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Benato Bug^eroaimspr 
the top job inu/orldirade 

Deafttifafe . .. 

JUm-makmg is ItiUingitself 

Page 15 * * • ; r " 


International equities 
head far a record year 

ftage2S ■. 

-0 v. 

• - % 

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Me2§J5tmca's tentacles 
in Italian politics 

Page 17 


Europe's Business NewsoSber' 

Yeltsin seeks 
crackdown on 
growing crime 

Russia's President Boris Yeltsin paid a symbolic 
visit to a crack paramilitary division outside 
Moscow at the weekend, in recognition that Rus- 
sia's "mafia" is taro rising business and mHwng 
Coinciding with several bomb blasts in the capital, 
the Russian leader last week issued instructions 
giving the security forces unprecedented powers 
for the crackdown. 

Condemned by the parliament and liberal media, 
the new powers include the right to detain suspects 
for up to 30 days without charge, to search without 
a warrant premises and examine b ank accounts 
of any companies, and to use in court evidence 
gathered by undercover methods such as phone-tap- 
ping and infiltration of criminal gan g* page 
3; Russia's second wave of sell-off. Page 3 ; Editorial 
Comment. Page 17 

Paris shrugs off Rwanda threat: France 
is seeking United Nations approval today or tomor- 
row for its plan to send farces to the Rwandan 
border in a humanitarian mission. Rwandan rebels 
warned that they would regard French intervention 
as hostile. Page S 

Pressure to Increase H Ireland security: 

The UK government was under pressure to step 
up security in Northern Ireland alter Loyalist 
gunmen shot dead six Catholics in a bar as they 
watched the Republic of Ireland’s opening World 
Cup soccer match on television. Page 18 

German SPD sUH split over candidate: 

Deep divisions re-emerged in Germany's opp osi ti on 
Social Democratic party at the weekend, days 
before a conference to endorse its leader, Rudolf 
Scharping, as the candidate to fi ght Chancellor 
Hebmrt Kohl in October's general election. Page 2 

Spanish economic policies to stay: Spain 
will keep its current economic pedicles, despite 
the defeat suffered by tbe ruling Socialist party 
in last week's European elections, according to 
economy minister Pedro Solbes. Page 2 

Japan opposition parties indtes Japan's 
two main opposition parties, the Liberal Democratic 
and Social Democratic parties, have joined forces 
to step up pressure on the fragile eight-week 
old minority government Page 4; Nuclear arms 
admission stirs Tokyo row. Page 4 

European Monetary System: The order 
of currencies in the RMS grid was unchang ed 
in spite of an unexpectedly strong European elec- 
tion performance by Germany's governing centre- 
right coalition. However, in a week in which 
currencies played second fiddle to the bond mar- 
kets, tbe spread between the weakest and strongest 
currencies narrowed. Currencies, Page 31 

MONDAY JUNE 20 1994 

< D8523&"* 

Juno 17, 1994 

EMS: Grid 

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The chart shows the member currencies of the 
exchange rate mechanism measured against the 
weakest currency in the system. Mast of the curren- 
cies are permitted to fluctuate within 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 in a 2JS5 per cent 

SBC sacks sbe Swiss Bank Corporation has 
sacked three foreign exchange dealers and three 
supervisors from its Zurich tr adin g centre for 
unauthorised trades that could cost the bank 
up to SFrlOOm <$70mV Page 19 

Colt warns of cola counter-attack: Cott 
Corporation, the fast-growing C anadian , maker 
of private-label soft drinks, has cautioned that 
a light-back by Coca-Cola and PepsiCo may damp 
its earnin g s growth this year. Page 19 

Magnet damages could hit Elba; Advisers 
and bankers to the ill-fated management buy-out 
of Magnet, the UK fitted kitchens retailer, face 
potential damages of up to £lbn ($1.5bn), those 
involved in the litigation said. In 1989 Magnet 
represented the largest MBO ever and the first 
involving “mezzanine" finance. Page 19 

China mo v es on human rights lawyers: 

China will allow more foreign law firms to open 
offices, but those involved in democracy or h nman 
rights are not welcome, the Justice Ministry said. 
China warms to Hong Kong task. Page 5 

Death-call for Bangladeshi feminist: 

Thousands of Islamic religious students marched 
In Dhaka to call for the death of Bangiacfesm 
fe minis t TasUma Nasrin. Sbe is hiding after publi- 
cation of an interview in which she allegedly 
said the Koran should be “revised thoroughly", 
prompting the government to order her arrest- 

Europe’s construction output up: A fragile 

recovery has begun in western European constric- 
tion mar kets but output is unlikely to approach 
previous high levels, according to forecasts from 
15 countries. Page 2 

Socialists hack EU membership: Socialist 
parties in Norway and Sweden recommended 
voters to back membership of the European Union. 
Norway's Labour Party polled 197-93 m favour, 
while Sweden's Social Democratic opposition, 
voted 232-103 after an intense debate. 

French Socialists in confusion as Rocard quits 

by John Ridcfing bi Paris 

Mr Michel Rocard resigned as 
head of the French Socialist 
; party yesterday after his defeat 
in a VOte of amnng the 

party’s leadership, throwing Into 
confusion the party’s plans for 
next year’s presidential elections. 

The resignation will MgWwi 
speculation that Mr Jacques 
Delors, the French president of 
the European Commission, may 
be tempted to enter the presiden- 
tial contest 

Mr Delors h ad marfa clear tfr*** 
he would not run against Mr Roc- 

ard. The resignation thus meets 
one of Mr Delors' preconditions 
for entering the race, although 
his appetite for politics was 
diminished by rhp bruising expe- 
rience of winning approval for 
the Maastricht Treaty. 

Mr Rocard is the latest casu- 
alty of tbe continental European 
left’s dismal showing in the 
recent elections for the European 
parliament The French socialists 
won just 14A per cent of the vote, 
its worst result in a national poll 
for mare than 20 years. 

Mr Achille Occhetto resigned 
last week as leader of Italy's 

Democratic party of the Left. 
Ominously deep divisions have 
re-emerged in Germany's opposi- 
tion Social Democratic party, 
only three days before a critical 
party conference called to 
endorse its leader, Mr Rudolf 
Scharping, as the candidate to 
fight Chancellor Helmut RrvM in 
next October’s general election. 

Mr Rocard called for the vote of 
confidence after criticism of his 
leadership and the party’s show- 
ing in the European elections. He 
won 88 votes for his proposals to 
revitalise the party. There were 
129 votes against and 48 absten- 

S Korean ministers 
prepare for first 
summit with North 

By John Burton In Seoul and 
Leyte Boulton m Moscow 

South Korean government 
ministers wifi meet today to dis- 
cuss preparations for a possible 
summit meeting between the 
leaders of North and South 
Korea, the first since the penin- 
sula was divided in 1945. 

The summit could be the first 
test of whether former US presi- 
dent Mr Jimmy Carter has suc- 
ceeded in drfusing tendons over 
North Korea’s nuclear arms 
plans following his private mis- 
sion last week to Pyongyang. 

Mr Carter briefed President 
Clinton's foreign policy aides yes- 
terday on an offer by North Kor- 
ean President Kim Il-sung to 
meet South Korean President 
Kim Young-gam. Hie offer, made 
without pre-conditions, was 
immediately accepted by the 
South Korean president on Satur- 

"I personally believe the crisis 
is over," Mr Carter said. “The 
next step is to assure that the 

Kohl set 
to veto 
Dutch PM 
as Delors’ 

By Lionel Barber in Brussels 

A stand-off between Germany 
and the Netherlands is holding 
up efforts to break tbe deadlock 
over the successes’ to Mr Jacques 
Delors as president of the Euro- 
pean Commission ah wad of this 
week’s European Union summit 
in Corfu. 

German Chancellor Helmut 
Kohl remains opposed to Mr 
Ruud Lubbers, Dutch prime min- 
ister, and is actively canvassing 
support for Mr Jean-Luc 
Dehaene, the Belgian prime min- 
ister, who formally announced 
his candidacy on Friday. 

The implicit threat of a Ger- 
man veto at the Corfu summit 
has irritated the Dutch govern- 
ment Mr Lubbers has sought to 
call Mr Kohl’s bluff by offering to 
pull out of the race, but only if 
Mr Kohl takes public responsibil- 
ity for blocking his candidacy, 
according to senior diplomats in 

Efforts to reach a compromise 
could turn on a meeting of Chris- 
tian Democrat leaders on 
Wednesday in Brussels, two days 
before the opening of the Corfu 
summit. Mr Kohl. Mr Lubbers 
and Mir Dehaene are to attend. 

Belgian officials believe that 
Mr Dehaene can count on as 
many as eight EU member states 
to support his candidacy. Italy, 
the Netherlands, Portugal, and 

Continued on Page 18 
Nordic parties Swing behind 
European Union, Page 3 

agreements that were worked out 
between me and Kim [fi-sung] are 
carried out” 

Assistant US secretary of state 
Mr Robert GaHuci told reporters 
at the White House that Mr 
Carter may have “brought back 
something from which we can 
build” to defuse the tension 
which has built up over the past 
three months. 

Meanwhile. Mr Andrei 
Kozyrev, the Russian foreign 
minister, claimed that North 
Korea did not yet have a nuclear 
bomb. He quoted “experts” as 
saying it would take the former 
Soviet ally three to seven years 
to develop one. 

While reiterating criticism of 
the US for failing to consult 
Moscow on proposal? for phased 
sanctions of increasing severity 
against Pyongyang. Mr Kozyrev 
said there was no paint in rush- 
ing ahead with them because 
they would be vetoed by China in 
the UN Security Conncfl. 

The media in South Korea yes- 
terday suggested the summit 

would be held within a month In 
Pyongyang. South Korea wants 
the summit agenda to include 
implementation of the North- 
South Korean 1991 denuclearis- 
ation tre a ty , the reunification of 
divided families and tbe estab- 
lishment of business ties b etw een 
the two countries. 

The South Korean president 
offered to meet his Northern 
counterpart last year, but harkpH 
away from the proposal as the 
nuclear dispute deepened. His 
sudden acceptance of the s ummit 
offer from Pyongyang suggests 
that Seoul is worried that Mr 
Carter’s misrinn could pave the ' 
way for direct talks between US 
and North Korea, which could 
leave South Korea as a subordi- 
nate party in resolving the 
nuclear issue. 

However some US and South 
Korean officials, expressed cau- 
tion about the summit, explain- 
ing that Pyongyang might use it 
to split Seoul and Washington. 

Details. Page 4 

Donor aid worth 
$200bn bypasses 
poor, report finds 


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By George Graham 
in Washington 

The World Bank will report today 
that $200bn a year of donor 
nations' infrastructure invest- 
ments in the developing world 
have brought the benefits of 
water, electricity and transport 
overwhelmingly to wealthier 
households and bypassed the 

“In developing countries, the 
poor use kerosene or candles 
rather than electricity for light- 
ing, they rely on private vendors 
or public standpipes rather than 
in-house connections for water 
sqpply, and they are infrequently 
served by sewerage systems,” the 
bank notes in its annual world 
development report 

In Ivory Coast, the bank found 
that among the richest 20 per 
cent of the population, 62 per 
cent had access to public water 
supplies, 57 pear cent to sewers 
and 75 per cent to electricity. 
Among the poorest 20 per cent, 
only 2 per cent had access to pub- 
lic water, 3 per cent to sewers 
and 13 per cent to electricity. 

Mr Lewis Preston, World Bank 
president, says that lbn people in 
the developing world have no 
access to clean water and 2bn no 
access to electricity. 

Infrastructure investments 
have often failed to provide 
needed services, he says, and the 
em phasis must now move from 
building more power plants and 
waterpipes to making sure that 
existing infrastructure is prop- 
erly maintained and efficiently 

“Basic issues such as effi- 


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ciency, maintenance and cost 
recovery have been too often 
neglected,” he says. 

Tbe hank found that infrastruc- 
ture subsidies in Bangladesh 
were six times as large to the 
rich as to the poor. 

Even though the poor usually 
consume water and use sanita- 
tion more than they do electricity 
or telephone services, the bank 
found that the richest 20 per cent 
rece i ved 1.3 times as much sub- 
sidy for water and sewer services 
as the poor in Costa Rica, L5 
timm as much in Chile and 2.8 
Hrnpc as much in the Dominican 

The report recommends 
restructuring subsidies so that 
they reach the poor more effec- 
tively. increasing block tariffs, 
for example, where a particularly 
low “lifeime” rate is charged for 
the first part of consumption, 
perhaps 25 to 50 litres a person a 
day in water supply, and hi gher 
rates for additional blocks. 

“This block tariff links price to 
volume and it is more efficient at 
reaching the poor," the report 

An even more useful approach 
can be to subsidise access to 
infrastructure, rather than its 
price. Heavy initial connection 
charges are particularly burden- 
some to the poorest sections of 
the population, and countries 
such as Colombia have success- 
fully targeted poorer households 
with subsidised connection 
charges for water mains. 

Report attacks inefficiency, 
Page 6 

Privatising the world. Page 22 

Managed Funds 27-30 

Money Martats 31 

9ara WomaSon 3 2 i 33 

Watt 9re* Martas 26 


Bw/KSy ~ sea a 
Spaneh bartmg Sect W 

tions in the party’s national lead- 
ership council. 

Party officials said no decision 
had been taken cm his replace- 
ment, and Indicated that a provi- 
sional leadership might be 
appointed. On Saturday, how- 
ever, Mr Laurent Fabius, the for- 
mer Socialist prime minister and 
a rival of Mr Rocard, said Mr 
Jacques Delors, the President of 
the European Commission, was 
the person “best placed” to lead 
the Socialists in next year’s presi- 
dential election. 

Mr Fabius said the choice of a 
candidate for the presidential 

elections should be left until tbe 
beginning of next year, coinci- 
ding neatly with Mr Delors' 
scheduled date of departure from 
the Commission’s presidency. 

Mr Jack Lang, former culture 
minister, has also been suggested 
as a possible Socialist leader. 

Mr Rocard told the national 
co uncil- “Uncertain political and 
strategic positions, confirmed iso- 
lation. and absurd means of oper- 
ation, are our three main failures 
which require radical change." 

Mr Rocard took over as general 
secretary of the party in October 
last year. 

President Cesar Gaviria - barred by tbe constitution from seeking 
re-election - was one of the first to vote yesterday in the final round 
of Colombia's presidential elections after a dead heat in the first 
round. Opinion polls put Liberals and Conservatives neck and neck. 
Polling was subdued after Colombia's defeat by Romania in tbe 
World Cap on Saturday night Report, Page 5 noun nun 

He rose to the party leadership 
after the Socialists' general elec- 
tion defeat last March at the 
hands of the centre-right RPR- 
UDF ruling coalition. 

After the setback in the Euro- 
pean elections he had proposed a 
new party platform and a renova- 
tion of the party machinery. 

Many party members blame Mr 
Rocard for failing to capitalise on 
the problems facing prime minis- 
ter Edouard Balladur's RPR-UDF 
coalition govemmenL 

Rocard gambles and loses. 
Page 2 

heads for 
clash with 
banker on 

By Robert Peston 

A battle is threatening between 
Mr Silvio Berlusconi, the Italian 
premier, and Mr Enrico Cucda, 
the country’s most powerful 
banker, over the ownership of 
Stet, the telecommunications 
monopoly, after it is privatised in 
the autumn. 

Mr Cucda, honorary chair man 
of Mediobanca, the Milanese mer- 
chant hank, wants to form a syn- 
dicate of shareholders in conjunc- 
tion with Pirelli, the tyres group, 
to effectively take control of Stet 
after the state's 53 per cent hold- 
ing is sold. 

Mr Berlusconi is under pres- 
sure from other members of his 
government to block Mr Cucda 
and ensure that Stet is sold to the 
widest possiole range of private 
shareholders and investment 

However, research by the 
F ina n cial Times shows that Mr 
Berlusconi faces a conflict of 
interest in deciding whether to 
do battle with Mediobanca 
because Mr Cucda is in a posi- 
tion of great importance in the 
restructuring of Fininvest, Mr 
Berlusconi's business empire. 

Mediobanca has considerable 
influence through cross-share- 
holdings over three of Fininvest's 
five biggest bank creditors - 

Continued on Page 18 
An intricate web of influence, 
Page 17 

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French Socialist leader 
quits after Euro-poll losses 

and loses 

By David Buchan ki Brussels 
and John Rkkflng In Paris 

Mr Michel Rocard and, to some 
extent, logic lost yesterday. 

He gambled that however 
controv e rsial his year of lead- 
ership of France's Socialist 
party and however sore the 
party felt over its poor showing 
in last week’s EuroelectLons, it 
would not topple him until it 
had coalesced behind an alter- 
native leader. 

But a majority of the 300 
members of the party's 
national council threw caution 
to the wind, voting him out 

His proposals to rej u ven a te 
the party's National Executive 
to include possible rivals such, 
as Mr Jack Lang, the former 
education minister, and popu- 
lar younger figures like Mrs 
Elizabeth Guigou and Mrs Mar- 
tine Aubry (the latte hating 
the extra merit of being Euro- 
pean Commission president 
Jacques Betas’ daughter) and 
his plan to eliminate the coar- 
ants, or clans that compose the 
party, evidently seemed to 
most to be treating the symp- 
toms of the party’s malaise but 
not its causa 

Equally important was the 
failure of Mr Rocard to appeal 
to the young voters and his 
failure to capitalise on the 
problems facing the RPRrUDF 
<ywljtinn headed by prime min- 
ister Edouard Balladur. “We 
have unemployment of 122 per 
cent, the highest level in living 
memory," said one party mem- 
ber. “We should be winning 
more support” 

So, unless the party ran rally 
quickly round a successor, it 
may fall to in-fighting. 

Originally the democratic 
hallmark of the Socialist party, 
the contents have frequently 
been, the bane of the party and 
delaying the choice of a new 
leader until a party conference 
in early autumn would give 
these factions free rein. 

The factions and the decline 
in popularity of Hie traditional 
Mt are not amenable to a rapid 
resolution. The threat of the 
factions was dear even when. 
Mr Rocard was elected general 
secretary in October last year. 


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Greece faces loss of EU cotton subsidies 

As many as 10,000 farmers are suspected of fraud, report Peter Marsh and Kerin Hope 

G reece feces the possi- 1991-92 cotton farmers in incorrect weights into pro duc- them! The has his own cotta 

ble withholding of its Greece as a whole inflated tim records m by expedteg mgttatdocmD^tionteMea become it wasn't sakt “You wat mla ou 

entire European Onion their production figures by 20 such as “double weighing^ the to cotton production was megai decision.* a*l activities, if you 

At the party congress which 
voted him into office, there 
woe more than 100 blank bal- 
lots and 51 abstentions. 

The only possible unifier 
would be Mr Delors, who last 
held office in France as a 
Socialist finan ce minis ter in 
the early 1980s. The entreaties 
coming from Paris for Mm to 
leave Brussels before the end 
of his term in December are 
now fast multiplying. 

He appeals to the remaining 
supporters of Mr Rocard, 
because the two men share the 
Mma brand of Social Demo- 
cratic pragmatism. He has had 
a complicated relationship 
with President Francois Mitter- 
rand who did not initially pro- 
pose him for the Comntisrion 
presidency, but the two men. 
have Triad**- up their differences 
and there haa never been any 
secret of the president’s prefer- 
ence for Mr Delors over Mr 

Nor is there a generational 
problem. Two years ago a 
group of Socialists in their 40s 
set up a priHtical fan club in 
France to promote the cause 
and ideas of the 67-year-old 
Cammissian president Nor is 
there any question that Mr 
Delors is "presidential”, in the 
sense that he has more or less 
incarnated Europe, not just 
France, over the past decade. 

Current opinion polls show 
he would lose a presidential 
election to Mr BaHadur by sev- 
eral paints, but he would run 
Mr Jacques Chirac very close 
and would defeat other conser- 
vative candidates. 

There is however the ques- 
tion of whether after 10 tiring 
years in Brussels Mr Delors 
would want seven more in the 
Etysees. If he succumbed to the 
entreaties of a desperate party, 
he would be in a strong posi- 
tion to dictate the terms on 
which he would carry its col- 
ours. One of these terms is 
likely to be that if elected he 
would only serve a single five- 
year term. That would involve 
a constitutional change from 
the present seven-year term, 
but the change after 14 years of 
Mitterrandism might prove 

G reece faces the possi- 
ble withholding of its 
entire European Union 
subsidy for cotter production 
amounting to about EcufiOfen 
($580m) in a highly embarrass- 
ing development before this 
week’s EU summit in Corfu. 

European Commission offi- 
cials are considering the sanc- 
tion in the dosing stages of a 
two-year inquiry into allega- 
tions of widespread fraud 
involving subsidies to Greek 
cotton, one of the country's 
most important products. 

The extent of the action 
against Greece will be an 
important test of the EC’s 
recent tough talk about crack- 
ing down an fraud and other 
irregularities, which are 
believed to account far about 
10 per cent of total ED spend- 

Mr Andreas Papastavrou, a 

Iftftrtfrig fanirar and pres- 

iden t of the Federation of Farm 
Cooperatives in Levadia, cen- 
tral Greece, says there have 
been "complications” involving 
the flow of EU subsidies to the 
local cotton industry. 

