage iflSfi * looted. Otar end ime In bath Hi end 
RATES. Some aton e are wetod by toe F.T. 


but ara knpRed by curare mrato r 


v Spot able 
IX ECU era 1 


quoted to US awency. -*- p Morgwi namrto ntae Jul 14. 1 


r dracdy quoad to toe r 

• Mnge 1980*100 


MONEY RATES 

-My 16 Over 


2130 499.1 

11.12 2613 


2885 

3X88 

12.74 

3000 

2407 

14.46 

2.456 

1202 

2X78 

1.872 

183X 

1X24 

week ago 

5 

998X 

1.122 

4X73 

103.0 

mm 

4X63 

0X43 

0413 

name 

0643 

82.91 

0X23 

Rr*wc* 

5H 

2378 

2.684 

1046 

2404 

197.7 

11X8 

2X18 

0997 

2.117 

1X38 

1505 

1262 

weak ago 

5% 

100. 

0113 

0440 

10X6 

8X15 

0499 

0085 

0X42 

nnoa 

0065 

k van 

QflV? 

Oarmany 

4.82 

88&0 

1 

laoa 

81X0 

73X7 

+424 

0762 

0,388 

0799 

0573 

56X9 

0496 

weak ago 

4X8 

2273 

9 «aag 

10 

2355 

189X 

11X5 

1X28 

0943 

2X24 

1X70 

143X 

1.196 

t-eiand 

5 

905.1 

1X69 

4X47 

100 

80X5 

a fan 

0X19 

0401 

0859 

0624 

81.10 

0508 

weak ago 

54 

1203 

1X67 

5292 

124X 

100 

0006 

1X20 

0499 

1X71 

0779 

7014 

0633 

Hriy 

8Vk 

2002 


8X11 

2075 

168X 

10 

1.699 

0X31 

1.783 

1295 

126X 

1X54 

week ago 

SVfc 

1179 

1X30 

5.186 

122.1 

97X9 

5X86 

1 

0489 

1.048 

0782 

74X1 

0620 

Nethertanda 

4X5 

2408 

2.719 

10X0 

2406 

2003 

12.03 

2X44 

1 

2.146 

1X58 

1525 

1268 

week ago 

4.97 

1128 

1X68 

4X42 

116,4 

93X8 

5X08 

n**a 

0486 

1 

0726 

71.10 

0X91 

awtttetewl 

4 

1548 

1.746 

6X04 

1802 

128.6 

7X21 

1X12 

0842 

1X77 

1 

97X8 

0X14 

week ago 

4 

15787 

17X3 

69X1 

1837 

1313 

78X9 

13X0 

6X57 

14X7 

1022 

1000 

8X15 

US 

44 

1800 

2.144 

8X80 

1908 

1500 

0437 

1X12 

0789 

1.682 

1229 

1203 

1 

week ago 

«4 


1 fane. Escudo, lxbi 


■ D-WU 

iRKnmm 

Open 

SS QMM) Dt> 
Settprica 

1 125X00 r 
Change 

Mr DM 

Ugh 

Low 

EsLvd 

Open hL 

Sep 

06433 

06432 

+0.0001 

0X453 

0X400 

61279 

99X68 

Dec 

0.6443 

0X439 

- 

0X456 

06407 

300 

3X2S 

Mar 

- 

0X451 

-00002 

* 

08439 

7 

669 

■ SWISS FRAMC FUTURES QMM) SFr 126X00 per 8Fr 



Sep 

07635 

07649 

+0X014 

07666 

07602 

24.711 

47X03 

Dec 

07669 

0.7982 

+00006 

07872 

07929 

74 

1X80 

Mar 

- 

07888 

+0X008 

07891 

07070 

9 

9 


INTEREST 


LONDON MONEY RATES 

Jtd IS Oueto 7 days Ona Thm 9tx Ona 

night notice month months months year 

Wartm* Staring 6% -4 5 - 4* 5-4% 5ft - 6ft 5% • 5% 6% - 8 


Three 

Sbc 

Ona 

Lomb. 

Dis. 

Repo 

mths 

mths 

year 

■rder. 

rate 

rtie 

54b 

6 

04 

7.40 

4.50 

_ 

84k 

BH 

641 

7.40 

4X0 

- 

56 

sg 

64 

5.10 

- 

076 

54» 

53 

64 

5.10 

_ 

&75 

4X5 

4X0 

£.00 

aoo 

4X0 

441 

4X0 

4.95 

5.10 

6X0 

4X0 

ASS 

54b 

6& 

8% 

- 

- 

6*25 

5fl 

6i 

6* 

- 

- 

6*25 

H 

84b 


— 

7.00 

a.oo 

8Vk 

8% 

94 

- 

7X0 

aoo 

4X9 

6X0 

5.19 

- 

52S 

- 

4X6 

6.05 

524 

_ 

5X5 

- 

4V4 

4W 

44 

8625 

3X0 

_ 

46 

44 

4H 

6X25 

3X0 

_ 

441 

54 

54 

- 

3X0 

- 

44* 

5ft 

56 

- 

.‘inn 

- 

2% 

2H 

24 

- 

1.76 

- 

2to 

2» 

24 

- 

1.75 

- 

4B 

5% 

5% 




4| 

5K 

541 

- 

- 

- 

4X3 

4X2 

6.48 

_ 

_ 

_ 

4X8 

4X2 

5X1 

- 

- 

- 

36 

3to 

4 

- 

- 

- 

36 

344 

4 

- 

- 

- 


Storing COa 
Traesuy Bte 
Barit BBa 


4fl-4g 5%-5ft 5%-5ft 5H -5% 
4S-4J5 4fi-« 

4S-4B 5-*a Sft-5ft 


■ JAPANESEYBinmnESI 


(Yen 12X par Yen IDO 



Open 

Sett price 

Change 

Fflgh 

LOW 

EsLvoi 

Open It 

Sep 

1X199 

1X260 

+0X091 

1X291 

1.0192 

24X48 

68,405 

Dec 

1.0305 

1.0337 

+00061 

1X385 

1X297 

384 

4,741 

Mar 

1.0410 

1.0422 

+0X081 

1X420 

1.0400 

1 

706 

D STBUNO FUTMS QMM) 292X00 per £ 




Sep 

1.6000 

1X598 

+0X910 

1X608 

1X560 

12.779 

40253 

Dec 

. 

1X668 

+0X008 

1.5600 

1X660 

384 

637 

Mar 

• 

1X566 

+0X008 

1X600 

1X560 

8 

161 


Local authority daps. & - 4fl 4tf-4fi 4# - 4fl 5ft -+« 5ft - 8ft 6» - 5{J 
Oacount Mtofeat depa 4% - 4% 4% - 4H 

UK c le aring baric bore lenring rata &% per cant from Fafaruary 0 1984 

Uptol 1-3^ 3-6 6-9 8-12 

month month morris morris morris 

Carts of Tax dap. £100300) 1*2 4 3% 3* 3*2 

Ctoto to Ttac dep under £100800 IB 1%pc. Oepceta ■Shawn far cadi lee. 

An- tender rata el rieoocnt 4^a7Cpa. 8CQO ted ima tea. &pcn Am Mte up dw June 30, 
1994. Apeatf rata tor pedod Jri aft 1884 to Aug 38. 1084, acteras 1 8 ■ BX4pc Reference raw Por 
parted Jun 1. 19B« to JmSO. 1SB4, Schemes IV a V S.1I7tk». Ffronc* Houra Bme RWe &W tan 
July 1.1994 

BANK OP ENttAND TREASURY BILL TENDER 

Jd 15 JB1 8 Jri 15 JU1 8 


M $ LIBOR FT London 

Interbank Rxkig 4ft 41 514 5* 

week ago 4ft 4| 514 5* 

US Odor CDs - 4X0 4X3 432 5.48 

week ago - 4X0 4X8 432 5X1 

SDH Linked Da 3* 3ft 3% 4 

weak ago SYh 3ft 3% 4 

ECU linked He arid Mtoee 1 rata: 6fc 3 m3* 8 ; 8 mu* 88: 1 yean B|. S LIBOR heartier* 1 
Mto m oOerod ntae lor SIOoi quoted to toe neriiac by low itomjewe barks to 11am each m 
( toy- The bants at* tomtom Truer. Bsnc of Tokyo. | *- || |* and Mrissl Wsaamnser. 

Md ntoa aa diuem tor toe ctameeoc Money RBtos. US S CDe end BOR LHwd Dspoees (DS 

EURO CURRENCY INTEREST RATES 

Jul IS Short 7 days Otto Three Sfac One 

term notice month morris mortha year 



IA SB £/S among E31J250 (ernta per pomd) 

- CALLS — PUTS 

Jri Aug Sep Jri Aug 

839 834 8,43 

534 830 639 - 038 

3X2 438 039 

238 2.79 - 1.10 


Bril on oltor 
Total ri WBotlas 
Triri riocatorf 
m. aecaptad rid 
Mrinsri ri nta. tost 


FT DUPE in WORLD C UHHW C BB 

Tha FT Qricto to World Curenciaa 
tatria cants found on ttwCompariee 
& Fkwnce pap* In todays od M on. 


Jd 15 

JD 1 8 


ESOOri 

ESOOto 

Tup Kcmua rate 

£ 1570 to 

£ 1725 in 

tea. cte ri dhcocot 

win* 

£ 50 Qq 

teeooe jWd 

198786 

£98780 

Oter ri cant tender 

58 % 

98 % 

Ifin. accept Uri 182 top 


48530 % 49738 % 
49179 % 49896 % 
49994 % 50319 % 
ESDQm 2500 m 


Belgian Franc 
□ariah Kras 
D-Martc 
□rich GuBdar 
French Franc 
Portuguese Esc. 
Sperish Peatos 
Staring 
Soles Franc 
Can. Ddar 
US Ddar 
tatei Urn 
Yen 

Man SStog 
Short term ram ■ 


5 - 4* 51* 

S%-5l, R- 
4S-4S 4%- 

4%-4\ 4\- 

02-Sh 5*. 

12tfl - 11% 12% - 

712 - 7 % 74 - 

5%-5 5ft- 
4% - 3% 4% - 

53 - 6ft 5% - 
4%-4% 4%- 

9-7% 8%- 

2ft -2% 2%- 
3% - 3% 3%- 

i* eel tar toe IX Dot 


-5 5ft - 5ft 
6% Gil - 5ft 
4% 4% - 4% 

4% 4%-4% 

5% 5%-5% 

12% 13% - 12% 
7ft 7ft - 7% 
4-i 5ft- 4J1 
3% 4% -4 

5% 6H-5ti 
4% 4ft - 4ft 
8% 8% - 8 
2ft 2% -2ft 
3% 4ft - 4ft 
Iw and Van. otoera: 


5% -5% Bft 
6 % - 8 6 % 
4%- 4% 43 

4%-4fl 5- 

5ft - 5ft 5ft 
13-12% 12% 
73-7% 8ft 
5ft - 5ft 5ft 
4% - 4% 4% 

8-5% 6ft 
4(J-4(i 5% 

8ft -8ft 8% 
2ft - 2% 2ft 
4% - 4% 5ft 
too day* - notice. 


9x One 

rtha yw 

- 5 ft 8 %- 8 % 
-6% 8ft -6ft 
-4ft 5-4% 
4ft 5%-S% 
-5ft 8ft -53 
■ 12% 12% - 12% 
-8% 8%-Bft 
-5H «* -5ft 

-4% 4ft - 4ft 
- eft 7% - 7% 
-6% 5% - 5% 

-8% 9%- 9 

-2% 2H-2U 

-5ft 5(2-53 


I 1 )'"* 


Fr-t 



S-fi 



■ Poaod in How Tort 



■ TtriWE MOrilW WIWOOOUJW QMM) Sim polns Ot 10039 

Open Settprica Change Hgh Low Eat vd Open bri. 
Sep 9435 9437 40.03 94.94 94.78 180,857 463X28 

Dec 94.17 9430 +0.03 9439 84.10 313358 448X39 

Mar 8330 9333 +0X4 94X2 83.82 144X78 323.108 

M USTRBASURYBriJL FUTUPBS QMM) dm per 10096 


The CD-apnratha Baric 
mtoiaa.tMHaito.lJrn OS4BZ 

TBSA_ - — -I m - I -1 1 

totoirwie. t ^^l^Vi»*"TM 1 bjoi I 

• |**r- -|j 

CSOKO+ US 3UM BJBla 

«5&j OOO-C tSJMB +50 MB 4JS|e 

noLoao-czuee- — uo ana am I a 

XOQ 22&1 SiBlQ 

im | 3.79)6 

eianm-atoraa 32s xm ui i 

c&ooo-eB.w 2.25 im 1 iasle 


iap Png am, 1 mm rnras ort-Kcaooo 

SembMoc. juaa zjn I Lsr j tea 

CHUHOOdtoew I 3.7EO 2*1 I 3J0I MB 

Wettern Trust Hgb Intantat Ctmquo Acc 

neHoeeiaenkB.nrmpin.iiGE D7M2»i«i 

- 4" IM I <H CIr 

tajXO-mMB 1 4J0 3JB | 450 Qtr 

CIJUKUH 1 *25 IIP I A32l Olr 


GILTS PRICES 


«rk% tat 

PrfcoE *f- Em 


m 


tsm 




SelB 

72 

027 

213 

S*24 

152 

W20 

184 

OeZI 

224 

JyiB 

118 

wa 

134 

MB 

17.1 

AH8 

117 

Jy2B 

208 

0CI6 

103 

*1 / 

108 

JT22 

158 





an 


toie 


vr 




ftw. 


Adam&Company — 535 

ABed Trust Bto* 525 

ABBank 525 

•HseyAnatschar 535 

Sorted Bcnoda 525 

Banoo BBbao Vtaaya- 

BaricriOypna ..525 

Benkribriand- _S25 

Bto*ribida 625 

Baric otSccriand 528 

Bantaya Baric 525 

MBkofMdEaat — 525 
•teMnariMy %Go U652S 
CL Baric Nedartand .... 625 

Citibank NA 535 

OydeaririaBank 526 

The Oo-operallwB Bank. 525 

Coutts&Co 525 

CrariLyonnrie 535 

OyptUB PopriarBenk _535 


% 

Demean Lamia 535 

Bator Bank Urribd ... 835 
Rsnetol«QanBank_ 8 
•Robert Homing 8 CO - 535 

Gkobonk.— 535 

•GUmaaa Mahon 536 

Hatrib Bank AO Zurich. 525 

WteirinsBar* 525 

Hflriabla & Gen tov Bk. 525 

M Samuel 536 

C. Hearn a Co .535 

Hongkong & Shanghai. 525 

Jrian Hodge Baric 525 

•LeopoU JoaophAScra 535 

Uoyda Baric &S 

uagh^tertcLU 525 

MriandBaric 535 

"MouriBaridng 6 

NriW a atori naia r 535 

•Raatorihara — 535 


• RoriutfwGuanrna* 
Ctaponripn Unted la no 
longer arihoriaed os 
aberichglneatrilort a 
Royal Bk ot Scoriand _ 525 
•arte & VMknan Sacs . 535 
TSB 525 

•UnaadnoHOtote — 525 

Urriy Trust Bank He... 525 

Wastom Trust _52S 

Wtusaway Lririaw .... 535 
Yoricstria Bank 535 

• Members at London 
Invastment Bonking 
Aoe o ri Wo n 
- ki o rinW tf abaw 



















































































** i .. 


****»._, 


FI NANCI AL TIMES MONDAY JULY 18 1994 





































32 


FINANCIAL TIMES MONDAY JULY IS 1994 


•tpmdusaMyts 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


ns. n &b 
nr % e «n» up 

148 15WZ 32 Idft (3% 
018 13 31 38 
MB 13 25 1739 

31 3081 S3 
12 29 3% 

£00 <« 29 3?1 45% 

0. 7B 17 18 3232 27 
OJB 13 9 
DL52 17 

24 

04* 1 2 3 

1. C910L1 



737 124 12*3 IZ% 
17 194 194 194 
S 13% 134 13% 
30 23% ' 


W» 

MDk Law feci 

17% 13% MR 
18ft 13ALLWA 
73 57% AW 
724 52% AMR 
5 3% MX 
56% 38% ASA 
31% 2S%AanL« 

134 11% AnHPr 
22% 17%ABMhdx 

134 11% Afi(*irts 

31 Z2% ACELK 
12% 10% AIM BUB 
10% 7% ACMG*Opp 080 18 

10% BMMGMSp 090118 

12 B% ACM M So 1JB118 

* B4 ACM Mao 18811.8 

8 ACM Manqd 072 87 
B4MntO> 044 38 14 

fig Am Ban 3 

SAwrdta 080 £2 13 

5% Man 038 4.1 2 _ 

15% 06 157 13 124 124 

18% 16*2 Mams Ear a«u 1 « 17% 17% 17 

M«ft««bo 3 JOB 56 . 

‘ ■“ 100 118 10 8SM 28% 

0)5 J) 8 25 5% 


114 

94 

’£ 

284 

9ft 



314 184MNMC 
8% SMwJt&p 
20 l5MK>tac 
574 <8% AKjan ADR 
65% 494 MOM. 
34% 254 ABK 
204 16% Anmsn 
4 IftAHaiK 
49% 38% tbPit 
39% 2B% Akbna Fit 
23% i9% Anyas «= 
18% 14%/Weeae 
26% 21% Airrdi 
168% 101 AbPnB.lS 
18% 13% NrtQ Ak 
21% 17% Albany hi 
17% 134 Abm 

S 25% 19% AfflCuB 
21% 174 AAArA 
30% 2S%AM&n 
25% 194 AtoiAl 
604 49ft«oS 
23% AfeB&ronn 
« AMU 

24% 17 Akegh La* 
2B%20%AaeoP 
184 13*2 Men Don 
25% zoAtagm 
4% t% anon 
27% 17% AUnoe Cap 
10% 9A*rc» E 
27% 21% AM MSI 
404 33%AM9g 

2912 24 AM Op 

6% 4% Aimm 
28% 21% Afcrrta 
62 84% Alcoa 
304 20% A&aQiA 


«8 55% 53% ... 
_ 25 25% 

5% 5% 


0.10 1611G 186 17% 17% 17% 

£85 5.4 12 37 54% 54% 54% 

276 4.B B2580 58 57 57% 

048 13 15 £414 U35 34% 34% 

088 44 14 1387 31% 16% 20 

1 30 2 2 £ 

090 23 23 3802 43% 42% 42% 

030 18 17 1290 29% 2S% 28% 

48 131 28 Z7% 27% 

184118 12 17 18 16% 16 

5383 24% 24% £4% 
818 78 3 104 MM MM 

020 18 8 2597 15% 14% 15% 

035 18 33 30 19% 19% 19% 

020 18 379 18% 15% 18% 

028 12 15 163 22% 22 Hft 

028 (.4 15 72 30% 29% 20% 

044 18 22 2034 27% Z7% 27% 

030 18 65 3077 24% 24% 24% 

180 1 JUS 1831 59% 58% 9 

080 28 4 96 28% 28 28% 

0.10 OG 32 3396 16 17% IS 

048 2.4 18 377 20% 19% 19% 

184 7.7 11 2164 21% 21 21% 

018 09 14 68 17% 17% 17% 

040 18 15 592 24% 24% 34% 

7 S3 2 2 2 

1.64 88 21 218 21 23% 

018 18 89 9% 9% 

184 5.4 14 zlQO 23 23 

067 18 7 1795 38% 35% 

088 38 18 103B 25% 25% 

24 2063 n8% 6% 

9 1691028% 27% 

180 28125 5B97 


20 % 

9% 

23 

36% 

25% 

6% 

a 


42 1705 


11% 8% AmGartcx 086118 311 

8% 9% AmPrecb 02i 37 23 11 
8% «%Am*af 
25% 20 Aracsst ho 
52% 44 Amdrtto 

9% 8%AMMJH* 

31 30% Am Bart* 


80% 79 80% 

23% 23 23% 

8% ®% 8% 
6% 8% 6% 
rh Th 7ft 
21% 21% 21% 


35£ 29% AnBrnd 


006 1.1 6 1044 
046 28 14 21 . . 

060 18 22 1241 97 51% 52 

024 2.7 zlOO 8% <B% 8% 

010 04 30 5728 22% 22% 22% 

280 61 9 3Q04 33 32 32% 

18% AmBmPnJ 080 4.1 12 41 19% 19% 19% 

S 6% Am Cap Me x 066 ft£ 351 7% 7 7 

20*2 17% Am Cap Bq 154 8.6 31 72 18 17% 18 

~ 188 5.4 0 12 20% 20% 20% 

185 11 34 32661159% 58% 59 

2.40 11 15 2790 29% 29% H% 

080 04 1115084 20% 76% 

1.18 4.1 24 2302 28% 28% 


23% 19% Are Cap CV 
56% 42% AmCyat 
37% 27% AnSPw 
33% 2S% Kn&prx 
29% 24% AmGerfl 
9% 6% AMGoMhx 07711.4 
27% 22% Am MBi ft 2.30 Afl B 511 24 22 

20% 16%AfflKrtDIx 066 38 11 185 18% 17 

65% 5S% AiMm 282 5.1 12 2109 57 50 . 

2% 2% AmHo&ta 075300 8 4 2% 2% 

B% 81% An** 046 05 154333 



98% 81% AbU 
11% 8% An Opp MC (1.00 11.8 
30 23% Anfton 088 38 
34 19 An Ami 040 18 8 493 

8% TftAmltartEi 044 05 S 45 
27% 2! AwStor 048 !8 7 1308 25% 

22% ISAnWUrSK 185 10 
32% 28% Am WBtr 1.08 38 12 30 

43% 36% AMch 182 48 14 5018 

43% 34% Amina he 128 16 5 125 

16% 11% AnaM 024 1.4167 856 II . 

60% 50% Mon 220 16 1813916uB1% 60% 60% 

9% 8% flmpcrt’IBx 010 1.4 5 261 7% 7 7%+% 

‘ ‘ 012 33 62 183 3% 3% 3% ♦% 

1.40 44 101522 31% 31% 31% -% 

10 173 2% 02% 2ft +% 

030 06 72 3301 51 ft 50% 50ft -% 

SB 8S7 30% »% 30 -% 

094 38 23 51 20% 25% 28 -% 

1.44 28 23 3770 51% 50% 50% +% 

287106 3 25% 425% 25% 

14 515 21% 21 21 

044 19 15 13 15% 15% 15% 

182 3.7 7 482 33% 33% 33% t% 

29% 22%Aprt»Qp 038 18 39 1485 38% 27% 27% -% 

lift 9% ApwiUun F 072 78 101 0% 9% 9% +% 

18% 14% Am 32 850 u19 18% 18% 

7% AAppMMao 1 1822 5% 5 5%+% 

22% \0% AaAA*A 012 08 33 2 20% 20% 20% -% 

27% £2% AfltflLkt OIO 04 17 3145 24% » £4% +% 

50% 43% Aim CW4 150 15 20 458 45% 45% 46% +% 

51% «6ft Amico 4J0* 480 98 ZlOO 40% 46% 46% -% 

8% 4% Aracu 2 088 B% 6 6 -% 

23% Amu HP 110 68 3 23% 23% 23*2 Jg 


4% 3% Aims he 
33% 29% AnsnuSl 
4% 2% Anaconp 
58ft 42%Anad3mn 
31% 23% Analog 
29% 24% AnosSa 
55% 47% Aldtadl 
28% 25% AtnPptf>l 

34 aft Annum 
18% 14%AMtaHlh 

35 30 Aon Co 


S7ft 43% AnSlW 
45% 33% Atom Bsc 
7% 4%/Wra6fp 
33% Z3 1 ! AmWhd 
30% 21% Asareo 
31% 22*2 M06 Oort 
44% 33% ASMS 
25% i6%AsbPa:F 
3% lftAsanmra 
37 31 % /to W 633 
57% 49% AT&T 
263*2 226% AS HUA 2 
38% 33% Atola Sas 
9% 5%AWaSos 
21% 1«%A**Ew 
112% 92% Am* 

10 4% Alas 


188 15 39 1609 S2% 51 S2% 


14 2787 38% 35% 

2 250 5% 5% 5% 

07B 11 13 384 24% 24 24% 

040 1.4 92 944 29% 29% 

040 1.4 11 8 27% 27% 

180 28 12 1708 35% 34% 

027 1M 408 17% 

028 9.7 2 140 2% 

012 04 21 52 32% 

1J2 24 20835 54% 

280 1.1 ZlOO 251 

288 5.9 IS BB 35% 34% 

028 11 8 14 5% 5% 

1J4 88 10 389 18% 18% 

150 12 53 3739 UK 105% 10 . 

1 453 5% 5% 5% 

20% 17% «ir<» Enw 088 4.7 8 19 18% 18% 18% 

12% 8% AWdeADRx 034 19 10 338 8% 8% 8% 
24% 17% tapf 040 18 25 B*9 21% 21 21 

12% 8%AimaFd 010 1.0 76 9% 9% 9% 

" ‘ 060 1.1 24 IBM 53% 53% 53% 

044 11 10 48 14% 14 14% 

OM 05 I 756 8% 8% 8% 



55% 47%AuD» 
20% 13% Ammo 
19 7% Altai 
45 art Ami 
81% 4fl% AwmPr 
14% lOft^dnCUp 
7% 5% AZW 


060 18 17 104$ 33% 32% 32% 
1.80 11 16 1815 59% 50% 58% 
10 33 11 10% 50ft 
20 174 S 5% 5% 


- B - 


38% 31% BCE 268 

8% 8% BET ADR 034 

S 3 Baki*n 020 

16%B*erFeni 040 
ZZ'a I70MVH 048 

27% 21% fiMttrSc 040 
30% 24%BJ£p 060 

15% 9EWMU 005 

9% 5% Bah 
25% 20% BaACE 152 

70% 13% Bar Mm 02 o 

38 30% BneOna 1J4 

29% 19% BaKFHa 
25% 20% BancaBOV ( 1.14 
11% 9% BanooCMH 072 
34% zroemmi \m 
1% 1% BsreTscB 
63% 49% Bandag 07D 
50% 38% Ba*Am 1.60 
96 85 Bu*. Bast 558 

28% 22% BABsai 086 
49% 46% BABostnP 304 
32% 25 BankHV l.ia 

50% 47% BMAn A 125 
95 61 BtakAmB 65a 

84% 64% HnfiTst 350 

36% MBcfcm 129 

30% 22% Ban (CIO 0.60 
37% Bines GiD 1.40 

48% 38%Barnflh 154 

12% 8% now oos 

50% 34% BaiiSdi 098 

27£1%Batar 150 
28% 23% Bay SI Gas 1.48 
22% 19%BdTr1838 1.72 
21% 16% harSh* 057 
50% 47% BeatSPIA 253 

37% 27% Bohns 064 
38% 23 Bauman to 040 
43 34% Band) 074 



,g,a 
21 % 21 % 
24% 23% 

« 
7 6% 
Z2% 21% 
30 - 
34% 





UM 

Hto9 Lw Stock 
7% SBsdpra 
59% flAMAOX 
19% lAljSelto 
63% 53BSCUIX 
55 43% BOA 

a ffl W%^ 4 J> 

S% 28%BBWttA 
T% »B0HKtB 


BBaryPrir 
37% 19 Bast Buy 

28% i5% Ban a 2. 

- • - |P| 


21% . 

32% 24 BkmtaQm & 

22% 16%BBsck 
22% 18BtaefcHH 
10% S%Btt)ttWvx 
Bi 2 6%BWatanex 
10% B%BUm*r«!i 
48% 37% Bo* 

31% 23%BkGM) 

8 % B% BtoaQ^ix 
28% 19% BUG M 
aj%<z%aoe*ia 

27% 19 BobsC 

21% 10%BMIB&N 
15% 9% Bonin Dm 
18% 11% Bgnkn 
22 l8%BgsfeiCM 
S%20%B0Mlr 
31% 18% Brad! fi « 
34% 30 KRE Prop 

80% 68% BrigS! 