Levadia, a bustling town of 
20,000 people, has many bars, 
nightclubs and shops. The 
signs of prosperity are linked 
to the high level erf cotton sub- 
sidies since the 1980s, which 
compensate farmer s for the rel- 
atively low price of cotton on 
the world market 
On average, each of the 7,000 
cotton formers in the area 
around Levadia have received 
about Ecu5,000 a year in EU 
subsidies over the past few 
years - in many cases amount- 
ing to more than half their 
overall incomes, according to 

Documents related to cotton 
production around Levadia 
have been particularly care- 
fully scrutinised in the EU*s 
inquiry, winch has centred cm 
nine cotter processing plants - 
or gins - of which seven are in 
or around the town, 
ft hag been alleg ed ffiafc in 

1991-92 cotton fanners in 
Greece as a whole inflated 
their production figures by 20 
per cent, gaining about 
EcuSOm in subsidies to which 
they wore not entitled. 

'Die gins are central to the 
inquiry because these plants - 
Of which there are about 70 
throughout Greece - act as col- 
lection points for cotton. It is 
separated into fibres used in 
the industry, seeds used 
for oil and the vegetation 
which is thrown away. 

On grounds of administra- 
tive ease, the gins receive the 
EU subsidies before channel- 
ling them to farmers. Investi- 
gators believe some gins have 
collaborated with growers to 
falsify the amounfa of cotton 
produced, either by entering 

incorrect weights into pro duc- 
tum records or by expedients 
such as “double weighing” the 
same bale of cotton. 

Another theory is that form- 
ers have regularly inflated 
their figures for the area 
planted with cot t on, aided by 
lax checking procedures fay the 
cotton board. Tins has often 
given the impression that 
farms have produced more cot- 
ton than is the case. 

According to one gin owner 
involved with the inquiry, up 
to 10,000 cotton farmers may 
have been involved with fraud 
or oth er irregularities over the 
past few years. The Greek Gat- 
ton Board, the organisation 
which administers the EU pay- 
ments, is by EU investiga- 
tors to have presided over an 

‘inadequate” system for check- 
ing that documentation related 
to cotton production was filled 

U nder special scrutiny 
have beta managers of 
nine gins, seven or 
them in the Levadia area, sus- 
pected by the cotton board of 
having rnj) d*' false claims. In 
some cases, the board bas 
imposed fines but nc me of the 
fines has been paid. 

Mr fl fathis Angeloussis, who 
owns two cotton gins in leva- 
dia, was one of those named by 
the board but says the fraud 
«t le gations are "a pack of lies". 

He adds: "The fines were 
imposed without a proper 
investigation. The c ot t on board 
inspectors locked around and 

came up with what suited 
f hom Tha process was quite 
illegal because it wasn't 
backed by a judicial decision. 

According to Hr Papastav- 
rou, the cotter fanner, some 

irregularities have taken place 

but many of these have con- 
cerned the technicalities of 
adjusting records of cotton pro- 
duction for the level of mois- 
ture and impurities which 
affects the subsidy. 

He is not surprised that so 
far no one has paid fines for 
any wrongdoing - in spite of 
the involvement In the inquiry 
oT public prosecutor* in Athens 
and other regional centres. "In 
Greece judicial investigations 
can go on for IQ years. That is 
the nature of the place.” 

Mr Markos Tsazoboe, a cot- 

*■ •?%*’ 



Levadia cotton fanners Markos Tsambos (left) and Andreas Ifapostavroo: "Life is hard on the farms" 

ton board official in Levadia 
who bas Ids own cotton farm, 
said: "You cut tula out crimi- 
nal activities, if you have a 
criminal disposition then it 
[false accounting! nay have 
ta fan place.’* 

Sparking the EC’s investiga- 
tion. which bas abo involved 
officials at the Greek cotton 
board and the Court of Audi- 
tors, the EC's Luxembourg' 
beaed financial watchdog, was 
th&t the board's declared pro- 
duction of 719,449 ton ne s for 
1991-92 was nearly 15 per cent 
Ugher than its initial estimate 
before harvesting. 

That alerted Investigates to 
the idea that widespread fraud 
might have taken place to take 
maximum advantage of the 
subsidies - which during 1991 
climbed by about 50 per cent 
due to a sharp fall in the world 
cotton price- Over the past 
year, the subsidy has fallen 
slightly and has accounted for 
between 50 and 80 per cent of 
the price paid to farmers for 

The amount of cotton grown 
In Greece has increased to 
nearly 1m tonnes last year, 
according to the cotton board. 
A teg factor behind this has 
bees the attractive subsidies 
which make the life of a cotton 
fanner relatively prosperous 
and keep cotton among 
Greece’s most important agri- 
cultural products along with 
tobacco and fruit. 

However, many in the Greek 
cotton industry faar that, what- 
ever the result of the EC 
Inquiry, the subsidies are 
likely to fall following calls 
worldwide for less government 
support for agriculture and the 
specific proposals related to 
farm rid in the latest round of 
the Gatt trade negotiations. 

Mr Athanask* Kostoyannoa, 
who farms in the village of 
Exarchoa near Levadia, said: 
"We've done nothing fraudu- 
lent Lite as a cotton fanner is 
hard and without the subsidy 
it would be impossible." 

Candidate Scharping fails to unite SPD behind him 

By Quentin Peal In Bonn 

Deep divisions re-emerged in 
Germany’s o pposi tion. Social Demo- 
cratic party (SPD) at the weekend, 
only three days before a critical party 
confere n ce to endorse its l eader , Mr 
Rudolf Scharping, as the candidate to 
fight Chancellor Helmut Kohl in next 
October’s general election. 

Scarcely-veiled criticism of Mr 
Stamping’s leadership, and the par- 
ty’s election strategy, was voiced by 
Trailing figures in the SPD. 

And a formal proposal wfil be pot to 
the party conference in Halle on 
Wednesday to back an SPD-Green alli- 

ance in the October election, flatly 
contradicting the strategy adopted by 
Mr ScharpiDg. 

The most prominent criticism of 
party tactics came from Mr Gerhard 
SchrOder, the SPD state premier in 
Lower Saxony and the man defeated 
by Mr Scharping last year for the 
party leadership. 

In an interview with Der Spiegel 
magarine, Mr StarOder accus ed the 
party of relying too heavily on the 
theme of law-and-order, and concen- 
trating too much on the personality of 
the party leader at the expense of his 
team, in its campaign strategy. 

He insisted that he was not calling 

for any change in leadership so dose 
to the general election, “ft would be 
the stupidest thing the SPD could do 
now, to have a debate about personal- 
ities," he said. 

Yet he made it dear that much of 
the Scharping strategy, seeking to 
win the political centre ground by 
opting for a tough hue on crime pre- 
Vtation, and to distance itself from 
any identification with the radical 
Greens, was wrong. 

“We cannot ccanpete with the CDU 
with law-and-order slogans, and, 
thank God, we can certainly not win," 
Mr Starfldo- said. 

He insisted that it was up to Mr 

Scharping to decide whether he 
wanted to seek a red-green coalition, 
as tire party left is urging, or keep his 
options opei for a revival of the coali- 
tion with the liberal Free Democratic 
party which ruled Germany under Mr 
wmy Brandt and Mr Helmut Schmidt 
in the 1970s. 

That issue seems certain to become 
a bone of contention at the party con- 
ference. The South Hesse branch of 
the SPD, the second strongest provin- 
cial branch after North Rhine-West- 
phalia, agreed at the weekend for- 
mally to propose a red-green coalition. 

Such a strategy is seen by Mr 
Stamping and his advisers on the 

right of the party as electoral suicide, 
because it would enable Mr Kohl and 
the CDU to label the SPD with the 
radical pacifist policies of the Greens 
- including withdrawal from Nato 
and abolition of the German army. 

The party leader now needs to reas- 
sert his authority, and sweep away 
the growing doubts within the party 
about his capacity to defeat Mr Kohl 
in October. 

Tha danger he faces is a secret bal- 
lot on Wednesday to endorse his can- 
didacy for the chancellorship, which 
could see a si gnificant minority vote 
against him or at least a number of 

Madrid acts to reassure Natural gas expected to 
business over economy double share of market 

By David White in Madrid 

Spain will not deviate from its 
current economic policies, 
despite the defeat suffered by 
the rating Socialist party in 
last week’s European elec- 
tions, according to economy 
minister Pedro Solbes. 

He told an aud i en c e of busi- 
nessmen in Catalonia at the 
weekend that this would mean 
tight national budgets for the 
next three years. Cutting the 
public sector deficit was essen- 
tial to enable the country to 
grow and create jobs on a per- 
manent basis, he said. 

His comments, aimed at 
reassuring business in an 

unsettled political cMmafe, fol- 
lowed pressure from hanf!nn» 
sectors of the Socialist party to 
move towards the left and seek 
a rapprochement with the 
Communist-led United Left 

party. The Socialists need 
United Left support to con- 
tinue running the regional 
government in Andalacia, 
where they suffered heavy set- 
backs in elections last week. 

The government has at the 
same time been pressed by 
leaders of the conservative 
Popular party to respond to 
the verdict of voters in the 
European ballot Mr Rodrigo 
Rato, the TP’s parliamentary 
spokesman, said in an inter- 
view published yesterday that 
Spain needed tougher budget 
cuts and lower social costs to 
i nd u stry. 

However, Mr Solbes, 
appointed last year as a non- 
party independent in the 
Socialist administration, said 
the government would 
"swerve neither to the right 
not to tile lrit”. 

Any rapprochement with 

United Left would jeopardise 
the government’s current pact 
with the Catalan nationalist 
party Convergtacia i Unldn, 
whose 17 deputies provide the 
Socialists with just enough 
support for a working major- 
ity in parliament 
Mr Jordi Pujol, the CiU 
leader and Catalan regional 
president, reaffirmed his 
readiness to keep su p por tin g 
the government in a meeting 
on Thursday night with Mr 
Felipe Genzriez, the prime 
minister. However, he made 
clear this was pegged to spe- 
cific economic and regional 
polities. Both the CiU and the 
Basque Nationalist Parly have 
discouraged the government 
from seeking their explicit 
backing in a confidence 
motion in parliament. 

Spanish Ranking and Finance 
Survey, separate section 

By l/ Echool Smith in London 

Natural gas is forecast to more 
than double its share of the 
electricity generating market 
in western Europe to 20 per 
cent in the next 15 years at the 
expense of coal, oil and unclear 

The International Union of 
Electricity Producers and Dis- 
tributors (Unipede) forecasts 
that gas growth and increased 
efficiency in power production 
should led to a 15 per cent fan 
in carbon dioxide emissions 
per unit of electricity between 
1990 and 20ia 

Demand Is also likely to 
grow more slowly as fuel effi- 
ciency measures take effect 
TJnipede puts the annual rise at 
L8 per cent between 1990 and 
2010, against 3.4 per cent in the 
previous two decades. 

Growth will be considerably 

more marked in southern 
Europe than in the north. 

Unipede’s forecasts are pub- 
lished today as more than ljQOO 
mainly European delegates 
meet in Birmingham, E n g fo m fl , 
for the union’s week-long trien- 
nial conference. 

The growing use of natural 
gas has been prompted by eco- 
nomic and environmental con- 
siderations. lx 1 most countries 
power stations fired by com- 
bined cycle gas turbine tech- 
nology produce cheaper elec- 
tricity than new plains using 
coal and nuclear power energy. 

Unipede forecasts that 
nuclear power’s share of the 
market will fall from 34 to 31 
per cent between 1990 and 2010. 
Coal is predicted to suffer the 
biggest dedine, from 37 to 29 
per cent, and cfl to drop from 
10 to 6 per cent Gas is expec- 
ted to rise freon 7 to 20 per 

Construction output rising in Europe 

cent. Electricity demand is 
expected to grow by 43 percent 
during the two decades. 

Within tite overall increase, 
the share of domestic and agri- 
cultural sectors is expected to 
remain at about 25 per cent 
and 2 per cent respectively. 
The share of demand from ser- 
vices is expected to rise from 
22 to 26 per cent but industrial 
consumption is forecast to fan 
from 44 to 40 per cent. " 

Although there is currently a 
surplus of electricity genera- 
tion in western Europe, Uni- 
pede expects the total to grow 
by about a fifth from the cur- 
rent 500 gigawatts. 

Mr David Jefferies, Unipede 
congress p resident «md chair- 
man of the UK’s National Grid, 
said yesterday trade of electric- 
ity between countries was 
likely to grow rapidly as links 
between various transmission 
systems were strengthened and 
deregulation of energy markets 
gathered momentum. 
Electricity in Europe Sumy, 
separate section 

By Andrew Taytor, 

Construction Correspondent 

A modest and fragile recovery 
has begun in western Euro- 
pean construction markets but 
output is unlikely to approach 
previous high levels, according 
to forecasts from 15 countries. 

EuroConstruct, a federation 
of European Construction 
Research Agencies and Eco- 
nomic Forecasting bodies say 
that output in the region is 
likely to fall by just 0J per 
cent this year before rising by 
L9 per cent next year* 

It will be the first overall rise 
reported since 1990. although 
individual countries such as 
Germany have increased con- 
struction output during the 

The value of western Euro- 
pean construction output next 
year, forecast at EcuS57.5bn 
($763bn) would still bo almost 3 
per cent lower than 1990 out- 
put Output in West Germany 
by comparison is forecast to be 

12 per cent higher next year 
than at the beginning of the 
deca de. 

The growth in eastern Ger- 
man construction activity, 
since the country was unifie d, 
is even more striking and is 
forecast by Euro-Construct to 
increase by a further 16 per 
cent fins year and by 12A per 
cent next year. 

The boom inactivity is being 
led by construction and reno- 
vation of flats and houses and 
Is forecast to rise by almost a 
third in eastern Germany this 
year and a further fifth In 1995. 
Residential construction in 
western Germany is forecast to 
rise by 7 J6 per cent over the 
next two years as the region 
seeks to house large numbers 
of immigrants, mostly from 
eastern Europe. 

Other European countries, 
which saw a sharp fall in con- 
struction activity in the early 
1990s. are expected to enjoy a 
small recovery over the next is 
months as housing markets in 

particular benefit from lower 

interest rates. 

Governments in France. Ger- 
many, Denmark, Finland, Por- 
tugal and Switzerland have 
raised subsidies or Introduced 
tax or other measures to 
encourage building and reno- 
vation of homes, which gener- 
ates large numbers of jobs as 
well as improving the ho using 
stock, says EimoConstruct 

Sweden, conversely, is seek- 
ing to reduce the high cost of 
its housing subsidies. Residen- 
tial construction, down 233 per 
cent last year, is forecast to fall 
a furthe - 59.3 per cent this year 
and 6 per cent in 1995. 

High unemployment will 
also put a brake on the pace of 
housing recovery, with 17.4m 
people estimated to be still out 
of work in the 15 countries. 
Enro-Gonstmct expects con- 
struction output to rise as 
economies recover with hous- 
ing and repair, maintenance 
and Improvement work the 
early beneficiaries. 












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United Kingdom 












W**ed WTbc Frontal Tima <Ebw») 
GmbH, NibdwijcopHu 3, A031& ttrtkfirt 
an Main. Gcnuy. Telephone W 156 
ISO. Fw ++49 49 596*81. Tela «««. 
fttmuari in Fnitkftnt by J. Wuiier Brand. 
Wllhdm J. Bribed, Cola A. Kcnari ■» 
OaKhifofabRr and in London by DtfW 
Git Bed and Aba C Miter Muter QVM 
Dradt-Venrisb ami Mnikcoa G»UL 
Adnimt-fieJmdall)- Slttue 5a. 63263 
Ncn- lien burp (owned by Hftnij* 1 
JjwnadoialL ISSN. ESN 01717363 
ftrtpnmitfc Editor Bichin] Lambed. 6ft The 
Financial Time* United. 
Member (toe Souftwart firidje London S£l 

- fS9*» fens are m*ctkm. ~WI md Wtt feu** < 

t Otnntry erty. 

Saw BnCamet 

Public spending however is 
likely to remain under pres- 
sure. Private nan-residential 
construction output, of offices, 
shops, factories and ware- 
houses, is forecast to fall by a 
further 8 per cent this year 
across the region but rise by 

15 per cent next year as the 
large amounts of empty office 
space start to be occupied, 
‘European Construction Trends 
1994-95; from Construction For* 
costing and Research* Princes 
Bouse, 39 Kingsuxxy, London 
WC2B 6TP; £390. 

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(Eampci ULUmdoa and F.T, (Geraaay 
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1 1 



Insider dealing 
law approved 
by Bundestag 

Insider dealers in Germany face up to five years in jail 
heavy fines under the terms of a new law voted through the 
Bundestag, the lower house of the German parliament. 

The second financial markets promotion act, passed on 
Friday, will also introduce a new regulatory body for the 
German securities industry - the German equivalent of the 
Securities and Exchange Commission in the OS -and will 
allow banks to introduce money markup funds, a form erf 
short-term investment vehicle hitherto outlawed in Germany. 
The law, which in part implements European Union legisla- 
tion, is a plank of government policy to strengthen Germany 
as a fi n a nc ial centre and is due to take effect at the beginning 
of August. The initiative for the law came from Mr Iheo 
Waigel, finance minister, who ou tlined ptn™ for ttip legisla- 
tion in early 1992. 

The law is designed to bring the regulatory regime for 
German securities markets up to international standards after 
| controversial cases in Frankfort highlighted weaknesses. The 
German authorities are especially worried tha t the absence of 
a law against insider dealing hag diverted business away from 
the German stock exchanges to London. 

Other measures innhwip stringent disclosure requirements 
for companies listed on the stock market They will be subject 
to fines of up to DM3m (£1.2m) if they delay releasing price- 
sensitive information to the stock market and will he obliged 
to release details of stake-building in other companies when 
the stake reaches 5 per cent compared with the present 20 to 
25 per cent disclosure threshold. David Waller, Frankfurt. 

Danes seek Maastricht amendment 

The Danish Social Democratic party, trying to restore its 
fortunes after a poor performance in last week’s European 
Parliament elections, is seeking an amendment to the Maas- 
tricht treaty to ensure that environmental safety takes prece- 
dence over European free trade in goods. 

The SDP is Denmark's largest party, with 69 seats In the 
179-seat Folketing ( parliament) anrf it dominates the centre- 
left coalition government Mr Ove Fich, a former Euro-BSP and 
the party's parliamentary spokesman on European affairs, 
said the Tarty intended to make the environmental issue the 
main plank m the Danish position at the 1999 intergovern- 
mental conference at which the future shape of Europe would 
be discussed. “It must be affirmed by treaty that consumer 
interests, the environment and the work environment take 
precedence over free trade," said Mr Fich. 

The SDP suffered a hnmifating defeat in the European 
Parliament election. fAiiing to i5j$ per cent of the vote a gainst 
23.3 per cent in 1989 and the 37 per cent which it won in the 
last Folketing election. The anti-European groups, the People's 
Movement Again*., the nU ami the June Movement, took votes 
from the SJP and rose from 1&9 per cent in 1989 to 25.5 per 
cent of the vote Hilary Barnes, Copenhagen 

Trawlers leave disputed waters 

Seven Icelandic trawlers yesterday decided to leave disputed 
fishing waters after the Norwegian coast guard crippled sev- 
eral nets in a mini "cod war” between the two countries. A 
coastguard vessel yesterday cut one of the wires of the Mar 
trawler near Svalbard, where Norway has sovereignty under a 
1920 treaty, forcing it to stop fishing The Norwegians cut one 
of the tran-i wires of another Icelandic trawler on Saturday 
and on Tuesoay sabotaged the nets of four Icelandic vessels 
and fired a warning shot at a fifth in the same area. 

Iceland's government has called the actions illegal, threaten- 
ing to take Norway to court unless the row is settled by talks, 
but has said it will nut escalate the conflict by sending its 
navy to protect its fishermen. A plunge in fish stocks around 
Iceland has forced its fishermen to seek more distant fishing 
grounds. Exports or fisheries products account for about 80 per 
cent of Iceland's export earnings. Reuter, Oslo 

Bomb explodes at Turkish rally 

Five Turks were wounded yesterday when a bomb exploded in 
an Istanbul square shortly before the start of a social demo- 
crat rally. The explosion occurred in Fatih district as Mr 
Bulent Ecevit, leader of the Democratic Left party and a 
former prime minister, was due to address thousands of people 
gathered for a local election campaign. No group has claimed 
responsibility for the bomb attack. Mr Ecevit, a l eading anti- 
fundamentalist figure in Turkey, has recently stepped up 
-riticism of radical Islamist movements. Reuter. Ankara 

Countries plan Aids summit 

Health ministers and officials from industrialised nations 
pledged at the weekend to assist developing nations in their 
fight against the spread of Aids but fell short of a specific 
commitment of funds. 

Representatives from about 40 countries a t t en ding a two-day 
conference in Paris agreed, however, to take part in a summit 
of heads of state and government aimed at curbing the spread 
of Aids. The s ummi t is scheduled for December. 

In a Joint statement participating nations emphasised the 
n eed for a combined effort by rich and poor nations. Political 
leaders must assure, they said, that "no continent, no country, 
or population group is marginalised or s tigmatis ed". Mr Hiro- 
shi Nakajima, director of the World Health Organisation, 
urged gove rnme nts to make a concrete commitment to tackle 
the spread of Aids. John Ridding, Paris 

Y eltsin seeks crackdown on crime 

Russia’s ‘mafia’ is terrorising business and ordinary citizens, writes Leyla Boulton 

Boris Yeltsin: gave security forces unprecedented powers 

Second wave 
of sell-offs 
due next month 

By John Uoyd bi Moscow 

Preparations are under way for 
Russia's second massive priva- 
tisation programme to begin 
next month in an effort to 
restructure Russian industry 
through investment 
Mr Anatoly Chubais, deputy 
prime minister in charge of pri- 
vatisation. revealed the plans 
in Stockholm over the week- 
end and expressed hope he 
would guide the privatisation 
through its next phase follow- 
ing his role in the introduction 
of economic reform. 

‘The main goal 
of privatisation 
has been 
achieved. . . the 
level of change 
makes the 
process of reform 

The early part of the first 
privatisation issued free vouch- 
ers to Russia's 150m men. 
women and children. Govern- 
ment legislation made privati- 
sation compulsory for large 
and small companies and cut 
into Russia’s vast state sector 
more deeply than any efforts 
exerted by other former com- 
munist states. Blr Chubais said 
that “the main goal of privati- 
sation has been achieved. The 
distribution of vouchers has 
changed the distribution of 
political power. The level of 
change makes the process of 
reform irreversible." 

He said that by the end of 
this year around 70 per cent of 
property would be in private 

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hands, 70 per cent of workers 
would work in the private sec- 
tor, 40m people would hold 
share s in industry and lm peo- 
ple would own small busi- 

The next phase, said Mr Chu- 
bais, would involve the sell-off 
of the rest of the state compa- 
nies and residual state owner- 
ship of most of the companies 
already part-privatised. This 
will mean: 

■ a transition from giving 
away shares for vouchers to 
selling shares for money. 

■ fewer privileges for workers 
and managers in the privatised 
companies compared with the 
incentives which marked the 
first stage. 

■ two new ways in which com- 
panies can be privatised: the 
first giving 25 per cent of all 
non-voting shares to workers 
and managers for nothing, 
with the remainder sold at auc- 
tion; and the second giving 10 
per cent of voting shares away 
free, a further 10 per cent at a 
nominal price (fixed at June 
1994) with, a 30 per cent dis- 
count, and the rest sold at auc- 

■ 51 per cent of the income 
raised from privatisation will 
go into the company, rather 
than to the state budget 

Other issues to be tackled In 
the programme, which is at 
least as ambitious as the first 
stage, will be privatisation of 
land on which enterprises are 
located. This issue is fraught 
with legal uncertainties. The 
privatisation of agricultural 
land remains mired in the 

Another plank of the pro- 
gramme will be restructuring 
at enterprise level by giving 
shareholders more rights to 
change management. In addi- 
tion, the extensive social provi- 
sions from enterprises will be 
transferred to local administra- 
tion and a working securities 
market is to be created. 

Though a start has been 
made on an of these matters, 
they represent a vast agenda 
which even Mr Chabais 
acknowledges wffi take up to 
the end of the century. 

The deputy prime minister 
said that this pro gr am me had 
already been approved by the 
government and should be 
published before the end of 
June. However, he warned of 
obstacles and dangers which 
he described as “the price of 
success” and which the next 
phase must tackle. 

The main issue, he said, is 
that the speed of privatisation 
had left no time to develop 
institutional investment by 
Russian and foreign compa- 
nies. However, financial com- 
panies had built up reserves 
and expertise and would now 
be encouraged to invest 

Mr Chubais said that he 
expected to be blamed for 
encouraging foreign invest- 
ment and for the “sell-off of 
Russian industry." Since that 
was the case, he said, be would 
appeal to foreign companies to 
come as quickly as possible. 

Mr Peter Aven, the former 
trade minister and now chair- 
man of Alpha Bank, part of 
one of Russia’s largest finan- 
cial groups, said: “This will 
now be the period of Russian 

R ussia’s President Boris 
Yeltsin paid a symbolic 
visit to a crack para- 
military division outside 
Moscow at the weekend. 

Coinciding with a string of 
bomb blasts in the m pjtni i the 
Russian leader last week 
issued a barrage of instruc- 
tions giving the security forces 
unprecedented powers for a 
law-and-order crackdown. 

Cond emne d as unconstitu- 
tional by the parliament and 
liberal media, these new pow- 
ers include the right to detain 
suspects for up to 30 days with- 
out charge, to search without a 
warrant the premises and 
examine bank accounts of any 
companies and to use in court 
evidence gathered by 
undercover methods such as 
phone-tapping infiltration 
of criminal gan gy 
On Saturday, Mr Yeltsin told 
the regiment named after Felix 
Dzerzhinsky, the ha ted fo under 
of the Soviet secret police: “I 
am counting on your will- 
power, honour and courage. 
Preserve and multiply what 
has always distingtiteiiad the 
forces of law and order -con- 
stant vigilance, military-readi- 
ness, and strong military disci- 

Russia’s so-called “ mafia ” - a 
• term used to describe anything 
from organised crime bosses to 
small-time racketeers and vio- 

lent criminals - is terrorising 
both the business community 
ami ordinary 

A successful crackdown on 
Russian society's number one 
scourge would yield priceless 
political benefits for Mr Yelt- 
sin, whose unpopularity is at 
an all-time low. 

In a front page editorial. 
Izvestia recognised an over- 
whelming public desire for law 
and order when its commenta- 
tor wrote: “1 am sure that the 
decree would have received an 
even warmer response had it 
provided for summary execu- 
tions on the spot, without trial 
or investigation." 

But the criminals* close Tmirs 
to corrupt officials and police 
are the strongest reason to 
doubt that this crackdown will 
yield its intended results. 

Mr Vladimir Tsekhanov, a 
senior official of the Federal 
Counter-Intelligence Service, 
recently provided a telling 
illustration of the scale of cor- 
ruption within the security 

He claimed that Russia’s 
equivalent of the FBI had 
“uncovered a wide criminal 
group” including Interior Min- 
istry officials and Moscow 
police officers “who took large 
bribes to release Moscow mob- 
sters under investigation on 
charges of robbery, smuggling, 
illegal possession of firearms. 

or at least to scale down their 
prison terms." 

Izvestia went on to warn that 
the security organs’ repressive 
traditions, inherited from the 
Communist-era police-state, 
could easily backfire against 
the healthy businesses Mr 
Yeltsin says he wants to pro- 

“From now on, a law-enforce- 
ment official may uncover a 
commercial secret, disrupt the 
privacy of investment inviola- 
bility of banking and finanwai 
documents. . . Can anyone 
guarantee that interference in 
a business will be dictated by 
the fig ht against crime or a 
bribe given by competitors?" 

Under pressure from Mr 
Yeltsin’s initiative, parliament 
on Friday tried to speed up its 
own discussion erf a separate 
law on fighting crime. It failed 
not only to adopt this law, but 
even to agree a resolution 
demanding that President Yelt- 
sin rescind his decree's uncon- 
stitutional provisions. It settled 
instead on sending its best 
wishes to the Russian soccer 
team as the World Cup opened 
in the IIS. 

Waging war against crime in 
these circumstances will 
require not just political will at 
the highest level -which Mr 
Yeltsin appears to be display- 
ing - but utmost caution in its 

behind EU 

Three political parties whose 
support is centra] to efforts to 
overcome strong opposition to 
European Union membership 
in the Nordic applicant coun- 
tries have swung behind the 
campaign for a Yes vote in ref- 
erendums to be held in the 
autumn in Finland, Norway 
and Sweden, writes Hugh 
Carnegy in Stockholm. 

Yesterday special congresses 
of Norway's ruling Labour 
party and Sweden's opposition 
Social Democratic party - both 
the biggest political parties in 

their respective countries — 
voted by wide margins to sup- 
port membership. On Satur- 
day, the Finnish Centre Party, 
led by Prime Minister Esko 
Abo, derided by 1,607 votes to 
834 to back a pro-EU line 
despite considerable scepti- 
cism among its grassroots 
rural supporters. 

The Labour party in Nor- 
way, skilfully led to a pro-EU 
stance against the current of 
national opinion over the past 
two years by Prime Minis ter 
Gro Harlem Bnmdtland, voted 
to support membership by 197 
votes to 93. Similarly, the 
Swedish Social Democrats 
decided by a margin of 232-103 
to join the Yes campaign. 

investment in Russian indus- 
try. We are ready for it," 


O S T 





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oiTSta S I 



turn to 
UN over 

Kashmiri militants who 
kidnapped two Britons are try- 
ing to involve United. Nations 
mil Hairy observers in plans for 
their release, Reuter reports 
from Srinagar. 

Militant representatives yes- 
terday said the pro-Pakistan 
Harakatul Ansar group, winch 
abducted Kim Housego and 
David Mackie on June 6 while 
they were trekking ta moun- 
tains south-east of Srinagar, 
wanted to hand the pair over 
to the UN Military Observer 
Group in India and Pakistan 

The small UN group has 
been based in both countries 
since 1949, watching over a 
tense ceasefire line which cuts 
through Kashmir after the two 
neighbours fought two wars 
over the Himalayan state. No 
reaction from TJNMQGIP was 
immedia tely available. 

mutant sources said Harak- 
atnl Ansar «!«* wanted jour- 
nalists to be present at the 
release of Housego, 16, and 
Mackie, 36. Kim Hoosego’s 
fatw David, who met the kid- 
nappers last week In the 
mountains where the abduc- 
tion took place, said on Satur- 
day they assured him the pair 
were safe and would be freed 
in Srinagar, Kashmir's sum- 
mer capital. They did not say 

LDP and SDP join forces I Nuclear arms admission stirs Tokyo row 

pressure on 
Hata grows 

By WBBem Dawkins In Tokyo 

The Japanese government is struggling 
to contain a controversy provoked by 
Prime Minister Tsutoma Hata’s official 
acknowledgment that Japan has the 
capacity to make nuclear weapons. 

Mr Bata’s remark, in reply to a par- 
liamentary question, drew an instant 

. of prising if it could not make an Buck* 

confidence against the minority coali- P^ed ffiSTth* 53r»*« Mr Waft 

Hm, firs* nuhite nacnznltfcm that not owning, making or al s nwnt created enough of 8 stir for Mr 

tion. This first public recognition that 
Japan is able to make nuclear bombs 
challenges a taboo imposed by Japan's 
wartime experiences and Its neigh- 
hours' suspicions - repeatedly denied - 
that it might develop nodear weapons 
in res pons e to a serious threat 
Mr Hata said that Japan had the 

_jt owning, making or allowing — *~“T enough of a stir for Mr 
toport or nudeor weapons. m roshl Kumngat. the gowmrrteat 

eiS DemwiaS: party. said: ■*» ^gSSSSSST “ “ ' 
the prime minister make such com Kumttgai stressed Japan’s 

men ts when every nation is unshaken adhcnsnfio to ite ixm-nnetaar 

efforts to resolve North BnA» JggM/S said Japan’s wT* 
pected nuclear weapons development jnncp m Mmlted to v9acaitA 

Earlier promises to free the 
Britons have fallen through, 
with the militants objecting to 
what they say is Indian mili- 
tary activity in the area. 

The Indian government is 
sensitive about UNMOGIP*s 
role, saying it has no mandate 
to observe a four-year-old 
uprising against Indian rule in 
the Moslem majority state. 

UNMOGIP officers were 
turned away when they tried 
to act as neutral observers to 
an army siege last October at 
Kashmir’s holiest Moslem 
shrine, where militants and 
some civilians were holed up. ! 
The miHfamte emerged peace- 
fully after a month. 

The kidnap has been widely 
condemned by other militant 
groups who see it as bad pub- 
licity for their uprising, in | 
which more than 16,000 are 
reported to have died. 

By UflBam Dawkins In Tokyo 

, Japan’s two main opposition 
parties have joined forces to 
step up pressure on the fragile 
eight- week-old minority gov- 

The Liberal Democratic 
party and Social Democratic 
. party have overridden govern- 
ment protests to summon for- 
mer prime mTwister Mr Mdri- 
hiro Hosokawa to testify before 
parliament tomorrow over alle- 
gations Of financial impropri- 

Mr Hosokawa resigned In 
April because of LDP pressure 
to divulge details of loans from 
a gangster-linked parcel deliv- 
ery company. 

The opposition hopes the 
hearings will embarrass the 
ruling coalition and increase 
the pressure for a vote of no- 
confidence. The LDP and SDP 
are internally divided, but if 
they can agree on the confi- 
I dance issue, a vote could hap- 
pen some time after this year’s 
I long overdue budget passes the 
upper house of parliament. 
This is expected on Wednesday 
or Thursday, and before the 
parliamentary session ends on 
June 29. 

Mr Tsutoma Hata, the prime 
minister, said over the week- 
end his cabinet would resign to 
pave the way for the formation, 
of a new government rather 
than call a general election if a 
no-confidence vote suoceeded. 
In that event a new coalition 
would probably include mem- 
bers of the LDP and SDP, 
Japan's traditional government 
and opposition respectively for 
38 years until last July. 

A majority of members of 
parliament signed a petition 
last week opposing a snap elec- 
tion for tear of delaying popu- 
lar plana to reform the elec- 
toral system. 

This latest political tremor 
comes at an inopportune tune 
for Mr Hata because his hands 
are already full with urgent 
international business. Fresh 

Margined Foreign Exchange 

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talks with the US to resolve 
the trade deadlock are in full 
swing and the North Korean 
crisis is barely under control. 
Mr Bata’s team Is also working 
hard on a deregulation and tax 
reform package for presenta- 
tion at the Group of Seven 
industrial nations' summit in 
Naples early nest month. 

Mr Yohei Kono, the LDP’s 
president, is planning to meet 
Ur Tomiichi Murayama, his 
Socialist counterpart, this 
week to seek support for a no- 
confidence vote. 

It is not yet clear, however, 
whether the two opposition 
leaders have the support of 
their party ranks, which are 
split on whether to accept or 
reject coalition overtures to 
join the government 

Mr Kono is out of line with 
such powerful LDP elders as 
former prime minister Mr 
Vas u him Nakasone, and for- 
mer foreign ministers Mr 
Mi rhin Watanabe and Mr Hiro- 
shi Mitsuzuka. They want to 
negotiate a wide and stable 
aiHanog of centrist politicians, 
not unlike the LDP before it 
started to fragment last sum- 

Such an alliance would best 
suit the current political situa- 
tion, Mr Nakasone said on a 
visit to Washington last week. 
Indeed, Mr Watanabe was 
reported in the Japanese press 
to have presented plans for a 
new coalition including the 
LDP to Mr Ichiro Ozawa, the 
coalition’s backroom strategist 

The SDP’s left wing ironi- 
cally supports uniting with the 
conservative LDP to bring 
down the government Yet the 
Socialists’ right wing repre- 
sented by Mr Watarn Kobo, the 
party's second in command, 
still hopes to rejoin the ruling 
coalition without LDP help. 

In the meantime, Mr Ozawa 
is making use of remaining 
LDP and SDP hesitation over 
launching a no-confidence 
vote, to seek an alliance with 
members of both camps. 

u mueniary qu rauuu, unsw an ubuum ^ ****** »«■* - 1T niTin?** »»»" -rr 

attack from the opposition Liberal Dem- capacity to make nuclear weapons but progranun^" heatins technological purposes, regardless of whether tt could 
ocraticta^.whSlStosarecoBsid - hadnot donewbeouseof SSETJS.pons. 
ering whether to launch a vote erf no- non-proliterattan treaty and the self-inx- achievements mrgn 

Carter solution awaits the test of time 

Questions remain on North Korean nuclear issue, writes John Burton 

T he next tew weeks are 
likely to determine if 
former US President 

T he next tew weeks are 
likely to determine if 
former US President 
Jimmy Carter’s trip to Pyong- 
yang has produced a possible 
solution to the North Korean 
nuclear dispute or whether it 
will prove to be another diplo- 
matic mirage. 

The essence of the proposed 
agreement, which Mr Carter 
reached after two meetings 
with North Korean President 
Kim D-sung last week, is a 
pledge by Pyongyang to freeze 
its nuclear programme if the 
US holds another round of 
high-level on possible dip- 
lomatic recognition and agrees 
to help supply North Korea 
with safer light-water reactors. 

If the deal is concluded, it 
would prevent North Korea 
from possibly building more 
nuclear devices but leave 
unanswered the question, for 
the time being at least, of 
whether North Korea has 
already acquired one or two 
atomic bombs as claimed by 
US Intelligence. 

“AH of the agreement will be 
confirmed through official 
channels, which might take 
several days, but I think that 
the crisis which was possibly 
approaching war has been 
defused,” said Mr Carter before 
returning to Washington to 
meet administration officials. 

“We think we should explore 
this,” Mr Anthony Lake, US 
national security adviser, told 
Cable Network News. “In the 
meantime, we will continue 
with the [United Nations} Secu- 
rity Council on our consulta- 
tions for a sanctions resolu- 
tion." North Korea also asked 
for a security guarantee from 
Washington that It would not 
be subject to a nuclear attack 




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A winuMd ifiridrad of 8M2 pteGaraSra 
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Hftta tescteBfll te mrisl ngkK baOUn&nsfly sad ekstn*. Dm 
tfeUw&mpmabngueBfn jMU® nEn|pA.iiiB 9 bBtKtnnd nm 

i lor tbs pnraais al 

-^'>****3, j ft 

Eelk of a former Korean conflict: a boy at Seoul War Museum yesterday touches the gun barrel of 
a Soviet-made North Korean tank 

by the US or other countries. 

“I was authorised to say that 
in the context of the North- 
South [Korean} declaration on 
denuclearisation, that the US 
will be willing to join in on 
such an assurance^” Mr Carter 
said on Saturday in Seoul after 
returning from Pyongyang. 

Mr Carter’s statement 
suggested North Korea must 
adhere to tbe 1391 denuclearis- 
ation agreement with Seoul in 
return for the US non-nuclear 
guarantee. Tbe a greement has 
not been implemented, thanks 
to disagreements between the 
two Kbreas on some of its pro- 
visions, including mutual 
inspections. North Korea has 
sought inspections of US mili- 
tary bases in South Korea as 
part of the agre em ent, while 
Seoul wanted to conduct 
inspections of suspected 
nuclear facilities In the North. 

Mr Carter indicated the US 
was willing to accept North 
Korean inspections erf Us mili- 
tary bases to assure Pyong- 
yang that it was not storing 
tactical nuclear weapons. 

One issue that remains to be 
answered is how long the 

North’s freeze would last on its 
nuclear activity, including sus- 
pending the operation of Its 
5MW reactor. 

Mr Kim said that he would 
freeze his country's nuclear 
activities only while there 
were talks between Pyongyang 
and Washington on dlpfannatic 
recognition, but added that the 
freeze would be extended “if 
there is an assurance of light- 
water reactor technology being 
available to North Korea". 

But Mr Cuter said it was 
"unclear" whether North 
Korea would suspend nuclear 
activity for the five to eight 
years it would take to build a 
light-water reactor. 

Another unresolved issue is 
whether North Korea would 
suspend the construction of its 
much bigger 50MW and 200MW 
reactors, expected to be com- 
pleted in 1995 and 1998 respec- 
tively, that could produce con- 
siderable amounts of 
weapons-grade plutonium. 

The replacement of the 
North's current gas -coo lied, 
graphite-moderated reactors 
with light-water ones would 
curb its ability to produce 

weapons-grade plutonium and 
force Pyongyang to rely on out- 
side sources for its reactor fuel 
The US last year expressed 
support for North Korean 
acquisition of the light-water 
reactors but added it would not 
supply the technology and 
finance the estimated $3bn 
cost. Mr Kim "understands 
that the US itself is not pre- 
pared to finance or furnish the 
equipment", Mr Carter said. 

One noticeable gap in the 
deal outlined by Mr Carter is 
whether Neath Korea is willing 
to accept full Inspections 
demanded by the international 
Atomic Energy Agency to 
determine if Pyongyang 
diverted plutonium from its 
5MW reactor In 1988 to build 
one or two nuclear devices. 
The disagreement over IAEA 
inspections triggered the 
nuclear dispute IS months ago 
North Korea has blocked 
complete IAEA inspections, 
possibly as a negotiating ploy 
to gain US diplomatic recogni- 
tion. Mr Carter expressed his 
support for US diplomatic rec- 
ognition of Pyongyang, while 
calling the threat (rf UN sanc- 

Mr Andrei Rosy rev, Ut« 
Russian foreign minister, 
claimed at the weekend that 
North Korea did not yet hma 
nuclear bomb and quoted 
-experts* as saying ft woaM 
take the former Soviet ally 
three to seven years te develop 
one. Leyla Boulton reports 
from Moscow. 