33% 19% BrinfcoM 
59% » %BlM|fSq 
74%S%»«- 
54% 39 BmGaS 

75% 55% BP 
27 19% 

24% 1BBSI 
ni 53% BT 

l%^nGc 

8 5%BmiSl| 

30% 26%BrnFinB 
32% 24% afar 
4% 3% BUT 
25% 17% Break 
18% i3%6nEhWol 
41 35%Buc6tyaPI 
16% 14% taui ra 
17 i5%8ugarK> 
28% lS%8wlGaat 
60% 51% Bum 
49% 39% Bain Bsac 
19% 18% Bantam Fe 


35% 25% ca 
mi 253% CBS 
% ACFhCUb 
23 19%CMSEn 
82% 61 CNAFa 

51% 44% CPC 

S i4cncnp 

71 CSX 

26% 19% CIS Cap 
24% 18% CsDWUMra 
132% 82% CMMrai 
58% 48% CsboE 
23% 18% CaMOSG 
17% 10% CMtacaOson 
59 35% CaomWl 
2% i% CM Rata E 
15% 11% MO* On 
10% 15% CaEnmr 
15% 9% CM Fed 
25% 17% catontCo 



12% 12% 12% 
12% 612% 12% 


m Pf Eta Obi 

to t I Hk l« Im (total 

036 5J 3 48 6% 8% 6% 

2.7E 4.9 16 5177 98 55% 50 

OW 25 14 59 18% 18% 18% 

2.75 45 29 5403 81% 80% 51 

0.80 14 19 264 44% 43% 43% 

054 2J 26 278 23% 23% 23% 

OQ 7 3 1100 59 68 58 

1.32 19 12 259 38% 38% 38% 
0.47 1.6 16 4 30% JD% 30% 

OW « 4 ffi % % % 

048 11 20 640 15% 15% 15% 
<7 Z30(17») 17300 17300 
aw 4,0168 135 10 9% 10 

14 5213 — ~* 

250 9.1 29 

5J» 03 14 

&40 14 88725 Zt 
1.44 U 21 219 44 

271413 12 
OIO 08 18 
040 14 55 0188 S% 24% 24% 
040 2J 17 1007 17% 17% 17% 
1-32 7.1 11 S3 18% 
are 02 SB 9 
075 105 338 7% 

070 7J 237 9% 

125 02 23 3858 39% 

OIO 04 24 8251 27% 25 
012 1J 29 7 8' 

16 17 28 ZB 

(.00 01 1211 (S3 47% 48% 46% 
060 25 6 1778 24% 23% 24% 
AW 06 26 169 10% 10% 10% 
084 58396 1235 015% 16% 15% 
030 24 18 788 12% 12% 12% 
185 88 8 5 20% 20% £0% 

On 23 13 1701(25% 25% 25% 
027 1.0 583 28% 25% 28 

240 78 7 154 30% 30% 30% 
184 28 12 B43 70% TO 70 
20 3572 24% 23% 24 

222 05 13 6853 52% 52% 52% 
1.77 28 18 417 67% 87% 

207 6.9 24 410 44 
225 20 24 2562 74 
158 M 7 197 231 


dm 

3 

*% 

-% 



OS 18 24 612 24% 

ff(% 


43% 44% 
74% 74% 
23% 23% 
24% 24% 
81% 61% 


42^%™ 


y CanpUtfe 
18% 14% Catftoc 
79 60% CapC# 

38% 28% WpHd 

14% 12% MM 1^8 X 1.26102 
37% 20% Capsid 1.6 m 7.6 


SLOT 40 Tfi 1499 . , . _ 

1JS 54 14 95 25% 24% 25 

1JB0 18191 255 35 34% 34% 

032 4.7 5 21 6% 6% 8% 

095 X4 4 326 27% Z7% 27% 

OBB 22 38 5396 31% 31 31% 

14 BB 4% 4% 4% 

044 )J 42 3152 24% 23 24% 

020 13 37 140 15 14% 15 

280 7.8 10 118 37 38% 3B% 

1.72 118 0 193 15% IS 15% 

m 03 19 27 18% 16% 16% 

« 221 20% 20% 30% 
m 2.3 17 1724 52% 51% 52% 
055 18 20 4248 40 d39% 40 

1.40 8.1 22 132 1 7% 17% 17% 


- c - 

088 1 J 28 442 27% 26% 

2JOO 08 15 1249 313% 311 

016 42.7 0 5Q U % 

072 33 II 1163 21% 21% 

29 200 81% 61% 

TJ8 17 16 1513 50% 

058 32 19 3Bu17% 17% 
1.76 2.4 21 858 75% 74% 

040 1.9 19 11 25 24% 

084 12 18 832 20% 20% 

27 2243 107% 108 

1.04 2.1 25 97 50% 50% 

0)6 08211 847 22% 21 ‘ 

843 2980 17% _ 

10 497 39% 30% 

020107 2 3 1% 

018 \2 26 153 12% 

18 107 18% 

0 737 12% 

OW 1JI 58 399 21% 

1.12 31 15 1374 36 

14 251 4 M 



022 2.0 60 1581 
020 03 2 4017 
080 27 SITU _ 

308 12% >2% 
5 21 21 



42% 22%MxtaMaa 332138 8 272 24% 24% 
22% 15%caramm 19 2880 21% 20% 

35% 30% CtfOo 072 12 17 80 32% 32 

22% 1E%Caniiaa 11 146 17% 17% 

a Jicaratoft 0 « « % 

13 B%CanMA 020 31 9 137 ^ 9% 

30 2£%0dKLx 1.70 08 11 1181 25 24% 

66% 56% CpnkT 2W 4D 14 108 68% 60% 

28% 16% CanaiWM 033 UB 29 152 18% 17% 

18% 13% Canto KG (096 88 12 55 14 13% 

10% 7%CataiAmaf 005 08 16 59 7% 7% 

121% 88% QAHrx 1 20 1.1 16 2073 108% 107% I 

IS 10% COt Cop 35 2 14 14 

36% 30% Cedar Mrn 2.00 04 11 61 31% 31% 

13% 9% Coffin 080 8.0 1 3750 10% d9% 

45% 23% Caffln 020 08 10 412 2S% 25% 

38% £5%Om-fttoni ZOB 7.6 0 tsz 28% 28% 
25%21%CtMrUld 1.48 8.1 13 81 23% 23% 
15 18% CanrIUn I 090 RO B 258 11% 11% 

30 24% Conk KUSp 048 1.8 22 29 27% 27% 

22 14% CantrWmt 1.A2 9.3 9 132 15% IS 

30% 20% Cents* 1.70 79 131146 21% 21% 

27% 21%CantaiyT1 032 1.3 18 242 2S% 25% 
27% 18%CMito 72 4054 ' " ' " 

36 -aampUl 020 OB 19 17B9 

12% B% OnpaiM 020 22 81 10 

15% 5% DnrtHaa 13 71 


51% 49%OagaMPfF 3JE 01 


1.32 14 20 3849 38% 38% 
1 10! 2 1% 
110 25 9 17% 17% 
070 5J 0 357 12% 12% 
2JH 58 20 7111138% 35% 
152 38 8 8372 38% 38% 
_ 9% 9 

25% 


40 30%! 

3% 1% DiauseB 
18% 10%OX*Sr 
12% 12Qton8kC 
36 30% Owned 
42% 33% CnemBK 

11% 7%QunWaato oao 28 8 715 
27% 27%CrvqMtae( 072 17 60 Z7I 
47% 41%DHlim 
96% 40% Die Find 
19% 11% CNqBr 
8>2 6% Chock Al 
38% 320011 
3«% 24% CMaflam 
63% 44% CDfiek 
83% 70% DUbb 
74 57Qsna 
9% 7 DgnaHI 

37% 2B%Dk»pto 
18% 15% Am 6M 
27% 21 One tea 
25 % i8%a«a 
3% 2% QneptaxO 
30% 25%QpaB> 

23 16% QrahCl 
40% 20% QnuQr 
44% 36% MpP 
£6*2 2SQ0W9.12 
96 82% QcpPEAd 
100% 33% CfepPOAd 
17% 13% CO) IN A 
18 13% QnWB 
11% 7% CtofNeW 
12% 7%CXE 
23% ^zOansSI 
99% 50% Coffin 
2B% 17Mjfc«ttn 
11% 9% Ctomenta G 
89 nQem7M 
45% 34%QfflOf 
86 730oina 
65% 4/Ocroi 
28% 22% CUJ Med 


38% 28% 
34% 34 

9 9 

8% 6% 

2 50% 50% 



105 4.1 1116937 447 

1.45 14 146 

020 1-6 14 1702 11 

79 57 

7 100 

48 (100 

1.00 2.) 717384 _ 

18* 14 19 1001 77 79% 

3.0* 4J 22 3091 72% 71% 

090 114 151 7% 7% 

146 04 11 100 29% 29 

060 <6 17 2B2 17% 16% 

1.72 76 751IB4 22% 22% 

038 16 15 431 19% 19% 

325 2112 3% 3% 

100 7.4 10 70 Z7% 26% 

OIO 05 18 3579 22% 21% 

21 8350 Z7% 26% 

060 1.4 1016387 41% 41 

128 8-9 36 25% 25% 

WO 12 3 82%dB2% 

7.00 7.4 7 94% 94 

20 327 14 13% 

162109 6 217 14 13% 

054 $ 8 31 772 11% 10% 

008 10 154 Bi 8 

0.12 1.1 9 7B7 11% 11% 

27 405 $5% 64% 

17 20IB 19% 19 

0-57 5-6 88 10% 10% 

758100 tSO 75% 75% 

160 12 8 111 37% 36% 

7.40 96 (90 75% 75% 

160 08 15 3W 30% «% 

OX 1.3 10 15 22% 22% 


Z7% 

41% 


+% 


13 10% GNAIK»ins 168 99 57 10^ 10% 

T8% 11% COacNnen OM I.B 1 76 13% 13% 

18% laomtsw 040 ZJ 19 370 18% W 

33% 205 CtaM OW 1.3 30 >621 31% 30% 

44% 38% Coca C 078 18 242173S 42% 42% 

10% 14 CocaEn 065 03128 802 18% 16 

23% 16% CMiirOtan 015 08 19 18S 17% 17% 

32% 25% Ottoman 25 1134 u33% 32% 

BS%51%COBP» 164 3.1 IS 3147 53 % 52% 

11% 9% Cotantovi 005 OB 52 9% d9% 
8% 7%CatortMH 060 7.7 285 8 7% 

7% 6% ColanMI 070105 33 6% 6% 

8% 7 CataoU H 096 76 357 7% U7 

30% 21%D0t&a 132 02 B 843 28% Z7% 

45% 3B%C0«CA 0.12 03 48 4751 39% 39% 

24% 17% Gomdtsco 038 16 9 181 19% 18% 

m 4J 10 4299 23% ZB% 
088 26 21 84 27% 27% 

B 25% 25 

510 3% «} 

7 24 24 

34 21% ?T% 

10 22 % 22 % 


30% 25%CUmrta 
27% is contone 

29 21 Cawed Mat* 048 13 18 

3% 3Canmdm 0 

28% 22% CaaffiaiAZ 1.43 56 

25% 2ICW0IMU (.90 03 
26 Z2QmBEd2in 100 09 2 

28% 22%CamB) 160 7.1132 4993 22% 22 

18 11% Cornu Pay 036 26 22 4«7 13 12% 

39% 24% Cotuaq 1515791 38 90% 

1% % QmortlKhs 0 17 H H 

44% 27% CnpAta 020 05 21 4183 41% 40% 

«4%31%QJ8*C( 28 1271 045% 44% 

9% S% CmnptrTGp OIO U 3 92 B% 8% 

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Continued oo 


17% -*% 




FINANCIAL TIMES MONDAY JULY 18 1994 


4(m oka? -My TS 


NYSE COMPOSITE PRICES 


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4 pn class My 7 j 




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WamET &u 0.10 TO 2479 24% 23% 2**4 +% 
Wa n to di 66 431 4 3j’ 4 ♦% 

WasbMutS8D68 71685 20% 19% M% 
WaStFreELtiLW 8 438 21% 21% 21% 

IMtalndA 022 9 206 24 23% 23% A 
nasal PM 024 15 319 24% 23% 24% +% 
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WtaManL 028 13 117 14% 14% 14% +% 
Wtangi 040 24 14X 18% 18*’ 16% +% 
tNFPGmm 003 IB 52 3% 3% 3A *A 
Wyman-GdnO40 I 712 6% 5^ 6 +% 


-X-Y-Z- 

HHm 211094* 32% 31% 32% 

XomaChp 11113 2% 2% 2% 

Veto* 094 27 1462 18% !8 1B% 

Yak tea, 10* 868 3% 03 j% 

Ztonsuai 1.12 10 783 <0% 39% 40% 





FINANCIAL. TIMES MONDAY JULY IS 1994 


34 


FT GUIDE TO THE WEEK 


MONDAY 

Middle East peace tails 

Jordan and. Israel hold their first peace 
talks in the region since the Middle 
East peace process was launched in 
1991. The talks wifi focus on borders, 
security, water, energy and the envi- 
ronment and will pave the way for 
the first public summit between King 
Hussein of Jordan and Yitzhak Rabin, 
Israeli prime minister, in Washington 
on July 25. 

Palestinian and Israeli negotiators 
also reconvene in Cairo to begin the 
“early empowerment" talks which 
will lead to an extension of Palestinian 
authority over civil administration 
in the West Bank beyond Jericho. 

Bosnian peace plan; The Bosnian 
Serb assembly in Pale, the Serb strong- 
hold, and the Moslem-Croat parliament 
in Sarajevo are to meet today, the eve 
of the deadline set by the international 
community, to reject or endorse the 
plan to divide Bosnia along ethnic 
lines. 

European agricultural ministers 

resume battle today over farm prices 
and milk quotas for the coming 12 
months. They wifi also discuss a pro- 
posal from Mr Rene Steichen, EU agri- 
culture commissioner, to tighten 
restrictions on British exports of beef 
carcases from herds which have been 
free of the disease for six years rather 
than the current two because of the 
threat of bovine spongiform encephali- 
tis, or ‘mad cow 1 disease. 

Japan’s Diet begins an extraordinary 
session (to July 22). Prime Minister 
Tomiichi Murayama makes his inaugu- 
ral policy speech, followed by questions 
from the ruling and opposition parties. 

Gyula Horn, Hungary's prime 
minister, makes a oneway visit to 
Bonn, his first after being elected last 
Friday. Germany is Hungary's most 
important trading partner in Europe 
and Horn will be hoping for more sub- 
stantial commitments about future 
membership of the European Union. 

Rolling settlements The London 
Stock Exchange introduces rolling 
share settlement ending the 173-year 
old system of account periods. From 
today, deals will have to be settled 
within 10 days, with first settlement 
day August l. The plan is then to move 
to 5-day settlement early in 1995 - 
or as soon as feasible. The prospect 
of same-day settlement hovers at the 
turn of the century. 

Investor protector; The Personal 
Investment Authority, the UK's new 
watchdog to protect the private inves- 
tor, becomes operational Intended 
to improve the regulation of retail 
financial services, it has been the sub- 
ject of much controversy and only 
grudging acceptance by many in the 
sector - Standard Life, the UK's largest 
mutual life insurer, last week signed 
up to the PIA in spite of earlier opposi- 
tion. 

FT Survey: South Africa. 


•v-E 


Other economic news 

Monday: The UK Treasury's 
mid-year forecast of the Public 
Sector Borrowing Requirement 
was perceived as quite conser- 
vative, so analysts will be 
watching today's figures for 
June's deficit to see if the gov- 
ernment is likely to under- 
shoot its £36bn forecast for 
1994-95. June’s PSBR is expect- 
ed to be £3.7bn. 

Wednesday: While MO 
growth has been racing away 
beyond its monitoring range, 
growth in M4, the govern- 
ment’s broadest measure of the 
money supply, has been sub- 
dued. Figures published today 
are expected to show the trend 
continuing, with annual 
growth edging up to 5.5 per 
cent in June, from 5.3 per cent 
in May. The more erratic ster- 
ling M4 lending figure is ex- 
pected to show net new lend- 
ing of £1 Jbn in June. 

Thursday: The UK's trade 
balance has been Improving 
slightly in recent months and 
the non-European Union trade 
deficit in June, released today, 
is expected to have dropped to 
£700m in June, from £767m in 
May. Also published today: the 
British Chambers of Commerce 
quarterly economic survey, 
which is expected to reflect 
businesses' concern about ris- 
ing costs. 


TUESDAY 

OECD employment outlook 

The Paris-based Organisation for 
Economic Co-operation and Develop- 
ment, the group of leading industria- 
lised countries, publishes its annual 
Employment Outlook. It is expected 
to elaborate on several of the themes 
spelt out in the recent OECD Jobs 
Study. Both reports underscore the 
necessity for OECD societies to 
enhance their ability to adapt to struc- 
tural change to achieve the twin goals 
of higher employment and good jobs. 

Ell Commission presidency: 

The recently- 
elected Euro- 
pean Parlia- 
ment, bolding 
its first plenary 
session in Stras- 
bourg, is expec- 
ted to vote 
this week on 
the appoint- 
rnent 0f ^ 

L president of 

the European 
Union Commission. Last Friday, the 
council of minis tars chose Jacques 
Santer (above), the prime minister 
of Luxembourg, for the post He is 
to address the parliament on Thursday, 
and the vote will follow. 

The Inauguration of Ukraine's new 
president Mr Leonid Kuchina takes 
place today. Mr Kuchma seems to have 
decided that market reforms are the 
only solution to Ukraine's economic 
problems, but how far he is prepared 
to go will not begin to unfold until 
the new government is assembled. 

Saleroom: Books and memorabilia 
from the Moscow Dat of the late Kim 
Philby, the “third" man among the 
Communist spies at the heart of British 
Intelligence, come up for sale at Sothe- 
by’s in London. There are typescripts 
of his memoirs and talk* he prepared 
for training KGB agents, as well as 
photographs and trophies given to 
him by the Soviet government Also 
included are books he inherited from 
another defecting spy, Guy Burgess. 

Santa Clauses from all over the 
world descend the chimneys of Copen- 
hagen to convene for their annual 
congress (to July 21). 




FT Surveys: Japan and Monaco. 



EH*-” 


WEDNESDAY 

Five years of house arrest 

Aung San Suu 
Kyi, the Bur- 
mese pro- 

democracy 
leader (left), 
ends her fifth 
year under 
house arrest 
and begins 
her sixth. The 
anniversary 
is likely to 

^ ’ ' be marked 

by human rights activists around the 
world, especially in neighbouring Thai- 
land, where many Burmese exiles live 
and where south-east Asian foreign 
minis ters gather at the weekend for 
their annual meeting. 

Burma's military junta, however, 
shows little sign of being prepared 
to release Ms Suu Kyi. Her National 
League for Democracy convincingly 
won an election in 1990 - although 
she was already detained - but the 
armed forces, in power since 1962, 
ignored the results. 

Sh im on Peres, Israel's foreign 
minister, sets foot for the first time 
publicly on Jordanian soO, joining 
Warren Christopher. US secretary of 
state, and Abdul-Salam al-Majali, Jor- 
dan's prime minister, to symbolise 
recently renewed momentum in Israeli- 
Jordanian peace talks. The meeting, 
two days after the start of detailed 
negotiations, is set to take place in 
the Jordanian desert north of Aqaba. 

President Nelson Mandela of 

South Africa visits Britain for celebra- 
tions to mark his country’s re-admis- 
sion to the Commonwealth. 

Moon landing: The world remembers 
the first moonwalk 25 years ago. Com- 
ing soon is the 25th anniversary of 
the first game of golf on the moon. 

German resistance: A series of 
nationwide ceremonies will take place 
to mark the failed bomb plot against 
Adolf Hitler in 1944. Many are angry 
that the occasion, usually the cue for 
much soul-searching, has been hijacked 
by Chancellor Helmut Kohl who will 
make a speech in Berlin, and has been 
trying to blot out the role played by 
left-wingers and communists who 
resisted Hitler alongside the better- 
known aristocrats. 

Some 5.000 people were arrested 
and many were executed after the 
bomb blew Hitler's conference room 
and trousers to bits but foiled to kill 
theFQhrer. 

UK economy: June's retail sales 
data will give further evidence of con- 
sumers’ ability to absorb April's tax 
increases. So far, the effect has been 
milder than many feared, and the Trea- 
sury forecasts consumer spending 
will be up 3J per cent this year. Never- 
theless, retail sales were static in May 
and analysts expect the annual growth 
figure to fall from May's 3S per cent 
to 23 per cent In June. 



areafc the OffoSit^ ends of the 


THURSDAY 

UK Labour party leadership 

Britain’s Labour party announces the 
result of a contest to succeed the late 
John Smith as leader. Tony Blair, the 
young and mode rnising home affairs 
spokesman, is expected to win, but 
there is a close contest for the deputy 
leadership between two more tradi- 
tional socialists: Margaret Beckett, 
the interim leader, and employment 
spokesman John Prescott 

Commons recess: Britain's lower 
parliamentary chamber, the House 
of C omm ons, rises for its summer 
recess, returning on October 17. 

A US State Department conference 
takes place today to mark the 50th 
anniversary of the Bretton Woods 
finanrial conference and the institu- 
tions it set up (the International Mone- 
tary Fund and the International Bank 
of Reconstruction and Development). 

Tonight, a new London evening 
newspaper launches today. About 
100.000 copies of the paper will be dis- 
tributed free to central London com- 
muters on weekdays and will be the 
first competition to the Evening Stan- 
dard since the closure of the Evening 
News in 1987. Mr Geoff Steggals, chief 
executive of Tonight, said the aim 
was to provide a bright, cheerful read. 

FT Survey: Albania. 

Crtcket: First CornhiH Test, Lord's: 
England v South Africa (to July 25). 

Holidays: Belgium (National Day). 


FRIDAY 


Asean ministers meet 

Foreign ministers of the six members 
of the Association of South East Asian 
Nations (Asean) - Brunei Indonesia, 
Malaysia, the Philippines, Singapore 
and Thailand - hold their 27th annual 
meeting in Bangkok (to July 23). Also 
there as observers and guests will be 
Vietnam. Laos. Cambodia and Burma. 

The minis terial meeting is followed 
on July 25 by the first Asean regional 
forum, which includes the US, China 
and Russia. 

No place in the sun: German 
members of parliament, who like every 
upstanding German take their holidays 
very seriously, are fuming about hav- 
ing to drag themselves back to Bonn 
for a special session of the Bundestag. 

Parliament has been recalled to 
throw its weight behind the constitu- 
tional court decision last week which, 
for the first time since the second world 
war, allows German soldiers to take 
part in United Nations' operations 
outside the Nato area. The extra sitting 
will cost about DM150,000 (892,000) 
and grumpy deputies say the vote could 
just as well take place in September. 

UK economy: The first estimate 
of second-quarter gross domestic prod- 
uct is released today. Analysts are 
expecting quarter-on-quarter growth 
of 0B per cent, which, combined with 
first quarter growth of 0.7 per cent 
will put the economy ahead of target 
for the Treasury's full-year forecast 
of 2.75 per cent 


23-24 


WEEKEND 

Japan and S Korea consult 

Japan's prime minister Tomiichi 
Murayama is to travel to Seoul on 
Sunday to hold discussions with South. 
Korean President Kim Young-sam 
on the situation in North Korea, follow- 
ing the death of President Kim 
n-sung. 

Mr Murayama’s Social Democratic 
party has hacked the idea of closer 
relations with North Korea, but Mr - 
Murayazoa has promised to support 
the United Nations sanctions against 
Pyongyang if it refuses to allow inter- 
national nuclear inspections. 

Ukraine’s parliamentary 

by-elections take place today in more 
than 100 constituencies which foiled 
to elect members in last April's elec- 
tions. 

There are 450 members to be elected 
and therefore a change in the parlia- 
ment's character, which is currently 
dominated by leftist hardliners, Is 
possible. 

Athletics: The Goodwill Games begin 
in Russia's second city, St Petersburg, 
on Saturday and will continue until 
August 7. 

Polo: England's smart set converge 
on Windsor for International Polo Day. 
At half-time, spectators are invited 
to step on to the field to tread in the 
divots of turf kicked up by the ponies' 
hooves. 

Compiled by Patrick Stiles and Angela 
Bleasdale. Fax: (+44) (0)71 873 3194. 




; £ i|| %• ; !v ^ t ' ' 

ECONOMIC DIARY 1 



. -'.rvr' . 1 ; . 



D"tr 

FWwwod 

Country 

Economic 

Sttftatfa 

Statistics to be released this week 

Mortal Fnwfcw Ony Economic 

Forecast Actus) RstaeMd Camay Statute 

Midfan 

Foracut 

l*Ttni Jiw tm 
riunwui 

Actual' 

Mon 

Japan 

Jun money supply (MS, cash depf* 1.5% 

1.7% 

Thur 

US 

Initial claims, w/e July 16 

355300 

353,000 

July 18 

J^ien 

Jun broad liquidity*' 

- 

02% 

•My 21 

US 

State benefits, w/e July 9 

- 

2.77m 


Japan 

Jun w'safe price indx, 1st 10 days 

- 

-02% 


US 

July PWtadelpWa Fed indx 

- 

18.1% 


UK 

Jun pub spending borrowing req 

SSJtn 

• £&3bn 


US 

M2, w/e July 11 

49JSm 

S9_2bn 


Canada 

May manufacturing new orders’ 

0.*% • 

3v4% 


Japan 

May income, workers” 

- 

1.3% 


Canada 

May manufacturing shipments* 

0.7% 

1.7% 


Japan 

May consumption sperefing 

04% 

-09% 

Tubs 

US 

May trade: goods & sendees 

-$&£bn 

-$8.41*1 


France 

Jun consumer prices indx. final*’ 

- 

1JW6 

July 19 

US 

May merchTse trade, bal of payts 

- 



Franca 

May trade balance 

FFWAbri 

FFttJStti 


US 

May merch'few trade, census 

-&2 Sbri 

-«12bn 


UK 

Jun usds balance, ax EC 

-4700m 

-£7B7»n 


US 

May, merchTsa exports, census 

$41 /«bn 

$41bn 


Canada 

May wholesale trader 

0-4%. 

05% . 


US 

May merchlsa imports, census 

$54t*i 

$53bn 

Frid 

US 

June treasury budget 

$14bti 

-$82.1 bri 


US 

Johnson Redbock. w/e July 16 

- 

-07% 

July 22 

France 

May Industrial p«-oductton*t 

03% 

2.1% 


Canada 

May merch'ise exportsf 

1.5% 

• 2.4% 


UK 

2nd qtr gross domaat prod, prsfim~f 

3JS% 

23% 


Canada 

May merchlse imports *t 

23% 

3,6% 


UK 

Ditto, qtr on qtr 

08% 

07% 


Canada 

May wage settlement rises 

05% 

0.4% 

During Ate week — 




Wed 

US 

Jun housing starts 

1.48m 

151ra 


Germany 

Jun producer prices Jncbf 

02% 

02% 

July SO 

US 

jun buScSng permits 

- 

1J36m 


Germany 

Jun producer prices inebr” 

0.7% 

04% 


UK 

Jun retail sates* 

0.3% 

00% 


Germany 

Jun M3, from 4th qtr base 

12% 

13.7% 


UK 

Jun retail sates** 

23% 

09% 


Germany 

May trade balance 

DM5.3bn 

DMGbn 


UK 

Jun M4* 

02% 

03% 


Germany 

May currant a/c 

-OMasn 

-QM1.8bn 


UK 

Jun M4“ 

SL5% 

03% 


Italy 

May industrial production**. rw*t 

- 

-1% 


UK 

Jun MS. lencSng 

£1.3&n 

£15bn 


haty 

May producer prices 

3.1% 

3% 


UK 

Jut bdg sty net new commitments 

£3-25Ui 

E3.3tjrr 


Italy 

May wholesale price mete” 

2.9% 

2.7% 


Canada 

May retail safes’T 

05% 

-1.7% 


Denmark 

Jun consumer prices Sndx”" 

2.1% 

1.9% 


Sweden 


Jun trade balance 


SKr05bn 


SKiSSbn 


‘month on month, “year on yeer, fseasonagy adjusted Statistics, courtesy UMS International. 


ACROSS 

i Girl's jewellery found on the 
fish counter (8) 

5 Overlook a smithy oa a sort 
of square (6) 

9 Allowed in now Ted's bolding 
Tim back (8) 

10 Programme is behind tlmo 
and different (8) 

11 Reasoning with fine man on 
board (8) 

12 Ash one new vet in (6) 

14 Praise for remark about 
cracked Up (10) 

18 Teacher heard mates running 
around UO) 

22 One has prisoner in vehicle 
turn over f6) 

23 Descendants of doctor in 
Chile start nursing (8) 

24 Carrying affair on I call sar- 
castic! (6) 

25 Witty retorts from salesman 
are taking Lawrence in (8) 

26 Understand the fish is outside 
(6) 

27 Daisy, love, I had a heavenly 
body! (S) 


DOWN 

1 Suit warms up redhead in it 
16) 

2 Soldiers going to sea to stay 
( 6 ) 

3 New recruits its wearing to 
accept t6> 

4 You'll see many bloomers In 
this new home (10) 

6 Groan about mould on fabric 

(5) 

7 Rising, say Lent is not exactly 
for non-Jews (8) 

8 Irritable artist against going 
into burlesque iS) 

13 Unable to talk, having last 
one's notes? (10) 

15 Blow getting in by midnight, 
that's appalling! (a) 

16 One standing by the kerb, 
lightheaded? (8) 

17 One mill ion stuff admitting it 
is rude <81 

19 Like plan to drop article on 
relaxation (6) 

20 if right inside must find cave 

(6) 

21 Mean to get one to name 
nurse (8/ 



MONDAY PRIZE CROSSWORD 

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FT writers assess the new 
South Africa's prospects through 
its first 100 days and beyond 


FINANCIAL TIMES SURVEY 

SOUTH AFRICA 



A powerful 
spirit of unity 

South Africa’s politicians must still show they 
can deliver their promises, but with a 
charismatic leader at the helm their luck may 
hold, say Patti Waidmeir and Michael Holman 


It has been one of the most extraordinary 
political transformations of the twentieth 
century: South Africans have defied the 
logic of their past, and broken all the rules 
of social theory, to forge a powerful spirit 
of unity from a shattered nation. 

Nearly three months after the national 
catharsis which liberated black and white 
alike - the April 27 all-race elec- 
tions - they remain dazed, proud, happy 
and surprised. They can hardly belie ve 
their l uck 

That new-found confidence is fragile, 
and news of the resignation of Mr Derek 
Keys, finance minister, the man who 
taught South Africa to believe in itself 
- has deflated the national mood. But even 
the departure of Mr Keys (he will step 
down from October) could not seriously 
undermine the politics of common purpose 
which has united South Africa. Having 
wrought a miracle, against all the odds. 
South Africans are eager now to go on to 
even greater feats of political magic. 