Mr Kozyrev seemed to Mat 
his information came frna 
Russian InteHlgenee when be 
cited "all the sources of 
information reaching Bfoecow 
and not just the Foreign Wale 

While reiterating critidu 
of the US for falling to consult 
Moscow on Its proposals for 
phased sanctions erf inrre— lu| 
severity against P yong y an g . 
he said there was to point ta 
rushing ahead with then 
because China would vote 
them In the Security Con 

However he warned tint 
sanctions against the fcaitiBas 
Communist state wore “tiiwE 
table" If It persisted la tap- 
ing the international Aftwte 
Energy Agency In the dark 
about its nuclear program 
He also criticised wind he 
called the Russian pnrtta* 
meat's "North Korean toNq". 

tlons against North Korn 

Mr Kim promised that two 
IAEA inspectors could remain 
at the North's nuclear compter 
at Yongbyon to verify that 
Pyongyang was not reprocess- 
ing and extracting plutonium 
from spent fuel rods recently 
removed from its 5MW reactor. 
The US had feared North 
Korea would use the absence 
of inspectors to reprocess the 
plutonium to build four or fire 
nudear devices. 

The US has refused to hold 
recent talks with North Korea 
until it accepted routine IAEA 
inspections of its nudear CnciU- 
ties. But It would appear under 
the Carter proposal that the US 
might agreed to discuss the 
IAEA Inspection procedures as 
part of the negotiations with 
North Korea in return for 
Pyongyang stopping the dock 
on its nudear programme. 

Government officials in 
Seoul expressed cautious opti- 
mism about Mr Carter’s pro- 
posals. They had expressed 
concerned that North Korea 
was using the talks as another 
ddaying tactic. 

Pyongyang’s charm offensive 



By John Burton 

The North Korean nuclear 
dispute has not diverted the 
Pyongyang media from report- 
ing other weighty matters, 
SQCh as the fifth rang -r frgg of 
the North Korean Juvenile 

The 3m children, age seven 
to 13, who are members of 
North Korea's version of the 
scouts and guides, were called 
upon to serve and protect their 
“graceful father" and Dear 
Leader, Kim Jong-il, the son 
and designated successor to 
the Great Leader, President 
Rim El-sung. 

“Away from his side, mem- 
bers of the corps are not able 
to be happy or even laugh,” 
declared Mr Choe Ruong-hae, 
the league’s head, as quoted by 
the (North) Korean Central 
Broadcasting Station. 

“If the 3m members of the 
Juvenile Corps, like the fan 
(older) members of the League 
of Socialist Working Youth, 
become guns and bombs, there 
will be no power to beat them," 
he added. 

In explaining the importance 
of tbe juvenile congress, Choi- 
Inna, a monthly magazine, 
noted that the Soviet Union 
and east European socialist 
countries had collapsed 
because the "third and fourth 
generations of the revolution 
spoiled" the revolution's 

"To complete the great casks 
oE socialism in North Korea, 
the rising generation must be 
educated to become a revolu- 
tionary successor loyal to Kim 
Jong-il,” the magazine 

The education campaign for 
revolutionary successors 

How the North Koreans portray their future leader, an official 
picture of Kim Jong-il, the Dear Leader 

includes such stimulating tele- 
vision programmes as a quiz 
show which questions children 
on the achievements and say- 
ings of the junior Kim. 

The forthcoming transfer of 
power from the 82-year-old 
Great Leader to the 52-year-old 
Dear Leader is a dominant 
theme of the North Korean 
state-controlled media. That is 
when reports are not condemn- 
ing “American, imperialists and 
their South Korean puppets” 
and, lately, the "International 
Atomic Energy Agency pup- 

"It is my great pleasure to 
see that Comrade Kim Jong-il 
is respected, loved and praised 
by the people as the leader to 
continue the revolutionary 

tasks,” KCBS recently quoted 
his father as saying. 

The junior Kim is portrayed 
in the west as spoiled and 
unbalanced, with a taste for 
foreign women and Hollywood 
movies. He appears to have an 
Image problem in North Korea 
as well, according to defectors. 
While his charismatic father is 
respected, the public blames 
his pudgy son for the country's 
mounting economic problems. 

The rhetorical overkill dis- 
played by the North Korean 
media on the nuclear dispute, 
wth its threats that Seoul will 
taste “the flame of war," may 
bean attempt to create a crisis 
atmosphere at home that will 
suppress public discontent 
over the worsening economy 

and unite support behind the 
junior Kim. 

Listeners are continually 
reminded by KCBS of his “mili- 
tary groins” and told that be 
“began to teach the North Kor- 
ean People’s Army as early as 
in 1963, when he was 21 years 
old, to make It the strongest in 
the world.” 

Kim junior’s support within 
the military is believed to be 
questionable, leading to specu- 
lation that the army might 
overthrow him in a coup once 
his father dies. Kim senior rose 
to power after his guerrilla 
activity against Japanese colo- 
nial rule in the 1930s, but his 
son is distrusted by the army 
because he lacks military expe- 

There is consequently great 
emphasis placed by the media 
on the Kim Jong-ll's relations 
with the military os teacher 
and guide. The media also 
warns North Koreans, isolated 
from foreign sources of Infor- 
mation, that things aro much 
worse in tim former Socialist 
countries that have chosen 

“The world Is in a food crisis. 
Especially, tbe soil in Russia, 
the Ukraine oral Hungary has 
become desolate due to the pri- 
vate ownership of land, result- 
ing in worse food conditions 
facing these countries,” said 
Sodong (Labour) S&mmun, the 
newspaper of the ruling Kor- 
ean Workers' party, hi appar- 
ent attempt to console North 
Koreans who are suffering food 

Mr Kim Jong-il no doubt is 
hoping that propaganda often* 
stve on his behalf will succeed 
and enable people to continue 
singing what KCBS says is the 
country’s most popular song. 
"Without you, there will bo no 

/-Mil' 1 






China warms to 
Hong Kong task 

Beijing is talking of improved relations 
with the UK, writes Simon Holberton 

Paris shrugs off Rwanda threat 

O ne of Hong Kong’s few 
remaining colonial 
mansions, painstak- 
ingly restored to its full 19th- 
century splendour, is the 
venue this week for a test of 
whether an apparent thaw in 
Sino-British. relations is real or 

A three-day meeting begins 
tomorrow at 28 Kennedy Road, 
in Hong Kong’s fashionable 
mid-levels district, of the Sino- 
British Joint Liaison Group 
(JLG), the body established to 
oversee the nitty gritty of 
Hong Kong’s reversion to Chi- 
nese rule in 1997. 

The meeting - the 29th JLG 
since 1985 - comes at a itmt» 
when Hong Kong has been 
encouraged to hope for an end 
to the political stand-off which 
has held up a critical revision 
of the colony’s law, and vital 
infrastructure projects such as 

a container te rminal and new 

Since the spring Beijing has 
been sending signals that 
China wants to get back to 
business with Bri tain and 
resolve outstanding issues 
about Hong Kong The stron- 
gest Indication came last week 
with a report that Mr Qian 
Qiehen, China’s foreign minis- 
ter, had spoken of the need to 
“correct and improve” rela- 
tions with Britain. 

On Thursday, the Chinese 
Foreign Minis try, while declin- 
ing to confirm Mr Qian's 
remarks made last Tuesday to 
a visiting group of Hong Kong 
trade unionists, said: “The Chi- 
nese side hopes that the diffi- 
culties on the question of Hong 
Kong will not affect ties 
between the two countries in 
other areas” 

The most compelling expla- 
nation for China’s apparent 
change of heart is self-interest 
At the end of this month there 
will be just three years to go 
until China resumes sover- 
eignty over, and responsibility 
for, Hong Kong, and much 
Deals to be done. 

According to a senior Hong 
Kong government official. Bei- 

jing’s appreciation of the dif- 
ficulties of achieving a smooth 
transition without active Brit- 
ish assistance is be ginning to 
override hostility towards Gov- 
ernor Chris Patten and his 

Negotiations for the financ- 
ing of the colony's HK$l5&2bn 
(£13.6bn) airport project, con- 
ducted in earnest for the past 
two months after earlier 
delays, may have now oxtered 
thg Anal phase. 

Hong Kong 
activists believe 
Patten and the 
UK government 
lack the stomach 
for a fight 

China ft as promised a meet- 
ing of the Sino-British commit- 
tee to discuss allport finance 

before the and of the month 
The Hong Kong government 
last week said it would go to 
the Legislative Council (LegCo) 
on July 1 for HK$l5bn of finan- 
cing to build the airport termi- 
nal and runway. 

Both sides say their differ- 
ences are smalL But a possible 
snag is that the Hming for the 
meeting on the airport may 
coincide with a LegCo vote on 
June 29 on Mr Patten’s democ- 
racy legislation. However there 
are signs that Beijing has put 
the row about Hong Kong poli- 
tics behind it and wants to 
move on. 

Hong Xnng government offi- 
cials have also been heartened 
by China’s request that the 
development of the colony’s 
container ter minal be included 
on the agenda for this week's 

Approval for both projects 
was held up pending the out- 
come of bilateral talks about 
Hong Kong’s political develop- 
ment These talks ended last 

year with Mr Patten going it 
alone. China has always said it 
is concerned about Hong 
Kong's prosperity and stability, 
a riaim which would be diffi- 
cult to sustain if it continued 
to hold up projects vital to 
Hong Kong’s economic well-be- 

Although many signs of 
improvement can be identified 
there are, as yet, no agree- 
ments. Indeed, an accord on 
the issue of military land, 
which the UK had hoped to 
sign at fids week’s JLG meet- 
ing, dissolved before British 
negotiators' eyes a month 

The Hong Kong government 
had undertaken to build and 
outfit a naval base large 
enough for a modem aircraft 

But Chinese negotiators 
have demanded a large 
increase in the naval base’s 
size and also want to keep a lot 
of the military land which they 
had previously agreed to 
return to the gnv p mmfint 

hi spite of the setbacks, the 
UK has attempted to encour- 
age a more moderate line from 
Beijing by avoiding policy mea- 
sures which might anger 


As one Foreign Office official 
put it: “In my judgment, the 
community is thoroughly fed 
up with confrontation. It is 
much better to slow things 
down and ftawiTi* thp essentials 
in a steady way.” 

Over the past month, and to 
the disenchantment of pro-de- 
mocracy groups in Hong Kong, 
Mr Patten has rebuffed calls 
for a freedom of information 
law, a human rights commis- 
sion, and visas for two leading 
Chinese dissidents wanting to 
speak at a meeting commemo- 
rating the June 1989 Tianan- 
men massacre. 

Some officials claim that the 
confluence of these events was 
simply coincidence, but democ- 
racy activists believe that Mr 
Patten and the British govern- 
ment do not have the stomach 
for a fight 

By John RidcBng In Paris and 
LesSe Crawford In Nairobi 

France is seeking rapid United 
Nations approval for its plan to 
send forces to the Rwandan 
border as part of a humanitar- 
ian mission despite a warning 
from Rwandan rebels yester- 
day that they would regard 
French intervention as hostile. 

Paris Is hoping for the 
go-ahead from the UN security 
council today or tomorrow, 
government officials said yes- 
terday. President Francois Mit- 
terrand said France wanted to 
send forces to Rwanda without 
waiting for the formation of a 
frill UN force. “Increasingly 
savage fighting is taking place 
and one can no longer wait 
This is a matter of great 
urgency," he said. 

The decision to send forces 
to support a humanitarian 
effort in Rwanda’s civil war 
was announced in a joint state- 
ment on Saturday from the 
offices of President Mitterrand 
and Mr Edouard Balladur, the 
p rimp minister. The statement 

said that the operation would 
be limited to the transitional 
period before the arrival of a 
larger UN force to support the 
existing 450-strong UN Rwan- 
dan mission. 

Senior French defence offi- 
cials met last wi ght to Hbaniga 
details of the operation. A gov- 
ernment spokesman declined 
to comment on how and where 
the French forces might oper- 
ate. But he s^ id that the dis- 
patch of French troops was 
conditional on UN approval 
and on the participation of 
other countries. 

Mr Francois Leotard, the 
ripfpnra minister, raled out the 
possibility that France would 
go it alone. Mr Alain Juppe, 
file foreign minister said, how- 
ever, that he had received a 
commitment from Seneg al to 
send troops. 

French officials said a few 
other African countries had 
also responded favourably to 
French requests for support. 
Among European countries, 
however, only Italy has said it 
might send troops to support a 

humanitarian effort 

According to Mr Juppe, 
French troops could be sent to 
the Rwandan border as early 
as this week or next week. Offi- 
cials in Paris indicated the 
forces could amount to 
between 1,000 and 2JJ00 troops. 

Rwanda’s rebel leaders yes- 
terday warned France to keep 
out of the country, saying they 
would regard a French-led mili- 
tary intervention as hnstfla. 

The Tutsi-dominated Rwan- 
dan Patriotic FTOnt (RPF), said 
France’s “ humani tarian’* ini- 
tiative was a pretext to deny 
the rebels an outright victory 
against the Frencfranned and 
French-trained government 
forces in Rwanda. 

“The French are not a neu- 
tral party to this conflict,” Mr 
Carlos Mngambage, an RPF 
spokesman, said from the capi- 
tal, Kigali. “They are partly 
responsible for the chaos and 
massacres in Rwanda. Their 
presence would only compli- 
cate the situation here.” 

In Kigali yesterday heavy 
fighting erupted and a Red 

Cross worker was killed when 
a hospital complex in the gov- 
ernment-held city centre was 
hit by a mortar bomb. 

The rebels’ hostility towards 
France is based on material 
and financial support Paris 
gave to the government of Gen 
Juvenal Habyarimana, a mem- 
ber of the majority Hutu tribe 
and Rwanda’s military leader 
imHi his death in &q aircraft 
crash on April 6. When the 
RPF launched its civil war in 
1990, France bolstered Gen 
Habyarimana's crumbling 
army with military advisers, 
weapons, armoured cars and 
helicopters. It also sent more 
than 300 French troops, osten- 
sibly to protect the foreign 

Paris darrias its forces taught 
the guerrillas, but several inde- 
pendent reports speak of 
French soldiers manning road- 
blocks and helping government 
troops defend the frontline. 

Mr Juppe said he hoped to 
convince the RPF that the 
French operation would be 

exclusively humanitarian . 





By Sarfta Kendafl and 
agencies in Bogota 

Both candidates in the second 
round of Colombia's presiden- 
tial elections yesterday 
launched intensive television 
publicity campaigns tied to the 
country's much-revered World 
Cup soccer team. But in the 
wake of the team’s 3-1 defeat 
by Romania on Saturday night, 
such populist efforts to rouse 
voters appeared to have fallen 

Outgoing President CSsar 
Gaviria, who is barred by the 
constitution from seeking re- 
election, opened voting early 
yesterday in central Bogota 
reminding Colombians or their 
duty to vote despite the disas- 
ter on the football field. 

“I think citizens know that 
voting is not just a right but 
also an obligation and the deci- 
sion which is being taken 
today is too important to be 
left to one side for lesser rea- 
sons,” Mr Caviria told report- 
ers after casting his ballot 

Opinion polls give the gov- 
erning Liberal party candidate, 
Mr Ernesto Samper, and the 
Conservatives’ Mr Andres Pas- 
trana identical percentages of 
the vote, hi the first round, Mr 
Samper and his vice-presiden- 
tial candidate, Mr Humberto de 
la Gaito, had an advantage of 

18.000 votes but did not win the 
necessary overall majority. 

However, television news on 
Saturday barely mentioned the 
elections, dedicating virtually 
their whole bulletins to 
exhaustive coverage of the 
World Cup. Mr Samper and Mr 
Pastrana toured more than a 
dozen cities in a final dash for 
votes but the 17m registered 
voters hardly noticed amid the 
torrent of football news. 

Most of the 16 other first 
round candidates have told 
their followers to choose as 
they please between the two 
remaining candidates, though 
General Miguel Maza, with 

55.000 votes, joined the Samper 

Despite minor guerrilla inci- 
dents - innhidhig the kidnap- 
ping of some officials - voting 
started quietly yesterday. 

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World Bank report 

By George Graham b> 

■ - - 


Ike World Bank is raging a 
complete reorientation of pot 
icy cm Infrastructure provision 
in developing countries, to 
shift the focus from building 
new roads, electricity plants 
and water pipelines towards 
ensuring such installations 
provide the service they were 
designed for, 

An extensive analysis of 
infrastructure issues in the lat- 
est edition of the World Bank’s 
annual world development 
report shows about $ 200 hn 
(n&Zbn) a year of infrastruc- 
ture investment in developing 
countries has greatly increased 
access to electricity, sanitation, 
paved roads, telephones and 
water. But inefficiency and 
poor maintenance have meant 
that money is wasted and ser- 
vice is patchy. 

"The report’s main message 
is clear: there has been too 
much **mphasfR on the stock of 
infras tr ucture built and not 
enough on the service pro- 
vided,' 1 said Mr Lewis Preston, 
flze World Bank’s president 
“The emphasis everywhere 
must be less an cutting ribbons 
to open new facilities and more 
on ensuring that those facili- 
ties deliver the intended ser- 
vices," he added. 

The report notes that spend- 
ing (lm to reduce the very 
high losses of electricity in 
transmission and distribution 
networks could save some Afri- 
can countries $l2m in generat- 
ing capacity, while the propor- 
tion of water delivered to the 
field in irrigation projects is 
typically only 25-30 per cent, 
compared wth 4045 per cent In 

the most efficient prefects. 

World Bank highway pro- 
jects primarily involving main- 
tenance produce returns that 
are almost twice as high as 
those concentrating on new 
road construction. But almost 
$13bn worth of roads -one 
third of those built in the last 
20 years - have eroded for lack 
of maintenance. 

Overall, the World Bank esti- 
mates that technical ineffi- 
ciency such as leaking water 
pipes, electricity transmission 
losses and railway overstaffing 
costs the developing world 
$55bn a year. In addition, it 
calffliTfltoc that inefficient pric- 

ing structures that fail to 
recover costs fully from users 
cost developing country gov- 
ernments ?123bn a year. 

These inefficiencies cause 
great hardships not only for 
the very poor but also for busi- 
nesses, the report says. 

A study in Istanbul showed 
♦hat, nearly all households used 
back-up water supply systems 
such as wells, rivers and street 
vendors because of the unrelia- 
bility of publicly supplied 
water. For the poorest house- 
holds, however, these back-ups 
cost 5 per cent of total income, 
while for the richest it was 
only 1 per cent 

attacks inefficiency 

Another survey of 179 busi- 
nesses in Nigeria showed that 
more than half owned electric- 
ity generators, an expense 
which amounted to around 10 
per emit of the total machinery 
and equipment for the largest 
companies but as much as 25 
per cent for the smallest Yet 
because Nigerian regulations 
prevent the sale of surplus 
power, they operated their gen- 
erators on average at no more 
than 25 p a cent of capacity. 

While efficiency of operation 
is typically much higher in 
industrialised countries, the 
report argues that there is 
nothing inevitable about this. 

M AhJinng fi the av ailahilify of 

infrastructure facilities does 
increase in step with national 
income, the efficiency and 
Quality of service delivered is 
relatively independent of 
income - that is, low income 
countries can be (and in nota- 
ble cases are) good performers, 
while chronic waste and in effi- 
ciency can be found among 

thMiUp and even high income 
countries." said Mr Gregory 
Tn grom, who headed the team 
that wrote the report. 

The report suggests three 
ways in which service can be 

■ manag p infrastructure like a 
business, not a bureaucracy 

■ introduce competition 
directly, if feasible, and indi- 
rectly If not 

■ give users and stakeholders 
a strong voice and real respon- 

Analysing 42 developing 
countries the report found that 
in those with centralised road 
maintenance systems one third 
of unpaved roads and more 
than 20 per cent of paved roads 
were in poor condition; in 
countries with decentralised 
maintenance systems only 15 
per cent of unpaved roads and 
a little over 10 per cent or 
paved roads were in poor con- 

Another study of 121 rural 
water supply projects in 

Africa, Asia and Latin America 
showed that of those where 
p yj-Hripation by the focal pOpU- 
lation was classified as high. 83 
per re n t had good mainte nance 
levels and 81 per cant were 
graded as effective in achiev- 
ing their goals. Of those where 
partidpatian was low. 23 per 
cent had good maintenance 
levels only 8 per rent were 
graded as effective. 

While non-governmental 
development groups applauded 

the World Bank’s call for more 
ftgphiMris cm mntnfrmy" 0 ? and 
for greater user participation, 
they said that the Bank itself 
was part of the problem. 

“What proportion of Bank 
infrastructure lending goes to 
maintenance? There is no fig- 
ure in the report," said Mr 
Paul Spray, bead of policy at 
London-based Christian Aid. 

The emphasis on improving 
infrastructural service rather 
than expanding the stock of 
infrastructure contained in the 
world development report ech- 
oes a theme which has been 
repeated in World Bank inter- 
nal analyses in recent years; 
most notably in the Wapen- 
report, which found an 
alarming deterioration in the 
success rate of Bank projects 
and attributed it in part to an 
in-house culture that rewarded 
officers more for the volume of 
new loans they arranged than 
for the success with which 
they followed through on pro- 

World Development Report 
1991: infrastructure for develop- 
ment Published bp Oxford Uni- 
•oersity Pms for World Bank, 
1819 H Street NW. Washington 

Economic Eye. Page 22 

Zedillo hails 

departure of 
Chiapas envoy 

By Damten rrae ar 
in Mex i c o City 

Mr Ernesto ZediUo. 
presidential candidate of 
Mexico's ruling party, baa wel- 
comed the resignation of Mr 
Manuel Camacho, former peace 
commissioner in the Mexican 
state of Chiapas, although to 
has strongly dented any 
responsibility for it 

Mr Camacho resigned last 
week after accusing Mr ZodSHo 
or deliberately undermining 
bis efforts to secure peace fax 
Chiapas. The resignation qua* 
just a few days after Zapatista 
rebels formally rejected the 
government peace offer for 
Chiapas, and has raised coo* 
cere of a resumption of vio- 
lence there before or after the 
August presidential ejection. 

Far from showing any regret, 
Mr ZediUo said Mr Camacho’* 
departure was the right deci- 
sion for the country. He denied 
that bis description of Mr 
Camacho’s peace efforts as a 
"failure" played any part to the 
resignation, claiming Mr 
Camacho had already made up 
bis mind to leave before the 
Z a p ati stas rejected the govern- 
ment peace offer. 

The Zapatistas launched a 
rebellion in Chiapas on new 
year’s day, demanding greater 
rights for the indigenous popu- 
lation and more democracy. 

Mr ZediUo’s continued stripes 

at Mr Cama cho fedtaate that 
to may be seating to fetish iff 
a poetical rival who has never - 
ratal Gn gnwaDQU tmot- 
ttons. and short tip support 
among the conservative. 
KKaHsd hardline wtog of the 
irrifng institutional Benatatktn- 
ary party, who have long 
opposed the reformist Mr 
Camachok and My 
further democratic opretag. 

Bn* the strategy ton opened 
up Mr ZediUo to crttkritms, 
tarn the oppos itio n, who hare 
accused him of obstructing the 
peace snow in Chtapa*. ifr 
ZediUo may tore attsnated Mr 
Camacho’s aup ports ra and pa* 
s&ly angered Prnddrat Cute* 
Salinas, who has strongly 
backed Mr Camacho's peace 
efforts and puhtidy pra ised 
him after he rationed. 

Nevertheless, any senort- 
ers of Mr Zedffio baton that 
Mr Camacho’s w ithd r a wal - 1 
from the national stage may 
help over the coating mouths. 

Party officials were hunts- 
lngly concerned that Mr - 

Camacho ms ii»w hw n h i|M uj* 

ZedlBo’a presidnntUd frkf by 

and campaigning for demo- 
cratic reforms. U a similar 
way earlier this year Mr 
Camacho’s peace efforts in 
Chiapas had overshadowed the 
campaign of Mr BmbMb 
C otosto, the stott prasfdsotial 
candidate of the P8X. 


Spain and Bolivia hit by 
two-game red card bans 

A language with many accents 

Jubilant Irish fans leave Giants Stadium near New York after their team’s 1-0 win over Italy on Saturday no imm> 
“They've always played it," says 

Spanish captain Miguel Angel 
Nfcdal and Bolivian star striker 
Mura Antonio Etcheverry were' 
both suspended for two matrihpg 
yesterday after being sent off in 
their teams’ opening World Cup 

The ban means both win miss 
their remaining two first-round 
group matches. Both countries 
were also fined $3£00, the mini 
mum automatic fine. 

Etcheverry was sent off for vio- 
lent conduct tear minutes after 
coming on as a substitute during 
Bolivia's 1-0 defeat by Germany 
in tile opening game. As a result, 
Ms World Cup is unlikely to last 
beyond those four minutes: 
Bolivia are given little chance of 
advancing to the second round. 

Nadal was dismissed for serious 
foul play when he felled a South 
Korean attacker on the edge of 
the box 25 minutes into Spain’s 
2-2 dra w in Gro up C. 

The disciplinary committee of 
Flfa, soccer’s governing body, 
decided that in principle a direct 
expulsion will lead to at least a 
two-match suspension. General 
secretary Sepp Blatter also said 
that all teams wav being warned 
to observe rules on shirt advertis- 
ing after Germany, Switzerland 
and Romania all breached rules 
in the opening two days. 

FUx added that if a player was 
sent off for two yellow-card 
offences, he would receive a one- 
match suspension. 

Brazilian targets 

When Russians speak of their 
World Cup opener against Brazil 
in San Francisco today, they say 
that shutting down Romario and 
Befceto Is their m a i n concern. Bra- 
zil’s two high-powered scorers 
seem like a nightmare to the Rus- 
sians. Between them, they have 
scored 55 goals for Brazil's 
national side. 

The Russians say a point 
n gulmd: B raril — thpi tournament 
favourites - would give them a 
chance of qualifying for the 
second round by helping them fin- 
ishat least second In Group B, 

■ Bowrite 


Brigtmn 1 Morocco _..Q 

1 Today's game* 


Brazil vs Rim fe 
Sen Frmdaeo ( 21 M BST) 


HoSand vs SaurSAoMa 

ahead of Sweden and Cameroon. 

Russian ca ptai n Viktor Onopko 
misses today’s game after a red 
card in a World Cup qualifier 
against Greece. 

A Dutch treat? 

The latest Fife world rankings 
show Holland at No 2 and Saudi 
Arabia in 34th place, which indi- 
cates a stroll for Holland today in 
their Group F opener in Washing- 
ton. The Dutch have been World 
Cup runners-up twice, whereas 
the Randte are n mi rfn g their first 
appearance in the finals. 

Hie Saadis' hopes may depend 
bn whether 35-year-old forward 
Mqjed Abdullah lives up to Ms 
nickname - the Pel6 of the Des- 
ert. "We are ready to surprise 
everyone hoe who doesn’t know 
about Saudi football,'' he said. 

Colombia upset 

Romanian striker Florin Radu- 
doiu scored one goal in each half 
as Romania surprised Colombia 
3-1 in a Group A game on Satur- 
day in Los Angeles. Many judges 
had tipped Colombia as title-wor- 
thy. Instead, Romania revealed 
doggedness in defence and a pri- 
mal appetite for goals. 

Colombia, rated as the best of 
the 24 qualifiers coming into the 
World Cup by Feld, the former 
Brazilian star, started well bat 
could not reassert themselves 
after going 2-0 down after 34 min- 
utes against a team that counter- 
attacks furiously. 

The US mid Switzerland drew 
1-1 in the weekend's other Group 
A game, at the Silverdome in Pon- 
tiac, Michigan - the first World 
Cup match ever played Indoors. 

Michael Shapiro 

on New York’s 
ethnic soccer 

dMbq ^rag | There are two kinds 
i to of people hoe who 
care passionately 
about the coming of 
the World Cup to 
America - the recently bam and 
the recently arrived. 

For the first group, and their par- 
ents, who were reared on little 
League baseball, soccer still repre- 
sents something exotic and there- 
fore a bit mysterious: "You mean, 
no timeouts for beer commercials?" 
Not so those whose forbears first 
played the game in distant places 
and later an the playing fie lds erf 
Astoria, Red Hook and Greenpoint 

Each represents a New York 
neighbourhood defined by ethnicity. 
Brooklyn’s Bensonhnrst has 
endured as at transplanted flaifon 
village for generations, while Flush- 
ing, in Queens, is, in its newest 
incarn a ti on , Korean and Chinese. 

Immigrants, needless to say, 
carry many thing s with t fr*™, some 
reviled by those who arrived before 
them, while others, music and food 
especially, are embraced - at least 
rm til something newer comes along. 

They also bring their games: 
cricket and field hockey to the 
Caribbean sections of Brooklyn, 
Gaelic football to Inwood, in north- 
ern Manhattan. But the games, 
unlike food and dress and odd bite 
of language and imiika the children 
who leave for the assimilated life, 
remain in the neighbourhood. 

New Yorkers have been playing 
soccer for 100 years. Not that any- 
one would necessarily know it out- 
side the neighbourhoods where the 
game has spawned some 250 local 

Now, with World Cup banners 
fluttering from midtowu light pedes 
and with World Cup traffic alerts 
posted all over town, this suppos- 
edly inclusive city is slowly begin- 
ning to discover that the game the 
rest of the world plays has been 
here all along. 

Frank Vardy, a city demographer 
and authority on local immigration. 
“Now they’re befog re i nforced by 
people from new countries." 

He refers to the present wave of 
immigration, the greatest the city 
has seen this century. The earKw 
tide was mostly European, the new 
one more from Asia and from cen- 
tral and south America. On any 
given weekend, the fields of Man- 
hattan's Central and Riverside 
parks are filled with men in meats 
and shorts, most speaking Spanish. 
Wives and children Unger nearby. 

T his ethnic cobesiveness paral- 
lels toe experience of those 
who came many years before 
and formed their own dubs with 
their own people, says Fritz Marth, 
administrator of the Cosmopolitan 
Soccer League. 

Over the generations, ethnic 
exclusivity has lessened. But that is 
a function of time.' The more 
recently established Albanian dubs, 
for instance, dominated by immi- 
grants from Kosovo, are homoge- 
neous, as are the Latino clubs. 

While the older dubs, like Gjoa, 
of Norwegian ancestry - one of 
whose directors goes by the name of 
Faddy O'Sullivan - endure as sport- 
ing and social clubs, the newer 
players bring with them the nation- 
alistic and ethnic passions recently 
tot at home. *T wouldn't like to be 
the referee," Marth said of matches 
between newly-arrived Serbs and 
the Croats who preceded them to 

Because immigrants have been 
coming to and through New York 
for so long, and because so many 
have written so eloquently about 
their experiences, a mythology 
about the city has evolved. Tike all 
myths, it is rooted in a hastily 
inflated version of the truth: in this 
case, that all who come here really 
want to become Americans, leading 
to (outward appearances aside) 
rapid and enthusiastic assimilation. 

In reality, a third of all immi- 
grants have, after some time, gone 
bade. Many are disappointed. Many 
never intended to stay. And many 
who remain never quite get used to 
the sound of America as home This 
means that almost any excuse 

to embrace the past will do. 

Italian restaurants, whic h for 
years hung portraits of the national 
team above their cash registers, 
now display hand-printed “Forza 
Azzurri" signs in their windows. 

It is modi the same in Irish pubs, 
where second- and tbird-genuatimi 
Americans, often only Irish on St 
Patrick’s Day, reaffirm their kin- 
ship with the young men who have 
recently arrived. looking for work 
in the bonding trades. 

The World Cup also comes to a 
New York caught in the midst of 
one of its most frenzied sportin g 
seasons in decades. The ice hockey 
Rangers have just won their first 
championship in 54 years and bas- 
ketball's Knteks have elbowed their 
way into the championship playoff 

It was always tough for soccer to 
compete, given national ignorance 
of the game. But that matters little 
in tiie city's “Second Little Italy” on 
Arthur Avenue in the Bronx, or in 
the Irish pubs of Woodside. in 
Queens. “It’s your team," says 
Vardy. “It's your country’s team.” 

Michael Shapiro is a writer Straw 
in New York. 

press greets 

The Rattan team ta staying la the 
US hot may have to leave the New 
York ana after Choir Utter 1-4 
defeat by Ireland ta thetr opening 
World Cup match at the weekend, 
lit soare eye*, Ireland’s perfor- 
mance stamped than as an authen- 
tic wwid soccer power. 

Italy’s teas jeopardised their 
dunces of ttataMng first fo Group 
B, and thus staying -in tire New 
York area for the second-round 
stage. The other member* of Group 
K, Norway red Merten, dashed ye*- 
terday in Washtngton. 

Kaftan player* and coach Arrigo 
Sacehl said they were already 
thinking of their next match - 
against Norway on Thursday. "All 
we can do now is win," said striker 
(ftnseppe Signori. 

Italy were overwhelmed bath an 
the field amt on the stands by the 
Irish, and suffered ta the heat and 

Sacchi noted that Norway are as 
physically tough as Ireland, sug- 
gesting that Italy face another diffi- 
cult test at Giants Stadium on 
Thursday. Norway knocked the 
Italian s out of the European cham- 
pionship two years ago. 

In Italy yesterday, the reaction 
was savage. “What a disaster. Sac- 
cMT said the headline in Gazzetta 
den Sport, typifying widespread 
frustration and anger with Italy** 
team and their coach. 

Ita lian soccer writers were scath- 
ingly critical of the team's lacklus- 
tre Play, and drubbed the compli- 
cated passing and attack strategies 
favoured by 

Oorriae della Sera described the 
result as a great disappointment, 
while Lo Repubblica said it was the 
red of Italy's World Cup dream. 
,4 Poor Italy," read the headline 
above a story calling the team 
against Ireland the worst 
Italy has ever produced. 

The b anne r headline of n Messay* 
aero, a Rome-based dally, said, sim- 
ply: "A small, small Italy.” 

We've had plenty' of 
practice tor the World Cup. 
It was, a little event called 
the Olympics. 


The technology services behind MfarMOyiUSASCgi 
For further Information caH B^l Wright on C44J 81 754 431 a 





Postal workers set for sell-off windfall 

By Roland Rudd 

Thousands of British postal workers 
may receive more than £400 in free 
shares in the Post Office if Mr 
Michael Heseltine, trade and industry 
secretary, wins support for his plan to 
sell 51 per cent of the Royal Mail and 

Mr Heseltine wants to distribute 
more free shares to workers in the 
sale of the Post Office *h«n in any 
previous privatisation. 

He disclosed the plan during recent 
presentations to Conservative 
backbench MPs in an effort to gain 

their support for the planned sale. 

Mr Heseltine hopes next week to 
publish a green paper setting out the 
options for change. He wants 10 per 
cent of the shares reserved for the 
workforce, the maximum number 
allowed under Stock Exchange rules. 

However, under Mr Heseltine 's plan 
a greater proportion of the shares 
reserved for employees would be free 
than In any other previous 
government flotation. He is 
considering offering the free shares 
on the basis of length of employee 
service. Be is also considering 
offering postal staff free shares to 

match the amount they purchase. 

With more than 170,000 employees 
working for Royal Mall, the Letter 
Service and Parcelforce, 10 per cent of 
the shares in the £lbn sell-off would 
see postmen rewarded with more than 
£800 worth of preferential shares. Half 
of those shares would be free for the 
longer-serving postal staff. 

While the green paper recognises 
that the Royal Mail and Parcelforce 
could be kept in the public sector, the 
DTI remains confident that Mr 
Heseltine will win his cabinet 
colleagues' backing to proceed with 

Mr Patrick McLoughlin, the DTI 
minister responsible for the Post 
Office, will outline the importance of 
cha n gi n g the Post Offices structure in 
a speech tomorrow to a London 
Conference on the - future of the 

He is expected to issue a warning to 
Tory backbenchers who want to limit 
privatisation to the sale of a 49 per 
cent stake in the corporation that the 
sale of a minority stake would not 
give the corporation enough freedom 
from the constraints of the public 

The Post Office will today announce 

record pre-tax profits of more than 
£300m in the year to the end of the 
March 1994. But Mr Mike Heron. Post 
Office chairman, will point out that a 
decline in letterbox mail, the first in 
recent history, underlines the need 
for the greater commercialisation at 
the corporation. 

Annual results showing a 1 per cent 
fall in ‘'pillar-box’* business - the first 
drop since 1980 - are forecast. 

"Pillar-box" business currently 
accounts for about 75 per cent of Post 
Office trade - the other quarter 
includes bulk business mail, direct 
mail and electronic mail. 

Railway peace 
talks fail to 
resolve dispute 

By Robert Taylor 
and David Owen 

RMT, the UK railway union, is 
on the verge of deciding 
whether to extend its cam- 
paign of one-day strikes after 
weekend talks with Rail track 
failed to bridge what negotia- 
tors describe as an "enormous 
gap" between the two sides of 
the pay dispute. 

Railtrack, which operates 
Britain’s railway infrastruc- 
ture, is to resume talk* with 
the union early this evening at 
the offices of Acas. the concili- 
ation service, in a final effort 
to avert a second 24-hour shut- 
down of the network on 

Rail track’s board is to meet 
this morning after the compa- 
ny's negotiators said at the 
weekend they would recon- 
sider the costings behind the 
pay offer to signal staff. 

Under industrial relations 
law, the union has to give 
seven days’ notice of any 
industrial action. That gives it 
the next two days to decide 
whether to call a further strike 
for a week on Wednesday. 

For their part, Ralltrack’s 
negotiators are re-examining 
the costings b ehin d their origi- 
nal offer to see whether they 
can offer signalling staff more 
pay in return far improved pro- 

RMT insists that signalling 

staff should have an “up front” 
payment of 11 per cent before 
entering talks on a longer-term 
offer linked to changes in 
working practices to boost pro- 
ductivity. Railtrack says it can 
only offer 2JS per cent now for 
all its employees. 

It has told signal staff it win 
offier substantial but self-finan- 
cing rises of at least 11 per cent 
once changes in working prac- 
tices are agreed. 

However, 7% hours of talks 
on Saturday foiled to achieve a 
breakthrough in spite of Acas 
officials’ attempts to establish 
common ground between the 
two parties. Railtrack insisted 
on a 48-hour adjournment of 
the negotiations to reconsider 
the company’s position. 

RMT union officials were 
annoyed at tire delay. 

Negotiators are convinced 
that Rail track's industrial rela- 
tions executives thn full 
authority to deal, and have to 
keep going back to the Rail- 
track board - and, indirectly, 
the government - to decide 
their m»rt move. 

The weekend disclosures 
that Ms Jill Rutter, a member 
of John Major's policy unit in 
Downing Street, attended a 
Railtrack board meeting last 
Friday at the behest of the 
Department of Transport has 
reinforced union suspicions 
that the government is 
involved in the dispute. 


By David Owen 

Mrs Margaret Beckett 
yesterday underlined her cre- 
dentials as the candidate of the 
left in the campaign for leader- 
ship of Britain’s wain opposi- 
tion Labour party. 

She raised the prospect of 
renationalising the water 
industry and n rade it clear she 
remained committed to nuclear 

di-saOTparnAn fr 

But Labour’s acting leader 
was also careful to hi g hli g ht 
her experience and to promote 
herself as a candidate capable 

Of uniting 1 tho party 

She said on BBC-TV: “I 
would be happy and proud to 
be described as a leftwinger 
but what I am Is somebody 
who has always made up their 
mind on the merits of a case 
and tried to argue that case 
honestly and forthrightly.” 

Mia Beckett invited a resur- 
gence of Tory claims that a 
Labour government would be 
soft on defence by acknowledg- 
ing that «h« might remain a 
member of the Campaign for 
Nuclear Disarmament if she 
became primp minister. 

Stressing that she would 
leave CND if it became a paci- 
fist organisation, she said she 
was still a member because it 
was the only body working for 
nuclear disa rmam ent She said 
she would be prepared to toler- 
ate higher defence spending if 
she was convinced this was in 
Britain’s interests. 

On the water industry Mrs 
Beckett said she was “not 
averse" to it coming back Into 
public control, depending on 
“what degree of public owner- 
ship is needed for that" 

sets out leftwing platform 

She added; “What I certainly 
want to see is the water indus- 
try taken under very firm con- 
trol. I think It Is outrageous 
the way people are being 
rooked at present by an indus- 
try which is paying huge sala- 
ries to the people who run it 
and making huge profits which 
go to a small group of people." 

Her comments appeared to 
open a new gap on policy with 
Mr Tony Blair, the arch- 
moderniser who is firm favour- 
ite to succeed the late John 
Smith as Labour leader. 

Mr Blair recently told the 
Financial Times: “I think most 
people would not regard it as a 
sensible expenditure of mon- 
ey. . . that you renationalise the 
water industry as opposed to 
say spending money on health 
or education." 

Mr Blair Is expected to 
launch his leadership mani- 
festo later this week and to fol- 
low this with a series of six 
speeches setting out his views 
on individual issues. 

Hie subjects are expected to 
be: education, the economy, 
constitutional change, Europe, 
the welfare state and the 
future of the Labour party. 

However, the main battle 
between Mrs Beckett and the 
third candidate, shadow 
employment secretary Mr John 
Prescott, appears to be for the 
deputy leadership, where they 
seem to be running neck and 
neck. But neither will admit 
that the leadership itself is 

He insisted: “We should not 
be ashamed of being working 
class and middle class. 1 shall 
be playing my part in the party 
- I hope as leader.” 