In a land of profound f aith, and belief in 
one or many deities. South Africans very 
often adopt the vocabulary of the miracu- 
lous to explain what has happened. A 
right-wing Afrikaner says President Nel- 
son Mandela, who has driven the process 
of unification with such wisdom and 
vision, is “a gift from God" He suggests 
that Mr Mandela is like the crooked stick 
in the Bible: God can do much good with 
him though he be flawed. 

Even the least sentimental political ana- 
lysts speak of hick and magic. Columnist 
Simon Barber, writing in the Johannes- 
burg newspaper Business Day, says South 
Africans “passed through the looking 
glass" at the moment of Mr Mandela’s 
inauguration. *Tn that instant , their coun- 
try became the mirror image of its former 
self. No longer a pariah but, in a world of 
Bosnias, Somahas and Rwandas, a bea- 
con.’* 

Mr Cyril Ramaphosa, secretary-general 
of the African National Congress, puts it 
even more simply: “The gods smiled on 
the ANC -not because the ANC won 
power, but precisely because it did not win 
too much power too soon. 


“The four years we spent in negotiations 
helped to let a lot of ideas mature in our 
own heads and hearts, to accept sitting 
down with De Klerk in a government of 
national unity. . he explains. "We were a 
little bit giddy... and 1 think we could 
have made mistakes. So, with hindsight, 
we played out a grand strategy but maybe 
some aspects of it we stumbled upon and 
found our way through the dark." 

What they stumbled towards, during 
those four years of endless talk and bestial 
violence, was the shared vision of a new 
South Africa which emerged so powerfully 
in the wake of the remarkably peaceful 
elections. Hardly anyone dissents from 
that vision: certainly not South Africa’s 
former rulers, the National Party, who so 
for seem to define their interests identi- 
cally with those of the ANC. And not even 
the normally fractious fniratha Freedom 
Party, full participant in the coalition gov- 
ernment of naHfwifli unity, or the white 
right Freedom Front which has remained 
outside the cabinet but tateri seats in all 
other constitutional structures. 

That vision has taken shape in the 
Reconstruction and Development Pro- 
gramme, a grand blueprint to transform 
South African society, to re-invent govern- 
ment and re-define patterns of ownership, 
influence and power. Says one business- 
man who folly supports the programme: 
"The RDP has replaced apartheid as a 
grand social project People talk about it 
as a kind of holy thing , beyond debate - at 
least in its goals." 

Those goals go well beyond mere 
socioeconomic development building lm 
new houses, electrifying 2.5m homes, 
redistributing 30 per cent of the land, 
bringing clean water, education and 
health to South Africa’s poor. Hie broader 
goal is to re-invent South Africa in its 
entirety: a brave new non-radal world 
must be created where the Twain institu- 
tions of society - the civil service, the 
security forces, the business community, 
the universities, the media, the stock 
exchange, the banks - are no longer domi- 
nated by whites. 

The culture of government must change: 


Monday July 18 1994 



the feudal arrogance of the National Party 
past, which bred obsequiousness in civil 
servants and sapped the general popula- 
tion's will to resist, must not be repeated. 
Mr Bobby Godsell, political analyst and 
industrial relations director for the giant 
Anglo American Corporation, says Sooth 
Africa’s new rulers must "behave differ- 
ently" and break the cycle of the past A 
senior ANC minister argues that govern- 
ment must keep its integrity - even more 
than keeping its promises. 

The transformation has barely begun. 
Mr Ramaphosa says: "Though we have 
achieved power at a formal level, we still 
do not have our hawrig on the levers of 
power throughout government struc- 
tures.” Ministers speak of paralysis in gov- 
ernment as politicians fight to masts' the 
civil service machine and, more impor- 
tantly, as they tussle with newly-elected 
provincial premiers who have shown a 


remarkable degree of independence. 

Ultimately, the success of the RDP will 
depend on the creation of a more efficient 
and responsive civil service, and provin- 
cial governments which can effectively 
deliver development But ministers point 
out that not only has the RDP given South 
Africans a shared vision; it has provoked a 
shared sense of risk, across the political 
spectrum within the multi-party govern- 
ment of national unity, and beyond. 

"Ail of us have to deliver the goods,” 
says Mr Jay Naidoo, minister charged with 
overseeing the RDP. “It’s not going to help 
the National Party if Herons Kriel [NP 
premier] fails to deliver the goods in the 
Western Cape, or if Frank Mdladlose 
pnkatha premier] fails to deliver the goods 
in KwaZulu Natal. “If the RDP does not 
succeed, the NP is as much responsible as 
the ANC," he concludes. 

Continued an Page 3 


President Nelson Mandela and Deputy President F.W. de Klerk after the inauguration 
ceremony at the Union Buildings in Pretori a on May 10 Ann.- auv 


IN THIS SURVEY 

□ Economic overview: The fate of the new South Africa lies in the hands of foreign 
investors, banters and fund managers. Stable growth and jobs are vital ............... Page 3 

□ The Reconstruction and Development Programme has sailed into calmer waters of 
national consensus after starting out as a highly contentious political manifesto ... Page 6 

□ Defence forces: Details of Inte gr atio n announced last month marked the end of a 
critical stage of one of the most remarkable revolutions of the twentieth century .. Page 8 

□ Man u facturing industry must fulfil two taxing conditions. Growth must be both 

export-led aid labour-intensive. Marrying these two goals will not be easy Page 10 

□ Foreign investment Many foreign companies have established a low-prolile presence 

In anticipation of an improved business cflmate from 1995. Page 12 

□ Ttade links: New markets from Asia to eastern Europe to Latin America - long out of 

bounds - are now open for trade Page 13 


□ Production Editor: PhHp Sanders □ Photography: Ashley Ashwood 


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II 


FINANCIAL TIMES MONDAY JULY 18 1994 


SOUTH AFRICA 2 


Q uestion: Why should Finan- 
cial times readers invest in 
South Africa? 

Answer: Sooth Africa is 
potentially a rich country. . . with 
developed infrastructure, modem 
ports, a sophisticated banking sys- 
tem, a telecommunications system. 
It can be a powerhouse for the 
southern African region. 

Investors in this country are 
likely to derive ma»iwnim benefit, 
far more than investing in other 
areas. South Africa is far more 
advanced than any of our neigh- 
bouring states and therefore to 
invest in this country you will be 
helping to raise the living standards 
of not only the people in South 
Africa, but in the southern African 
region. 

Why invest In South and southern 
Africa rather than Best Asia? 

We have taken precautions to 
ensure that investors have a maxi- 
mum return for their investments. 
Nationalisation was a fundamental 
part of ANC policy. But in order to 
attract investments it was clear to 
us that we bad to make a very sig- 
nificant shift; if we did not, we 
would not get investments. There 
will be no expropriation of foreign 
investments. Investors will be free 
to repatriate dividends and if an 
investor sells his business, he will 
be able to export those proceeds. We 
believe in keeping our tax rate low 
so as to attract foreign investment 
That's a decided advantage. . . 

What are the prospects for a social 
contract in Sooth Africa? 

I don't know if I would call it a 
social contract. But there is an 
agreement between labour, capital 
and the government The harmony 
that exists between ourselves in the 
ANC and big business is striking. 
The support we have had from bust- 


Three men will shape the destiny of South Africa: President Nelson Mandela and Deputy Presidents 
Thabo Mbeki and F.W. de Klerk. Below, they talk to Patti Waldmeir and Michael Holman about 
nati onal unity, economic development and the many difficult challenges which lie ahead 

A powerhouse for the region 


ness, had it not been for that sup- 
port . . we probably would not have 
had such a landslide victory. 

Are you surprised at the degree of 
powers claimed by provincial pre- 
miers? 

Our own people are demanding 
some form of federalism. Whereas it 
was the Inkatha Freedom Party of 
Chief Buthelezi, the National Party 
of Mr de Klerk that was demanding 
it. Now it is our own people 
dpwamting independence from the 
central government. We are happy 
about that AD that we’re concerned 
about is that there should be free 
movement of goods, services, capi- 
tal and labour. 

Why did yon decide on a govern- 
ment of national unity, and will It 
continue after the five years set out 
in the constitution? 

There is a long history here, 
starting from our experiences in 
prison. The moment we arrived at 
Robben Island, there was debate 
amongst Afrikaner warders, some 
saying let’s treat these people 
harshly so they must respect white 
supremacy, others saying. . . we 
must treat them in such a way that 
when they win it should not be a 
government of retribution. We 
adopted a policy of talking to the 
warders and persuading them to 



tY as td en t Nofaon Mandate 


treat us as human beings. 

And that is a lesson that one of 
our strongest weapons is dialogue. 
It has been a very powerful weapon. 
Our people accepted this, because 
throughout the history of the ANC, 
the idea of nation-building, of a non- 
racial society, has been uppermost 
And we have now implemented that 
through, a g o v er nment of natjnn^i 
unity. So bras continuing this gov- 
ernment after five years, we have 
an open mind; we’re very flexible. 
Could you articulate your vision of 
the RDP? 



Deputy President F.W. de Klerk 


Wen, it wants to address the basic 
needs of the masses of the people: to 
ensure that our people lead a better 
life, to ensure that everybody has a 
job; that everybody lives in a decent 
house; that there is free, quality 
education; that there is electricity 
in every home; dean, healthy, run- 
ning water; that there are sporting 
and recreation centres; that there 
are paved roads in our areas. 

But the RDP also addresses the 
question of nation-building. 
(Through the RDP] we are appeal- 
ing to whites. Remain in our coun- 



Deputy President Tbabo Mbotd 


by, don’t take away your skills. The 
RDP is intended not only to address 
the basic needs of the majority, it is 
actually to set the minority free, 
free from fear of retribution, ft is a 
programme to transform the whole 
South African society. 

A Truth Cnmmiwinn in a country 
where the previous government 
still holds power is unusuaL Do 
you worry such a commission 
might, as deputy president De 
Klerk has warned, prove divisive? 
The ANC has twice the combined 
strength of the IFP and the 


National Party, so if we wanted to 
we could just ran the government, 
but we are not doing that We are 
committed to making the govern- 
ment of national unity something 
which has got a substantive con- 
tent As for as the Truth Commis- 
sion is concerned, we have made it 
clear that we have no intention of 
retribution. We are doing tills in 
order to heal the wounds of the 
past. People must know what 
crimes were committed and that we 
have forgiven those crimes. 

Is the spirit of national unity 
strong enough to survive these 
pressures? 

Recently I went to the most power- 
ful congregation of the Dutch 
Reformed Church in Pretoria. There 
was a time where if you went to the 
DRC. you would need a whole 
police force to protect you from 
being attacked. They needed a 
police force to protect me from the 
love of the people. You would think 
I was in Soweto. Everybody wanted 
to touch me. And the whole idea of 
national unity has attracted a posi- 
tive response from all segments of 
the population. 

Aren’t yon in danger of not satisfy- 
ing your [black] constituency at the 
end of your firm year? 

This is a process. The people are 


justified In having these exagger- 
ated expectations when they see 
whites enjoying rights and opportu- 
nities that are denied them. Fran 
inside the country, forces are being 
mobilised to enable us to start this 
programme. 

I can assure you, as we said dur- 
ing the elections, that we promise 
no miracles. We want you to under- 
stand that it Is going to take time 
for us to mobilise the resources.,. 
But what is important is that a few 
days alter a new cabinet was set up, 
the process of trying to address 
problems started, and l can tell you 
that the co-operation in the GNU is 
impressive. 

Don’t you underestimate the role of 
the front-line states in ending 
apartheid? 

That, actually, I don’t agree with. 
The people -men, women and chil- 
dren - inside South Africa who 
came out into the streets, called 
strikes; stayaways, who were shot 
and killed by the racist South Afri- 
can Police; they are the people who 
kept the fires burning, and eventu- 
ally brought down tyrants. 

When do you think the NP finally 
realised that It was majority rule 
or nothing? 

You can't put a date and say on the 
particular day they realised; gradu- 
ally, they came to accept that 
majority rule was unavoidable. But 
you must understand that it takes a 
long time for concepts to be 
accepted because even now, without 
in any way being discourteous to 
the NP. they still think that they 
are in the majority because they 
would like us to consult them on 
everything we do. 

But de Klerk is a man who means 
well and when we point out to bine 
“Look, don't go too for. we are the 
majority party,” be accepts that 


Accommodating participants Reform struggles ahead 


Interview with F.W. de Klerk, deputy 
president 

Question: How well is the government of 
national unity working? 

Answer It got off to a good start All the 
participants are going out of their way to 
be accommodating. I have identified a 
number of issues where... one might 
experience problems: the question of a 
truth commission; how should we deal 
with the past; the question of affirmative 
action; the whole land issue is going to be 
a very emotional and sensitive one for 
years to come. 

Bat the whole question of economic pol- 
icy has basically been breached: it is dear 
that economic and financial policies will 
be based on principles which can ensure 
economic growth, which wifi build inves- 
tor confidence, which will continue to 
maintain inflation at acceptable levels, so 
in that I find proof that we can and will 


also reach accommodation with regard to 
other i m portant issues. 

Has South. Africa ended up with a federal 
constitution, through the back door? 

Tve always said this Is essentially a fed- 
eral constitution. What is happening now 
is just proof of that 
What is the role of tbe National Parly? 
One of folly participating in the govern- 
ment, putting aside our differences. . . I'm 
not saying that on specific issues ft will 
not become necessa r y for us to say we 
have to consider our position on this very 
important issue as a party, but so for it 
hasn’t been necessary. So the ministers 
and I would be playing the normal role 
that you play irrespective of winch party 
forms the government . . 

But the NP intends also to be an effec- 
tive opposition. Obviously, one will be 
inhibited by the fact that one is also par- 
ticipating. It is for this reason that policy 


frameworks are important Because once 
yon have agreed on policy frameworks, 
the political debate, aimed at the next 
election, is to say “Our policy is better. 
We had to make a compromise, yes, but 
vote for os next time and you’ll get a 
better policy.” 

Will you still need a government of 
national unity after the five years 
entrenched in the constitution? 

I personally think that five years might 
be too short Even if the concept of power 
sharing were to be weakened in a final 
constitution, because I don’t think it will 
disappear, I believe it is quite probable 
that South Africa will move to the situa- 
tion of so many European countries, 
where on the basis of proportional repre- 
sentation you wifi have coalitions because 
of the election results and because no 
single party gets more than 50 per cent of 
the vote. 


Interview with Thabo Mbeki, deputy 
president 

Question: Is there a commitment In soci- 
ety to fundamental change? 

Answer One of the things that happened 
over the past few years, unplanned I 
think L was because of the length of time 
that it took from tbe first official public 
negotiations to elections, some consensus 
was built about some things so everybody 
fell within the same framework. 

Everybody wants to get rid of apartheid 
and the consequences of apartheid: there 
are certain thing s that are so glaringly bad 
that there is nobody in the country, 
whether different parties or different 
strata of society or whatever who are 
going to differ about certain basic 
thing s, . . but the issue of the transforma- 
tion of the civil service, for example, is not 
by any means going to be very easy. There 
are people whoVe been in the civil service 


for a very Jong time, they know a particu- 
lar kind of civil service with a particular 
manner of operating, and you want to 
change that Tm sure there is going to be a 
very big struggle about that 
I think theres going to be a very big 
struggle to change patterns of ownership, 
management control ol the direction of the 
economy. We might all of us appear to be 
saying the gamp thing now, a more equita- 
ble distribution of wealth and all of that 
But in substance how do you get there? 
Do you believe there should be legislation 
to ensure that the corporate sector partici- 
pates In tire reconstruction and develop- 
ment programme? 

I think you need both moral and political 
pressure and perhaps in certain instances 
legislation. It will need to be a mix of 
measures, it will not be one thing that you 
do. You might have to pass legislation 
with regard to some matters, and with 


regard to other matters you might intro- 
duce an incentive system. 

Do you see power-sharing being 
entrenched in a final constitution? 

I think once you have moved some dis- 
tance with regard to addressing the out- 
standingly glaring iniquities of the apart- 
heid system and that’s gone and society 
looks a little better, it’s not so divided... 
tins must result in people beginning to , 
focus on wbat might be ideological, poBti- 
cal, philosophical differences among them- 
selves. You might have alternative strate- 
gies for growth, for all sorts of things. 

The parties which could unite against 
apartheid and maintain that unity when 
dealing with the consequences of apart- 
heid, once you have gone beyond a certain 
threshold people in the same party find 
that they have different ideas. . . and you 
get a new political alignment. 1 think that 
is inevitable. 



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FINANCIAL. TIMES MONDAY JULY 18 1994 


111 



SOUTH AFRICA 3 




Economic policy must deliver stable growth and jobs, says Tony Hawkins 

East Asian ‘miracle’ is needed 


I KEY FACTS 1 


1.221.Q38 GO km 1 

n rt ■■■ if 1 1 1 1 nr i 




Nelson Mandela 1 

Currency 




199 

2S1-R2-850 


1993 $1cR 3^264 

ECONOMY 




1093 

1983 

1 Total GDP 1990 prices (Rm) 257.701 

260.555 

Real GDP growth (%} 

- 2.1 

1.1 

Annual average % growth in 



Consumer prices (%) . 

14.0 

9.7 

Gold production {%). 

2.6 

n/a 

.Manufacturing production (%).._ 

-3.1 

0.1 

- Average earnings (%). 

15.4 

11.1 

Total reserves minus gold pm)-. 

882 

925 

Money growth (M3) 

8 

7 

FT-A index (%) Gold 3 

-29.4 

170.8 

FT-A index (%} Industrials 9 . 

4.6 

27.7 

PiMc sector deficit (% of GDP). 

7.8 

6.9 

Foreign debt (% of GDP) 

14.4 

142 

Current account (Sbn) — — 

1.4 

1.8 

Merchandise Exports (Sbn) 3 

23.6 

24.0 

Merchantfise Imports (Sbn) .... 

18.2 

18.0 

Main trading partners (%) * Exports 

Imports 

Germany. — 

6-0 

15.1 

Japan 

5-6 

9.3 

US — 

5.4 

13.1 

n Commodities tor South African consumption {=) Year end 

f) Inducing gold M Share of worid trade 1992 


Sources: Datastnaam, BU. National sources 




No matter how one crunches 
the numbers, it is obvious that 
the fate of the new South 
Africa lies in the hands of for- 
eign investors, bankers and 
fund managers. 

This is little more than a 
statement of the obvious in an 
increasingly integrated global 
economy, but also a result of a 
capital outflow of some $25bn 
since the mid-1980s. Reversing 
this capital outflow is the top 
priority, since foreign capital is 
likely to waft* all the differ- 
ence between sluggish growth 
of 2.M per cent annually and 
expansion of at least 5 per emit 
a year. 

Recognition of this unpalat- 
able reality has bred a new 
consensus within the African 
National Congress to accept 
the inevitable trade-off 
between fiscal and monetary 
discipline on one hand and 
mrfai npHfTmpnt- spending pro- 
grammes on the other. 

That consensus remains 
firm, despite the unwelcome 
news that Mr Derek Keys, 
finance minister, has decided 
to resign, from October. He 
leaves behind an overtly pro- 
business, supplyside budget 
that will do little for populist 
expectations in the short term; 
and an economic team which 
gives every sign erf carrying on 
his policies without him, 

At the same time, the foreign 
capital issue is splitting the 
country into two camps, with 
many in tfm business establish- 
ment urging the new adminis- 
tration to lift at least some 
exchange controls and abolish 
the financial rand. 

“With a sound conservative 
budget behind us, commodity 
prices improving and massive 
world support and sympathy, 
there will never be a better 
time for dropping the finrand,’' 


says one banker who also 
warned: "The climate for 
exchange control liberalisation 
is not going to get any better”. 

“The cute money” he adds, 
“is waiting for the second shoe 
to drop, for the inevitable 
decline in the commercial 
rand, before taking the 
plunge.” The danger is that 
this could turn out to be a 
setf-MfiJQing prophecy as for- 
eign investors watch and wait 
for exchange controls to be 
loosened. 

Having achieved the seem- 
ingly impossible on the politi- 
cal front. President Mandela’s 
new government now needs an 
economic miracle. South Africa 
must become the first non- 


South Africa ranks 93rd 
in terms of human 
development 


Asian country to replicate the 
East Asian miracle of growth 
with equity. 

The numbers in this year’s 
United Nations Hitman Devel- 
opment Report underscore the 
challenge. South Africa, with a 
gross domestic product of 
$120hn and one of the world’s 
25 biggest economies, ranks 93 
in terms of human develop- 
ment. and sixtieth in terms of 
income a head. The UN says 
that if white South Africa were 
treated as a separate country, 
it would rank 24th in the 
world. Just below Spain, while 
if the Mme were done for black 
South Africa, it would rank 
123rd, just above Congo and 
behind Lesotho, Zimbabwe and 
Vietnam. 

The sheer unsustainability of 
such comparisons, now that 
the black majority is in the 
driving seat, highlights the far . 


midable nature of the eco- 
nomic challenge- It is not just 
a matter of jerking the econ- 
omy back on to the relatively 
high growth path of the 1950s 
and 60s -5 per cent annually 
- which will be difficult 
enough, but of restructuring it 
to ensure substantially greater 
participation for those margin- 
alised for the past 300 years. 

East Asian experience shows 
this can be done although 
whether Sooth Africa is ready 
for the sacrifices this will 
involve is another matter. 

With the commodity cycle 
having passed its trough, the 
global economy on the mend 
and South Africa’s rn ves tmen t 
climate looking better thpn at 
any time for at least 40 years, 
the economy is poised for a 
period of sustained growth. 

Even so. few economists 
believe that growth of more 
than 25&5 per js on the 
cards for the next two years, 
while for the rest of the cen- 
tury, a battery of constraints 
-the cumulative legacies of 
apartheid, the balance of pay- 
ments, unsustainable levels of 
domestic debt, the shortage of 
skins and the np«»H to restruc- 
ture warmfentairing - will Ituqi 
expansion below 5 per cent 
ann ually, 

At issue is the new govern- 
ment's capacity to impose 
restructuring while simulta- 
neously delivering on the 
social front In the first post- 
apartheid budget last month, 
Mr Keys set a near-perfect 
example. Given the constraints 
on fiscal expansion — a budget 
deficit of 6.6 per cent of GDP at 
a time when the country is tee- 
tering on the edge of a domes- 
tic debt trap -the minister 
focused an reallocating public 
spending rather than raising 
taiTPg to ftmd social n pliftrnnnt 


programmes. He managed to 
find BkJjhn ($7QQm) in savings 
from normal departmental 
votes to finance the ANC’s 
Reconstruction and Develop- 
ment Programme (RDP). while 
leaving unscathed those earn- 
ing less than R5Q.000 ($14,000) 
annually. 

The RDP is the instrument 
designed to redress the ills of 
apartheid - the yawning rbami 
between white and black living 
standards. The government 
has “pencilled in" RDP spend- 
ing of R37.5bn over the next 
five years on health, education, 
bousing WVl l ynH The plan is 
that government’s contribution 
will be leveraged by private 
sector contributions, especially 
in housing, by the parastatals 
- high-density township elec- 
trification telecommunica- 
tions - and by foreign donors. 

The Keys rubric - avidly 
shared by others in the govern- 
ment's economic team - is that 
gppnrifrng overrun s an normal 
departmental votes wifi erode 
the “pot of money” available 
for such social programmes. 

While initial market 
response to the budget was 
favourable, it was not long 
before second-thoughts sur- 


Dr State has set three 
conditions for financial 
rand abolition 


fawH Some of thi« Hart more to 
do with global developments 
than the budget, but in the 
words of one government 
adviser “The markets don’t 
trust us ... Because there is no 
track record, we have a credi- 
bility problem.” 

But while the confidence fac- 
tor is certainly critical at this 
stage, there is more to it than 


that Almost everyone wants to 
see exchange controls and the 
financial rand abolished, but 
while many in the business 
com m unity believe this can 
-indeed must-be done soon, 
ministers and their advisers 
are much more cautious. 

The central bank governor 
Dr Chris Stals, has set three 
conditions for financial rand 
abolition: that the discount on 
the investment currency falls 
below 10 per cent; a substantial 
reduction in financial rand bal- 
ances, estimated at R4-5bn, 
h e l d with the h en ks ; and, most 
im p ortan t of all, a build-up in 
the country’s foreign reserves, 
which in May had fallen to 

R7.Zbn, same five weeks import 
cover. 

These three conditions are 
unlikely to be satisfied this 
year and possibly not until 
mid-1995, or even beyond. How- 
ever. the critics warn that an 
overly cautious administration 
will always find reasons to 
delay. Their argument stands 
and falls on the assumption 
that the end of the financial 
rand would spark huge capital 
inflows, without which the 
economy wifi remain stuck in 
the slow lane. 

Government economists, 
question whether now is the 
time for a “leap over the cliff” 
that could end in tears with 
interest rates of 3040 per cent, 
the commercial rand down a 
farther 20 per cent and the 
government’s credibility in tat- 
ters. 

Countries such as Kenya, 
Uganda and Zimbabwe have all 
shown that errhang p control 
liberalisation can result in 
grrhatipa rate appreciation and 
a rapid increase in reserves. 
But Mr Keys believes South 
Africa Is different, with 
wealthy individuals, cash-rich 


corporates and institutional 
investors just waiting for the 
opportunity to invest offshore. 
Officials point out that South 
Africa is not as under-bor- 
rowed as often suggested, not- 
ing that while foreign debt is 
only a modest 14 per cent of 
GDP, if foreign holdings of 
equities, and fixed interest 
securities, are added in, the 
ratio doubles. 

Dr Stals questions whether 
South Africa is ready for “the 
burden of convertibility” - the 
impact that premature 
exchange control abolition 
might have on the exchange 
rate, infla tion, wages and inter- 
est rates. 

It is ironic that the private 
sector, so insistent that now is 
the time for “an economic leap 
of faith like the constitutional 
agreement”, is more pessimis- 
tic about the economic funda- 


mentals - inflation, growth 
and the new administration’s 
capacity to Impose fiscal disci- 
pline, than the government. 
Private sector economists 
believe not just that the trough 
of the inflationary cycle has 
passed but that inflation, 


The really tough 
decisions will come 
next March 


which touched a 21-year low of 
7.1 per cent in April, edging 
fractionally higher to 7.2 per 
cent in May, could be back in 
double-digit figures before the 
end of 1995. There are real res- 
ervations. too, about the fiscal 
strategy. The 1994 budget is a 
stop-gap affair; the really 
tough decisions will come next 
March when the new minister 


will have to act on the advice 
of the recently-appointed Tax 
Commission, on such issues as 
zero-rated valued added tax for 
basic foods, equal tax treat- 
ment for women and inflation- 
adjustment taxation to minim- 
ise fiscal drag. All are very 
worthy causes in their own 
right, but each one comes with 
a price tag at a tune when the 
RDP is certain to bulk large on 
tbe spending side of the ledger. 

All of this suggests that the 
markets will have to live with 
the uncertainty surrounding 
the future of the financial rand 
for least another nine mouths. 
In the meantime, after a poor 
first six months, the economy 
is picking up, bur with growth 
of Utile more than 5-5.5 per 
cent over the next 18 months, 
unemployment is set to worsen 
while living standards stag- 
nate. 

“It all comes back to track 
records," says an industrialist. 
“If the government gets the 
next budget os right as this 
one, and exchange controls go 
early next year, we could be on 
our way. . .” 

President Mandela’s problem 
is that he doesn't have a year 
or two in which to await mean- 
ingful results. Its not that 
expectations are excessive but 
that the new administration 
must deliver soon in the fields 
of township electrification, 
housing, more school places 
and improved social services, 
but also on tbe key issue of 
jobs. 

The World Bank estimates 
that half the country's black 
workforce is without formal 
sector employment. Optimistic 
as ever, the Bank believes that 
given appropriate policies, 
including wage restraint and 
fiscal discipline, this ratio 
could halve within 10 years. 

If President Mandela can 
deliver jobs ou this scale, be 
will indeed have performed a 
remarkable double-wham- 
my - an economic as well as a 
political miracle. But In the 
1990s world of jobless growth 
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A senior National Party minis- 
ter concurs: “Unless we 
develop the country, we all 
fail 

“The need for development is 
so overwhelming that it over- 
rides party political differ- 
ences,” he says, arguing that 
such differences are a luxury 
which South Africa can ill 
afford. 

Deputy President F.W. de 
Klerk, the leader of the 
National Party, has outlined a 
strategy of what might be 
called “constructive opposi- 
tion” but is constrained by his 
presence in the coalition gov- 
ernment from too vigorous dis- 
sent 

In practice, true opposition is 
likely to come not from the 
National Party, or even from 
the less cosily entrenched 
Inkatha Freedom Party, but 
from within the ANC itself 
- from the provincial premiers, 
who have scented power and 
will fight the ANC-led central 
government for more iff it and 
from Mr Ramaphosa, who has 
remained outside the cabinet 


to build his own constituency 
within the party itself 

He has defined his role as 
“keeper of the soul of the 
ANC” - watchdog over the 
implementation of the RDP. 
and check on the governing 
party's natural tendency to 
assume the arrogance of 
power. 

For although the temptation 
may be for the government of 
national unity to act as if it 
rules a one-party state. South 
African society is likely to 
prove too plural - and the 
political system too balanced 

- to allow that in the end. 

Ironically, despite constitu- 
tional guarantees of overriding 
power to central gove rnme nt, 
political realities -not least of 
them the lust for power of pro- 
vincial premiers from the ANC 

- seem to be bringing federal- 
ism to Sooth Africa through 
the back doin'. 