Labour’s acting leader Margaret Beckett said yesterday she was 
“proud to be described as a leftwinger” rouw Tn»i«npMa 

Britain in brief 

centres under 
fresh review 

The future of Britain’s 
military search-and-rescue 
nerve centres is under fresh 
review in the latest round of 
defence cost-cutting, the 
Ministry of Defence confirmed 

But it denied weekend 
reports that a decision had 
already been reached to dose 
one of them, at Pttreavie in 

Last year Defence Secretary 
Malcolm ftiOrind ann oun ce d 
the Scottish centre was to 
handle all rescue and 
coordination work currently 
split b etween Pttreavie, 
covering the entire northern 
half of Britain, and Plymouth, 
covering the southern half. 

“No decision will be made 
until the findings of the study 
group are complete," said an 
MOD spokesman. 

At the time of the original 
announcement, concentrating 
the work at Pttreavie was said 
to be likely to give cost 
savings of more than £5m a 

Shephard faces 
animal protests 

UK agriculture minister 
Gillian Shephard will face the 
wrath of animal welfare groups 
this week over the transport 
of live animals for slaug hter. 

Mrs Shephard and fellow 
European Union farm 
ministers will be shown new 
video evidence at talks in 
Luxembourg that sheep and 
cattle are subject to intense 
suffering and cruelty during 
trans-European journeys to 
slaug hter houses that can last 
well over 24 hours. 

Current rules insist that 
animals in t ransi t must he fed 

and watered at least once 
every 24 hours, but animal 
rights campaigners say the 
rule is unenforceable. 

They want Britain to back 
Holland. Germany and 
Denmark in cutting the 
number of hours that animals 

can be transported without 
rest by two-thirds to a 
maximum of eight 
But Mrs Shephard is 
expected to back a Greek 
proposal on Wednesday which 
would provide a 15-hour 
watering time for fully grown 
animals and 10 hours for 
young animals. 

Legal threat 
over HMSO 

Legal publishers may take 
legal action against HMSO. 
the British government's 
stationery office, after talks 
broke down over material 
covered by crown copyright 
The Professional Publishers 
Permissions Group which 
comprises all the main legal 
publishers complains that 
since HMSO was given 
executive agency status in 
1988 it has adopted a more 
restrictive approach to 

licensing of cr own copyright 
The group says HMSO’s new 
stance is an abuse of its 
monopoly position as supplier 
of crown and parliamentary 
copyright material and 
threatens the fnture viability 
of their businesses. 

Trade union 
image changes 

The image of the average 
British trade unionist conjured 
up by the rail dispute or by 
the union voters in the Labour 
leadership contest is strongly 
male and blue collar, but the 
latest data from the polling 
organisation MORI underlines 
how false this image 

Not only are a majority of 
trade unionists not manual 
workers, but very nearly half 
are middle-class under the 
standard occupati onal 
classification. MORI says that 
47 per cent of union members 
now belong to the white collar 
and professional classes A, B 
and CL That compares with 
only 30 per cent classified as 
ABClin 1579. 

'mere has also been a 
substantial increase In the 
proportion of women trade 
unionists, up from 24 per cent 
in 1579 to 38 per cent in 1994. 
In 1979 a total of 30 per cent 
of all adults over 18 were trade 
unionists - 76 per cent men 
and 24 per cent women. By 
1994 the overall adult figure 
had fallen to IS per cent - 82 
per cent men and 38 per cent 






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Graduate jobless 
figures improve 

How graduates fere in the Job market 


hsummor 1993 . „ -- 

0 to 20 30 40 » *° 

70 00 AO 100 

By John Authors 

Graduate unemployment fell 
for the first time in five years 
last year, according to govern- 
ment figures published today. 

Six months alter completion 
of courses, the proportion of 
graduates who had entered 
full-time employment rose 
from 43 per cent for the equiv- 
alent period In 1991-92 to 45 per 
cent, while thp unemployment 
rate Cell from 1L6 to 1.0.5 per 

This was achieved in spite of 
continuing expansion in stu- 
dent and graduate numbers. 
Overall, the number of stu- 
dents graduating successfully 
from “old" universities - 
excluding forms: polytechnics 
- last year compared with 1992 
rose 6 per cent to 87,073. 

The number unemployed 

dropped from 7,832 to 7,472 - 
having been as low as 3.079 in 
1989 - while the number in 
full-time employment rose 
almost 10 per cent from 29,199 
to 31949. 

However, the proportion of 
graduates choosing careen tn 
industry reached an all-time 
low of 21 pa: cent In the aca- 
demic year 1982-83 the propor- 
tion was as high as 33 per cent 

Most of the extra recruit- 
ment ramp in white-collar ser- 
vice industries, with commer- 
cial jobs accounting for 84 per 
cent of employed graduates, 
compared with 81 per cent the 
year before. 

According to the Universities 
Statistical Record, which pro- 
duced the figures, heavier 
recruitment by advertising buh 
market research agencies 
accounted for most of the rise. 

The immediate prospects for 
women remained much better 
than those for men , with an 
unemployment rate after six 
mnntKft of only 7.7 per cast 
Male unemployment was 12L$ 
per cent 

This was in spite of a much. 

sharper increase in the number 
of women graduating - up 9 
per cent, compared with 5 per 
ront for mm. Mate graduates 
stffl outnumbered women grad- 
uates by more than 20 po- cent 
although, the evidence from 
admissions services is this 
gap will continue to narrow 
next year. 

Figures for individual sub- 
jects will deepen government 
concern that university expan- 
sion has avoided the mathe- 
matical and scientific subjects 
it wants to encourage - the 
number of mathematics gradu- 

■ mdvdtoe Bwm « wrvowy «n*doyn*ntor 

asking *®rfSl«22S 

ftfps increased just l per emit 
compared with 1991-92, while 
the numbers graduating in 
creative-arts subjects rose 11 
per cent 

They could add to suspicions 
voiced by Mr William Wal de- 
grave, the science minister, 
that science degrees are 
unpopular because employers 
are not sending the right sig- 
nals to the jobs market. After 

humanities graduates, on 13.5 
per cent, unemployment rates 
were worst for math em aticians 
(13,4 per cent), engineers (12.7 
per cent) and physicists (liL5 
per cent). 

University Statistics 1992-93 
Volume 2: First Destinations of 
University Graduates. Universi- 
ties Statistical Record, PO Bax 
130, Cheltenham, Gloucester- 
shire. GLS0 3SE. £15.75. 

CBI demands boost for 
vocational qualifications 

By Usa Wood, 

Labour Staff 

More resources should be 
devoted to maintaining the 
“quality and credibility” of the 
new vocational qualifications 
iriwnri at improving skiTfe, the 
Confederation of British Indus- 
try says today. 

The organisation says in a 
review that the quality assur- 
ance systems that underpin 
the vocational qualifications, 
which measure an individual's 
competence to do a job, must 
be "soand and robust”. 

Labour MPs claimed recently 
that former employees of a 
training provider had made 
fraudulent claims for attain- 
ments of NVQs, which are 
awarded by internal assessors 
but verified externally by 
awarding bodies. 

More then 68 recommenda- 
tions for general reform of 
NVQs and the bodies responsi- 
ble for administering them are 
given by the CBI m the first 
major independent review of 

the system. The CBI was one of 
the pioneers of the national 
system, which is based on 
measuring an individual's 
competence in day-to-day 


The review treads a careful 
path between endorsing NVQs 
and ■making radical propos a ls 
for change at a time when the 
system has been criticised on a 
number of fronts - from the 
makeup of the qualifications 
to the integrity of the assess- 
ment process. 

Mr Dominic Cadbury, chair- 
man of the CRTs education and 
training committee, said: “The 
overwhelming message of the 
report is one of widespread 
support from employers for the 
NVQ system. 

“Just because it contains so 
many recommendations for 
change, it should not be taken 
as a negative document. 
Indeed, the reason why so 
many recommendations are 
made is because employers 
want to see NVQs succeed,” Mr 
Cadbury said. 

Recommendations in the 
report, which will be put out 
for consultation, include: 

• Redesigning NVQs to 
increase their flexibility. This 
could require substantial 
change in a number of very 
task-spedfic NVQs. 

• Expanding the policing role 
of the National Council for 
Vocational Qualifications, the 
government-funded body that 
set up NVQs. This would give 
it more responsibility for qual- 
ity and marking Additional 

staff and funding should be 
provided to enable this expan- 
sion to take place. 

• Marketing NVQs more 
effectively. Current marketing 
is seen by companies as cm- 
fused and ineffective with no 
central co-ordination, the CBI 

Quality Assured: The CBI 
review of NVQs and SVQs. 
From CBI Publications, CBI, 
Centre Point. 103 New Oxford 
Street, London, WCIA 1DU. 
Price £5 members or £10 non- 

Performance pay ‘is 43% 
of managers’ average rise’ 

Bond picking 
in the groves 
of academe 

By Usa Wood 

Almost half the average pay 
increase is linked to how well 
staff perform at work, says a 
survey of more than 1,000 man- 
agers by the Industrial Society, 
the advisory and training 

The survey acknowledged 
that performance-related pay 
has had a relatively bad public 
image recently, attributing this 
to suspicion that companies 
used it to cut pay bills rather 
than as an integrated part of 
company strategy. 

The Industrial Society sur- 
vey also covered the more gen- 
eral area of "performance man- 
agement" where appraisal may 
not necessarily be linked to 
pay. Half the organisations sur- 
veyed linked the results of 
appraisal to individuals’ pay. 

A majority of managers 
favoured a link between pay 
and the outcome of appraisal, 
but a majority also lacked 
confidence that their organisa- 
tion had got this link right so 

The financial sector 
appeared to have embraced 

PE P most enthusiastically. 
Overall 43 per cent of the aver- 
age pay increase was finked to 
individual performance but in 
finance this rose to 61 per cent 
In the public sector the share 
was 26 per cent. 

Pay increases were 100 per 
cent determined by perfor- 
mance in fewer than one in 
five organisations nationwide 
but in almost one in three 
financial sector companies. 

Managing Best Practice No 2 
The Industrial Society, 48 
Bryanston Square London W1H 
7LN. £35 or by subscription. 

City analysts will soon have to 
grapple with a new problem - 
how to credit-score a univer- 

European Capital, the mer- 
chant banking advisory com- 
pany, has compiled a blueprint 
for higher education institu- 
tions on how they can raise 
capital from the bond markets. 

But it does not believe all of 
t hgni will be able to do so. 
Analysts will have the sensi- 
tive job of assessing which 
institutions are sufficiently 
credit-worthy, and where the 
cut-off point for funding should 
be made. 

Institutions judged to be 
good credit risks will not nec- 
essarily be restricted to univer- 
sities. Several specialist insti- 
tutions, such as music colleges, 
may prove very safe borrowers. 

Mr John Holden, of Euro- 
pean Capital, says two sets of 
tests will determine whether 
colleges can borrow. First 
there are financial tests - 
reserves, interest coverage 
ratios, surpluses of income 
over expenditure and all the 
normal indicators. 

These need extra research, 
but much of the information is 
already available and will be 
looked on favourably by finan- 
cial institutions. Universities 
lave the advantage of a regu- 
lar stream of income from the 

The second set of tests 
relates to likely fixture demand 
for the university's services. 
They would try to answer the 
question: “Is this institution 
going to be around long 
enough to repay in 25 years?” 

After the fast expansion of 
student numbers, some City 
institutions may be anxious 
about this. They will need to 
look at universities’ research 

John Anthers 

on higher 
capital market 

track records, and also at their 
popularity with students and 
with industrial sponsors. Any 
indication that a university is 
thriving academically wHl help 
convince the City that its 
future stream of cash from the 
government Is assured. 

The test of whether build- 
ings could be sold for alterna- 
tive uses - usually regarded as 
central to credit-rating - may 
be Iras important Success f ul 
universities such as Bath and 
York have purpose-built cam- 
puses a few miles outside pro- 
vincial centres which would be 
difficult to sell for any altera- 
tive use. but European Capital 
believes they would still have 
no difficulty borrowing. 

Universities will not be 
forced to use the new bond 
finance when it becomes avail- 
able, but it holds several 
advantages for them. They will 
have access to funds in a vol- 
ume which banks m ig ht not be 
prepared to offer - and at more 
favourable terms and costs, 
thanks to the large deals 
involved. Most importantly, 
their finance will he long-term 
- probably for 25 years - and 
at a fixed rate. 

This type of funding suits 
universities, which expect 
assets such as libraries and 
laboratories to last over a simi- 
larly long timescale, and would 
be almost impossible to obtain 





By John Anthers 

The chief executive of 
Cleveland County Council, Mr 
Bruce Stevenson, yesterday 
accused Sir John Banham, 
chairman of tha Local Govem- 
mwrt Commission, of misrepre- 
senting the council’s popular- 
ity. The commission has 
recommended abolition of the 
county council. 

He rejected Sir John’s claim 
that Cleveland was unpopular, 
and said results of MCR1 opin- 
ion polls for the commission 
Itself showed that the level of 
community identity with 
Cleveland was above average 
and higher than that for Lin- 
colnshire and Gloucestershire. 
The commission has said both 
of those counties should 
remain fritanL 

Lobbying of MPs by council- 
lors i otenaifiBd aver the week- 
end as they reacted to last 
week’s proposals from the com- 
mission that eight county 
councils should be abolished. 

In Cumbria, which the com- 
mission wants to split into two 
all-purpose authorities, one dis- 
trict council described the pro- 
posals as "anti-democratic”. 

However, the Association of 
District Councils, which is 
cam paigning for all-purpose 
unitary authorities, published 
a telephone poll by MORI 
which showed that 76 per cent 
of people would rather their 
services were not split as they 
are at present between coun- 
ties and districts. 

Film and TV body demands media safeguards before liberalisation 

‘Superhighway’ warnings issued 

By Raymond Snoddy 

The government has been 
urged to set up strong competi- 
tion policies for the media and 
information industries in order 
to prevent abuse of power in 
the age of multimedia and 
information “superhighways”. 

The urgent appeal has been 
made by the British Screen 
Advisory Council, the all- 
industry body set up to advise 
gov e rnments on the fUm, tele- 
vision and video industries. 
The council argues in a report 
sent to the Department of 
National Heritage and the 
Department, of Trade and 
Industry that the convergence 
of media, computers and tele- 
communications is likely to 
alter the rules of the game for 
the screen-based media busi- 

If the “cultural imperative" 
- the sum of the benefits of 
public-service broadcasting - 
were to endure, then tough 
competition policy would have 
to come before liberalisation 
pvtomrtu fi chang gs XU own* 
ership nxles. The council wants 
the powers of the Office of Fair 
Trading strength e ned so that it 
ran taka more Ind ep endent ini- 

“To be truly effective, an 

enhanced OFT would need 
enhanced resources, additional 
powers and the political wHl 
that they should be used,” the 
council says. The remit of an 
enhanced OFT should include 
monitoring the market 
operations of private and pub- 
lic broadcasters in order to pro- 
tect the public interest 

It should also be able to 
allow private l awsuits for dam- 

ages arising from the abuse of 
dominance and distortion of 
the market The comical found 
that greater concentration of 
ownership would lead to econo- 
mies of scale and might 
strengthen the position of the 
ITV companies to compete 

But no one should be 
allowed to use a dominant 
position to inhibit the growth 

of a competitive programme 
market, the council says. It 
also believes that the BBC 
must be free to pursue com- 
mercial ambitions as long as it 
continues to fulfil its public- 
service obligations. Mr Leslie 
H3L chairman of Central Tele- 
vision and of the ITV Associa- 
tion, registered an objection to 
the council's policy on the 

The council believes that a 

flexible policy framework is 
needed to cope with develop- 
ments, including digital com- 
pression technology. That win 
involve hundreds of television 
channels; high-definition, inter- 
active and widescreen televi- 
sion; multimedia and virtual 
reality. Rather than dealing 
with each activity in isolation, 
general principles should be 
developed to manage the 
changes underway. 

“They should derive princi- 
pally from a recognition of the 
part which public service 
broa dcastin g has played in our 
national life and of the need 
for dear and strongly enforced 
competition rules as - through 
technological ch ange - conven- 
tional broadcasting becomes 
part, and a receding part, of 
the entire spectrum,” the coun- 
cil believes. 

Manchester runway hearings open tomorrow 

By Ian Hamlton Fazsy, 
Northern Correspondent 

Two local authorities and eight 
protest groups trying to stop 
M anchester Airport from bund- 
ing a second runway will use 
five main hues of argument at 
a public inquiry beginning 
tomorrow. The inquiry is fore- 
cast to last until mid March 
text year at a cost of about 


The opponents will say the 
EiGOm, 3,050 metre runway 
should be shelved on the 
grounds of green belt law, 
environmental protection, 
operational unsoundness, air 

safety hazards and potential 
danger to public health. 

Instead, Manchester will be 
urged to operate its one run- 
way more efficiently trans- 
fer charter business and small 
aircraft to Liverpool and Leeds- 
Bradford airports. 

Liverpool's own expansion 
plans, which Inrinde realigning 
its present runway - in effect 
building a new one - will face 
their own public inquiry if, as 
expected, they are called In by 
Mr John Cummer, the environ- 
ment secretary. Mr Gmnmer 
has said the Manchester out- 
come would not then he 
announced until he was also 

ready to pronounce on Liver- 
pool's plans. Macclesfield Dis- 
trict Council and Liverpool 
City Council will lead the 
objections to Manchester's 
plans, followed by Majag - 
Manchester Airport Joint 
Action Group, formed from 
eight separate campaigning 
bodies. The latter’s case will be 
co-ordinated by Mr Brian 
Greenwood, an environmental 
law specialist with Norton 
Rose, a London firm of solici- 

Majag has raised about 
£250,000 towards its costs, but 
believes this will not be. 
enough to compete lawyer-far- 

lawyer with the airport’s team 
some of whose leading mem! 
bers will be on fees of £5,000 a 
day. But Majag has secured the 
services of Mr Robert Webb, a 
QC whose parents own laud 
threatened by the new runway 
The airport wants to expand 
toSOm passengers a year by 
2005 from its present size of 
ISmplus and rising. It daime 
50,000 jobs would be created. 
Surveys have shown more 
tiian 90 per cent of businesses 
m north-west England support 
the expansion, which some 
regard as more important eco- 
nomically to northern England 
than the Channel tunnel. 

To win, Manchester must 
show it Is in the public interest 
to set aside the law protecting 
Cheshire’s green belt. The 
objectors say the law should 
stand to protect the environ- 
ment and sites of special scien- 
tific interest from damage. 

They will also say Manches- 
ter needs a second runway 
only because It operates ineffi- 
ciently by allowing an uneco- 
nomic mix of afa gg and types of 
■dreraft, that the proposed run- 
way configurations will be 
unsafe because flight paths 

wL and that 

increased activity will disturb 
tocal residents. 





By John Authors 

Most universities will be aide 
to raise private capital from 
the bond markets, poatiMy by 
the end of this year, under a 
financial blueprint commis- 
sioned by university vice- 
chancellors and the govern- 

Formal government guaran- 
tees would not be needed 
under the scheme, which 
marks the first extension to 
the higher-education sector of 
the government’s private 
finance initiative. The initia- 
tive was la unch ed two yean 
ago by Mr Norman Lament 
when he was chancellor. 

Primary legislation la also 
unnecessary, a ccor ding to the 
blueprint, which was com- 
pleted last week. Univentittei 
will not be forced to b o r row 
money this way. but most are 
thought likely to find the 
long-term fixed interest rates 
on offer in the bond markets 
very attractive. 

European Capital, the mer- 
chant banking advisory group, 
and the solicitors Trowere & 
Hamlins, which were commis- 
sioned by universities to draw 
up the blueprint earlier this 
year, estimate that a bond 
issue of £75m is possible by the 
end or this year, depending to 
how quickly universities can 
fix their budgets after the 
beginning of the academic year 
in September. 

They would do so in a syndi- 
cate, using a vehicle company 
with a small permanent staff 
similar to The Housing 
Finance Corporation, which 
has raised £770m for housing 
associations in bond issues 
since 1990. European Capital b 
now confident that there is suf- 
ficient demand In the City for 
universities to be able to bor- 
row at rates significantly bet- 
ter than they could obtain 
from banks. 

Not all universities and 
other higher-education institu- 
tions will be able to raise fiinds 
this way, as the City will not 
he convinced about their cred- 
it-worthiness. However. Euro- 
pean Capital Is certain that the 
majority wQl be able to do so. 
and it will work over the next 
few months to decide what per- ft 
outage of universities Mil be 
able to raise finance in this 

The first issue is likely to 
involve a range of institutions 
including both the mare highly 
regarded unlvasities such as 
Oxford and Cambridge, and 
news' institutions. 

Universities need the finance 
for capital projects such as 
libraries aim laboratories. 

Many say they are underre- 
sourced after the sharp expan- 
sion in student numbers ova* 
the past 15 years, which has 
semi the proportion of 18-year- 
olds going into higher educa- 
tion more than doubling from 
13 per cent in 198041 to 31 per 
cent this year. 

However, they also recognise 
the reluctance of the govern- 
ment to pay for building which 
could be funded elsewhere. 