Provincial premiers are flout- 
ing the authority of central 
government and exercising 
even those powers which the 
constitution denies them. And 
the centre seems to think it 


imprudent to resist. 

However bitterly the princi- 
ple of federalism was resisted 
by tbe ANC - and often by the 
National Party - at multi-party 
negotiations, everyone now 
agrees that tension between 
the centre and the provinces is 
a healthy sign of emerging 
democracy. 

Only time will tell whether 
dissent will be so welcome 
once South Africa emerges 
from its cm lent honeymoon to 
face the s a d reality that eco- 
nomic growth may simply be 
insufficient to support the 
RDP’s goals; that foreign 
investment may be slow to 
materialise; and that political 
power may not be enough to 
shift the burden of underdevel- 
opment. 

Economic realities may yet 
defeat the politicians in their 
desire to do good. But for the 
moment they still believe in 
miracles. And with Nelson 
Mandela at tbe helm- surely 
one of the greatest leaders of 
the twentieth century - maybe, 
just maybe, their luck will 
hold. 


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IV 


SOUTH AFRICA 4 


FINANCIAL TIMES MONDAY JU1.Y IS 1994 


Corporatism has been embraced with relief, writes Tony Hawkins 

Love-in that may not last 


After generations of often 
bitter confrontational eco- 
nomic management, with gov- 
ernment, labour and big busi- 
ness at each other's throats, it 
is hardly surprising that South. 
Africans should have embraced 
the corporate state with a mix- 
ture of enthusiasm and relief. 

Even the sceptics concede 
that the smooth transition 
owes much to the forum sys- 
tem where different stake- 
holders -in the economy, in 
ho using , health and education 
-sat around the table in an 
effort to sink their differences 
and work out compromises. 

All three sides of the “golden 
triangle" - government, busi- 
ness and the unions - are keen 
to build on such past successes 
as the National Economic 
Forum, responsible among 
other things for securing con- 
sensus in the difficult and com- 
plex negotiations over last 
year’s General Agreement on 
Tariffs and Trade submission 
for the Uruguay round. 


All sides were conscious of 
what was at stake in the deci- 
sion to lower tariffs radically 
over the next five years - mar- 
kets, exports. Jobs and indus- 
trial peace. But the system 
worked, setting what many see 
as a model for the future. 

Those with memories of 
tailed experiments in corporat- 
ism - the UK in the 1960s and 
1970s - have their reservations. 
The concept Is riven with 
internal contradictions. Take, 
for example, the contradiction 
between the ANC’s commit- 
ment to anti-trust legislation 
and a more active competition 
policy, and tax measures in the 
last two budgets designed to 
encourage businesses to rein- 
vest Threats to clip the wings 
of big organisations conflict 
with measures encouraging 
them to reinvest 

A second, more serious, 
potential weakness is the eco- 
nomic management crunch 
that is bound to come during 
the five-year life of the 


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national unity government. 
The ANC has a mandate to 
restructure the economy. In 
this process one - or both - of 
the other two sides of the tri- 
angle is going to get hurt 

Sooner, rather than later, 
too, ministerial impatience 
with government by forum and 
consensus will develop. The 
government’s commitment to 
implement - not just 
announce - important social 
programmes during its first IQO 
days In office, is vulnerable to 
delay as the number of partici- 
pants proliferates. 

Above all, there is a question 
mark over the ANC’s willing- 
ness to share power, not just 
with defeated political oppo- 
nents but with the unelected 
representatives of what many 
on the left see as the old 
enemy, big business. 

For the present the love-in 
between business and govern- 
ment looks rock solid, but the 
third side of the triangle seems 
to be increasingly suspect. Mr 
Derek Keys, finance minister, 
agrees that there Is little pros- 
pect of a compact with labour, 
but hopes for a tacit, unspoken 
deal that would link wages 
with productivity. Employers 
are less sangnina, no ting the 
tendency for wage settlements 
to average out at two or three 
percentage points above the 
inflation rate. 

In early July, negotiators in 
the mining industry were a foil 
10 points apart, with employers 
determined to keep the 1994 
wage round in single figures 
while the unions were demand- 
ing 18 per cent 

Management worries that 


now the top echelon of union 
leadens has moved off into poli- 
tics and government, there is a 
very real danger that - even if 
wage agreements are reached 
- the unions will lack the 
capacity and credibility to sell 
the deal to their members. 

Some 1.2 ra working days 
were lost to strike action in the 
first half of 1994 - the coun- 
try's worst industrial relations 
performance tor seven years. 
While this was partly attribut- 
able to preelection disruption, 
it also reflects wage disputes 
which, according to industrial 
consultants. Andrew Levy and 
Associates, accounted for one 
third of the stoppages. The 
danger here must be that 
labour, which played a crucial 
role in bringing down apart- 
heid, will push hard for an 
immediate, substantial, libera- 
tion dividend. Ministers and 
employers believe this will not 
happen, arguing that labour 
leaders are more preoccupied 
with job security than wage 
levels, but the current trend of 
above-inflation pay awards will 
put this thesis to the test 

Government has a similar , if 
less acute, problem in terms of 
ensuring that what is agreed at 
central government level is 
translated into action by pro- 
vincial administrations and 
parastatals. This too, is an 
inherent weakness of corporat- 
ism - the difficulty Of gnawing 
that all the main players stick 
to their agreements. Some 
larger employers, for example, 
accuse their smaller colleagues 
of conceding unnecessarily 
high wage claims. 

Missing from the golden tri- 



Pratorta: there Is a question mark over the ANC’s vriBngnoss to share power, not just with defeated poBtical opponents but also with W9 business 


angle - if central bank inde- 
pendence is to be a reality - is 
one of the key actors. As many 
in business voice their impa- 
tience over the Reserve Bank’s 
caution on exchange control 
liberalisation and abolition of 
the finanrfal r and , while anvi . 
eties surface over inflationary 
wage claims and job genera- 
tion, the role of the central 
bank becomes increasingly 
crucial to the success of corpo- 
ratism. 

In many countries, corporat- 
ism has foundered on this 
issue - the refosai of the mone- 
tary authorities to accommo- 
date wage inflation, to lower 
interest rates - to boost output 
and employment - and the 
need for tight monetary policy 
to counter fiscal weakness. In 
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Profile: The economic team. Two reformed socialists 
and a conservative banker make up the troika which 
drives South Africa's economic revolution 


Figure of 
flawless 
orthodoxy 

fn the bad old days before the 
government of national unity, 
Mr Jay Naidoo had an 
unfortunate habit of looking 
like Satan, sounding like Marx 
and acting like 
Mephistopheles, writes Patti 
Waldmeir. 

But those days are long gone 
now, and his image has been 
transformed. 

With his well-cut suits and 
carefully tailored vocabulary, 
the new-look Mr Naidoo 

- formerly head of the largest 
union federation, Cosatu, and 
now minister charged with 
implementing the 
Reconstruction and 
Development Programme 
(RDP) - is a figure of flawless 
economic orthodoxy. The 
firebrand trade unionist and 
militant socialist of the past 
has become a persuasive 
advocate of fiscal and financial 
discipline. 

With just a hint of American 
twang in his accent, he might 
be a missionary from the 
World Bank, pushing its gospel 
of structural adjustment 

- except for one crucial 
difference, which he highlights 
forcefully: Mr Naidoo believes 
he has society on his side. 

Mr Naidoo. who turns 40 this 
year, describes South Africa's 
own brand of structural 
adjustment, the RDP, as a 
“shared partnership between 
government and civil society”. . 
a vision which unites all the 
parties in the coalition cabinet 

But his commitment to the 
RDP, which is fervent goes 



Jay NaUoo: the former mffitant 
sodaSst has become an advocate 
of fiscal and financial cflscipfine 

well beyond the simple 
intention to speed money. 
“Overriding everything in this 
country is going to be the fact 
that this is how much money 
we have, these are the 
constraints,'’ he says. 

He constantly insists that 
it is not an “add-on” 
programme: "The RDP Is. . . 
about how to reorganise 
government expenditure to 
meet new priorities. We are 
turning the ship of state 
around to those new 
priorities. . . but we must do 
so white ensuring that we 
maintain stability.” 


Hard choices tie ahead, he 
says, and conflict is probably 
inevitable. “But 1 spent my 
whole professional life 
mediating conflict." Mr Naidoo 
points out, referring to his role 
as Cosatu general secretary 
during 1985 to 1993: the 
toughest years of 
unio n -m gnflgumpnf- 
antagonism. Those years 
honed his rhetorical and 
political skids to the point 
where be earned the grudging 
respect of business; they also 
taught him pragmatism. 

Nothing could have prepared 
him better for the difficult 
years to come. . 



Alec Erwfci: fiscal moderate with a 
fervour and passion wfiicti few 
orthodox economists oould equal 

Discipline 
‘vital to 
strategy’ 

“Alec Erwin was sent by God. 
Jay Naidoo, I embrace him." 
Mr Derek Keys, the outgoing 
finance minister, has been 
overheard to utter such 
praises about the two men 

- ironically, both former 
socialists - who have been his 
lieutenants, writes Patti 
Waldmeir. 

Now that troika is breaking 
up, with Mr Keys ceding his 
place to Mr Christo 
Liebenberg, a respected 
banker. Hr Liebenberg is 
untested as finance minister, 
but Mr Erwin and Mr Naidoo, 
reconstruction and 
development minister, have 
already done mucb to prove 
their credentials as fiscal 
moderates. 

Indeed, to hear Mr Erwin, 
deputy minister of finance, 
defend the need for discipline 

- with a fervour and passion 
which few orthodox 
economists could equal - is 
to believe that his conversion 
is genuine. 

“You simply cannot meet 
people’s basic needs if yon 
generate rampant inflation. 

It would be totally 
counterproductive to our goals 
if we let Inflation rise,” he 
says with earnestness and 
conviction. 

“Oar commitment to fiscal 
discipline isn't just there 
because it looks good,” he told 
his first press briefing after 
entering public office. “Fiscal 
discipline Is fundamental to 
the strategy.” 

He reiterated the same 
message less than 24 hours 
after the announcement that 
Mr Keys would resign, 
obviously eager to reassure 
investors that South Africa's 
commitment to fiscal 
discipline would not depart 
with the minister. 

Even so, time will test that 
commitment sorely. And the 
loss of Mr Keys - who worked 
with Mr Erwin and Mr Naidoo 
for the past two years to 
develop an agreed economic 
vision based on discipline 

- could prove a serious blow. 
The new troika will lack 

the rapport built up by the 
previous team during tough 
months of negotiations in the 
national economic forum, the 
bosiness-iabonr-govemment 

body which brought 
corporatism to South Africa. 
And Mr Liebenberg will wield 
far less political clout than 
the wily and shrewd Mr Keys. 

But Mr Erwin is clearly keen 
to make things work. Once 
a doctrinaire socialist - he 
comes from Cosatu, the black 
union federation -he has 
made his peace with 
capitalism. 

Mr Keys was sorely right: 

Hr Erwin was an inspired 
choice. 


A widely 

respected 

banker 


The decision by Mr Derek 
Keys, finance minister, to step 
down in October for personal 
reasons caused panic in the 
financial markets when it was 
announced this month, but 
bis chosen successor. Mr 
Christo Liebenberg is likely 
to prove a capable 
replacement, writes Mark 
Suzman. 

Mr Liebenberg, who is 
presently acting as Mr Keys’s 
understudy before the 
incumbent leaves, fits all the 
requirements for finance 
minister. Hie is a widely 
respected banker with strong 
private sector credentials, a 
sound understanding of the 
economy, and a tough, 
conservative attitude to fiscal 
discipline. 

“He's 3 journeyman 
executive. He's capable and 
will work hard at the job.” 
observes one banker. “A very 
good back-room man." notes 
another businessman who has 
worked with him. “He 
understands the issues, works 
through them carefully and 
delivers the goods.” 

Mr Liebenberg. a career 
banker, started work in the 
mail room of a Ned bank 
branch and slowly worked his 
way up the ranks. En route, 
be picked up managerial 
qualifications from the 
Institute of Bankers, Dale 
Carnegie. Insead and Harvard, 
and built up a solid reputation 
as a dedicated and 
hardworking executive. 

In 1989 he became Nedbank’s 



Christo Liebenberg: a sound 
uncferstarKfing oUhe economy and 
a tough attitude to dtetipfine 

managing director and in 1990 
he was appointed chief 
executive of Nedcor, South 
Africa’s fourth-largest banking 
and financial services group, 
a post from which he retired 
in February of this year after 
a solid stint at the helm. He 
has no previous government 
experience and will be 
expected to bring business 
acumen rather than political 
skills to the post. 

Although affable and good 
humoured. Mr liebenberg is 
seen as both less charismatic 
and less cerebral than the 
ebullient Mr Keys and he will 
find it more difficult to win 
people over to his point of 
view. One probable result of 
lus appointment will be a 
change in the balance of power 
in the government's economic 
policy team. 

Whereas Mr Keys was 
unquestionably the dominant 
figure in the troika composed 
of him, Mr Jay Naidoo. and 
Mr Alec Erwin, the new 
arrangement will likely be 
more of a gathering of equate- 
Mr Liebenberg’s tower 
international profile will also 
allow the other two to increase 
their exposure within the 
global fi nancial community- 




FINANCIAL TIMES MONDAY JULY 18 1994 


THE MEASURE 
OF OUR FAITH 
IN THE NEW 
SOUTH AFRICA 
- R15 BILLION 

ANGLO AMERICAN 
CORPORATION 

Points from 
the annual statement 
by the Chairman, 
Julian Ogilvie Thompson. 


■ 1994, a momentous and rewarding year fir 
all South Africans, has seen the culmination of 
a process of profound change that we had long 
advocated . The country has been fortunate in the 
outstanding statesmanship of President Mandela- 
and Deputy President De Klerk , in the goodwill 
of all who suffered under apartheid and in the 
manifest desire fir peace and reconciliation that 
President Mandela has made a central tenet of 
his administration . Now all components of the 
new South Africa must rise to the tremendous 
challenges that lie ahead . As a member of the 
business community I am acutely aware of the 
part we have to play. The mining finance house 
continues to demonstrate its vigour and adapt- 
ability, harnessing under one roof the range of 
administrative, financial and technical skills and 
capital-raising capacity required for the major 
projects necessary to South Africa’s development. 

■ Our faith in the future of South Africa is 
signalled by the current R1 5 billion investment 
programme of the Group and its associates. The 
major projects - almost entirely export- driven — 
each exceed R1 billion: the Namakwa minerals 
beneficiation project; the Moab extension to the 
Vaal Reefs gold mine and the new No 4 Shaft at 
Freddie’s goldmine; the Columbus joint venture, 
which will make South Africa a leader in world 
markets for stainless steel; and our investment 
in the Del Monte Royal Group, which draws 
substantially on South African products for the 
international branded foods business. 

■ South Africa’s re-acceptance into the world 
community has opened up new horizons fir 
the Group , enabling us to expand into areas 
previously closed to us. In West Africa we are a 
partner in the development of a most promising 
gold deposit in Mali and are conducting explo- 
ration in neighbouring states, in Central and East 
Africa, and in Madagascar. In Zambia we have 
proposed, contingent on a feasibility study, a 
joint venture with ZCCM to develop the Konkola 
deep copper orebody. We are taking an interest 
in industrial ventures in the Far East and 


undertaking joint exploration in Vietnam and 
other countries in the region. We retain our 
close financial and technical involvement in 
Minorco’s six exciting new mining ventures in 
South America, which could double the size of 
Amsa and re-establish the wider group as a major 
world copper producer. 

■ The ability to operate internationally as a 
developer of major projects with or without over- 
seas partners, is a function of size. Our Zebra 
high-energy battery project could not have been 
undertaken without substantial research and 
development expenditure, spread over many 
years, and the support and participation of 
overseas partners — in this case Daimler 
Benz /AEG. Our extensive resource base was a 
factor in bringing Daewoo of South Korea, one 
of the leading industrial groups in Asia, into 
partnership with us tq seek new development 
opportunities in South Africa. 

■ The Corporation’s excellent results testify to 
our financial strength arid the benefits of planned 
geographic and product diversity. Net earnings 
increased by 23 per cent to R2,984 million and 
attributable earnings by 20 per cent to Rl,681 
million , with the total dividend increasing by 14 
per cent to R3.95 per share. 

■ As our central business purpose is wealth 
creation - not only for shareholders - the Cor- 
poration is investing in significant programmes in 
the fields of small business promotion, economic 
empowerment, share ownership, employment 
equity and education. In the words of our founder. 
Sir Ernest Oppenheimer , ; 40 years ago: “Our aims 
have been, and they still remain, to earn profits, but 
to earn them in such a way as to ??take a real and 
permanent contribution to the well being of the 
people and the development of Southern Africa”. 

ANGLO AMERICAN CORPORATION 
OF SOUTH AFRICA 



VISION BEYOND BORDERS 


A FULL COPY OF THE CHAIRMAN'S STATEMENT; TOGETHER WITH THE CORPORATION'S ANNUAL REPORT & ACCOUNTS, IS AVAILABLE 
FROM THE LONDON OFFICE, ANGLO AMERICAN CORPORATION OF SOUTH AFRICA LTD., 19 CHARTERHOUSE ST, LONDON EC1N 6QR 

Incorporated in the Republic of South Africa, Registration No.01 05 309 06. 



VI 


FINANCIAL TIMES MONDAY JULY 18 1994 


SOUTH AFRICA 6 


Michael Holman reports on housing expectations 

Voters’ crucial yardstick 


The provinces and the premiers 


Western Cape 

Hemus Kriei (NP) 

Eastern Cape 

ReyMMabalANQ 

Northern Cape 

Mann* DtpiCO (ANC) 

KwaZuhVNatal 

Frank Mdu***(lFP) 

Orange Free State 

Patrick LakfltelANC) 

Northwest 

Pgpo Molefe (ANC) 

[ Northern Transvaal Ngoafce RamatewcR (ANC) 

Eastern Transvaal 

Matthcnw Phase (ANQ 

PWV 

Tofcyn Sexwvto (ANC) 



Th* housing backlog Is on* of many issues factog Mr Stovo - and provincial premiers who am clamouring for 
power. There are turf batttea over the ROP and a fight Is looming owr funding for the provinces: Reports, Pag* ? 


t Joe Slovo, Conner 
ANC guerrilla chief 
and chairman of the 
South Afri can Communist 
Party, holds what is arguably 
the toughest job in South 
Africa: he has to implement 
the African National Congress 
election promise to build at 
least lm low-cost bouses in five 
years. 

Apart from setting tills ambi- 
tious target, assisted by a 
Ria.sbn state subsidy, the 
party also vowed to “transform 
and upgrade” the 411 migrant 
workers’ hostels which house 
lm residents, and bring elec- 
tricity to at least 15m homes 
by the year 2000. 

A government white paper 
setting out ways to meet these 
targets is due to be published 
in the neat few weeks. Mean- 
while Mr Slovo is listening and 
taking stock - and setting out 
some of the tenets that will 
shape policy. 

The housing backlog cannot 
be left to the market, argues 
the minister. “Private sector 
representatives are unanimous 
that the market requires the 
assistance and intervention, 
direct and indirect, of the 
state." 

Deliberate neglect of black 
urban housing - apartheid's 
architects treated black South 
Africans as only temporary 
residents in white cities -cre- 
ated a backlog of between L5m 


and gm homes. Even if govern' 
merit sought only to keep up 
with the annual demand 
caused by papulation growth, 
It would face a formidable task; 
about 240.000 new homes each 
year need to be built 
In the Pretoria-Wltswaters- 
rand-Vereeniging (PWV) prov- 
ince alone, lm people need 
decent bousing. Some 200,000 
people have in recent years 
established squatter settle* 
meats, driven to the region in 
search of work or to escape 
from the draught of the early 
1990s, and freed from apartheid 
laws restricting movement 
The migration to the cities 
looks set to rise. A recent 
study prepared by the Central 
Witswatersrand Metropolitan 
Chamber estimates that the 
population of the PWV will rise 
to 16m by 2010, an SO per cent 
increase from the 1990 figure. 
A study by the country's 
National Housing Forum, a 
broad-based independent asso- 
ciation of interest groups 
established in August 1991, 
doubted whether the construc- 
tion industry can cope with the 
target The number of regis- 


tered building companies had 
dropped from 24,300 in 1088 to 
about 7,000 as a result of the 
recession. Skills are in short 
supply and plant and equip- 
ment is ageing, the study 
points out 

In an interview last month, 
Mr Slovo made clear that he 
was opposed to what are called 
“site and service" schemes, 
which allow people to build 
their own homes on plots pro- 
vided with running water and 
water-borne sewerage. 

Mr Slovo argues that govern- 
ment must provide a secure, 
weatherproof structure, other- 
wise such schemes soon 
become little better than the 
slums they are designed to 
replace. 

Many housing experts dis- 
agree. Given the resources 
available, the size of the back- 
log, and Hu* annuel demand 
stemming from population 
growth, there is no alternative 
to serviced sites, they say. 

Some of Mr Slovo's concerns 
are borne out by a 200-page 
report on the latgest low-cost 
housing project in South 
Africa’s history. Known as the 


Capital Subsidy Scheme (CSS), 
it was launched in March 1991 
by the state-financed Indepen- 
dent Development Trust, estab- 
lished a year earlier to manage 
and disburse a R2,000m fund 
“to enhance the standard of 
living of disadvantaged com- 
munities”. The R75Qm scheme 
offered 113,000 subsidies of 
HTfiOO In 103 projects around 
Sfruth Africa. 

E ligibility was limited to 
households earning less 
than R 1,000 a month, 
and giving registered owner- 
ship of a serviced site. These 
would be provided with water 
and waterborne sanitation, 
access by graded road to each 
site, and paved bus routes. On 
completion, the project will 
have provided facilities for 
between 5 and 10 per cent of 
the low income population 
needing housing . 

The assessment needs to be 
put in the context of the trou- 
bled times. Housing was in the 
political arena, with efforts to 
tackle the problem set back by 
political violence, rent boycotts 
and tensions created by the 


economic recession and rising 
unemployment 

Despite these difficulties, the 
evaluation describes the CSS 
as having been “largely suc- 
cessful”. In the two years since 
its inception, some 300,000 peo- 
ple have been accommodated 
on 57.000 plots, at a cost of 
R44Qm of the allocated Rnsm. 

But as the assessment goes 
into more detail, it becomes 
clear that for all its achieve- 
ments, there are serious prob- 
lems which current bousing 
strategy has to take into 
account. 

“There is a high risk of the 
subsidy being Lost in the col- 
lapse of roads, toilet structures 
and pipes due to inadequate 
mechanisms being instituted 
for maintenance”, it warns. 

“The scenario could develop 
where there are taps but no 
water; blocked storm-water 
drains; impassable, eroded 
roads; toilets but no sewer 
systems; piles of refuse etc.” 

“This eventuality", the 
report continues, “is already 
raising its head In a number of 
projects. As the situation wors- 
ens, it will become increas- 


ingly difficult to resolve, with 
financially restrained local 
authorities unable to respond, 
and communities becoming 
more and more unwilling to 
pay for services that they only 
experience as 

The report also warns that 
“the level of expectation 
appears to have increased 
since the CSS started in 1991. 
The current expectation is that 
housing schemes for the poor 
need to make subsidy provi- 
sion for a serviced site and a 
two-roomed house at least” 

The government can go a 
long way towards meeting 
these expectations, says Mr 
Slovo, with a programme in 


which government subsidies 
will be accompanied by private 
sector participation. A forth- 
coming white paper will pro- 
pose: 

• Provision of a maximum 
grant of R12js00 far those earn- 
ing less than Rl.500 a month. 

• Mortgage indemnity insur- 
ance scheme, with the capital 
provided by government and 
foreign aid, and the scheme 
maintained by users* premi- 
ums. Banks will be insured 
against non-payment of loans 
or if they are unable to repos- 
sess homes because of violence 
or political conditions. 

• Consumer protection: mea- 
sures to prevent speculation, 


and ensuring quality control 

• A national housing bank 
which will “cheapen housing 
capital by acting as a whole- 
sale bank", says Mr Slovo. 

• Provision of state-owned 
land for low-cost housing. 

Given these schemes and the 
co-operation of the private sec- 
tor. Mr Slovo believes that 
50,000 houses can be erected 
this year, rising to 125,000 in 
1995, 175,000 in the following 
year and 225,0 00 in 1997. 

How dose Mr Slovo's minis- 
try comes to reaching these 
targets will be one of the yard- 
sticks by which Mack South 
Africa will judge the ANC at 
the next election. 





Tony Hawkins assesses the Reconstruction and Development Programme 

Calmer waters of national consensus 


A fter starting out as a highly conten- 
tious political manifesto - the arena 
for angry ideological and economic 
debate during the election campaign- the 
ANC*s Reconstruction and Development 
Programme (RDP) has sailed into the cal- 
mer waters of national consensus. 

Ideology is much less of an issue, cer- 
tainly insofer as social upliftment is con- 
cerned. Just about everyone - government 
ministries, parastatals, private enterprise, 
nongovernmental organisations, and the 
donor community - is jostling to climb 
aboard the RDP bandwagon. Such broad- 
based enthusiasm for a programme which 
many decried only a few months ago, is 
itself a triumph for the new administra- 
tion, but especially for the ANC. 

Mr Jay Naidoo, the cabinet minister 
with overall responsibility for the RDP, 
says: “The remarkable thing about politi- 
cal transition is that we have a pro- 
gramme that united us, even before we 
started our first cabinet meeting:” 

This has meant that the focus of the 
debate has shifted from sterile argument 
over what it will cost -R39bn at the low 
end to R79bn at the top - to much mare 
pragmatic issues such as priorities, link- 
ages between the many different players 
who will be called to participate, sequenc- 
ing and, above all, delivery systems, and 
how they should be funded. 

The RDP has two broad thrusts - social 


upliftment and economic development 
There are five key, inter-linked pro- 
grammes: meeting basic needs; developing 
human resources; building the economy; 
democratising the state and society; and 
implementing the programme its e lf 

Meeting basic needs encompasses 
far-reaching land reform - an unreachable 
target of redistributing 30 per cent of agri- 
cultural land within five years; raising the 
number of houses constructed annually 
from 50,000 in 1992 to 300,000 by the end of 
the five-year programme in 1999; providing 
clean drinking water for the 12m people 
without access to it at present, and ade- 
quate sanitation for 21m people; supplying 
electricity to 19,000 black schools <86 per 
cant of the total) and some 4.000 clinics 
presently without electricity as well two 
thirds of the country's homes; redressing 
the imbalance in access to telephone lines 
- (me line for 100 black people compared 
with 60 lines for 100 whites; and social 
safety nets for the vulnerable. 

According to the RDP, millions of blacks 
do not have access to such services. The 


RDP calls for the creation of a national 
health system focused on primary health 
care. 

The plan includes phasing in a iG-year 
compulsory education system; limiting 
class tto to no more than 40 by the wiri 
of the decade; the launch of adult educa- 
tion programme and the revamping of ter- 
tiary education. The underlying goals are 
widely accepted but this is not so for the 
third element of the programme - building 
the economy. Here the ANCTs belief in 
interventionism comes through along with 
some unrealistic targets - for example, the 
creation of 300,000300,000 non-farm jobs 
each year. 

There is a pledge to “reverse privatisa- 
tion programmes that are contrary to the 
public interest"; a promise to introduce 
“strict anti-trust legislation" while creat- 
ing a more competitive business environ- 
ment; and a commitment to “de-racialise 
business ownership”. The section on 
industrial relations promises free collec- 
tive bargaining, payment of a living wage 
and affirmative action. 


As is invariably the case when a radical 
administration takes office, the more con- 
troversial elements of the programme 
have been de-emphasised and watered 
down. Indeed, this happened well before 
the elections, when some of the more ideo- 
logical , interventionist elements relating 
to the mining and financial services sec- 
tors were amended in the face of sharp 
criticism from the private sector. 

T his process has continued as minis- 
ters new to government tackle a 
steep learning curve. For example, 
ministerial opposition to site-and-service 
housing schemes is ebbing away as the 
new incumbents face up to hard reality. 

The new administration will soon have 
to start prioritising. One attempt to quan- 
tify the amounts needed to “remove social 
back-logs" within five years puts the 
extension of social services at the head of 
the list with 26 per cent of the total cost of 
R39bu, followed by education and training 
with 2L5 per cent and housing with 18 per 
cent 


In the new government's first budget, 
covering the nine months to March 1995, 
R2£bn is earmarked for the RDP. This will 
be funded from savings from departmental 
votes - what Mr Jay Naidoo, the minister 
with overriding responsibility for the RDP, 
calls “turning the ship of state around to 
meet new priorities”. He promises “a 
major kick-off of the programme” within 
the first 100 days - by mid-August 

The government is preparing a policy 
document to convert a political manifesto 
into a development plan. This will include 
a macroeconomic framework, or model, 
that ties the programme to anticipated 
future economic growth. 

In the budget, Mr Derek Keys, finance 
minister, “pencilled in” total RDP spend- 
ing of R37.5bn over five years, all of it to 
be financed from departmental savings. 
Assuming inflation of 9 per cent a year, 
this will mean that real recurrent govern- 
ment spending, excluding interest pay- 
ments, will have to be cut by about 2 per 
cent a year. This looks to be unattainable, 
especially given the capital spending bias 


of the RDP, which in turn will create 
demands for higher departmental votes. 
Building more schools and hospitals 
implies metre teachers, doctors and nurses. 