This year, for the first time, 
the Committee of Vice- 
Chancellors and Principals 
made no request for student 
accommodation f unding in 
its submission for Treasury 

Alternative plans to raise 
finance only for the financially t 
strongest universities, or to 
attempt to nut together bond 
issues for all higher education 
institutions, were considered 
but rejected. 

Copies of the blueprint are 
being sent to university vice- 
chancellors, the Department 
for Education, and the hi gher 
education funding councils. 

Some universities are 
alarmed by the prospect that 
by joining a syndicate with 
other lower-ranked Institutions 
they will in effect be providing 
them with a subsidy. 

However, European Capital's 
research shows that all the 
institutions involved in the 
syndicate would gain from the 
preferential rates on offer for 
larger-scaie syndicated borrow- 

Fresh formula, page 16 

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MPs set to urge tougher trademark bill illlfl 

‘ ] ; ^ ; 

f {>!>*' 

By Nefl Buckley 

Manufacturers of leading brands are 
vowing to continue their campaign 
»or legislation to curb supermarket 
“lookalike" brands, in spite of their 
taiiure to get measures included in 
tne trademarks bill, which has its 
third reading in the Commons today. 

Several MPs are expected to call for 
tougher measures against lookalike 
brands, own-label products designed 
to resemble closely those of top manu- 
facturers, but the bill Is thought 
finely to be passed by the Commons 
without s ign i fi ca nt amendments. 

Tories to 
avoid row 
over EU 

By David Owen 

Conservative Eurosceptics are 
preparing to back away from 
confrontation over a bill 
increasing Britain's contribu- 
tion to the European Union's 
budget for fear that renewed 
wrangling could smooth 
Labour's path to government. 

But ministers may be unable 
to exploit the situation to 
secure Commons approval for 
the measure before MPS begin 
the summer recess next 
month, as they originally 
intended. This is because the 
bill remains blocked in the EU 
Council of Ministers. 

Meanwhile, in an indication 
that the government still faces 
a struggle to get its way on 
some European issues, Tory 
rightwingers yesterday intensi- 
fied their calls for Britain to 
veto the appointment of Mr | 
Jean-Luc Dehaene as president i 
of the European ComnrissimL 
The calls were led by Mr 
Norman Lamont, the former 
chancellor, who said Britain 
should reject the Belgian prime 
minister's nomination and 
threaten to veto it 
Earlier this month. Mr Doug- 
las Hurd, foreign secretary, 
hinted that the government 
was not prepared to veto Mr 
Dehaene’s appointment if its 
preferred candidate - Sir Leon 
Brittan - did not gain enough 
support among other EU 

Tory Euro-sceptics yesterday 
played down the prospects of a 
Maastricht-style rebellion ova: 
the bin giving farce to changes 
in the European Union's sys- 
tem of own resources. They 
warned of a “sea-change" in 
attitudes brought about by 
growing concern in Conserva- 
tive ranks that Labour was 
making itself "electable”. 

But Sir Teddy Taylor, 
another leading Euro-sceptic, 
made it clear that he would 
oppose the bill, which will lift 
Britain's contribution to the 
EU budget in line with the 
agreement reached at Edin- 
burgh in December 1992. 

Sir Teddy, the MP for 
Southend East, said he found 
the idea of passing a bill to 
give the EU more money “liter- 
ally unbelievable". 

According to the Treasury, 
Britain's net payments to the 
EU are set to double to £28bn 
in the year beginning April 
1995 from £l-3bn In 1994-95. 

The government said last 
month that the bill was being 
"blocked by Italy” in the Coun- 
cil of Ministers, making it 
increasingly unlikely that it 
can be presented to MPs before 
they leave for the summer in 

If minis ters are unable to 
introduce the measure until 
the autumn, it mil raise the 
prospect that next year's legis- 
lative timetable will have a 
pronounced European flavour, 
which would be unwelcome to 
the government. A bill to 
permit the enlargement of the 
EU is also expected to be 

Brand manufacturers are hopeful, 
however, that they may extract a 
promise from Mr Patrick McLougbiin, 
a junior trade and industry minister, 
to look into the issue further. 

They want legislation to stop super- 
markets not only infringing registered 
trademarks, but copying the overall 
look of branded goods, including the 
colour and shape of packaging. 

The manufacturers say existing 
safeguards, such as the threat of legal 
action against “passing off”, are inad- 
equate, especially compared with leg- 
islation in continental Europe. 

The British Producers' and Brand 

Owners* Group, which includes com- 
panies such as Unilever, Mars and 
Grand Metropolitan, was originally 
formed as a loose alliance to cam- 
paign for measures in the trademarks 
bin. It is now expected to appoint a 
formal secretariat, with a constitution 
and agreed funding, to continue its 
fight against lookalike brands. 

Hie group’s spokesman, Mr John 
Murphy of Interbrand, the consulting 
group specialising in branded goods, 
said brand owners had no alternative 
but to fight on. 

“They feel they have waited for too 
long to take action,” he said. “They 

are worried the situation is deteriorat- 
ing, and the major retailers mil see 
the government's reluctance to legis- 
late as a licence to cheat.” 

Own-label products now account for 
more than 50 per cent of turnover in 
superstore chains such as Sainsbury, 
Tesco and Safeway, but have been 
strongest in areas such as chilled 
and fresh foods and some packaged 

However, after the i««nw»h of Sains- 
bury’s Clastic Cota as a direct compet- 
itor to Coca Cola, manufacturers fear 
the supermarkets will take the battle 
into areas where branded goods 

remain dominant, such as soft drinks 
and branded alcoholic beverages, pet 
foods and cereals. 

Mr Murphy cites Sainsbury's 
recently launched peach schnapps, 
which brand owners claim is a looka- 
like of IDV's Archers, as another 
example of the trend. 

S ains bury insists the drink is not a 
copy of Archers, and in fact more 
closely resembles some brands in con- 
tinental Europe, where peach 
schnapps is a well established drink. 
It defended its use of a frosted-glass 
bottle with the c laim that this was 
necessary to protect the drink. 

SNP attempts to don 
mantle of socialism 

Net profit: City workers will be able to emulate their tennis 
heros during Wimbledon fortnight - which starts today - as 
Broadgate’s Exchange Square is transformed into a tennis court 

State ownership is yielding - to 
privatisation everywhere from 
Poland to Mongolia but its 
virtues are still being preached 
in Monk lands East, the 
Scottish constituency which 
votes in a by-election next 
week to elect a successor to the 
John Smith. 

Mrs Kay Ullrich, the Scottish 
National party candidate, 
proclaimed last week that an 
SNP government would 
renationalise Scotland's gas 
and electricity - and its water, 
if it had been sold off. Coal, 
steel, transport and telephones 
would also go back into state 


These views may not disturb 
people in Airdrie, the former 
steel town outside Glasgow 
which. lies in the constituency. 
But they sound a little strange 
from a party which 10 days ago 
won support from thousands of 
ex-Tory voters to take the 
North East Scotland seat in the 
European elections from 

In those elections the SNP 
won a record 329 per cent of 
the vote across Scotland. It is 
trying to follow up its success 
by seizing MonManrlg East, a 
Labour stronghold where Mr 
Smith had a majority of 15,712 
in 1992. 

It is not as unlikely a 
prospect as it might seem. Hie 
SNP took the Airdrie South 
council seat, which makes up 
40 per emit of the constituency, 
in the regional elections in 

It believes it achieved a 
swing from Labour over the 
whole constituency of 17 per 
cent - only four points short of 
that required to oust Labour in 
the by-election. 

But Labour, remembering 
the humiliating defeat it 
suffered at the hands of the 
SNP in the 1988 Glasgow 
Go van by-election, has moved 
with almost unseemly haste to 
schedule the by-election for 
June 30, allowing little more 
than two weeks for cam- 

James Buxton 

assesses the 
prospects in 

paigniug after the 

It also selected one of its 
most formidable Scottish 
figures, Mrs Helen Liddell, 
former secretary of the 
Scottish Labour party, 

manag er of many tin election 

campaign and once an 
executive at Mirror Group's 
Daily Record. 

Immaculately coiffed and 
dressed to radiate power, she is 
professional to her fingertips 
and was closely associated 
with John Smith. 

But she represents a party 
which has allowed the word 
Monklands to become a 
byword for Labour municipal 
malpractice. In 1992 and 1993 
the local newspaper revealed 
that Monklands District 
Council was controlled by a 
"mafia" in the Labour party 
which appointed many of its 
own relatives to council jobs. 

The council administers the 
similarly-sized towns of Airdrie 
and Coatbridge. But 
Coatbridge has had capital 
spending of £471m in the past 
three years to Airdrie's £S9m, 
gening a leisure complex and 
a shopping centre. 

Airdrie people put 
Coatbridge’s advantage down 
to the fact that they are 
excluded from the “mafia", 
and, more darkly, that they are 
mostly Protestant while the 
people of Coatbridge are 
Catholic, as are all the 

Mrs Liddell admits that 
Monklands council is 
“something of a curate's egg'" 
but, like John Smith, prefers to 
stay above the issue. 

Talks go on 
over Severn 

Talks between management 
and unions will resume today 
In the dispute which has 
halted work on the construc- 
tion of the E300m second Sev- 
ern bridge between England 
and Wales, Roland Adburgbam 

The main contractors, Laing- 
GTM, dismissed more than 700 
workers on Thursday when 
they held a 24-hour strike in 
pursuit of higher bonus pay- 
ments. Five hours of talks on 
Saturday between the manage- 
ment and the Ucatt construc- 
tion union and the TGWU and 
GMB general unions felled to 
resolve the dispute. 

Laing-GTM has Invited the 
sacked workers to reapply to 
their jobs today under existing 
terms and conditions. The 
unions seek reinstatement 

Nissan’s personnel chief 
at Sunderland to quit 

By Chris Tlgfie 

Mr Peter Wickens, personnel 
director of Nissan Motor Manu- 
facturing (UK), Is to leave the 

Mr Wickens, who is also a 
board member, is credited with 
being the man. who moulded 
the shape of industrial rela- 
tions and practices at Nissan’s 
£90Qm UK plant at Sunderland, 
Tyne and Wear. He joined the 
Japanese carmaker in October 
1984 as the first British 
employee of its Sun d erlan d 

A former mdustriaPrefetions 
manager at the Dagenham 
body-plant of Ford, he jetti- 
soned most industrial relations 
practices at Nissan, substitut- 
ing a philosophy of team- 
woriring, flexibility and qual- 

He instituted a controversial 
single-union agreement with 
the AEEU engineering nninn 
as well as "flat" management 
structures and angle status for 
all employees. He will leave 
the company early next year. 

Mr Wickens masterminded 
the recruitment needed for the 
swift expansion of the Nissan 
plant, which now employs 
4^50. It was the UK's biggest 
car exporter in 1993, with 
nearly £lbn in export ea rni ngs, 
and is Europe's most produc- 
tive car plant 

Last autumn he imple- 
mented an “agreed separation” 
policy - shedding jobs without 
redundancies in thg face of the 
European car sales downturn. 
He said he was not leaving 
under this programme. “Unfor- 
tunately it's closed,” he 

The AEEU has not found 
recruitment easy given its lack 
of a collective-bargaining role 
at the plant: just 40 per emit of 
employees are members. But 
Mr Wickens Mid he is “a friend 
of trade unions” and believes 
they have a role to play in the 
new style of industrial rela- 

He said: “The vast majority 
of British trades unions 
haven't realty addressed these 
issues. It’s up to trades unions 
to find their relevance.”’ 

He said at the weekend that 
this was an “opportune time” 
to move on, having been at 
Nissan 10 years. 

However, he is not moving to 
another job in industry - his 
plans include lecturing. His 
second book. The Ascendant 
Organisation, is to be pub- 
lished next year. 

concentrating on the area's 13 
per cent unemployment and 
issues such as the National 
Health Service. Mrs Ullrich has 
called vaguely for a public 
inquiry into the council. 

It has been left to the 
Conservatives, whose 
candidate, Mrs Susan Bell, is a 
leading member of the Tory 
Reform Group, to highlight the 
religious divide and associate 
itself with the Protestants: on 
Saturday she witnessed the 
annual inarch through the 
town by its Orange Lodge. The 
Liberal Democrat candidate, 
Mr Stephen Gallagher, plays 
down the sectarian issue. 

Several people on the streets 
of Airdrie talk of their 
resentment at the council. 
“You see all the building going 
on in Coatbridge and then you 
look around here where 
nothing is happening and it 
makes you really angry,” says 
a middle-aged man, adding 
that the SNP will get his vote 
for the first time on June 30. 

Mrs Ullrich tries to portray 
the SNP as the true socialists, 
having “more in common with 
the Red Clydesiders [Scottish 
Labour radicals of the 1920s] 
than today's pinko Labour 
party.” But she is far 
less sure-footed than Mrs 

SNP volunteers are coming 
in from outside the 
constituency to make up to 
the lack of an established 
organisation, to match 
Labour’s. But there may not 
enough time left. The odds are 
on the SNP coming a very good 

General election : John Smith 
( Labour ) 22J66: SNP 6,554 
Conservative 5,630; Liberal 
Democrat 1679. Majority 15,712. 
Candidates: Helen Liddell, 
Labour; Kay Ullrich, SNP; 
Susan Bell Conservative; 
Stephen Gallagher, Liberal 
Democrat; Duncan Paterson, 
Natural Law party; Abi i 
Bremner, Network Against the 1 
Criminal Justice BQL ! 




Weakness in the housing 
market is the greatest threat to 
further consumer spending 
growth. PA Cambridge Eco- 
nomic Consultants reports 
today In its latest quarterly 
survey, Graham Bowley 

It adds that consumer confi- 
dence r emains fragile but has 
improved slightly following the 
impact of April's tax increases. 
Only 12 per cent of people 
believe the recession has 
ended, it says. 

However, the number of peo- 
ple intending to buy bouses or 
flats wi thin the next year has 
fallen to its lowest level since 
the survey began more than 
three years ago. 

Confidence in the govern- 
ment remains very low, it 

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A view from the Institute for Fiscal Studies about the chancellor's options in post- 1994 Budgets : ; ■ . ; • *** ventures to success. 

Spending level to govern pre-election tax cuts 

ft Kenneth Clarke used his 1995 
or 1996 Budget to make pre- 
election tax cuts, he would be 
following closely tn the foot- 
steps of several of bis recent 
predecessors. Lord Howe's 1983 
Budget saw a pre-election 
increase in the celling on mort- 
gage interest relief. Lord Law- 
son’s 1987 Budget cut 3p off the 
standard rate of income tax, 
while Mr Norman Lamont. 
even amidst gathering fiscal 
gloom, found room to cut 
income tax by around £2bn by 
introducing a new 20p tax rate 
in 1992. But if electoral consid- 
erations are at the forefront of 
the current chancellor's think- 
ing, his scope for implementing 
substantial tax cuts looks 
rather limited. 

One important fact to bear in 
mind is that the government 
has yet to finish Implementing 
all of Mr Lamont s tax 

increases announced in March 
1993, to say nothing of the 
additional tax increases set out 
by Mr Clarke last November. 
Chief amongst the Lamont 
measures Is the increase in the 
rate of value added tax on 
domestic fuel from 8 per cent 
to 17.5 per cent due in April 
1995. In addition, both chancel- 
lors announced sharp real 
increases in duties on petrol, 
and to these Mr Clarke added 
increases in tobacco duty and 
further cuts in income tax 

Altogether, these measures 
represent an additional £8£bn 
of tax increases still to come hi 
April 1995 ami another £2£bn 
in April 1996 as the fall effects 
of these measures work 

What evidence is there to 
suggest that the fiscal (as 
opposed to political) climate 

has changed so much since last 
November that there is now 
scope for tax reductions? One 
promising sign is that the out- 
turn for the PSBR in 1993-94 
was about £4bn lower than had 
been expected at the time of 
the November budget. Whilst 
some of this was due to one-off 
factors such as higher local 
authority capital receipts, a 
significant part did reflect 
slightly better than expected 
economic performance. 

A Anther source of encour- 
agement has been the recent 
trend in unemployment- By 
convention, it is assumed that 
over the planning horizon 
unemployment will remain 
unchanged, and the November 
projections were based ana fig- 
ure of 2.75mn. This is likely to 
be an over-estimate to 1994-96, 
where on present trends unem- 
ployment looks likely to aver- 

age less than 2J5m. Given that 
each 100,000 off the unemploy- 
ment register is estimated to 
save the government about 
£350m in social security spend- 
ing alone, the overall effect of 
the frill in unemployment could 
be to add a further £lbn or so 
to the chancellor's room for 

ft the chancellor was perhaps 
£2bn or £3 bn better off than he 
bad anticipated, he could - in 
principle - either cancel same 
of the planned tax increases, or 
go ahead with the announced 
changes but at the same time 
cut other taxes. If he went 
down the first route the most 
attractive option would proba- 
bly be to cancel the second 
stage of the imposition of VAT 
on fueL The toss of revenue 
from this would be more than 
El^bn, hut he could also cancel 
the second stage of the social 

security compensation package 
and reduce the net cost to 
around £lbn. 

As an alternative, the chan- 
cellor could attempt to re- 
establish the Conservatives' 
tax-cutting credentials by 
going straight for the most 
prominent tax rate of all - the 
standard rate of income tax. 
The government is in principle 
still committed to moving 
towards a standard rate of 20p, 
and just under £2bn of the 
chancellor’s spare cash would 
buy him a standard rate of 24p. 
The beneficial political effects 
of such a change might how- 
ever be somewhat diminished 
if Implemented next April, 
since the overall package 
would still represent a net tax 
increase of around £4bn. 

All of this speculation is 
based on- the assumption that, 
the existing public spending 

plans will be adhered to. An 
overshoot on the rather strin- 
gent public-sector pay targets 
would soon change the picture. 
In the longer term the message 
is that significant tax cuts win 
be possible only ft there are 
substantial cuts in public 

Over the past fifteen years 
this has simply not happened, 
with spending in 1994-95 
accounting for almost exactly 
the same share of national 
income as in 1978-79. Unless 
the economy performs mark- 
edly better than expected Mr 
Clarke will have to wield the 
knife on spending for more 
effectively than any of his pre- 
decessors if he is to have any 
scope for significant preelec- 
tion tax cuts. 

Steven Webb is a pro g ramme 
director at the Institute for Fis- 
cal Studies. 

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staff to 

U K public services 
such as health, trans- 
port and education 
have adopted many of 
the methods of the 
private sector in the past 15 years. 
But has this exposed them to the 
sort of excesses that can arise from 
a more entrepreneurial approach? 

The government's aim has been 
to improve the efficiency and 
responsiveness of the public sector 
by enmu ra g in g managerial auton- 
omy and placing much greater 
emphasis on performance. The 
move away from the traditional 
administrative approach of delivery, 
however, has led to growing con- 
cerns over waste of taxpayers' 
money, corruption and fraud. 

It has also raised questions over 
the role of the thousands of outsid- 
ers appointed to the boards of quan- 
gos and other bodies that deliver 
public services. These "non-execu- 
tive directors” have been blamed 
for several of the fallings of public 
bodies, which led to the warning in 
February from the powerful Com- 
mons Public Accounts Committee 
of a decline in management stan- 
dards. This parllampntor y Watchdog 
catalogued an increase in “serioas 
failures in administrative an d finan- 
cial systems and controls" in gov- 
ernment departments and other 
public bodies. These included: 

• The loss of at least £20m on an 
abortive plan to computerise the 
Wessex regional health authority 
involving conflicts of interest 
between board members and com- 
puter contractors. 

• Serious neglect of their duties by 
members of the West Midlands 
regional health authority that 
allowed managers to waste more 
than ElOm on the authority’s ser- 
vices organisation. 

• Misuse of public funds at the 
Welsh Development Agency, includ- 
ing the provision of cars for board 
members without requiring them to 
pay for private motoring. 

“If the level of problems contin- 
ues at its present level, we are just 
not capable of handling it," Michael 
Stem, a Conservative member of 
the PAC. told a recent seminar 
called to laimch a discussion paper 
on corporate governance in the pub- 
lic services* published by the Char- 
tered Institute of Public Finance 
and Accountancy (Cipfa). 

The seminar brought together 
more than 50 top managers horn 
the sector to discuss the responsibil- 
ity and accountability of those In 
charge of high-profile public ser- 

The starting point for the discus- 
sion was the report of the Cadbury 
Committee, set up in 1991 to exam- 
ine the financi al aspects of corpo- 
rate governance in the private sec- 
tor. Participants in the se minar 
were keen to see whether they 
could learn anything from the 
debate in the private sector over the 
code of practice recommended by 
the committee in its 1992 report 
One immediate point of similarity 
between public and private sectors 
was highlighted by Sir Adrian Cad- 
bury, the businessman who chaired 
the committee. He pointed out that 
behind most cases of fraud and mis- 
management lies the unfettered role 
of a single individual. 

“Checks and balances are needed 
to avoid these undesirable concen- 
trations of power," he said. 