Government spending on the RDP will 
be leveraged by add inflows, by parastaial 
funding of electrification and telecommu- 
nications, by private sector financing of 
housing, by user-cost systems and by the 
sell-off of government assets such as the 
oil stockpile and forest land. On one calcu- 
lation, R9bn could be raised from such 
asset sales. The Organisation for Eco- 
nomic Co-operation and Development 
believes South Africa could receive 
upwards of $lbn a year in aid flows, the 
greater portion of which would be for 
RDP-type programmes. 

Co-ordination between central govern- 
ment, provincial administrations and par- 
astatals, not to mention donors, is bound 
to be a problem - conceivably posing a 
greater challenge than financing: There is 
a number of well-run non-government 
organisations in South Africa with the 
infrastructure and capacity to deliver the 
goods at relatively low cost What is in 
doubt is the willingness of some in govern- 
ment to make maximum use of such 
NGOs. 

Senior officials also question the bureau- 
cracy's capacity to spend efficiently the 
amounts likely to be available from 1996 
onwards. 




“No one is in a better position 
than Barlows to help build the new South Africa.” 



Warren Clew low. Chairman. Barlow Limited. 


\Jm M / e stand at 
the dawn of 
the greatest change in 
our country's history. 

And as I look around 
at our group it seems 
a challenging and exciting prospect. AU 
of our companies are long-established 
leaders in their field across the country. 
We have the resources and facilities to 
help build a new nation. 

Barlows Equipment Company through its 
long association with Caterpillar is well positioned to 
level the ground for infrastructural development. 

No one is better equipped than PFC, the 
country's largest producer of cement, to provide 
solid foundations. 

Federated -Blaikie is the principal 
source of building materials. 




Robor Industrial Holdings 
can also provide the steel 
tube and piping. 

Whilst Plascon, one 
of the top paint suppliers in 
tbe world , will ensure 
protection against tbe elements. 

Of course. Barlows Consumer Electric 
Products, tbe overall leader with brand names 
Kelvinator, Electrolux, Frigidaire and Goldstar, 
who promise to deliver all kinds of appliances 
forborne convenience. 

And Barlows Motor Investments, tbe 
country's second largest motor retail enterprise, 
will put a car outside the door. 

From where 1 am sitting no other 
company in tbe region seems better placed 
to play a constructive role in South Africa’s 
development and growth. 


Barlow Limited 


Barlow Limited, PO Box 7S224U, SanUlon. 2146, South Africa. Tel +2MI-A01-9HV. Han +27-11 -144- J&4J 

OOW S HUNBt BKHTKMD XMLE-IH? A MUM 63444) 




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Leadership in South African Equity Capital Markets in ippfr P4 


PEPKOR 

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US$67,718, 316 
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£52,256,500 
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SOUTH AFRICA 7 


S ™£A*rica’s political landscape is 
gifting by the day, but nowhere is 
themovement more rapid than in 
me wjuntrjrs nine new provinces. 

Provincial premiers axe damonrine for 
power, and in some cases eserdsinepow- 

018 no unctefthe 

constitution. Turf battles are under way to 

Jtennine who controls the Reconstruc- 
tion and Development Programme: the 
provinces or the centre. And the fight over 

foffihng tiie Provinces has not evenhegun. 

Despite the best efforts of African 
National Congress and National Party con- 
stitutional negotiators, it looks as though 
federalism has arrived in South Africa 
-albeit by the back door. And, ironically 
it is not the “dissident” provinces of Kwa- 
Zulu Natal and Western Cape -ruled 
respectively by the lnkatha Freedom Party 
and the National Party - but the provinces 
controlled by the majority party, the Afri- 
can National Congress, who are posing the 
greatest challenge to the centre. 

"We knew the provinces were going to 
cause problems and the provinces that 
were going to cause the most problems 
were the ANC provinces,” says Mr Zola 


Patti Waldmeir reports on the struggle for power in South Africa’s new provincial regions 

Federalism arrives by the back door 


Skweyiya, minister of the public service 
and administration and the charged 
with devolving powers to the new provin- 
cial administrations under the 1933 consti- 
tution. 

“The tension between the provinces and 
centre will cut across the political divide,” 
says Mr Thozamile Botha, head of the 
Commission on Provincial Government, 
established to determine the extent of 
powers granted to provinces under the 
existing constitution, and under the new 
constitution due to be negotiated over the 
nest two years in the newly elected con- 
stituent assembly. 

"The main confrontation in the constitu- 
ent assembly is not going to be between 
the ANC-NP-IFP but between the (ANC- 
led) national government and regional pre- 
miere of the ANC,” says Mr Skweyiya. 


The centrepiece of the battle win inevi- 
tably be the Reconstruction and Develop- 
ment Programme; ultimately, provincial 
governments win stand or fall according 
to bow well they deliver on the RDF’s 
promises. 

But their power to 
do so is circum- 
scribed: central gov- 
ernment sets norms 
and standards for 
RDP programmes 
which could, in some cases, impede deliv- 
ery at provincial level 

For example, Mr Joe Slovo, national 
housing minister, made clear that he 
opposes using RDP funds for so-called 
"site and service” schemes: programmes 
which provide basic services to squatter 
communities and allow them to construct 


their own shelter from whatever materials 
are available. 

Housing experts agree that, however 
morally distasteful such schemes, they 
provide the only realistic solution to South 
Africa's massive housing backlog. Prov- 
inces which are 
forced to build for- 
mal housing with 
their RDP allocation 
from central govern- 
ment will end up sat- 
isfying only a fraction of their constitu- 
ents - and this will have inevitable 
electoral consequences. 

Tensions will inevitably arise over cen- 
tral government’s constitutional right to 
impose uniform norms and standards 
throughout the country, and over the cen- 
tre's right to allocate funding to provinces, 


on the basis of a formula yet to be agreed 
by a Financial and Fiscal Commission 
established under the constitution. Prov- 
inces have only very limited powers to 
raise revenues of their own. 

“The key question is finance.” says Mr 
Skweyiya. “What power do you really 
have if you have to account to central 
government for what you want to do and 
persuade them to finance it?” 

The answer to that question is as yet far 
Grom dean the political battle over the 
powers of provinces has only just begun. 
Their powers are outlined in the national 
constitution, subject to a vaguely worded 
over-ride clause which would allow central 
government to Intervene to most arras if it 
wished. But before being allocated such 
powers, they must prove they are capable 
Of py*rri3rng them 


“All these provinces are saying - - ‘We 
want all our powers now.’ But the reality 
is that there is not an administration in all 
these provinces yet. there is just an 
elected government." says Mr Botha. In 
extreme cases such as the Northern Cape, 
a new province created at the elections, no 
administration yet exists. 

Questions of long-term importance 
remain unresolved. Who will set the cur- 
riculum of provincial schools? Who will 
decide how teachers are paid? Who will set 
university entrance qualifications? 

These are political, not constitutional 
questions although ultimately, if they can- 
not be resolved by political negotiation, 
the final arbiter will be the Constitutional 
Court And the political battle between 
provinces and the centre has only just 
been joined. 

Ironically, as ANC provincial leaders 
admit privately, they will be strengthened 
in their cause by the elements of feder- 
alism introduced into the constitution by 
their chief rival, the lnkatha Freedom Par 
ty - provisions which they fought bitterly 
at the time. 

It truly is a new South Africa. 


Provinces have only very 
limited powers to raise revenues 
of their own 


Profile: PWV province 

Biggest splash so far 


Profile: Western Cape province 

National party redoubt 


In the legislature of the PWV 
province - the industrial hub 
of South Africa, rather inele- 
gantly named for its three 
main centres, Pretoria, the Wit- 
waters rand and Vereenig- 
ing - the spirit of provincial 
unity is so strong that National 
Party members shout “Aman- 
din”, the black power salute, 
and the African National Con- 
gress shouts “ Aoor i hoof', the 
traditional Afrikaans interjec- 
tion - just to show willing. 


It has become almost a cliche 
to refer to South Africa's 
remarkably peaceful transition 
to democracy as a “miracle", 
writes Patti Waldmeir. Such 
hyperbole may not be appropri- 
ate for most of what happened 
but it is difficult to find a less 
emotive term to describe 
events In the province of Kwa- 
Zulu NataL 

“Amazingly, the population 
in Natal just forgot about ten- 
sion and violence on all the 
days of the election,” says Mr 
Jacob Zmna. African National 
Congress leader in the prov- 
ince. His party lost the election 
to the rival lnkatha Freedom 
Party -and conceded that loss 


writes Patti Waldmeir. 

It is an impressive display, 
led by Mr Tokyo Sexwale, the 
premier -a man who proved 
his conciliatory credentials last 
year when he pleaded for racial 
tolerance in the aftermath of 
the assassination of Chris 
Hard, the ANC guerrilla leader 
killed by a right-wing white 

True to form as South 
Africa's most powerful prov- 
ince, the PWV and its leadens 


despite widespread allegations 
of lnka tha electoral fraud. 
“The people gave leadership to 
the leaders on that day they 
showed us how much they 
wanted peace.” 

Since that day. KwaZulu 
Natal’s politicians have largely 
failed to respond to that 
damand. The provincial legisla- 
ture has met only once, to 
swear In its members, and has 
been prevented from sitting 
since by a dispute over the 
choice of a provincial capital 

Bickering over the capital, 
and over the allocation, of port- 
folios in the coalition “govern- 
ment of provincial unity” 
required by the constitution, 


have madp the biggest splash 
so far on the provincial scene. 

Hardly a day passes but Mr 
Sexwale, or Miss Jessie Duarte, 
his diminutive police minister, 
visit a black township to urge 
residents to co-operate with 
police, or drop in on a migrant 
workers’ hostel to try to foster 

Mr Sexwale’s performance as 
premier will be judged largely 
by how well he implements the 
reconstruction and develop- 
ment programme. And here, 
conflicts are already looming. 

In his inaugural speech to 
the new legislature, Mr Sex- 
wale promised to build 150,000 
houses in the province over the 


has prevented the new govern- 
ment from tackling any of the 
daunting probl ems of a prov- 
ince with nearly a quarter of 
South Africa’s population and 
some of its woret poverty. 

While other provinces have 
forged ahead with plans for 
implementing the Reconstruc- 
tion and Development Pro- 
gramme, KwaZulu Natal has 
projected an image of political 
conflict which jars with the 
overwhelming national empha - 
sis on unity. 

Dr Frank Mdladlose, the pre- 
mier, Is from lnkatha which 
has six of the 10 cabinet seats 
and 41 of 80 seats in the legisla- 
ture. He angrily denies that his 
party is blocking progress. But 
lnkatha insid ers say that Chief 
Mangosuthu Buthelezi, the 
party leader who is minister of 
home affair s in the national 
government, has forced Dr 


PWV KEY FACTS 


Area: 18.760 sq km 
. Population: 02m 
Population growth: ‘13% 

. Literacy: 69% 
labour torca employed: 54% 
.ContobutteQ to nations! gross 
domestic product 37% 

Ufo expectancy: 66 years'" 
Sourva: Dauefopment Bank 
of Southern Africa 


next year - compared with 
only 30,000 homes built 
throughout South Africa last 
year. 

He- is understood to have 
plans for a grand R4bn house- 


KWAZULU NATAL 


Area: 9f;48t-aq km 
'Population; 8.5nt' 

. Popetiatfon growth: 2.B% 
Utewcy.-05%. s ‘ . 

Labour.fance employed: 45%. 
Contribution to natfooal gross 
.tkxriesdfopfoduct 14.7% 
iltfs expectancy: 63 years -■ 
Souths; tievokiprn&it Bmfo 
„ crf Sotitham Africa ■ 

...‘..L.. . 

Mdladlose to take a rigid line 
on both capital and cabinet 
which has provoked conflict 
Slowly, though, things seem 
to be coming right The cabinet 
recently agreed that the capital 
will be chosen by referendum, 
and that the cabinet will alter- 
nate between the old capital of 
Pietermaritzburg and the for- 
mer capital of the KwaZulu 
homeland, Clundi-an UP 


building project involving mas- 
sive private and public sector 
finance. The plan has already 
caused friction with Mr Joe 
Slovo, national hnnsfag minis- 
ter. but Ur Slovo appears to 
have been powerless to prevent 
it. 

Mr Sexwale’s youthful and 
Inexperienced cabinet - which 
includes a finance minister 
who is regional general secre- 
tary of the South African Com- 
munist party and other noted 
radicals - certainly does not 
ladf energy 

Only time will tell whether it 
lacks the circumspection nec- 
essary to avoid grand and 
costly development failures. 


stronghold - until its result is 
known. 

“It’s better to delay than to 
break down totally,” says Mr 
Zmna. drawing a parallel with 
national negotiations which 
took four years to complete but 
appear likely to yield a durable 
peace. Natal did not enjoy this 
long period of consensusbuild- 
ing; its people fought each 
other until the very day of the 
elections. More than 10,000 peo- 
ple were killed in the province 
in political violence in the past 
decade. 

“Everything must be given 
time. If you rash people, they 
taka amntinnal decisions," be 

concludes. “We know their 
power; they know our power. 
We have to treat each other 
with respect. In the end, we 
have a responsibility to govern 
Natal, not to fight about the 
province.” 


Cape Town, the European 
settlers’ first landfall nearly 
350 years ago, now finds itself 
the last redoubt of white politi- 
cal control following the vic- 
tory of Mr F.W. de Klerk’s 
National party in the Western 
Cape, the only one of South 
Africa’s nine new regions 
which it secured in the April 
elections, writes Gordon 
Cramb. 

Representatives of President 
Nelson Mandela's African 
National Congress dominate 
the national par liamen t, which 
sits in Cape Town. But when 
the regional cabinet meets at 
the other end of a leafy ave- 
nue, its four ANC members are 
outnumbered by the six from 
the white-run National party, 
which won the Western Cape 
because it convinced “col- 
oured” (mixed-race) voters that 
it could better protect their 
interests. 

The parties are linked at 
each level in a government of 
national unity. But many 
Capetonians fear that their 
city, 1,000 miles from the 
ANC’s Johannesburg power- 
base, will become marginalised 
in the new South Africa - miss- 
ing out on reconstruction 
spending and losing its bey 
Institutions. 

There is pressure within the 
ANC for parliament to be relo- 
cated to a site near Johannes- 
burg. Mr David Bridgman, 


director of Wesgro. an eco- 
nomic development organisa- 
tion funded by the private sec- 
tor and local municipalities, 
argues that this is not “the sort 
of signal to the local or inter- 
national populace to be send- 
ing out” and says the R1.5bn 
estimated cost of the move 
would provide housing for a 
quarter of a milli on people. 

Greater Cape Town has a 
population of some 3m, with 
hundreds each day arriving 
from rural areas to seek work. 


WESTERN CAPE 


Area: 129, 385 sq km 
Population: 3.6m 
Population growth: 1.7% 
Literacy: 71 .9% 

Labour force employed: 68% 
Contribution to national gross 
domestic product: 1SL2% 
Ufeaxpectancy: 65 years 
Soorta:. Development Bank 
of Southern Africa 


But the dty and its surround- 
ing region have few industries 
which can absorb unskilled 
labour. The Western Cape - be- 
reft of metals and miner- 
als -has as its main produc- 
tive sectors agriculture (and 
the majority of South African 
wines), a textiles and garment 
industry, and tourism. 

“For every 10 tourists you 
have a job,” says Mr Kobus 


Meiring, the region's finance 
minister who was administra- 
tor of the old, larger Cape 
Province in the dying years of 
apartheid. He describes the 
ANC’s reconstruction and 
development programme as “a 
summary of what I have been 
trying to do in the last five 
years” and he diverges in no 
respect from his ANC counter- 
parts when he enumerates 
housing, employment and 
health as the biggest chal- 
lenges. 

Mr Meiring admits being 
worried about a possible north- 
ward drift of decision-making 
but argues that constitutional 
provisions, as well as the gov- 
ernment of national unity oper- 
ative at central and regional 
level, should protect the West- 
ern Cape from discrimination 
in allocating funds. 

The region can trade not 
only on its breathtaking scen- 
ery but on an underemployed 
port and airport and a rela- 
tively well-educated workforce. 
Oil multinationals and insur- 
ance companies are among 
companies headquartered in 
Cape Town in spite of the dis- 
tance of the city from refiner- 
ies or stock exchange. 

According to Mr Bridgman, 
potential foreign investors are 
exploring “one ot two Rlbn- 
plus projects”. If the National 
Party-led administration dif- 
fered to any extent from its 
ANC-headed equivalents else- 
where, it would “focus a little 
more an production as opposed 
to redistribution,’’ he suggests, 
adding: “We need the other 
side, too.” 


Profile: KwaZulu Natal province 

A delayed new start 



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C yril flamaphosa, secretary-general 
of the African National Congress, is 
probably not overstating the prob- 
lem in this line from a recent speech on 
land reform; “Unless we settle the land 
question, we do not have a country. If we 
handle it badly, we tear South Africa to 
pieces. If we manage it well, we create the 
foundations of a truly united nation." 

Deputy President F.W. de Klerft recently 
highlighted land reform as one of the 
issues which could destroy the govern- 
ment of national unity and anyone with 
even a passing acquaintance with the 
issue must recognise that resolving com- 
peting interests, meeting basic needs and 
defusing anger over land will require not 
only the wisdom of Solomon, but quite a 
lot of his wealth as welL 
Apartheid’s worst Injustices were con- 
centrated in this area. Since 1960. an esti- 
mated 3.5m people have been forcibly 
removed from their homes under various 
programmes designed to rid white South 
Africa of blacks. Some 122m black farmers 
have been. left with only 17m hectares of 
often sub-standard land -13 per cent of 
the country's total -while 55,000 whites, 
employing a further Llm blacks as labour- 
ers. form 102 m hectares. 

Millions more are simply in need of land 
for settlement, whether urban or rural In 
the former homelands, 83 per emit of black 
households are estimated to fall below the 
poverty line, largely the result of land 
shortage. It is a massive problem. 


Path Waldmeir looks at land reform 


Haunting test even for Solomon 


“If you don’t have a land reform pro- 
gramme with some sign i fica n t effect, it 
comes back repeatedly to haunt you. Peo- 
ple's grievances don’t just vanish," says 
Mr Derek Hanekom, the newly-appointed 
minister of land affairs, from the African 
National Congress. He points out that land 
reform Is central to the Reconstruction 
and Development Programme which calls 
for 30 per cent of South Africa’s land to be 
redistributed over five years beginning 
nest year. Mr Hanekom estimates the cost 
at R3bn a year - although only R92m is 
allocated for land reform in the present 
year's budget, which provides only a total 
of RSLSbn for all the RDP programmes. He 
outlines the government’s goals as: 

• Restitution: a Commission on Restitu- 
tion of Land Rights and a Land Claims 
Court will be set up to deal with the 
claims of forced removals victims. Under 
the new constitution, people dispossessed 
of land after 1913 - the year when system- 
atic racial dispossession began in earnest 
- can claim restitution from the state. 

Original land may be returned to them 
or, where this is not feasible, alternative 
State-owned land or other compensation 



ANC secretary-general Cjufl Ransphosa: 
the foundations of a truly united nation 1 


will be provided. But under the bill of 
rights, the interests of existing as well as 
original landowners must be respected. 
The constitution bars expropriation except 



for “public purposes”, and requires that 
"just and equitable" compensation be paid, 
takip g into account factors such as market 
value, use of the property and value of 


investments in it. Mr Hanekom says that 
only state-owned land and land acquired 
through the market will be used for this 
purpose, or for 

• Redistribution: millions of black South 
Africans -not just those with historical 
grievances - lack adequate land for settle- 
ment Their plight has been highlighted by 
cases of squatters invading privately- 
owned land near Johannesburg, an inva- 
sion which the government condemned- 

But, as the World Bank points out in a 
recent policy document on land reform: "it 
is essential that an expeditious, transpar- 
ent and thorough, land restoration and 
redistribution process be implemented as a 
means of discouraging the landless from 
resorting to land invasions." 

As Mr Geoff Budlendcr, a land lawyer, 
puts it "Land occupation is the only func- 
tioning land claims process in South 
Africa today.” Until land reform begins in 
earnest, the threat of invasion will grow. 

• Rural restructuring: "Restitution 
entails more than just the acquisition of 
lost land," says Mr Hanekom. "Good plan- 
ning, the resettlement of people, the provi- 
sion of infrastructure and services, eco- 


nomic support programmes, sustainable 
development and, very importantly, com- 
munity institution building are essential 
dements of the programme." 

• lj*gai and market reforms: tenure 
rights wiii be strengthened, and state 
financial institutions restructured to 
improve poor people’s access to finance. 
"We want to remove the impediments, and 
ensure that those people who are in a 
position to take advantage of market 
opportunities arc encouraged as much as 
possible.” Mr Hanekom told the Johannes- 
burg newspaper Business Day recently, 

• Mr Hanekom docs not mention reform 
of agricultural markets -the ministry of 
agriculture is the responsibility of the 
opposition National Party - but the gov- 
ernment’s programme includes measures 
to stimulate competition in agricultural 
markets and reduce barriers to entry, as 
an essential adjunct to land reform. 

Many questions remain unanswered. 
How will the beneficiaries be chosen: 
according to need, or the ability to farm 
land productively? How will nepotism and 
corruption be avoided? Where will the 
money come from? Can the state move 
quickly enough to stave off the threat of 
invasion? One foct is clear, however the 
present highly unequal pattern of land 
ownership cannot continue. Other coun- 
tries with a similar pattern have seen 
neglect lead to civil disorder and violence. 
South Africa cannot afford to do the same. 


Michael Holman on the defence forces integration 


Critical stage completed 


In its own way, the 
announcement at the end of 
last month was almost as 
momentous as the Installation 
of President Nelson Mandela. 

Mr Siphiwe Nyanda, former 
chief of staff of Umkhouto we 
Sizwe (MK), the African 
National Congress’s guerrilla 
army, was appointed Acting 
Chief of Staff of the South 
African National Defence 
Force (SANDF). 

Mr Nyanda, 44, was one of 
nine BIK officers given senior 
positions in the integrated 
SANDF in a statement issued 
by Mr Joe Modise- himself a 
former MK commander and 
now minister of defence. 

Confirmed in their positions 
were the present chiefs of the 
army, air force and navy: Lt 
Gen J H Pretori ous, Lt Gen J 
.Uriel, and Vice-Admiral 
R C Simpson. In a restrained 
comment that must have con- 
cealed many emotions, Gen 


Hie South African armed 
forces were not defeated 
and their MK adversaries 
never managed to launch 
an effective guerrilla war 


Georg Meiring, commander of 
the SANDF, declared himself 
"quite happy". 

The announcement marked 
the end of a critical stage of 
one of the most remarkable 
revolutions of the twentieth 
century. 

The South African armed 
forces were not defeated and 
their MK adversaries never 
managed to launch an effec- 
tive guerrilla war. But the sol- 
diers of both sides had to find 
an accommodation that would 
underpin the civilian leaders’ 
political settlement 

The essentials of the accom- 
modation provide for the 


SANDF to swell to aboni 
130,000 over the next year, 

allowing for the entry of MK 

cadres, soldiers of former 
homeland armies, and a much 
smaller number of guerrillas 
from the Axanian People’s Lib- 
eration Army, military wing of 
the Pan Africanist Congress. 

Over the next three years 
this force win continue a pro- 
cess of "restructuring and 
integration”, during which it 
will be trimmed feck to the 
pre-integration strength of the 
armed forces- about 91,000. 

These fere facts do not do 
justice to the complex behind- 
the-scenes negotiations that 
have run parallel to the public 
political bargaining. But in a 
chapter from a book to be pub- 
lished later this year by 
Johannesburg’s Centre for Pol- 
icy Studies, Mr Mark Shaw, a 
researcher at the centre, pro- 
vides a detailed account.* 

The essence of Mr Shaw’s 
thesis is that the former South 
African Defence Force (SADF) 
made their own assessment of 
the political and military 
options open to them, and 
“chose. . . not to prevent 
change.” 

"Contrary to expectations of 
many observers, the SADF did 
not seek to derail or prevent 
the transition; rather it sought 
to secure its place within it”, 
writes Mr Shaw. 

“This willingness to live 
with majority government and 
military integration was made 
far easier by the knowledge 
that its power, and the techni- 
cal competence of its senior 
officers, ensured that it would 
remain a force which the new 
civilian authorities would 
have to respect, whatever for- 
mal arrangements were 
signed”, he continues. 

Equally illuminating com- 
ments are made about MK, 
whose operational strength 



Gen Melting: co m ment that mint 
have concealed many emotions 


numbered about 10,000 in the 
mid-1980s. It never had an 
overt political agenda of its 
own. aside from the basic 
objective of ending white role, 
says Mr Shaw. This made it 
easier for it to revise its strat- 
egy after Nelson Mandela’s 
release in 1990, he writes. 
From 1991 onwards, Its train- 
ing changed from guerrilla 
skills to conventional military 
skSDs, "designed specifically to 
prepare individuals for incor- 
poration into a new national 
defence force”. 

Some 8,000-10,000 MK sol- 
diers are believed to have been 
trained for this purpose, bring- 
ing the estimated number of 
troops available for integra- 
tion to about 14,000-16,000. 

“If estimates of MK guerrilla 
strength are accurate, it 
trained more people for the 
national army than for its 
guerrilla war. While this still 
left it vastly outnumbered by 
the SADF, it made it less 
likely that military “integra- 
tion* would amount to the MK 
being absorbed by the SADF”, 
Mr Shaw writes. 

According to Mr Shaw, the 
South African cabinet decided 


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Sokflam of both afcfes had to find an accommodation /******* Troops of the 5th Mechanised Battalion were deployed to KwaZulu in April to combat violence ncuK«> 


in 1990 to fry and leave the 
SADF untouched: "It alone 
would control the military 
until it was reasonably certain 
of the outcome of the transi- 
tion,” and ANC efforts to the 
contrary were "stonewalled” 
until early 1993. 

The compromise reached on 
tiie thorny Issue of control was 
the agreement to form a 
N ationa l Peace Keeping Force 
(NPKF). 

Although it was to prove a 
failure, tee exercise neverthe- 


less served a valuable purpose. 

Originally intended as force 
of 10,000 men, it initially com- 
prised some 4,500 drawn from 
the SADF, the police force, MK 
and homelands forces from 
Transkei, Clskei and Venda. 

Poorly trained and badly 
led. It was discredited on tts 
first operational deployment 
in the East Rand, where vio- 
lence actually increased after 
the force was deployed. Two 
days later it was withdrawn 
and later it was disbanded. 


The experience increased the 
legitimacy of the SADF, wel- 
comed baric enthusiastically to 
the East Rand. But, says Mr 
Shaw, the NKPF prevented a 
negotiation deadlock on joint 
control of the armed forces 
and showed that more time 
was needed for integration, 
while the legitimacy it 
afforded the SADF was to be 
transferred to the new SANDF. 

The months and years 
ahead, warns Mr Shaw, will be 
marked by internal battles 


over senior appointments and 
affirmative action. The call by 
the farmer SADF for "a tech- 
nologically advanced military 
force” will also be a sensitive 
issue, for it has political impli- 
cations. 

A high technical capacity, 
Mr Shaw suggests, could help 
extend white officers' hold on 
military power. 

He also warns that “tensions 
will inevitably develop 
between the old military lead- 
ers and the new political ones, 


with the ex-homeland officers 
split between them.” 

But the analysis ends on a 
cautiously optimistic note: 
"Restraint and political skill 
on both rides could however 
yet ensure a united military, 
constrained by civil authority, 
in a society in which this once 
hardly seemed likely”. 

* The Small Miracle, Ravan 
Press, c/o Centre for Policy 
Studies, PO Box 16488. Doom 
fontein 2028. Tel: (2) 11-1024306, 


Fax 4027755. 


Patti Waldmeir reviews developments in the police PoMcai violence: fatalities 


From force to service 


BOO- - 


Momtty figures 


Mr Sydney Mufamadi, minister 
of safety and security, wears a 
plastic watch with the hammer 
and stride of the Italian Com- 
munist party, accepts bis tea 
from an obsequious white Afri- 
kaans civil servant and 
de fe n d s "his” policemen - a nd 
women - against the charge 
that they are all apartheid’s 
criminals. 

Such incongruities have 
became the normal stuff of life 
in the new South Africa. White 
civil servants have new black 
bosses whom they treat with 
the same studied servility as 
their Afrikaans predecessors. 
White police generals, who 
defended the apartheid state 
with such vigour, are rushing 
to ingratiate themselves with 
new political masters. And 
Sydney Mufamadi, 35. finds 
himself in the uncomfortable 
position of having to find nice 
things to say about the most 
hated institution in South Afri- 
can society: the South African 
police. 

It is a tribute to the extraor- 
dinary qualities of the soft-spo- 
ken and articulate Mr Mufa- 
madi that he does not seem to 
find this difficult He is one of 
South Africa's most adroit con- 
ciliators, a true peacemaker in 
the mould of his mentor, Net- 
son Mandela. And best of ail 
he is a pragmatist who knows 
that violence can never end so 
long as police are seen as most 
of the problem, and not part of 
the solution. 

"My police men and women” 
-Mr Mufamadi never omits 
this awkward but politically 
correct reference to gen- 
der - "in the past they were 
expected to enforce laws which 
were not based on human 
rights. Perhaps the fact that 
they were vicious can mean 
that they were potentially good 
policemen and women.” 


In other words, their job was 
repression and they were good 
at it. “Now we need to ensure 
that they enforce humane 
laws” - and hope that they are 
equally good at fulfilling that 
task. 

Ironically. Mr Mufamadi 
believes that a “truth commis- 
sion”, aimed at revealing 
apartheid abuses, could actu- 
ally enhance the legitimacy of 
the police by proving teat "99 
per cent of three people are not 
teat bad.” 

“Precisely because it is gen- 
erally understood that the 
police are up to something sin- 
ister, whether or not it can be 
proved, the truth commission” 
- which South Africa’s former 
rulers fear could turn into a 
witch hunt - “can address this 
problem by promoting the 
legitimacy and integrity of the 
police. Those involved in 
unlawful activities cannot be 
more than 2 per cent of the 
entire force.” 

But if Mr Mufamadi, and pro- 
vincial police ministers such as 
Ms Jessie Duarte in the Johan- 
nesburg region, are trying bard 
to re-establish trust in the 
police, they are simultaneously 
trying to change the force from 
within. 

"You have a police force, not 
a police service. It's run on 
completely militaristic lines. 
You don’t have people saying 
’Our job is to protect human 
life; to protect people and com- 
munities.' They see their role 
as protecting privilege. But it's 
not enough to protect {the 
man] who has nine cars and 
not protect the poor,” says Mr 
MufomadL 

“There is a particular culture 
of policing and that is the cul- 
ture you want to change,” he 
concludes, adding with a note 
close to despair “But how do 
you inculcate in the whole 


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South African society a human 
rights culture?" 

Changing thq command 
structure of the new South 
African Police Service (SAPS) 
will be crucial. “The Pretoria 
officer corps must reflect the 
Fact that there are not just 
white male Afrikaans speakers 
in the police," he says. “The 
police leadership must be 
restructured to reflect South 
African reality.” 

But, as one of Mr Mufamadi’s 
officials says, taking on the 
police is a mammoth task. “It's 
a state within a state - they 
even hare their own holiday 
resorts!” 

And it i& not dear that South 
Africa's former rulers are will- 
ing to come completely clean 
on the subject of the security 
services. “Officially there is 
just a police force -but then 
you discover there is even offi- 


800Hi»J* 


400 - 


Annual totals 
IMS W9 ~ 

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dally a force engaged in gun 
running! It’s like an onion; 
we're getting one peel after 
another. We may never get tee 
whole thing,” says the official. 

In the meantime, police 
forces in the 10 former home- 
lands are in chaos, making ille- 
gal promotions and looting 
government property- “Polic- 
ing In some of three areas has 
virtually collapsed,” says a 
senior police official. 

So if violence has abated, the 
credit goes primarily to the 


people, not to the police. Mr 
Jacob Zuma, African National 
Congress leader in KwaZulu 
Natal reflects on the drop in 
violence in the province 
“Amazingly, the population of 
Natal just forgot about tension 
and violence on all the days of 
the election. The people gave 
leadership to the leaders on 
that day: they showed us how 
much they wanted peace” 
Sydney Mufamadi was listen- 
ing to their message; his job 
now is to deliver. 



CREDIT LYONNAIS LAING 


INTERNATIONAL MINING DEPARTMENT 


Specialists in trading and researching 
Southern African stock markets 








Credit Lyonnais Laing 
Broad walk House 
5 Appold Street 
London RC2A 2DA 

Mining Department: 

Fax: U 7 1 -588 0294 
Tel: 071-214 5524 


Ciota t.y«n Km fain* i, j u*lam nunc uf 
Onlii Lvomun Mccimiir.. 4 mrmlu 
uf rtv- l.uAiton Slock lUihurn: 
•rtufJtf-H. 



Copies of these two major reports on ihe South African election and investment prospects in 
sub-Saharan Africa are available from Cl-L Mining ai the above address. 








FINANCIAL times MONDAY JULY 18 1994 


** 

SOUTH AFRICA 9 ~ 


Trade unions are changing, writes Patti Wafdmeir 

Price of success 


T oday's South Africa is a 
country of many parallel 
revolutions: virtually 
every Institution of state or 
society is undergoing dramatic 
change, not least the trade 
union movement. 

The union movement, itself 
an important catalyst of politi- 
cal change during the bad 
times of apartheid, is today 
paying the price for its success. 
The African National Con- 
gress, which arguably could 
not have achieved power with- 
out onion help, has poached 
the best and brightest union- 
ists for the government of 

national unify 

Mr Jay Naidoo, formerly gen- 
eral secretary of the most pow- 
erful union federation, the 
Congress of South African 
Trade Unions (Cosatu), has one 
of the most important jobs in 
the new government: he is 
minister without portfolio in 
the President's office, charged 
with overseeing the Recon- 
struction and Development 
Programme. Fellow unionist 
Mr Alec Erwin is deputy minis- 
ter of finance, Mr Sydney 
Mufamadi, a former Cosatu 
official, has the powerful post 
of minister of safety and secu- 
rity (police), anri other union- 
ists serve as influential advis- 


ers to ministers or MPs. 

Overall, Cosatu has lost 
some 100 of its leaders in 
recent months, not only to 
high offices of state, but to the 
private sector and academia. 
The result is a crisis of leader- 
ship, which could have impor- 
tant implications for labour 
relations anti economic devel- 
opment in the months and 
years to come. 


With 3.5m members, the 
unions are a leading 
force In society 


Stron g leaders will be 
required to ensure that South 
Africa’s powerful imfons con- 
tribute to the process of mak- 
ing the public and private sec- 
tors more competitive and 
productive, rather than fight. 

ing ffhang w 

With 3.5m members, or 26 
per cent of the economically 
active population, the 
are a leading force in society. 


Cosatn has L3m members. 

Cosatu's outgoing leaders 
laid a firm basis for co-opera- 
tive change before tearing the 
movement, through their par- 
ticipation in various tripartite 
negotiating forums bringing 
together business, unions and 
government for the first time. 

They brought imagination, 
pra gmatism and clear strategic 
th i nking to bear on the prob- 
lems of industrial restructur- 
ing and socio-economic devel- 
opment and key thinkers such 
as Mr Ebrahim Patel of the 
South African Clothing and 
Textile Workers Union will 
continue to do so. 

But the unions’ clout within 
such corporatist structures will 
inevitably diminish - at least 
until a new crop of articulate 
and forceful unionists can 
emerge to take the place of 
those lost. And perhaps more 
importantly, the leaders' abil- 
ity to deliver the co-operation 
of the union rank file may 
also be jeopardised-, already 
mine employers report disci- 


pline problems at the mines, 
the direct result of union loss 
of authority. 

Government officials believe 
strong union leadership is 
essential to South Africa's eco- 
nomic recovery. Tariff reform, 
prompted by the General 
Agreement on Tariffs and 
Trade, will cause upheaval in 
sectors such as textiles, the 
motor industry and electronics. 
Across-the-board wage 
restraint is viewed as neces- 
sary for the success of the 
Reconstruction and Develop- 
ment Programme, and to 
rebuild confidence in the econ- 
omy before measures such as 
removing exchange controls 
can be taken. Weak leaders 
cannot hope to deliver union 
acceptance of these and other 
unpopular measures. 

Mr Derek Keys, finance min- 
ister, says the question of wage 
restraint has not yet been “bat- 
tened down." 

“I think a compact as such is 
not on the cards, but I think a 
tacit, never-expressed under- 


Strifces and union membership 


Length of strike® 

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standing is possible," he said. 
His successor, Mr Chris Lie- 
benberg, will be equally keen 
to secure such an understand- 
ing. Government seems to be 
proposing that Cosatu temper 
wage demands in exchange for 
large private-sector pro- 
grammes to train and upgrade 
workers and government 
action to improve what union- 
ists call the “social wage” - im- 
proved social services which 
reduce the cost pressure of 
education, health care and 
transport on workers’ pay. 

Mr Sam Shllowa. Cosatu's 


new general secretary, seems 
tacitly to accept this arrange- 
ment, although he rules out 
any unilateral union offer oC 
wage moderation. “You don't 
call for wage restraint in a sit- 
uation where there is no social 
programme to take the strain 
off people's salaries. Anyone 
speaking about wage restraint 
would first have to tell us what 
has changed in terms of the 
distances that have to be trav- 
elled from Soweto to Johannes- 
burg, and in terms of the living 
standards of our people." 

But even if Cosatu leaders 


accept such a "never-expressed 

understanding", will their 
members agree? In many sec- 
tors. real wages have fallen 
over the past four years of 
recession, and with the econ- 
omy recovering and Cosatu's 
political allies in power for the 
first time, the trend may be 
towards greater union mili- 
tancy, rather than moderation. 

Cosatu officials predict a 
fairly turbulent year, not nec- 
essarily over wages, but issues 
such as racism in the work- 
place and greater involvement 
of workers in corporate deci- 


si PTh*nfliring - Some 12m man- 
days have already been lost to 
strikes in the first half of this 
year; double the figure for the 
corresponding period last year. 
Affirmative action could also 
prove a flashpoint, although 
Cosatu opposes the imposition 
of legislated quotas, arguing 
that this simply fosters token- 
ism. 

Cosatu argues that business 
must pay to train both black 
and white workers for more 
senior positions - with more 
and more whites joining Cosa- 
tu -affiliated unions, the federa- 
tion cannot afford . to ignore 
their needs - and union leaders 
will push this dwmnnd force- 
fully in months to come. 

In the longer term, says Mr 
Ebrahim Patel, writing in a 
recent issue of the Johannes- 
burg Weekly Mail newspaper 
“Unions will tend to reflect the 
impatience of the community 
and the urgency of social 
transformation.” 

That, in the end. will be 
what government fears most a 
union movement which mobi- 
lises popular frustration over 
the necessarily slow implemen- 
tation of the Reconstruction 
and Development Programme. 
Labour relations will never be 
the same 


Patti Waidmeir on plans to promote blacks through affirmative action 

Voluntary steps preferred 


THE BUSINESS MOOD 

Bubbling with enthusiasm 


The African National Congress has set out 
to transform South Africa: nothing less 
will do. Changing the racial c ompositi on 
of management, the professions, the uni- 
versities - all the institutions of pow- 
er - will be central to that transformation. 

South Africans no longer debate the 
moral arguments in fa v o ur of affirmative 
action - or the utilitarian arguments 
against it. They treat it as inevitable. 
Apartheid prevented the entry of hlarire to 
the wianagpriai Bud entrepreneurial clas- 
ses: now this must be reversed, lest apart- 
heid's legacy destroy the spirit of racial 
goodwill which was such a welcome 
byproduct of April's elections. 

The scale of the task is enormous: 
within the rivfl. service, most power lies in 
white male Afrikaner hands. Although 
many ministers are now black, most 
senior civil servants remain white. Before 
the elections, fewer than 1 per cent of top 
positions were held by black Africans, and 
only a handful of senior black appoint- 
ments have been made since then. 

Blacks still have only a token presence 
on tbe boards of leading quoted compa- 
nies, and top management is mostly white. 
Although a recent survey showed that the 
number of senior black managers had dou- 
bled in the past two years, the figure bad 
risen from 15 per cent to only 35 per cent 

Changing the balance radically will be 
difficult because apartheid has deprived 
Africans of the ed u cation and experience 
they need to cope at senior levels. Few 
blacks are qualified to run government 
departments or big corporations. The large 
pool of bureaucrats from black homelands 


prorides few technically competent indi- 
viduals -and far too many who rely on 
nepotism and corruption to survive. 

Public corporations such as South Afri- 
can Airways and the electricity utility, 
Eskom, have made big strides toward 
ri ghting the racial balance. But the aril 
service has lagged behind. 

Mr Zola Skweyiya. public service minis- 
ter, pledges a rigorous affirmative action 
policy. He points out that although white 
civil servants had their jobs guaranteed 
under the constitution - none can be 


Private sector business, too, has 
judged it better to take 
pre-emptive action now 


sacked except with full pensions - they 
can be moved from their current posts to 
make way for black candidates. 

No one will lose but tbe taxpayer. For 
the only conceivable way in which whites 
can be retained and blacks advanced at 
the same time will be by adding to the 
already bloated civil service payroll 

Private sector business, too. has read the 
writing on the wall judging it better to 
take pre-em p t iv e action now rather than 
risk legislation in future. A recent survey 
conducted by the Johannesburg company 
PSA-Contact showed that three quarters of 
companies bad affirmative action pro- 
grammes in place, up from just over half 
last year. 

The ANC has said it prefers voluntary 
affirmative action to legislated change, but 
has m ade clear that legislation will he 


used if companies prove recalcitrant Some 
ANC officials have suggested tax incen- 
tives to companies who train workers to 
further affirmative action. Others focus on 
punitive levies to penalise those slow to 
change. 

But both the ANC and its allies in tbe 
trade unions agree that racial quotas, leg- 
islated or voluntary, are unwise. Mr Ebra- 
him Patel economist for the South African 
Clothing and Textile Workers Union (Sac- 
twu), says that “workplace democratisa- 
tion” - bringing workers into decision- 
making structures - is one way of getting 
around the shortage problem while still 
empowering blacks in the workplace. 

Mr Sam Shllowa, general secretary of 
Cosatu, the largest union, federation, is 
ifw»n to insist that affirmative action is not 
intended to penalise whites. 

'If affirmative action is stwi as tuiring- 
white job6 it can be det rimental it can 
cause strikes,” says Mr Nelson Ndisa, pres- 
ident of the South African Ra ilways and 
Barbours Workers Union (SARHWU), the 
SAA union. Mr Ewan Abrahamse, a union 
official says: “In the end, we’ll bear the 
brunt of the racial tension in tbe work- 
place. If we cannot have a better under- 
standing between whites and blacks, the 
country will be ruined." 

He might have been quoting from a 
recent African National Congress policy 
paper. If well hand led , affirmative action 
will help bind tbe nation together and 
produce benefits for everyone. If badly 
managed, it will simply re-distribute 
resentment, damage the economy and 
destroy social peace." 


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The recent announcement that 
Mr Derek Keys, finance minis- 
ter. Intends to resign in Octo- 
ber has pot a bit of a dent in 
the unadulterated optimism 
that most businessmen had 
been professing after April's 
elections, writes Mark Suz- 
man. But there is still an over- 
whelming sense of relief 
within the South African pri- 
vate sector Hut tbe transition 
proved so successful 

More important, there is a 
widespread conviction that, 
given the new political dispen- 
sation, South African business 
maybe in a position to revistt 
the glory days of the 1560s. 

"It really is a miracle,” says 
Mr Richard Laubscher, chief 
executive of banking group 
Nedcor. "There’s no other 
word to describe it” Indeed, 
the South African corporate 
sector has been positively 
bubbling over with enthusi- 
asm since the success of elec- 
tions, and the South African 
Chamber of Business confi- 


dence index has been rising 
steadily month by month. 

This is not to say that tradi- 
tionally hard-nosed business- 
men are overlooking the big 
problems they continue to con- 
front - including overpriced 
labour, outdated machinery 
and a severe shortage of skills 
-but there is an overwhelm- 
ing sense of relief that the dif- 
ficulties now being faced are 
of a conventional economic 
nature and not those of sanc- 
tions, disinvestment and the 
threat of civil war. 

“We’ve been through the 
business equivalent of the ten 
biblical plagues,” observes Mr 
Meyer Kahn, chairman of 
South African Breweries, one 
or tiie country’s largest indus- 
trial corporations, “These 
problems are paradise com- 
pared to what we’ve been 
through." 

As a result, it is hard work 
finding someone willing to 
point to any downsides to 
business life in the new South 


Africa. Part of this is just reac- 
tion to the dismal economic 
and political climate of tbe 
past decade. 

“If you’d told me ten years 
ago we were expecting 2JS to 3 
per cent growth 1 would have 
been depressed. Now I'm 
ecstatic," admits one execu- 
tive. Similarly, while the 
recent budget’s projected defi- 
cit of 6.4 per cent and Its mild 
investment incentives would 
have drawn jeers amid the 
prosperity of the 1960s and 
1970s, today it is applauded as 
a blueprint for growth. 

But while the economic 
numbers may turn up some 
negatives, there are also some 
fairly hefty positives. The 
economy has returned to 
growth after a four-year reces- 
sion; exports are at record 
highs; and inflation is at a 21- 
year low. In addition, retailers 
report rising sales and, most 
importantly, fixed investment 
is rising after yean of decline. 

Add to this the return -in 


small numbers - of many lead- 
ing multinationals which 
departed during the apartheid 
years and, more importantly, 
the opening of markets from 
Africa to the Middle East to 
eastern Europe, that were out 
of bounds for decades, and the 
resultant feeling Is that the 
only way from here is up. 

No doubt torsions will sur- 
face. There are also worries 
that Mr Christo Liebenberg, 
the new finance minister, will 
prove less capable of standing 
up to rfwnmwis for fresh gov- 
ernment spending than his 
capable predecessor. 

But despite all this, the 
underlying fact is that confi- 
dence is at its highest level in 
years. And while it would take 
a miracle for South Africa to 
transform Itself into what one 
businessman wistfully 
describes as “an African lion 
that can take on the Asian 
tigers,” miracles are some- 
thing tiie country mh claim to 
have some experience with. 


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FINANCIAL TIMES MONDAY JULY IS 1994 


SOUTH AFRICA lO 


I n the naw South Africa, manu- 
facturing industry must fulfil 
two taxing conditions. Growth 
must be both export- led and labour- 
intensive. Marrying these two goals 
is not going to be easy. 

South Africa is not a low-cost 
country -more a high-wage, low 
productivity one - and its competi- 
tive advantage stems primarily 
from the combination of a rich 
resource base and highly capital-in- 
tensive, value-adding activities. 

The numbers tell their own story; 
in 1990, base metals, chemicals and 
metal products accounted for 58 per 
cent of manufactured exports, while 
almost three quarters were classi- 
fied as “resource-based". 

In part, as trade theory predicts, 
this reflects South Africa's resource 
endowment, but two policy ele- 
ments - forward cover for exports 
and tax incentives for “beneficia- 
tion” industries, adding value to 
minerals, also contributed. Since 
the 1920s, industrial growth has 
been driven by import substitution 
behind high tariff and protective 
walls. In the past decade, however, 
the emphasis has changed as 
domestic recession pushed more 
and more companies into the export 
market. 

Despite sanctions, exports of man- 
ufactures grew 10 per cent a year 
between 1984 and 1990 - nearly 
three times faster than in the 1970s. 
Indeed, since 2972, exports have 
grown twice as fast as production 
- 6 per cent as against 2.6 per cent 
for output 

Five industrial sectors - foods, 
industrial chemicals, steel, non-fer- 
rous metals and metal prod- 
ucts -make up almost two thirds of 
total manufactured exports but in 
recent years non-traditional 
exports - furniture, jewellery, rub- 
ber and plastics, and cars - have 
expanded strongly as business was 
forced to seek market opportunities 


abroad. On the face of it, this ought 
to make cheerful reading for Pre- 
toria’s policymakers. Industrial 
exports that performed so impres- 
sively under sanctions should 
surely do far better now, not just 
because sanctions have gone, but 
also because supplyside reforms to 
enhance productivity and competi- 
tiveness are in train. 

These reforms take two main 
forms. First, political transition and 
the thrust of the RDP which, 
between them, should both improve 
substantially the industrial rela- 
tions environment, while boosting 
productivity, on the strength of 
increased spending on education 
and training. 

The second is the pronounced and 
continuing shift in trade policy, 
underlined by tariff reform and the 
co mmi tment to more export- 
friendly strategies. 

South Africa's extremely complex 
and skewed tariff system is being 
reformed as part of the country's 
General Agreement on Tariffs and 
Trade submission under the Uru- 
guay round. From next January, 
tariffs will be lowered and ration- 
alised over a five-year period, with 
longer phase-in periods and higher 
protection for “sensitive” indus- 
tries, most notably clothing and tex- 
tiles and vehicle assembly. 

Although South African manufac- 
turing has not been over-protected 
- according to the World Bank the 
average tariff is about average for a 
developing country, although very 
high by first world standards - the 
dispersion, complexity and instabil- 
ity of the system have undermined 
economic efficiency. 

The net effect has been a heavy 
bias against exports, two- thirds of 
which steins from the higher input 
prices that industry must pay for 
manufactured inputs. The South 
African Chamber of Business 
(Sacob) estimates that manufactur- 





HighyekJ Steel plant east of Johannesburg. Crucial to the export drive will be a new system o» incentives 


Tony Hawkins reports on manufacturing industry 


Two taxing conditions 


ing costs are IS per cent above the 
Organisation for Economic 
Co-operation and Development 
average, mainly because South Afri- 
can companies pay a quarter more 
for their inputs than their first- 
world competitors, but also because 
both the exist of capital and labour 
costs, adjusted for productivity, are 
higher. 

From next January, this will start 
to change. The number of tariff 
rates will be reduced from more 
than 100 to just six, ranging from 0 
per cent to 30 per cent, lowering the 
average tariff to 15per cent. The fre- 
quent discretionary changes in the 


system that have been the norm, 
will no longer be possible. 

The World Bank says that the 
General Export Incentive Scheme 
which, until the 1994 budget, pro- 
vided tax-free financial subsidies to 
exporters, provided a subsidy of 
nearly 17 per cent of the value of 
export 


T he subsidy, costing some 
R2bn annually, applies to 
most exports, increasing with 
the degree of value added. The 
Bank warns that manufacturing 
industry's recent impressive export 
growth is unlikely to be main- 


tained, when it is phased out. proba- 
bly by the end of 1997. 

Crucial to the export drive will be 
a new system of incentives - by 
way of exemptions and duty-draw- 
backs - improved mechanisms for 
providing pre- and post-shipment 
export finance, and linking training 
and research and development 
assistance to export-oriented compa- 
nies. The underlying strategy is a 
reversal of past performance, shift- 
ing from a situation in which export 
sales are a residual alter satisfying 
the home market, to one in which 
domestic market sales play second 
fiddle to exports. How tariff reform 


and export incentives will play out 
in terms of their impact on manu- 
facturing will only become clear 
towards the end of the decade. The 
Industrial Development Corpora- 
tion, using a macroeconomic model 
borrowed from the Australians, has 
calculated that Gatt submission will 
have a positive Impact, albeit only a 
minor one. Its model, criticised on 
technical grounds by some private 
sector economists, estimates that 
tariff reform will increase gross 
domestic product by only 0.7 per 
cent - a one-off impact - while low- 
ering inflation l per cent, raising 
employment l per emit, exports 1.2 
per cent, and imports SL5 per cent 

The magnitude of these calcula- 
tions suggests that the impact of 
Gatt on the South African economy 
is being oversold. This, however, 
ignores the qualitative implications 
in terms of transforming an inward- 
looking into an outward-oriented 
manufacturing sector, with signifi- 
cant gains in terms of technology, 
skills and productivity. 

Nor do such macro calculations 
capture the impact of restructuring. 
Two sensitive industries - cars and 
clothing and textiles - face a poten- 
tially traumatic transitional phase 
during which some companies will 
have to close, jobs will be lost and 
significant government financial 
support will be needed, for retrain- 
ing and possibly for redundancy 
benefits. 

The motor industry, with seven 
assemblers, faces far-reaching struc- 
tural change. The number of models 
produced will shrink, exports will 
loom larger as protection phases 
down over the next seven or eight 
years to 45 per cent from U0 per 
cent at present, and - in all proba- 
bility - two or even three of the 
Existing manufacturers will close or 
merge with a local competitor. 

Just what this will mean for 
employment is unclear at this stage. 


but there is an influential lobby in 
business, with some support from 
the World Bank, for further 
exchange rate depreciation. This 
would make exporting more profit- 
able. generating investment and 
jobs, while giving Import substitu- 
tion industries at least a temporary 
respite in coming to terms with 
enhanced competition from abroad. 


G reater outward orientation 
Of the economy from 1995 
might be an engine or 
growth, according to the World 
Bank, though not, it warns of 
(direct) employment generation. A 
Bank research paper comes down in 
favour of a three-proaged approach 
- fostering growth in a small num- 
ber of selected subsectors, which 
sounds suspiciously like picking 
winners, usually frowned upon in 
Bank orthodoxy; linking support to 
export performance; and supporting 
employment generation. Crucial to 
employment growth is a shift away 
from the capital-intensive self-suffi- 
ciency, counter-sanctions. Invest- 
ments of the 1970s and 1980s, to 
smalier-scaie. export-oriented, job- 
intensive investment. A potential 
snag is the ANC's opposition to 
Aslan-style low- wage, sweat-shop 
industrialisation. The new govern- 
ment is looking for the best of both 
worlds - labour-intensity but at 
wage levels above those found in 
competitive economies. 

Naively, in a world in which 
employment growth has been 
decoupled from output expansion, 
the World Bank's best scenario for 
South Africa assumes a return to 
capital-labour relationships that 
existed 25 years ago. Only the opti- 
mists believe that this will happen. 
A more likely outcome is greater 
job creation in manufacturing, espe- 
cially the small scale sector, though 
at nothing like the rate necessary to 
defuse the unemployment crisis. 


O ne market analyst 
muses: “Like it or not, 
mining is still the 
steam engine of the South Afri- 
can economy.” Such a view is 
amply borne out by statistics: 
although the industry’s contri- 
bution to overall output has 
been declining over the past 
decade, mining still accounts 
for about 10 per cent of gross 
domestic product, and is 
responsible for more than 60 
per cent of South Africa’s 
export earnings. 

The past 12 months has 
seemed to signal an upturn in 
the industry after several years 
in the doldrums. The commod- 
ity cycle is improving steadily 
and the continued depreciation 
of the rand has helped boost 
revenues even further. Gold is 
recovering from the disaster 
years of the late 80s and early 
90s, coal and diamonds have 
both picked up from the bot- 
tom of their price cycles and 
the same is true for a wide 
range of other minerals. 

But while the commercial 
position may be looking 
brighter, there are renewed 
problems for the industry on 
the political front. Although 
the battle over nationalisation 
appears to have been won by 
the mining houses, there has 
been considerable debate in 
African National Congress 
quarters over the possibility of 
the state taking control of the 
country’s mineral rights, 
which in South Africa, unlike 
many other countries, are pri- 
vately owned. 

The idea, aggressively pro- 
moted by Mr Paul Jo urban, an 



#***> •& . 







Goedehoop coHery near Johannesburg. Tlw mining Industry stffl accounts for about 10 per cent af gross domestic product and la responsible for more than 60 per cent of South Africa's export earnings 

The past 12 months has seemed to signal an upturn in the mining industry, writes Mark Suzman 


Economy’s steam engine trundles on 


ANC adviser on mining, is pre- 
mised on the argument that 
such a move would allow the 
government to raise new reve- 
nue from increased taxes, 
leases and royalties, while free- 
ing up new deposits for exploi- 
tation by small, black-run min- 
ing operations. In addition, by 
allowing the possible entry of 
foreign mining companies that 
have long sought a foothold in 
the South African market, Mr 
Jourdan argues, the plan 
should promote competition 


and efficiency as well. 

But as Mr Julian Ogilvie 
Thompson, chairman of the 
country’s largest mining con- 
glomerate, Anglo-American, 
points out, in South Africa any 
moves made in this direction 
would “not be from a standing 
start" Local companies have 
already spent a great deal of 
time and money investigating 
the viability of mineral depos- 
its. To arbitrarily alter the sys- 
tem, he argues, would be 
expensive, unfair and unprod- 


uctive. So far, despite its pre- 
election rhetoric, the new gov- 
ernment lias not taken any 
action, and the appointment of 
Mr Pik Botha, former foreign 
minister, as minister of min- 
eral and energy affairs has 
helped reassure mining houses 
that little of substance is likely 
to change. 



ing 


Mail in 


B ut the debate is the sub- 
ject of continued discus- 
sions between ANC 
advisers, the government and 
the mines. One senior mining 
executive notes: "Our talks 
have had a tone of constructive 
collaboration, and we are con- 
tinuing the dialogue." He pre- 
dicts that the outcome will 
probably be a compromise, 
with mines selling or leasing 
some of their less valuable 
claims to new users. 

Another potential danger 
area is on the labour front The 
industry's recovery is still very 
fragile and predicated on con- 


tinued cost containment But 
after years of accepting below- 
inflatlon wage increases, mine- 
workers are becoming increas- 
ingly restive. Hoping for sup- 
port from a sympathetic 
government and demanding a 
share of the benefits accruing 
from higher mineral prices, the 
current round oE wage negotia- 
tions, due to be completed this 
month, is going far less 
smoothly than in previous 
years. 

Many leading companies are 
pushing for productivity 
bonuses or profit-share 
schemes that will allow them 
to embark on much-delayed 
capital expenditure, but work- 
ers are insisting on increased 
base pay and wild-cat strikes 
and go-slows have already 
depressed output for the year. 
Lingering apartheid legacies, 
such as the continued lack of 
proper housing for black mine- 
workers, are also causing ten- 
sion. 


“Its going to be much 
tougher this time round," 
notes one official involved in 
the pay talks. “The unions are 
being less accommodating than 
during the recession." 

In the longer term, too, other 
problems are looming. While 
South Africa still has vast min- 
eral deposits, it is a very 
mature mining environment 
and new capital investment 
has slowed dramatically over 
the past 10 years. Of the devel- 
opments which have gone 


ahead, while the Kl.7bn Moab 
extension to Anglo's Vaal 
Reefs is on track, Gengold’s 
Oryx development and JCl's 
Joel expansion have both 
underperformed, as has the 
struggling Nortbam Platinum 
mine, all of which serves as a 
discouragement for further 
new initiatives. 

As a result, freed from the 
restrictions of the apartheid 
years, companies are increas- 
ingly focusing their attention 
on more attractive prospects 


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ch 


abroad, particularly in the 
underexploited African envi- 
ronment. Already, South Afri- 
can mining companies are 
aggressively investigating new 
mineral deposits from Mali to 
Botswana and further develop- 
ment is expected over the next 
few years. 

"Ten years ago, 80 per cent 
of our exploration was in 
South Africa and 20 per cent 
outside; today the situation is 
reversed." notes Mr Gary 
Maude, managing director of 
GengokL 

In the global context, too, 
new initiatives are under way. 
Anglo last year shifted most of 
its international assets to off- 
shore associate Minorco as a 
prelude to further expansion, 
while Gencof has been negotia- 
ting to purchase Shell's inter- 
national mineral arm, Billiton. 

This is not to say that thfe 
South African mining industry 
will be neglected, and some 
new mines will continue to be 
developed, but big capital 
spending within the country is 
increasingly likely to shift 
away from mining projects 
towards beneficiation of miner- 
als for export. 

The three biggest capital pro- 
jects presently In progress, the 
R5.8bn Alusaf aluminium refi- 
nery extension, the R3.5ba 
Columbus stainless steel 
expansion and the Ri.4bn 
Namakwa Sands project, are 
all examples of such val- 
ue-added mineral initiatives 
that should bear fruit in the 
future. In the meantime, how- 
ever, the steam engine will 
keep puffing away. 


S? Sa.- m ., n 


tocces 





i^IfNArv C-1AX- TIMES MONDAY v 


XI 


SOUTH AFRICA 11 


The ban ks want a level playing field, writes Tony Hawkins 

Five challenges ahead 


Ffew industries are better placed to cope 
with the challenges of post-apartheid 
economics than the services 

sector. 

-We are in the top i per cent in world 
banking ip terms of systems, instru- 
ments ana performance" says Mr Barry 
Swart, first National Bank's chief exec- 
utive. 

Services generally, and financi al 
vices in particular, form one sector 
where South Africa has an interna- 
tional competitive advantage, although 
this does not mean that it will escape 
the pressures of global competition 
already manifested in the arrival of sev- 
eral international commercial and 

investment banks. 

This is something of a sore point on 
two counts. The new arrivals, and the 
return of banks that divested in the 
1980s, are unlikely to improve services 
and enhanc e competition in the bottom 
half of the market, where arguably the 
country is underbanked and where mil- 
lions of consumers and thousands of 
small-scale enterprises offer new oppor- 
tunities wild chaHonppg 

Instead, groups such as Citibank. 
Morgan Guaranty and Standard Char- 
tered are setting up representative 
offices targeting high-profile businesses, 
focusing on trade finan ce, raising off- 
shore loans and corporate finance ser- 
vices in the realm of cross-border merg- 
ers and alliances. 

While accepting the inevitability of 
such new competition. South African 
banks want the government to insist on 
a level playing field, forcing the new- 
comers to put capital on the table and 
opai up branches - "just as we had to 
do In the UK", says one banker. 

No one expects the foreign banks to 
risk the enormous capital needed to 
opai retail networks in South Africa. 
“There is no way," says one, “that Bar- 
clays or Standard Chartered will return 
to retail banking. The entry barriers are 
just too high and returns on assets of l 
per cent unattractive.” 

It’s a similar story in the investment 


field, where South African brokers have 
Set up joint ventures noth intam^nnat 
merchant banks. S G Warburg has 
taken a 50 per cent stake in the Ivor 
Jones Roy broking house in a deal 
which is bound to im pact on the invest- 
ment banking business gnd aspi rations 
of South African banks 

Predictably, the foreigners are eyeing 
the high margin operations which, poli- 
ticians and industrialists say, are not 
the top priorities. 

The banks see themselves up against 
five main, ehanonp-^ 

• At the top of their list is the np **d to 
retain and strengthen their imag e as 
world-class players. This means adher- 
ence to Basle capital ratios; greater 
transparency, which ANC politicians 
are demanding; closer central bank 
supervision; and deregulation of the 
markets. 

Capital requirements have been 
raised significantly to satisfy Basle 
standards - from next year, hanks will 
have to meet the 8 per cpwt risk-based 
capital adequacy requirement. All the 
leading groups are already there. 

• The second is coping with the new 
international competition. Dr Conrad 
Strauss, chairman of Standard Bank 
Investment Carp (Stanbic), says South 
African banks must become larger, 
pointing out that, ranked by assets, 240 
banks around the world are bigger than 
the largest South African bank. 

On 1993 numbers, the tig) four hanks 
accounted for nearly 80 per cent of total 
bank assets. Amalgamated Banks of 
South Africa (Absa) ranked first with a 
28 per cent market share, followed by 
followed by Standard Bank (20 per 
cent). First National (17.5 per cent) and 
Nedcor with 13.5 per rent 

• The third, and politically most press- 
ing, is relevance - the need to ensure 
that the h anks are meeting the 
demands of the new South Africa in 
terms of providing services for the 
small man and the cmoTl enterprise. 

In a capital-scarce economy, it is not 
surprising that some politicians should 


see the banks as a source of low-cost 
funding for social projects, while simul- 
taneously advocating directed credit to 
ensure that people and businesses with- 
out collateral can get access to bank 
loans. 

ANC politicians are calling for “trans- 
parent" reporting by banks, requiring 
them to report their loan portfolios by 
race and gender, giving reasons why 



Stanbic chief Conrad Strauss says that 
South African banks must become larger 

loan requests are rejected. 

The banks have long been conscious 
of the opportunities available In the 
fast-growing mass consumer market. 
Automatic telling machin es, smart 
cards and debit cards are being used to 
provide quick, efficient and low-cost 
services to the miitinnc of users seeking 
baric hanidnp services. 

Standard Bank is opening a new divi- 
sion. E-Bank, which is a network of 
terminal-based branches catering for 
people wishing to deposit and withdraw 

rash. 

More challenging is the need to fund 
home purchasing and black business. 
The Nedcor group, through its 1989 pur- 
chase of the Penn, bought a large black 
customer base. Its experience with 
black home-buyers, who have good 
repayment records, will stand it in good 
stead as the mass consumption market 


expands. It stands to benefit too freon 
donor funds, such as the 515m package 
from USAID, to be rhawnpllwl tO lOW-lll- 
come households. In 1991, it established 
NedEnterprlse which make* loans of 
between R50.000 and Rim to «m»ii and 
nxedfumscale businesses. Some % per 
cent to 60 per cent of its lending is to 
black, arian and coloured-owned enter- 
prise, with about GO per cent going to 
franchise-holders. 

NedEnteiprise offers three types of 
loans - traditional overdrafts for work- 
ing capital, instalment finance for asset 
purchasing and three- to five-year t e r m 
loans. 

Bad debt ratios are low, especially in 
the franchise business where they are 
below 5 per cent It is not as high risk 
an operation as might be Anticipate^ 
because two organisations, the Small 
Business Development Corporation and 
USAID provide guarantees for many 
loans, while fran chising is a low-risk 
operation anyway. 

• The fourth challenge is that of servi- 
cing corporate clients offehore. Stanbic 
earned 2£ per cent of its R844m net 
income in Europe, while a Anther 48 
per cent came from its acquisition of 
the former ANZ Grindlays African net- 
work. 

First National Bank has opened 
operations in the UK and Hong Kong, 
while Nedcor has struck strategic alli- 
ances in Africa with iwaHiwg European 
banks -BNP of France. Dresdner of 
Germany ynd 7fa»nq m» Bruxelles Lam- 
bert of Belgium. It recently opened an 
office in Beijing and reopened in New 
York. 

Increasingly, the banks see southern 
Africa as the logical extension of their 
domestic market, with Stanbic, FNB 
and Nedcor all expanding their regional 
business in the past two years. 

• High on the challenge list, too, is 
affirmative action. This is going to be a 
difficult, co n trovers i al area. Experience 
elsewhere in Africa highlight* the dan- 
gers of foiling standards of service awH 
increasing losses through fraud. 

The sh«w sophistication ana techno- 
logical superiority of the South African 

hank* means that they ahonlrt manage 

to minimise this threat but investment 
in training an element of affirma- 
tive action in promotion pollute* will 
have to be a core part of future man- 
power strategies. 


F ifty years ago. South 
Africa's most contentious 
political issue was the 
“poor white" problem - how to 
cope with hundreds of thou- 
sands of poverty-stricken, 
rural Afrikaners seeking work 
in the cities. 

The answer came in the 
form of parastatals: big, state- 
run companies which provided 
huge numbers of new jobs and 
useful sources of patronage for 
the Afrikaner elite. 

Now, with the country's 
attention focused on finding 
employment opportunities for 
the vast, unskilled black 
labour pool, attention has once 
again centered mi these giant 
companies. But despite the 
pre-election aspirations of 
some of the more statist 
among African National Con- 
gress advisers, the economic 
climate Is now vastly different 
from the early days of Afrika- 
ner rule. 

Iscor, the state iron and 
steel company, was privatised 
in 1989 and is now the most 
actively traded stock on the 
Johannesburg market Simi- 
larly, SasoL the giant oil-from- 
coal company, is also privately 
run and has begun to shift its 
focus to the manufacture of 
petrochemicals and other 
derivative products. Both are 
now among the country’s lead- 
ing exporters of semi-manufac- 
tured products. 

Over the past few years, 
moreover, with an eye to pos- 
sible further privatisations, 
the remaining state corpora- 
tions have been shifted to a 
“commercial” basis, and are 
run as self-financing, indepen- 


Mark Suzman on the future of state-run enterprises 

More commercial role 


dent public companies, with 
an appointed board of direc- 
tors. In recognition of this 
shift, the new gover nm ent has 
chosen to emphasise the stra- 
tegic Importance of existing 
state industries and their 
potential as bases of local 
technology and manufactured 
exports, rather than their pos- 
sible ride as job providers for 
the masspR- 

“The public enterprises have 
a special role to play in the 
process of rebuilding and 
revitalising the economy” 
observes Ms Stella Sigcau, 
minister of public enterprises. 

Although some state-run 
companies, such as the Moss- 
gas oil terminal off South 
Africa’s southern coast, are 
struggling, others have dra- 
matically improved productiv- 
ity in the past few years. 

Transnet, which runs the 
country’s railways, airline, 
ports and harbours was for 
years best known as a home 
for unskilled, white workers 
who could be guaranteed life- 
time employment on the rail- 
ways. “I don’t even want to 
talk abont how bad our hiring 
ratio used to be,** acknowl- 
edges Mr Anton Moolman. 
managing director, noting that 
the company is now commit- 
ted to a comprehensive affir- 
mative action programme. 

However, while the demo- 


graphics may have improved, 
overall employment in the 
company has been falling 
steadily as it has sought to 
improve productivity and cut 
costs. In 1993, more than 
15,000 employees were rede- 
ployed and 27,000 took volun- 
tary severance packages. “Our 
prices are now competitive 
globally," Mr Moolman says. 
“We stand to benefit greatly 
from the economic recovery.” 


G 


rven the prominence of 
electrification goals in 
i the government’s 
reconstruction and develop- 
ment programme, Eskom, the 
giant electri city utility , has a 
particularly important role to 
play. Last year, the utility 
electrified 200,000 new homes. 
In 1994 it hopes to raise the 
total to 250,000. all financed 
internally. 

Both of these companies, 
moreover, are now intent on 
expanding their operations 
abroad, especially in Africa. 
Transnet has already got 
operations under way in Libya 
and east Africa, while Eskom 
envisions the establishment of 
a vast regional electricity grid 
that can make use of the 
hydroelectric resources of the 
Congo and Zambesi basins. 

Mr John Maree, Eskom’s 
chairman, wants to use South 
Africa’s low-cost electricity as 


a key incentive to increase for- 
eign investment "With the 
second-cheapest electricity In 
the world, we are able to cre- 
ate an Electricity Valley in 
South Africa - similar to Calif- 
ornia’s Silicon Valley -that 
will attract high energy con- 
sumption industries to the 
region,’’ he says. 

Perhaps most striking of all 
has been the ANC-led govern- 
ment’s new affection far the 
country’s arms industry, now 
split into two companies, 
Denel, winch does most of the 
manufacturing, and Annscor, 
which concentrates on pro- 
curement and maintenance. 
They have been applauded by 
the new administration as rep- 
resenting a “very important 
technological base without 
which numerous job opportu- 
nities would be lost” 

Given this emphasis on com- 
mercial activity, moreover, the 
thorny question of privatisa- 
tion has forced its way back 
onto the agenda. Although 
President Mandela recently 
deprecated the notion as just 
another means of maintaining 
white economic clout the gov- 
ernment seems to be leaving 
the door open for a change of 
heart It has publicly declared 
that tt will “look with inter- 
est” at ways in which privati- 
sation might empower the 
black community, while Mr 


Jay Naidoo, minister without 
portfolio, has said that he is in 
favour of selling “unproduc- 
tive assets’* in state hands. 

Whatever the future of that 
debate, however, it seems 
hi g hl y unlikely that the gov- 
ernment wQl seek to decom- 
merdalise, let alone renation- 
alise, the privatised 
companies. In the unexpect- 
edly sober new South Africa, 
job creation and patronage in 
the parastatals will be hiring 
second place to efficiency and 
sustainable growt h . 


THE FINANCIAL RAND 

Reserves fear 
delays abolition 


If there is one thing that South 
African businessmen detest 
above all others, it is the finan- 
cial rand (finrand) - the invest- 
ment currency for foreigners. 
At last month's World Eco- 
nomic Forum summit in Cape 
Town, speaker after speaker 
reiterated the same demand to 
the country’s authori- 

ties; the country’s exchange 
controls and its confusing two- 
tier currency - widely seen as 
an impediment to foreign 
investment - must be scrapped 
as soon as possible. 

Unfortunately, however, 
while everyone might agree 
that the cumbersome restric- 
tions should be eradicated, 
there is no similar consensus 

on when such a 

move should be 
made - al- 
though there is 
continuing 
speculation in 
the market 
about a possible target date 
before the end of the year. 

Nonetheless, both Mr Derek 
Keys, finance minister, and Mr 
Chris Stale, Reserve Bank gov- 
ernor, are adamant that the 
financial rand is not going to 


One jump that the 
government seems 
unwilling to make 


disappear any time soon. “Peo- 
ple need to stop speculating 
and talk about the issue con- 
structively.” stresses Mr Stale. 

The main reason for the hesi- 
tation is the parlous state of 
the country’s foreign reserves 
which have taken a real ham- 
mering over the past 18 
months; 1993 saw record net 
capital outflow of R103bn and 
the first part of this year saw a 
similar haemorrhage, with a 
probable net loss of some 
R3<5bo. Although the outflow 
has sfn<y stabilised, there h»s 
still been little sign of capital 
inflows, and reserves currently 
amount to only just over a 
month of imports. 

Also, decades of exchange 
controls have created intense 
pressure among local institu- 
tions «nd individuals to invest 
abroad. In the short faw n y the 
country would almost certainly 
face massive capital exports 
following any scrapping of the 
present system. Combined with 
the fret that a very large pool 
of speculative finrands, abont 
R4.5bn is currently in the 


banking system waiting to be 
pulled out if the currencies 
merge, this is a cause for 
severe anxiety among Reserve 
Bank officials. 

“We need to be aware of the 
possible consequences {of abol- 
ishing the fmrandj.” Mr Stats 
says, asserting that whatever 
the long-term rewards, in the 
short term massive capital out- 
flows will almost certainly lead 
to a sharp depredation in the 
currency and a very steep rise 
in interest rates. “The shock 
therapy would be a big shock," 
he asserts “I don’t think South 
Africa is ready for such a 
major restructuring." 

Given these problems, Mr 
Stals and Mr Keys emphasise 
that three pri- 
mary condi- 
tions have to 
be met before 
the financial 
rand can be 
scrapped: 

• First. South Africa has to 
build up reserves that amount 
to at least three months’ cover, 
preferably more; 

• Second, the discount 
between the commercial and 
financial rand, presently about 
23 per cent, must narrow to 10 
per cent or lower, and 

• Third, the finrand pool pres- 
ently in the banking system 
must be cut to about Rlbn. 

It seems that exchange liber- 
alisation is more than a year 
away at least And even when 
reform does take place, it is 
likely to be done in stages so 
as to try and limit any down- 
side. But despite this, business- 
men continue to argue loudly 
that the system's demise 
should come sooner rather 
than later on the grounds that 
the government will likely ben- 
efit from the element of sur- 
prise while being applauded for 
showing confidence in the 
strength of the economy. 

“We took a hell of a political 
risk with the transition," 
observes a senior banker. “1 
think we should grit our teeth 
and take a similar leap of faith 
with the finrand.” 

So far, however, that is one 
jump that the government 
seems unwilling to make. 

Mark Suzman 


FINRAND HISTORY 


South African exchange 
controls have boon in place 
for decades, writes Mark 
Suzman. 

The financial rand was 
first Introduced after tha 

Sharpeviffe riots of 1961 to 
staunch massive capital 
outflows. 

Although tt was briefly 
scrapped In 1983, renewed 
political unrest forced the 
finmnd's introduction in 
1985 following then 
President PW Botha’s 
notorious Rubicon speech 
and the subsequent run on 
the currency. 

financial rands comprise 
a pool of rands that can 
only be used by 
foreign investors, end 
trade at a significant 
cfiscount to the commercial 
rand, the currency used for 
all ordinary eurent account 
transactions. 

Finrands are created 
when a non-resident sens 
an asset to a South 
African. 

The payment is made In 
rand and d ep osited at a 
local bank. It can only be 
used again by anothor 
non-resident in exchange 
for foreign currency. 

In addition to acting as a 
penalty against capital 
withdrawal, the finrand also 
servos as an investment 
incentive for new foreign 
investment because aU 
yields are remitted tan 
commercial rands, 
giving a greatly augmented 
return, thus helping 
maintain foreign reservos 
and prevent capital flight. 

Whtte it does Gmit the 
outflow of capital, however, 
the finrand ttfso Imposes 
serious costs on the 
economy. Most obviously, 
by creating severe 
distortions In the currency 
market, tt encourages 
asset-stripping and 
“round-tripping” by 
companies to ergoy the 
benefits of the discount 
between the two 
currencies. 

Because the finrand is 
relatively thinly traded, 
moreover, speada&on in 
times of political 
uncertainty can lead to wfld 
gyrations in Its value. 

And although the 
currency is designed to 
attract foreign investors. Its 
volatility is a strong 
deterrent, as capital gains 
can be eaten away by 
currency losses. 


Mark Suzman examines the black business community 

Success stories needed 


“Blacks will never make good 
entrepreneurs - they don’t have the head 
for it," was the indiscreet comment made 
at a corporate l unch in Johannesburg 
recently. Surprisingly, however, the 
speaker was not a recalcitrant white exec- 
utive disparaging the new order, but a 
youngish black executive. 

The comment highlights the big problem 
facing the government and corporate sec- 
tor in trying to nurture a credible black 
business communi ty. 

For years in South Africa, black busi- 
ness was something of an oxymoron: as 
blacks were not allowed to own property 
or conduct business in the cities, indepen- 
dent economic activity was limited to 
activities such as shebeens or spoza stores 
-the speakeasies and corner stares that 
litter the country's black townships. 

At the same time, denied access to edu- 
cation, t raining or financ e, few were given 
the wherewithal to try and compete in the 
rough and tumble world of business. 

The result has been a lingering lack of 
fialth about black capabilities in the busi- 
ness world - a problem that has been high- 
lighted by the difficulty of trying to 
encourage blacks to buy shares in black- 
run companies. “There is still a basic lack 
of trust in black skills and that will only 
wear off in time,” notes Mr Thami Mazwai, 
editor of Enterprise, a black business mag- 
azine. 

Part of the problem is a continued lack 
of leading black success stories. Although 
most big companies have also appointed 
some black faces to their boards, few hold 
executive positions. And while the past 
year has seen a flurry of takeovers by 
black businessmen of leading companies 
- including two life assurers, a mediant 
h ank , and The Sowetan, the country’s big- 


gest daily paper - the deals are largely 
engineered by white conglomerates, and 
the companies often retain whtte manag- 
ers. 

But however unsatisfactory such a situa- 
tion might be, many regard it as the only 
viable route to economic power. “In the 
short and medium term, blacks will suc- 
ceed in business only through linkages 
with whites,” notes Dr Nthato Motl ana, 
President Nelson Mandela’s personal doc- 
tor and a key figure in many of the 
empowerment transactions. “Total control 
is unrealistic at this stage." 

One move that mi gh t start to shift the 
balance of power, however, has been the 
announcement by Anglo American, the 
country’s largest corporation, that it 
intends to split up subsidiary mining 
house Johannesburg Consolidated Invest 
ments into three parts and sell off two of 
them, one incorporating the group's gold 
mingg and the other its leading industrial 
shareholdings, to blacks. . a 

But despite the high expectations raised 
by the plan, Mr Julian Ogilvie Thompson, 
Angl o chairman, warns that its final exe- 
cution could take years. 

“We mustn’t let media hype create a 
situation where we make a deal that is 
structurally and financially unsound, he 
notes, observing that the completion of the 
planned moves requires alterations to 
eristin g legislation on corporate restruct- 
uring and working out some highly com- 
plicated shareholder arrangements. 

Given these problems, black business 
has begun to increasingly look to Bk m 
government for help in creating a suitable 
environment for business development. 
“We can use the same method as the Am- 
kanere utilising the state to help nurture 
Archie Nkonyeni, pre* 


ident of the National African Chambers of 
Commerce, the country’s largest black 
business federation. 

Accepting the importance of black enter- 
prise, government is likely to help steer 
state business to black companies where 
possible, or insist that white companies 
use black subcontractors when filling ten- 
ders. Last year African National Congress 
pressure managed to get black business- 
men a stake in the country’s new cellular 
phone operators and companies such as 
Thebe Investments, a private company 
with close ANC links, are expected to ben- 
efit from deals with the new government 

Also high on the government agenda is 
the encouragement of black entrepreneurs 
end the growth of small and mid-sized 
black businesses that can build up black 
capital and create jobs. The state-run 
■Small Business Development Corporation 
has shifted its focus to black applicants 
and tiie government is trying to put pres- 
sure on hanks to help finance more black 
business schemes in other sectors. 

Another promising route to empower- 
ment is through franchising and joint ven- 
tures with foreign companies which can 
supply both skills and financing. Interna- 
tional giants such as Coca-Cola and Pepsi, 
have both recently decided to return to 
South Africa with the stated aim of help- 
ing black business. 

But despite the flurry of initiatives, the 
sobering fact remains that blacks still con- 
trol only a very small, if rapidly growing, 
proportion of South African business. In a 
communi ty robbed of skills and ca p ital by 
decades of apartheid, economic victory is 
likely to take more than a generation to 
achieve. And while a black elite is already 
reaping the benefits of change, the masses 
will have to wait a little longer. 


SOME ACHIEVEMENTS ARE MORE NOTICEABLE THAN OTHERS 


Most of our achievements are more 
likely to be noticed, such as the many 
products we produce which are used 
in the making of candles, inks, 
crayons, oils, plastics and aspirin, to 
name a few. But there is also our ever 
developing world-famous technology, 
involving the production of fuels and 
chemicals from natural gas and 
coal. This technology is our greatest 
achievement, but for obvious reasons 
often goes by unnoticed. 



INTO THE FUTURE RESOURCEFULLY. 


HIM USCMS IWM me »w 



XU 


FINANCIAL TIMES MONDAY JULY 18 1994 


SOUTH AFRICA 12 


The stock exchange is undergoing important changes, writes Mark Suzman 

International investors stay wary 


Tony Hawkins examines foreign investment 

On the touch-line 



Few people were happier with 
the outcome of South Africa’s 
elections than the country's 
stockbrofcing community. 
While market players may be 
used to life on a roller coaster, 
investing in South African 
financial market s in the run-up 
to April’s poll at times seemed 
more akin to bungee jumping: 

In rapid succession, the mar- 
ket rose, fell, and rose again, 
almost entirely focusing on 
political sentiment rather than 
economic f undamentals 

To make matters worse, the 
renewed volatility came after 
an excellent year for the 
Jo hannesb urg Stock Exchange. 
In 1993, it seemed that tittle 
could go wrong for the market 
as the overall index increased 
50.1 per cent and net foreign 
purchases reached R3.8bn in 
the year to February 1994 after 
years of dis inv estment 

Highlighting the return to 
favour of the South African 
market in the international 
arena was the creation of sev- 
eral investment funds target- 
ing South African equities, 
brin g in g hundreds of million s 
of dollars into the market. 

But in March and April, 
responding to fears of civil 
war, foreigners beat a mass 
retreat, becoming net sellers 
once more. The result was 
soaring gilt yields, a sinking 
stock market and a plummet- 
ing currency. The combination, 
which shifted almost daily, 
was wearing. “It was like being 
In a ring with Mike Tyson 
every day," reminisces one not 
very nostalgic broker. 

Following the successful and 
remarkably peaceful elections, 
however, local investors have 
returned to the market to pre- 
empt the expected flood of new 
international fund money. 
After South Africa was 
included in the International 
Finance Corporation's global 
index with a hefty 13 per cent 
weighting, local brokers are 
expecting some leading inter- 
national investors to adjust 
their emerging market share- 
weighting accordingly, with 
the potential windfall for the 
Johannesburg exchange run- 
ning into bntions. 

So far, however, despite the 
return of fund managers and 
investment analysts to Johan- 
nesburg's biggest hotels, little 
new money has been forthcom- 


ing. Part of the problem stems 
from a general ttisgriohanfcTnff nt 
in enrag in g markets after sev- 
eral top players got burnt in 
countries such as Mexico, 
Poland and Turkey, but most 
of it depends on South Africa 
itself 

Despite a conservative bud- 
get and numerous statements 
by President Mandela and his 
economic team professing their 
adherence to free market disci- 
pline and macroeconomic sta- 
bility, many investors seem to 
want to see how successfully 
the encouraging rhetoric is put 
into practice before taking the 
plunge. International investors 


also cite some continuing 
structural flaws with the mar- 
ket Mr Frank Savage, chair- 
man of Alliance Q»p»fe»i man- 
agement, one of the big 
southern Africa fund manag- 
ers, singles out the presence of 
big conglomerates without a 
proper anti-trust legislative 
framework and the low tradea- 
bility of shares, as among the 
most important problems. 
Although liquidity on the JSE 
improved to 714 per emit in 
1993 from 4.76 per cent in 1992, 
It still remains for below other 
comparable markests. 

Under pressure from foreign- 
ms and local banking groups 


1 Hand bWan 



Squtobt J oha n uM toq 3toot Exgiwge 

who have long railed against 
the Johannesburg Stock 
Exchange's restrictive 
operations, the exchange has 
recently announced a plan for 
restructuring to improve both 
efficiency and accountability. 
In addition to proposals related 
to affirmative action anrf the 
encouragement of black share 
ownership, the report recom- 
mends the revision of existing 
capital requirements and sug- 
gests that non-residents be 
allowed to act as brokers and 
that local firms can sen up to 
30 per cent of their equity to 
institutional investors. 

Foreign firms have been 


JSE: turnover 

Value (Rand Wfe w) 


50.000 



.1988 89 90 91 92 93 
So«ca:Jc *ian»w afa» i taStet* Ei xJa B 9» 

quick to respond, setting up 
partnerships with local brokers 
even before the recommenda- 
tions have been endorsed and 
legislated. In the past year, 
Robert Fleming, Smith New- 
Court and SG Warburg have 
all made domestic alliances in 
the South African market, and 
more are expected to follow. 

To many, however, the pro- 
posals do not go far enough 
and critics are pressing for an 
rad to the maintenance of sin- 
gle capacity trading, urging 
frill corporate membership, and 
pushing for a move to screen 
trading from the current sys- 
tem of open outcry. But despite 
threats from disgruntled bank- 
ers to open a rival exchange, 
the Johannesburg Stock 
Exchange seems unlikely to 
budge further at the moment 
“If exchange control goes, 
then we would obviously have 
to reappraise the situation, but 
under current circumstances 
we feel that an evolutionary 
approach is best for the stock 
market" notes Mr Roy Ander- 
son, stock exchange president 
Nonetheless, it is clear that 
the stock exchange, tike other 
South African institutions, is 
undergoing important changes 
in the new environment and 
will continue to restructure 
further over the next few 
years. “One way or another I 
think we're going to have 
move to a fully deregulated 
market in the not-too -distant 
future,” predicts one leading 
fund manager. 


More talk than action sums up 
South Africa's recent record of 
foreign investment Most of the 
action has come in the past 18 
months with a surge of portfo- 
lio investment and a large 
number of franchise and other 
non-equity deals. 

A recent independent survey 
concludes: “Most companies 
are adopting a wait-and-see 
attitude”, avoiding manufac- 
turing and keeping their 


thirds in gilts 
and the balance in equities. 
This oompares with substantial 
net foreign selling, especially 
of equities in the 1990-1992 
period. 

The same survey, which 
warns that it may not have 
tracked down all post-1990 for- 
eign investment, lists 17 first- 
tune new investors, including 
Vodafone of the UK and 
Alcatel of Fiance in telecom- 
munications, Daewoo of South 
Korea in household goods, Mr 
Tony O' Re ill/ s Independent 
Newspapers of Ireland in pub- 
lishing and Digital Equipment 
of the US in computers. 

Another seven are listed as 
returning companies - those 
that divested in the 1980s for 
political reasons. This list 
includes leading players such 
as IBM, Procter & Gamble and 
Afi Electrolux of Sweden. 

Another important partici- 
pant who stayed behind, BMW, 
has brought in RlOOm in new 
capital to expand its Rosslyn 
vehicle-assembly plant 

There has been a good deal 
more activity in the field of 
indirect investment - distribu- 
tion, franchise and licensing 


deals. This list is dominated by 
the returnees - Apple, Hone- 
ywell and Novell in computers; 
Volvo and Peugeot in cars, and 
Morgan Stanley, Citibank and 
Warburgs In banking. Signifi- 
cantly, the largest single cate- 
gory, of some 36 companies, is 
made up of those intending to 
invest or reinvest Here, too. 
the list reads like a Who's Who 
of global business: Ford, Moto- 
rola, Heinz, Philip Morris, 
Wang, AT&T. Ericsson, NEC, 
Coca-Cola and Pepsi 
The conventional wisdom Is 


that this cautious trend, with 
its emphasis on Indirect invest- 
ments with minimal equity 
involvement, such as franchis- 
ing, will continue for another 
18 months to two years. The 
broking community is bullish 
about portfolio investment 
prospects, especially once the 
financial rand is abolished. But 
direct investment is seen, in 
the words of Mr O'Reilly, chief 
executive of Heinz, as a “post- 
ponabte event”. 

How postponable was out- 
lined at last month’s World 
Economic Forum meeting by 
Mr Frank Savage of Alliance 
Capital Management Interna- 
tional. Mr Savage put up a 10- 
point wish list of conditions 
that foreign investors want to 
see in South Africa: financial 
rand abolition, the removal of 
exchange controls, removal of 
limitations on foreign owner- 
ship, no capital gains taxes, 
non-inflationary budgets, lower 
tariffs, reform of the Johannes- 
burg Stock Exchange, anti- 
trust legislation, black eco- 
nomic empowerment and con- 
solidation of the government of 
national unity. 


Almost all of these are on 
the new government's agenda 
- the one exception being the 
probability of some form of 
capital transfer tax. But it will 
take years to translate an 
agenda into action. 

While the foreigners sit on 
the touch-line, domestic invest- 
ment has started to recover. In 
March. Nedbaxxk’s Economic 
Unit, relying on public 
announcements, estimated new 
and continuing capital projects 
worth almost RIOObn ($27bn at 
present exchange rates), over 
the next six 
years. This 
estimate 
includes an 
adjustment of 
10 per cent a 
year for infla- 
tion. Commu- 
nity and social 
projects 
(R35bn) make 
up the largest 
single chunk, 
followed by 
energy and 
water projects 
(R21bn) and 
manufacturing 
(R13 bn). 

In the past. 
South Africa’s investment 
record has fallen, short on two 
counts. Even when it was 
investing more than compara- 
ble middle-income economies 
such as Brazil, Chile and 
Mexico - averaging 26 per cent 
of gross domestic product in 
the early 1870s - output and 
employment growth did not 
respond proportionately, 
because of growing capital 
Intensity. 

In the 1980s and 1990s, the 
problem was less the efficiency 
of Investment than the steep 
decline in volume. By last year 
investment was down to 1&2 
per cent of GDP, touching bot- 
tom in mid-year, since when 
there has been some recovery. 

To grow at 5 per cent a year, 
the economy needs to Invest 
more than 25 per cent annual- 
ly-implying a shift of more 
than 7 per cent of GDP from 
consumption to savings. Part 
of this shift can be fimded from 
offshore, with foreign capital, 
but achieving the domestic 
transfer of resources while 
simultaneously satisfying 
expectations will be a formida- 
ble task. 


investments relatively small 

Many foreign companies 
have established a low-profile 
presence in the 
country in 
anticipation of 
an improved 
business cli- 
mate from 1995 
onwards. 

The main 
action has bear 
on the Johan- 
nesburg Stock 
Exchange. In 
the 15 mouths 
to March 1994, 
net Lnward 
investment on 
the JSE 
totalled R&9fm, 
almost two- 



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XIII 


SOUTH AFRICA 13 


Exporters are fin ding new markets open for trade, writes Mark Suzman 

Generous Gatt ‘window’ 


South African exporters are a 
little overwhelmed by their 
new-found international 
respectability. After years of 
developing expertise in such 
arcane shills as transhipping 
and re-labelling to try and 
counteract sanctions imposed 
as a result erf apartheid, compa- 
nies find that many countries 
are now rolling out the red car- 
pet, and new markets from 
Asia to eastern Europe to Latin 
America- long out of bounds 
- are now open for trade. 

As part of this new order, 
the South African government 
; is starting to formalise its trad- 
" tag relationships. At the top of 
the list comes reatindssion to 
the General Agreement on Tar- 
iffs and Trade. South Africa's 
formal submission to the Uru- 
guay Round was accepted late 
last year and a fundamental 
restructuring of its tariff struc- 
ture will shortly get under way 
to bring the country more in 
line with international norms. 

The adjustments required by 
Gatt will involve pain for awno 
highly protected industries 


but, by securing classification 
as an. "economy in transition”, 
South Africa has manage to 
get a generous eight-year win- 
dow for leading employment- 
oriented industries, such as 
textiles and motor vehicles, to 
adjust to the new arrangement 
The deal also allows some lee- 
way in the reorganisation of 
South Africa’s contentious, »n<l 
widely abused. General Export 
Incentive Scheme. 

Meanwhile, new trade agree- 
ments are giving further impe- 
tus to trade growth. President 
Clinton gave South Africa GSP 
status in May, allowing prefer- 
ential access to the US market 
for a wide range erf goods, and 
the European Union has 
announced its intention to do 
the same by the end of the 
year. A more formal, separate 
trade treaty with the European 
Union is under discussion, as 
is the possibility of some Hn/i 
of associate member status 
with the Lom& aid group. 

Also on the agenda are a set 
of new regional trade arrange- 
ments. At the World Economic 


Forum meeting last month, 
President Mandela and other 
southern African leaders sig- 
nalled their intention to work 
towards a regional free trade 
agreement. As a first step 
towards this goal in August 
South Africa will join the 
South African Development 
Community, a grouping of 10 
southern African states origi- 
nally formed to try and reduce 
dependence cm South Africa. 

In the shorter term, Mr Tre- 
vor Manuel, trade and industry 
minister, has already irfgnaUpd 
his intention to restructure the 
South African Customs Union, 
which South Africa shares 
with Namibia. Botswana, Leso- 
tho and Swaziland and in 
which it currently pays out 
some R5.6hn of a customs and 
excise revenue pool of R16.3bn 
to its partners. It is also seek- 
ing to renew a bilateral trading 
arrangement with Zimbabwe. 

Reflecting all this activity, 
exports have been soaring, and 
in 1393 totalled R7&3bn as the 
country ran a c urren t account 
surplus of R5.9bn - although 


this year's surplus is likely to 
be lower due to a higher 
import bill But despite this 
success, the majority of 
exports are still primary prod- 
ucts and while the proportion 
of manufactured goods has 
been increasing there is still a 
lot of room for improvement 

A survey of exporters by the 
South African Foreign Trade 
Organisation estimates that 
South Africa's manufacturing 
industry is at a 15 per cent cost 
disadvantage to Organisation 
for Economic Cooperation and 
Development countries, with 
its only comparative advantage 
in electricity. In addition, the 
report notes that after years of 
focus cm the domestic market, 
local manufacturers have a 
“tendency to b lam e external 
factors” for failures, and many 
fall to take export promotion 

and p lanning Seriously. 

“South African manufactur- 
ers still lack an export cul- 
ture," acknowledges one senior 
trade officiaL “Until that 
changes, growth win be disap- 
pointing." 



I f South African newspaper 
headlines are taken at fece 
value. President Nelson 
Mandela is the diplomatic 
equivalent of Superman. 

Barely a week has gone by 
since the new government took 
office without what is pres- 
ented as yet another presiden- 
tial foreign policy initiative, 
exciting unrealistic expecta- 
tions. 

Mr Mandela is, it seems, sin- 
gle-handedly reforming the 
Organisation of African Unity, 
in which newly-admitted South 
Africa is “destined to play a 
leading role in peacekeeping 
and conflict resolution" , 
according to local reports. He 
is much in demand. Over the 
past few weeks Mr Mandela 
has been described aa "broker- 
ing” peace efforts in Rwanda 
and Angola, and contemplating 
imposing democracy on trou- 
bled Lesotho. 

Thanks to President Fran- 
cois Mitterrand’s invitation, he 
will attend the next gathering 
of Francophone states, while 
the French leader’s champion- 
ing of South Africa placed the 
country “firmly on the agenda” 
at last week's Group of Seven 
leading industrial nations' 
meeting in Naples. 

Meanwhile South Africa has 
rejoined the Commonwealth 
and looks forward to playing 
an active role in the Non- 
Aligned Movement 
New ties have also been 
forged with Japan. Tokyo’s aid 
package, said to be worth 
R4bn, wifi, says Mr Mandela, 
help to “kick-start” the coun- 
try’s reconstruction and devel- 


FOREIGN POLICY 

Missions abroad 
have doubled 



Foreign minster Alfred Nzoe years 

of loyal service to the ANC 


opment plan. But closer exami- 
nation of the package suggests 
it may be worth less than the 
initial estimates suggest. 

If all this is not enough. 
President Mandela appeared on 
video at President BUI Clin- 
ton's White House conference 
on Africa last month to lend 
his weight to calls for a Mar- 
shall Plan for the continent, 
the name given to the US-led 
programme to rebuild Europe 
after the second world war. 
Included in Mr Mandela's 
speech was an appeal for radi- 
cal measures to ease Africa’s 
external debt burden. 


While these initiatives - real 
imag ined or exaggerated - 
place, one arm of foreign policy 
seems to be operating with tts 
past efficiency; the stateowned 
arms manufacturer. Armscor. 

With sanctions lifted, and its 
activities given the endorse- 
ment erf Mr Joe Modise, defence 
minister, nffirfaic are now lift- 
ing at least a comer of the veil 
of secrecy. The defence indus- 
try provides 70,000 jobs and for- 
eign exchange, say government 
officials, who add defensively; 
“If we didn’t sell weapons, 
someone else would.” 

To he fair to Mr Mandela, he 
and his senior advisers have 
tried to play down expecta- 
tions. On the one hand. Mr 
Mandela's integrity and moral 
authority makes him the 
acceptable voice erf Africa an 
behalf of its many causes. At 
the same time, he makes clear 
that that he has no easy 
answers to offer. 

Advisers also point out that 
an effective diplomatic rote is 
not made easier by the fact 
that the Ministry of Foreign 
Affair s is in the throes of reor- 
ganisation. 

South African missions 
abroad have doubted since the 
transition to respectability 


Michael Holman on foreign aid 

Net benefit may 
prove marginal 


F ew international aid 
causes are more popular 
than South Africa’s 
appeal' for assistance in 
redressing the legacy of apart- 
heid. Raising funds, however, 
may prove to be easier than 
putting them to efficient use, 
and if aid is seen as a substi- 
tute for investment the net 
benefit may prove marginal 
If pledges are taken at their 
face value. South Africa can 
expect up to RlOhn over the 
next five years, from a variety 
of bilateral and multilateral 
donors. 

Leading the field is Japan, 
which earlier this month 
unveiled what it called its larg- 
est aid package to a single 
country - $l.3bn over two 
years. Mr Katsumi Sezaki, 
Japan’s ambassador to South 
Africa, said that almost all the 
aid was untied, bar a £LQQm 
export-import credit facility 
aimed at promoting trade 
between the two countries. But 
a further $400m worth of 
export-import bank loans were 
untied, he said. 

Of the balance, $250m would 
be ta the form of soft loans 
- seven years’ grace and a 25- 
year repayment period at 3 per 
cent interest A further $50Qm 
in the package represented the 
amount of private Investment 
and commercial credits the 
Japanese government was pre- 
pared to guarantee. 



Sam: aid atone camot defiver the 
economic growth which is needed 


Next on the list is the US 
which has offered R2hn over 
three years, while a host of 
other bilateral donors have 
chipped in including Australia 
(RTQOm over three years), the 
European Union is offering 
over R400m; the UK wffl pro- 
vide R560m over three years. 

Meanwhile the African 
Development Bank says it can 
release between R720m and 


Rl,200m of project-linked 
finance over five years. 

Past experience in Africa has 
shown that aid has mixed 
results and even allowing for 
South Africa’s considerable 
pool of skills, handling 
resources an this scale will not 
be easy. The amount on offer, 
however, may not be as much 
as it seems. As is so often the 
case, assessing what may be 
termed the “real money” - that 
is assistance that Is readily 
available and which can be 
rapidly disbursed - is not 
straightforward. 

Although trade cover and 
investment guarantees can be 
put to good use, including 
them in the category of “aid” 
can give a misleading impres- 
sion of what Is available for 
conventional aid pro- 
jects -health, housing, educa- 
tion, and so an. 

Development packages 
almost invariably include aid 
tied to purchases from the 
donor country, which can 
prove expensive. A recent 


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began, while new entrants to 
the diplomatic service have to 
be trained, and suitable ambas- 
sadors found to replace many 
of the preelection incumbents. 

Meanwhile the overstretched 
service is stfil getting to grips 
with issues in which it has had 
little or no experience. These 
range from getting to know the 
OAU to the implications of the 
General Agreement on Tariffs 
and Tirade or reconciling 
relations with countries with 
whom ties were initially forged 
by the African National Con- 
gress, or the former govern- 
ment. 

Thus, the new South Africa 
baa to weigh its relationship 
with Taiwan, one of its biggest 
trading partners, against 
recently-established official 
links with the People’s Repub- 
lic of Phtna Hie latter ’s trad- 
ing potential is bigger, and its 
position as permanent member 
of the UN Security Council will 
have to be taken into account 
by Pretoria should South 
Africa have aspirations for a 
council seat as Africa’s repre- 
sentative. 

Nominally in charge of this 
demanding portfolio is Mr 
Alfred Nzo. the foreign minis- 
ter. His surprising appoint- 
ment is put down to years of 
loyal service to the ANC. It 
may also be explained by the 
fact that policy wQl be shaped 
by Mr Mandela hims elf, and 
his senior deputy president, Mr 
Thabo Mhelri- 

As the initial euphoria and 
excitement dies down. South 
Africa’s foreign policy is likely 
to become more cautious. 


study by a British development 
charity calculated that the 
resulting lack of competition 
can add anything from 10 to 15 
per cent to the price of the 
items ordered from the donor 
country. 

Another way of boosting 
bilateral aid figures in press 
releases is to indnrie the con- 
tributions made by western 
governments to multilateral 
lending institutions. United 
Nations agencies, or money 
that would be channeled 
through European Union aid 
schemes. 

A further device used by 
same donors is to include esti- 
mates of the benefits for South 
African exporters from introd- 
ucing favourable tariff changes 
made in the wake of President 
Mandela's inauguration. 

Given the competition 
between donors as to who will 
appear the most gener- 
ous - which in tom may influ- 
ence the South African govern- 
ment when it comes to 
allocating contracts for state- 
backed or funded projects - the 
donors themselves are often 
reluctant to make clear the 
precise benefits and terms cf 
their (filers. 

In short, the arithmetic of 
aid is complex and South 
Africa, unused to being a recip- 
ient, may sometimes be too 
inclined to take promises at 
face value. Significantly, the 
World Bank, potentially Sooth 
Africa's largest multilateral 
donor, is reluctant to put a fig- 
ure to planned lending, 
although some officials have 
suggested a figure of about 
llbn a year in the initial 
phase. 

Mr Isaac Sam, the Bank’s 
resident representative in 
South Africa, says that foreign 
aid is “rather crucial" in South 
Africa’s development What is 
more, fond r aising “has to be 
done fairly rapidly” in order to 
take advantage of the goodwill 
South Africa presently enjoys. 

But Mr Sam cautions that 
aid alone cannot deliver the 
economic growth that the 
country needs. White the Bank 
plans to provide substantial 
aid. foreign and domestic 
investment are the keys to 
post-apartheid growth; “The 
real resources for South Africa 
are zn the international capital 
market not donate”, says Mr 
Sam. 


Mr Aziz Pahad, the deputy 
foreign minister, acknowledges 
the dangers of fairing on too 
much. But expectations are 
nevertheless high. In an inter- 
view with the Financial Times 
be echoes the explanation he 
gave to the Johannesburg Sun- 
day Times; "We have captured 
the moral high ground in non- 
racialism. democracy and con- 
flict resolution to become the 
world leader in this area." 

First of all however. South 
Africa has to consolidate its 
success and build a stable, 
flou rishing , democracy: “If we 
don’t sink, they [Africa's 
donors and creditors] see the 
hope that the region won’t 
sink, and if the region doesn't 
sink, they see some hope of a 
breakthrough in the develop- 
ment of other parts of Africa." 

Mr Pahad hopes that, foreign 
investors do not ignore South 
Africa's neighbours: “If you 
don't have mutually advanta- 
geous regional development, 
illegal immigrants will come to 
South Africa and, given that 
our borders are so big, we will 
not be able to prevent it" 

Michael Holman 


FOREIGN BORROWING 

Credit rating sought 


One of the more dramatic 
signals of the normalisation of 
South Africa’s International 
economic relations has beat 
the country’s decision to seek 
an international credit rating. 

After an intense competition 
among international merchant 
banks for the Tight to 
represent the country, toe new 
government in May appointed 
Goldman Sachs as its agent to 
secure a grading from the 
leading agencies, who are 
expected to announce their 
assessment later this year. 

Although South Africa has 
long borrowed money on 
European markets without a 
rating, it wants access to the 
American market, hence the 
the new move. 

Following the successful 
agreement with international 
banks on a repayment 
schedule for outstanding debt 
that fail been caught in t he 


1985 standstill, and given its 
new-found political stability, 
the country feels toe time is 
ripe to make formal entry into 
global capital markets. 

Depending on the success of 
the present initiative, a 
similar move into the 
Japanese market may follow 
early next year. 

Although political and 
economic uncertainty has long 
forced South Africa to pay a 
fairly hefty premium on 
offshore borrowing, 
government authorities are 
confident of achieving an 
i nv e stm ent grade rating of at 
least BBB. 

“I would actually prefer a 
lower rating that we can 
improve upon, rather than a 
higher one which might be 
downgraded,” notes Mr Chris 
State, South African Reserve 
Bank governor. 

Bven with the rating. 


however, initial borrowing Is 
likely to be limited. 

The new budget makes 
allowance for about S500m, 
bat Mr Derek Keys, finance 
minister, says that figure may 
well be increased, depending 
both on the final rating 
achieved and the comparative 
strength of international 
markets at the time of 
borrowing. 

The outcome of the 
government’s initiative will 
also have a bearing on South 
African companies seeking to 
raise money offshore. 

Assurer Liberty Life recently 
announced plans for a 
$360m-S500m rights issue, and 
electricity utility Eskom and 
the Development Bank of 
South Africa are both likely to 
float issues some time later 
this year. 

Mark Suzman 





he South African Mutual Life Assurance Society 
(“Old Mutual”), established in 1845, is South 
Africa’s oldest and largest life assurer. It has a 
leading position in the South African mutual fund 
industry and manages pension and provident funds 
for many of the country's leading organisations. As at 
31st December 1993, Old Mutual had total funds 
under management of some R1 17 billion ($34.4 
billion*). 

MARKET LEADER 

Old Mutual is the leading South African financial 
institution. Its activities are well-established, serving the 
individual and group markets in South Africa, Zimbabwe, 
Namibia. Malawi and Kenya. The opportunities for 
expansion into olher African countries can be expected to 
multiply in the future. 

INVESTMENT CAPABILITY 

Old Mutual currently manages more than R69 billion in 
South African equities For a range of life, pension and 
mutual funds. Investment assets are spread across the 
capital and money markets, the equity markets, and in 
property. We aim to provide good long term returns at 
acceptable risk to our members, through strong 
management by our highly qualified and experienced 
team. 

Old Mutual's investment team, one of the largest in the 
South African investment community, comprises 42 
investment professionals, including portfolio managers, 
investment analysts and economists. Our twelve portfolio 
managers have considerable collective experience of the 
South African market. The research department comprises 
14 analysts and is one of the largest in the country, whilst 
the economics team of six enjoys a high professional 
reputation. 

INTERNATIONAL COMMITMENT 

Since the mid 1980’s the Old Mutual group has realised 
the need for greater international exposure. This resulted 
in the purchase of the Providence Capitol group in the 
United Kingdom which provides assurance and investment 
products to the international market. Old Mutual now has 
operating companies in the United Kingdom. Ireland and 
Guernsey, and manages assets of some $2.4 billion on 
behalf of a broad range of international investors. 

* At the dosing Commerce] Rand rate on SI December lySSofRM ;S1.00. 


Old Mini*. Sw.ni Ainu. PC Box 66. Gw Ton* WOO. Rwreu,: uf Scum Arm a Th : (27211 5U»0| 1 1 Fite o> 72 i| 


.. * » • 






XIV 


FINANCIAL TIMES MONDAY JULY IS 1994 



Souvenirs for sate on the beach front at Durban 

THE TOURIST INDUSTRY 

Fresh markets 
opening 


SOUTH AFRICA 14 



The new flag is here to stay, writes Mark Suzman 

Symbol of liberation 



It (s difficult to find anyone with an unkind word to say about the Rag 


The Umngazi River Bungalow 
Hotel nestles sleepily in its 
Indian Ocean cove, where roll- 
ers break on the crescent- 
shaped white beach, deserted 
but for a lone fisherman and 
two dogs, gambolling in the 
adjoining lagoon. 

Anywhere else in the world 
it would be the retreat of the 
rich, a private playground in 
an anspcriU environment It’s 
within easy reach from Johan- 
nesburg's 60-minute flight 
east to Umtata, and then an 
hour’s drive through the green 
hills of what used to be the 
Transkei homeland. 

On the cove’s grassy dopes 
are scattered 42 bungalows. A 
tennis court and swimming 
pool are in easy read!, while 
alongside the jetty on the river 
which feeds the lagoon, a 
motorboat stands ready for 
fishing or bird-spotting expedi- 
tions. 

The hotel is not a retreat for 
the well-off. Dinner, bed and 
breakfast costs B125 a night 
-just over £20' but the resort 
has only a handful of guests.* 
It is as if Umngazi is still 
cocooned and isolated from the 
outside world by the country’s 
apartheid past 


In the grim period after the 
mid-1980s, when Hr P.W. 
Botha, prime minister, defied 
the world and angry black 
teenagers took to the streets, 
Omngazi and hundreds of 
other resorts suffered the con- 
sequences. South Africa 
seemed to have put up the 
shutters against political 
re fo r m , and the outside world 
shunned it barely 260,000 
tourists came to the country in 
1988. But with the political 
transition and the inaugura- 
tion of a stable government of 
national unity, Umogazi 
awaits discovery by visitors to 
the new South Africa. 

Many of those travellers 
who already knew what this 
spectacular country has to 
offer are looking back with 
something akin to guilty nos- 
talgia to a time when a berth 
in the luxurious Blue Train 
could be obtained at short 
notice, or a room at the Mount 
Nelson hotel in Cape Town 
with a view of Table Moun- 
tain - provided It wasn’t the 
school holidays. 

Those days are well passed, 
for a vigorous promotion cam- 
paign is getting under way. 

“Explore South Africa 95 


Tear*' will be its theme, 
exploiting events such as the 
World Rugby Cup, the Com- 
rades Marathon in Natal, the 
SGUion Dollar Golf Classic at 
Sun City and the Graham- 
stown festival 

“The aim is to to achieve 
R9.5bn in foreign exchange 
earnings by 1996, based on tin 
overseas visitor arrivals and 
3.7m arrivals from Africa**, 
says the South African Tour- 
ism Board’s marketing plan. 

It may seem an ambitious 
target, bnt when the world dis- 
covers what Sooth Africa has 
to offer it will beat a path to 
beaches, game parks, moun- 
tains and lakes served by an 
excellent transport and com- 
munications in fr as tr uc tu re, 
and offering lodges and hotels 
that range from budget 
to the luxurious. 

Since the lifting of sanc- 
tions, direct air links with 
Australia and the US have 
been re-established, existing 
airlines have increased their 
services, and more than 20 
new airlines are serving South 
Africa. 

Tourist sector officials 
acknowledge that coping with 
a million holidaymakers a 


year will strain the country’s 
existing hotel capacity. But 
the sector is already preparing 
for a boom that win encourage 
hotels to upgrade their facili- 
ties and, above aft, create jobs. 

And while the Im target is 
four times the annual number 
of holidaymakers who came 
during the political traumas of 
the mid-1980s, Sato or points to 
last years’ figures as evidence 
that it is within reach. 

In 1993, the country earned 
about R6bn from 618,000 over- 
seas tourists - 10.5 per cent up 
on 1992 - making the sector 
the fonrth-largest foreign 
exchange earner after manu- 
factured goods, gold and min- 
ing, and employing approxi- 
mately 430,000 workers. 

Notwithstanding this 
increase, the potential has 
barely been tapped, say Satour 
officials. South Africa has less 
than a 1 per cent share of the 
international market and tour- 
ism accounts for only 2 per 
cent of South Africa's gross 
national product, compared to 
the world average of 6.1 per 
cent 

There is scope for growth 
even in traditional strong- 
holds. The UK is by far South 


Africa’s largest overseas mar- 
ket, accounting for about 23 
per cent of visitors - excluding 
those from Africa - and Ger- 
many is the second-largest 
source. 

But thanks to the new politi- 
cal environment and the num- 
ber of new airlines serving 
Johannesburg, Satour can now 
exploit lucrative markets hith- 
erto out of reach, such as India 
and Japan, and Scandinavia. 

But it is Africa itself that is 
expected to provide the most 
dramatic results, from a mere 
206,000 arrivals in 1991 to a 
targeted 3.7m in 1996. 

Good news for the South 
African economy, bnt not 
happy reading for those who 
now have to share tbe coun- 
try’s scenic beauty with mil- 
lions of newcomers. 

So don't delay: visit South 
Africa while the hotels are rel- 
atively cheap and nnder- 
booked, the beaches are not 
crowded, tourists are not 
fleeced, and Umngazi River 
Bungalows are not taken over 
by the package tour business. 
•Umngazi River Bungalows, 
near Port St Johns (0471) 22370 

Michael Holman 


Tbe shock and disapproval 
when South Africa's new Bag 
was first displayed was palpa- 
ble and widespread. 

“Aa exotic tea towel" and 
"Dayglo Y-fhrats* were two of 
tbe more charitable comments 
about tbe patterned, six-colour 
emblem that was unveiled at 
the end of last year. 

Such was the attachment of 
whites to their old "oranje 
bianje blew", and most blacks 
to the African National Con- 
gress's black, green and gold 
colours, that tbe new banner 
seemed to be representative of 
continued tension in a still 
divided society rather than any 
common ground. 

By the time the poll was 
over, however, the flag had 
been taken up by black and 
white alike as tbe symbol of 
liberation, a tangible demon- 
stration of commitment to the 
new South Africa. After an 
emotional flag-raising cere- 
mony on the first night of the 
elections, the country awoke to 
find the multi-bued banner fly- 
ing proudly over city halls, 
police stations and government 
buildings throughout the land. 

And when, at President 
Mandela’s inauguration, flag- 
patterned T-shirts and banners 
littered the lawns of the union 
buildings and the air force 
thundered overhead trailing its 
colours, the apotheosis was 
complete. The new Bag, origi- 
nally regarded as a temporary 
compromise until a final one 
could be agreed upon, is 
undoubtedly here to stay. 

it has been a curious phe- 
nomenon, both for tbe speed 
with which it happened and 
the genuine feelings which it 
appears to evoke. 


A private agency 
produced the design and 
immediately came under 
fire 


While the debate over the 
national anthem was solved by 
allowing both the stirring Afri- 
kaans “Die Stem” and the 
hauntingly beautiful liberation 
anthem “Nkosi Sikel’ Afrika," 
no similar deal was possible 
over the flag issue. Following 
the failure of a nationwide 
competition to come up with 
an acceptable alternative, the 


matter was bonded over to a 
private agency which produced 
the current design and immedi- 
ately came under fire for its 
ridiculous result 

Now, however, it is difficult 
to find anyone with an unkind 
word to say about the emblem, 
and most people are rushing to 
buy their own. Flagpoles are 
sprouting in both white subur- 
bia and black townships, Dag 
bumper stickers are becoming 
ubiquitous, the emblem fea- 
tures on new airmail stamps 
and the Springbok rugby team 
has had it embroidered on 
their shorts. 

Even the corporate sector, 
not in the past known for its 
displays of enthusiastic patrio- 
tism, have been striving to 
outdo each other in the size 
and number of flags at their 
disposal. One big company out- 


side Johannesburg can bo seen 
flying no fewer than 10 of the 
new banners above its office 
buildings and executives have 
been known to fight over tittle 
designer flag pins for their 
jacket lapels. 

in short, the flag has become 
the symbol of the euphoria 
that has gripped the country 
for the past two months follow- 
ing the remarkably successful 
transition to democracy, and it 
seems destined to remain the 
touchstone of a new-found 
patriotism. As a result, in addi- 
tion to the traditional goods 
and trinkets hawked on South 
Africa’s streets, any shopper is 
now just as likely to be offered 
a selection of flag key-rings, 
coffee cups, table-cloths and, 
yes, even tea-towels. But 
they’re tea-towels that can be 
used with pride. 


Today’s finance for 
tomorrow’s needs 



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