The Cadbury committee bad con- 
cluded that strengthening the role 
of non-executive directors and sep- 
arating the roles of c h air man and 

A novel "trade fair” at which 
40 voluntary organisations 
effectively compete for the 
free time and expertise of up to 
35,000 British Airways 
employees will be staged near 
London today. 

Designed to achieve a better 
return on what BA nhafnnan Sir 
Colin Marshall calls the airline's 
"care capital” - the Largely 
untapped energy, s kills and 
enthusiasm of staff which can be 
donated to charitable causes - the 
initiative is likely to interest 
senior managers in other large 

The main aim of the Community 
Partners Fair, to be held in a 
converted hangar at Heathrow 
today and tomorrow, is to identify 
and recruit mentors. These are 
individuals or groups of 
individuals among BA's staff 
prepared to adopt a particular 
charity and offer their skills on 
a one-to-one basis. As well as all 
employees working at head office, 
BA has invited its pensioners, 
whom the company believes are 
a potentially valuable voluntary 

"This is by far the largest 
exercise of its kind In Britain,’' 
said tiie organisation Business 
in the Community approvingly 
last week. "It is also an example 
of a company listening to its 
employees rather than betraying 
the signs of what we used to 
call the chairman's wife 

Gary Gray, BA’s head of 
community relations, sees staff 
development as one commercial 
benefit for the airline but he also 
maintains that companies such 
as BA require a broader “licence 
to operate”. 

He adds: "We have listened 
carefully to those who say that 
time and s kills can be just as useful 
as money. In our overall strategy 
in this area we are giving surplus 
resources which are or minimal 
use to ns bnt which are of 
enormous value to the community 
as a whole.” 

Today’s fair has been widely 
promoted within the airline, half 
of whose staff said In a survey last 
year that they wanted to be more 
involved in community projects. 

BA has even costed the manpower 
value of time volunteered in the 
1993-94 financial year at £2.7m. 

“We want our employees to come 
and see what’s on offer aod deride 
for themselves how best to help," 
says Gray. 

Exhibitors range from local 
organisations, such as the 
Hounslow Afro -Caribbean 
Association and the West London 
Somali Association, to national 
charities including Age Concern, 
the British Bed Cross Society and 
the Prince’s Trust 

Tim Dickson 

The role of non-executives in UK public services is 
increasingly important as concern grows over 
potential waste and corruption, says John Willman 

Private pain of 
public sector 



chief executive was the key to good 
corporate governance. It was the 
responsibility of the non-executives 
to provide independent judgment on 
issues of strategy, performance, 
resources and standards of conduct, 
on behalf of the shareholders. 

Noel Hepworth. director of Cipfa, 

warned that creating such checks 
and balances was more difficult in 
the public sector. These services are 
accountable to a variety of stake- 
holders, including the community 
at large, their customers and higher 
levels of government 
Too often, it was assumed that 

political accountability was a sub- 
stitute far good governance, be said. 
Yet the Interests of politicians 
and the public services may not be 
the same, with the former subject to 
the short-term imperative of re-elec- 

“We have to look for alternative 

structures which harmonise with, 

but are not part the political 
process," he said. 

The Cipfa paper suggests that 
non-executives in the public ser- 
vices should play a bigger role in 
reviewing the systems of internal 
control, financial or otherwise. 
They must ask questions about the 
balance of power and authority in 
thf organisation, ensuring that no 
single individual wields unfettered 

They should ensure that their 
own roles are properly defined, and 
that there is a «*ipwr iinHtTOhnwiing 
of which decisions must be taken at 
board level. And they are responsi- 
ble for ensuring adequate systems 
of internal control, monitored by 
effective internal anrf external audi- 

Non-executives also need to pro- 
mote greater openness in the public 
services they are responsible for, 
said Hepworth. He believes that 
exposing the public sector to compe- 
tition has made it more secretive. 

“The competitive threat has made 
managers less willing to disclose 

information and rboragn problems 

with others.” he said. 

Yet openness is central to good 
corporate governance, as Sir Adrian 
reminded seminar. “It is essen- 
tial if the public are to have confi- 
dence In Hy organisation,” he said. 

If non-executives are to fulfil all 

these tasks effectively, they need to 
understand the wider public inter- 
est issues involved in the delivery 
of public services, according to Hep- 
worth. Public bodies must work 
within an ethos that stresses impar- 
tiality and equity as well as effi- 
ciency and effectiveness. 

The requirement of equity, for 
arampip, implies faimws in the dis- 
tribution of scarce resources and 
equality in the treatment of custom- 
era. Training may be required to 
introduce those with no experience 
of public-sector management to the 
norms of behaviour expected of 

Hepworth's hope is that public 
services will draw up their own 
equivalents of the Cadbury code to 
promote good governance in ways 
that reflect the unique features of 
each service. The National Health 
Service has already published a 
draft code for consultation. 

A cbnflnr inquir y is Under Way 

among housing associations whose 
board members - all unpaid non-ex- 
ecutives - now handle large 
amounts of public money and raise 
Im p r essiv e sums an the capital mar- 

However, better governance in 
the public services may also require 
a greater commitment from non- 
executives. Sr Adrian warned the 
seminar that outside appointees 
may need to commit, more time 
than many currently do if they are 
to provide the necessary monitor- 
ing. They should also be subject to 
tough assessment of their peifor-" 
manes, he added. “If someone is not 
pulling their weight on tire board, 
the chairman should take action — 
passengers drag down the whole 

Those invited to join the boards 
of bodies delivering public services 
can expect much closer scrutiny of 
their performance in future, with 
increased expectations of their 
responsibility for ensuring good cor- 
porate governance. 

* Corporate Governance in the Public 
Services. Cipfa, 3 Robert Street, Lon- 
don WC2N 6BK £12.50. 

Mean bosses, nice bosses, no bosses 

I'm not sure how best to break the 
news, so I’d better come out with it 
straight The FT Mean Boss Award 
has been a total flop. 

Two weeks ago I asked readers to 
nominate up to three mean bosses. I 
was looking for leaders of Britain's 
biggest companies who were tyran- 
nical, bullying and intransigent. 1 
was expecting so many responses 
that I had considered installing a 
special fax machine. 

Sadly, however, I received just 
one lonely reply that met the crite- 
ria laid down. That came in an 
anonymous brown envelope and 
nominated Rudolph Agnew, chair- 
man of Lasmo. It cited nine unflat- 
tering attributes, some of which are 

I am reluctant to award the title 
to Agnew, about whom I know 
nothing that substantiates the 
c laims . In any case he is disqualif- 
ied for heing in the middle of a 
particularly ugly bid battle. For all 1 
know, the sender is some joker from 
Enterprise OIL 

Having rejected him, and in the 

absence of any other suitable candi- 
date, I am declaring the competition 
null and void. But before forgetting 
this unhappy episode, I want to 
understand why the result was so 
disappointing. I can think of three 
possible explanations. 

• Nobody read the original article, 
a All British basses are delightful 
to work for. 

a The bosses are so mean that peo- 
ple do not dare to expose them. 

The evidence from my in-tray 
leads me to reject the first two 
explanations. There was no short- 
age of mean boss nominations, but 
nearly all of them run companies 
too small to qualify. Judging from 
the letters, these bosses are so hor- 
rid as to be barely credible. Here 
are three particularly mean ones: 
a The boss of an engineering com- 
pany who apparently sacked one 
person for taking Us jacket off dur- 
ing a meeting, and another for hum- 
ming. He also shouted at a senior 
manager for using his private toilet 
on the company's jet. 
a The chairman of a chemicals 



group who takes colleagues out to 
lunch, only to scream at the top of 
his voice in the middle of a busy 
restaurant Apparently this individ- 
ual likes nightclubs but always 
leaves his guest to pay, and fills his 
own cigar case from the box pro- 
vided for company entertainment, 
a The head of a distribution com- 
pany who was so incensed by the 
state of his finance director's pri- 
vate car that be subjected him to a 
humiliating inspection of his col- 
leagues' cleaner vehicles. 

Amid so much evidence of mean 
bosses of medium-sized companies, 
how is it that there could be none at 
the top? Are they all rumbled before 

they reach the first division? 

I have occasionally heard say that 
there was a mean streak r unning 
through Sir Alastair Morton, Sir 
Colin Marshall. Sir Peter Levene, 
Mick Newmarch. Sir Richard Green- 
bury. Alan Sugar. Sir Allen Shep- 
pard, to name just a very few. It 
seems I’ve been misinformed. 

Moving on to ultra-nice bosses, I 
was surprised to learn that Ben & 
Jerry's, the Boston ice cream 
maker, is scrapping its relatively 
egalitarian pay scales in its search 
for a new CEO. The famous New 

Age, socially aware company is 
looking for someone with "gentle- 
ness of spirit”, but is having trouble 
buying that at its cut-price rate. 

However, to conclude that there 
is a market rate for every job would 
be wrong, at least on UK experi- 
ence. All the studies show a great 
variance between comparable jobs 
in comparable companies. I doubt if 
Sir David Lees, who earns £330,000 
at GKN, wants to move to TI Group 
just because the top job there com- 
mands more than twice as much. 

As for Ben & Jerry’s, it was all 
very well if Ben Cohen himself had 
a small salary, because he has a big 
stake in the business. But for a new 
CEO to run a thriving company as a 
wage slave, earning what in the US 
is peanuts, may be pushing ft 

A scurrilous story in the tabloid 
press Unking strippers and call girls 
to the eminently respectable Con- 
federation of British Industry turns 
out to be true - well, almost. I’ve 

just had lunch with Howard Davies 
who drew my attention to a News of 
the World story claiming that the 
woman who by day organises the 
vokui-vents for the VIP gusts at 
the CBI is by night hiring out strip- 
pers. The only flaw in ibe -story, is 
that tire woman in question is not 
exactly a “CBI boss” as stated, hut 
an employee of the contract cater- 
ing firm used at Centre Point 
It says much for Davies that' he* 
can see the funny side cf a story 
that claims CBI stands for "Crunk 
pet. Bonking and Indecency”. 
Indeed he thinks the story consider- 
ably more accurate - and certainly 
more amusing - than, a perfectly 
credible tale in The Independent 
newspaper last week. That claimed 
that the CBI leader was backing 
Tony Blair for the Labour leader- 
ship. Let us hope that Blair is also 
amused when he finds out that 
Davies is less worried about the CBI 
being publicly associated with girls 
In bondage gear than with a pre- 
sentable young man who may lead , 
the country one day. 



* VTr wi, 

/ ; Monks 

/Jdho'Monks, 48-year-old general 

i Congress, fe hat looking forward 
o» a desert island. A 
•xapde^cbe^ .who la.trying to 

would not; however, seek to 

.’dfefeetefaeiBis bade fix the office 
‘fi^thffeodofat*^honfi. Tm 
thtee.wfco behaves out of 

.•sightoot bfnumt^lieeays.' . ■ 

HjowwoaM you copewito. . 

. *Tte^agood^xaint>l- 
■ • s^f^iancev Whidi Eteahs I like. . 
.walking: tfce-hfflaTf a he pretty 

.• Hymr could take one person 
-you, who woaldtt be? 

would gobesertc ff I ssddsi-.v \ 

anybody' efeel But in could one 

ft for . 

short periodsbot after a couple 

"A radlo timed to the World ; . 
. Seatfco.'Xtaa agwsjxoUdp.^I: .\ 

n^be5ng.hi:t<Hibh butlekHft ' 
thinktfcat P& havfi^my Influence 

my- writing 

..... r _ 

young pessflh-gcowlng iq> frt a 

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W igbtmaa Monatui Limited) 

known m Allni OBr bfarMnra Urndnl) 

aodkra 98 or lie loaolrcocy Ad 1986, that ■ 
MEETING of Ibe CREDITORS of I bo aberee- 
BBcd aapa i ta will be held ar Ibe Coom g h l 
Room, 61 Gm Oun Sard. Loorfcw WCIB 
SDA oa 38 June 1994 al 4HUpm for the pmpoaea 

mcnboortl ia u d mi *9 lo 101 of die rad A a. 

A list o[ Ibe nimca aod addtnara of ibe 
cooi pan 1*1 creditors ni) be inyc t cd free of 
dap- between lOflfum and JiBpta n Coopers 
A LyhraaiL Si AadlcWs House, 20 Si Andrew 
sued. London BC4A JAY os 24 lone l"*4 and 
27 Jane 1994. 

DATED; LI lone I99» 

By order of lbs Board 
WH P Holmes 


H D R wai nl n U d b i l Hbrmeafr brawn aa 
Hydra Dynamic Pradnna Lindtodj 
H W PReaHmtana Lknttcd Iftnnarfr known 
as R W Peri A Co LMud( 

FG (ReaBtatbicii L ia g bc d l formed? knows a 
Pre mi er Grip Lto nwd ) 

T D Reatariona UbM Ifcnwdj kanwn aa 
AH is nlmkdanj arTe nsdmdip 

aeciion 98 u( tbe loaolvcoci A cl 1986. iboa a 
MEETING of ibe CREDITORS ot the above- 
■aid cnopanlea wiD bo bcM m Ac Cent ogbl 
Rooms, 61 Cmt Qoeeo Street. London WCIB 
SDA on 28 Jane 1994 al !0.00am. 1 1.30am. 
2.00pm and JDO-m lafMiudp for ibe pmpioe* 
me i dwnedm sections 99 m IOI of Ibe laid AcL 
A list of Ibe oome* and addresses ol ibe 
company’* creditors map be inspected free or 
chaise b an re en ICHUam and ?OOpm m Cooped 
ft Ljtmad. Si Andrew's. House. 20 Si Andrew 
Street. Lemkm EC4A JAY oa 24 Jooc iw and 
27 Mne 1994. 

DATED: U Imre 1994 

Bp onier of Ibe Baud 
w H F Holmes 

I b i uu l j aa I«y Pradsota Limited! 

■i idak tokiw — !r**f 
section 98 of Ibe InsuNcncr Aa (936. dial i 
MEETING of Ibe CREDITORS of tbe anose- 
named wiH bo held at tbc CousagM Roems. ol 
Grew Queen Sneer. Louden WCIB SDA on 29 
June 1994 « 1 200am lor ibe pmpmes meatuml 
io rocoaus 99 to 101 of ibe s»M AcL 
A list u( Ibe Diner and addresser of Itc 
oaoprapi creditors may be impeded (fee Al 
charge between IfhOOam and StOfipm al Cuupm 
ft Lyfrrud. Sa Andrew', Hook. Ji Si Andrew 
Street. Loodm EC4A JAY oa 27 June 1S»« and 
28 Jnac 1994. 

DATED- 13 Jane 1994 

By order ol ibe Board 
WHY Holmes 




Tronwig and speedt-wnting by 
award winning speaker. 

First lesson (ree. 

Tel: (07Z7) 861133 

Both in admmbaroifTic reads errfrlp 
ae crion 9 9 of ibe IvoHeoc? Ad 1986. ihai a 
MEETING of ihc CREDITORS of Ibe abewe* 
mined compmjes wd 1 be held al Ibe Coanaopb 
Ruoaea. 61 Gnal Croeen Slrecl. Loaduo WCIB 
SDA no 29 Joe IMU a irVWmo lor Ibe p uip o tu 
menoreieU in ettnw. 90 t.. I'll of rbe rad Ad. 

A list ol Ibe name* rail addieaees ol Ibe 
ce>mpan?'& creditor? mav be inspeactl tree of 
ctarpr between litutun and Sierpm al Owpen 
ft I i+Waad. SI Andrew * Hwre. 20 Si Andrew 
SureL iemdon ECJA JA> < a 2~ im 1994 rad 
28 Jnae |9ni. 

DATED; 13 Jane 1VM 
3" Ordet ol ibe Breod 
W II P Holme. 



NOTICE lb IIEREB1 GIVEN, purarunl n. 

wiMi 9i vf tier line-lerne^ Ad low. rhal J 

MEETING ol ihc CREDITORS ol Ihc ab..,»- 
■UOted Aaspoanr. wiD be held d! Ibe Coamupfcr 
Rumxrv. r.1 deal Ooeen Slrecl. lowLcr Wr in 
SDA on 29 June 1994 n 1 1 Uimn fur dvr penyawe 
Her.! treed m veetaem. 99 fc. In] id Ibe aid ,\a 
A Iim of ibe emu rad iddre v.ei ul ibe 
lemprak', errdnor-. miy be Ih|tc*ii] fire ol 
duift her»eea iiikaoh and 9'pn a Cunreii 
ft Lihrari it .\i»lrew-i Hoa-c. 2l» M Andrew 
Sind. Lidoa EC4A JAY oo 2" June |9m jnd 
2S Jncc I‘*94 

DATED: 13 Jane 
W II P Hefnree 
ba te r 

2 If? ? if; 

Including: Istanbul, Kocadl, Bursa, Baffle*, paoahk^e and TeMnlagPni^iiceft. 
For arfvertlsii^ aid space reservation please contact 

NBss Khsty Saunders to London 
Tel: 071 873 4823 Fax; 071 8733934 
Mr Clio Costanto bi i« i a i*iJ 

Tel: (0212) 279 2648 / 279 5350 FSJc (0212) 264 1761 

FT Surveys 


Pension relief for 
the self-employed 

If you are self-employed, in the UK, 
the second instalment of your 
income tax is due on July i. 

This payment will be the second 

tor the 1993/94 assessment For 
those who have been in business 
for a number of years, it is based 
on profit earned in the 1992/93 tax 
year. One way of reducing the tax 
bill is to check that you are happy 
with the level of contributions paid 
into your pension scheme. You 
obtain relief at your highest rate 
of tax on premiums paid in to a 
personal pension plan but only 
up to a certain percentage of earned 
income. The percentage is 
determined by your age, as the 
table shows. The eamingg cap for 
1994/95 is set at £76,800. up from 
£75.000 the previous year. 

The “carry hack" rules allow 
pension premiums made now to 
be treated as if they had been 
in 1993/94 so that the tax relief 
becomes available immediately, 
instead of being delayed imHi the 
tax due on the 1994/95 asfiPBsnwnt 
Is paid next year. Since the tax 
relief is granted at the rate for the 
earlier year, the carry back 
provision is useful if you have 
moved from being a highw rate 
taxpayer to the lower land. 

Eileen Doherty, tax manager at 

Contribution limits 

Age on April 6 

% of 

35 or less 












Agcraa shown jm» tor panoml pentfont far tax 
>ears 1989/90 ormanJs. OontribuOan Bmlla are 
dHwent forretirwnont annuity oonbact a. 

Fiona Price & Partners, 
independent financial advisers, 
says: “If you were a higher rate 
taxpayer last year and pay £54)00 
into a personal pension plan now, 
you could cut tax due next month 
by £2,000. You need to complete 
a claim form and send it to your 
Inspector of Taxes with a receipt 
from the pension provider." 

You cannot carry back any 
further than one year unless you 
had no taxable earnings in 1993/ 

94, in which case you could go back 
to 1992/33. But no further than that 
"Carry forward” provisions let you 
"mop up” unused pension pension 
contributions from the past six 
years but you must have first used 
up all the present year’s allowance. 

Andrew Frape, tax partner with 
chartered accountant Wheawill 
& Sud worth, says people often 
overlook the fact that life assurance 
premiums paid under a pension 
policy can also qualify for tax relief. 
The limit Is 5 per cent of earnings 
regardless of age. Note that this 
is not in addition to those limits 
listed in the table. 

Do not, however, increase your 
pension contributions only to 
reduce tax. Consult a fee-based 
independent financial planner or 
your accountant to see if it fits in 
with your wider financial plans, 

Scheherazade Daneshkhu 


Through a glass 

What is It with Ray-Bans, exactly? 
How is it that they've became the 
optical equivalent of Levi’s - 
casual-dress Americana that no-one 
can now five without? Heretical 
as this may sound, are they 
nflppgflar fly the best Kungfaggp*^ 
or even the ones with the most 
desirable label? Is there an 
alternative to trying to look like 
Tom Cruise or one of the Bines 

Well, if you want to get away 

car dealer look, bat are desperate 
for a name with which to impress 
your friends, the most obviocs 
alternative is A rmani. 

Armani sunglasses (as opposed 
to the cheaper Empario Armani 
range) not only come in the latest 
styles (little lozenge-shaped Janies 
Joyce-style stmspecs befog very 
popular at the moment), hut are 
also surprisingly durable. They 
carry a two-year guarantee - most 
sunglasses are only guaranteed 

for one year - use glass lenses (far 
better vision) with anti-reflective 
coatings, and win stand up to 
considerable wear and tear. Prices 
range from £115 to £180. 

Serengeti and Vuamet are also 
worth mentioning. Serengeti are 
American, traditionally-styled, 
well-made, appealingly low-key 
glasses with, photochronric glass 
lenses; and are aimed heavily at 

r3T drivers who want s ompthfog 
that will cut out the glare but still 
allow them to see where they’re 
going. Prices are between £89 and 

Vuamet - somewhere between 
£50 and £75 - are French action 
men’s sunglasses, extremely tough, 
extremely black and wrap-around. 
They are ideal for nfctmg and other 
dynamic sports activities. 

But if you really want to be 
different, you must hit Cahfonna: 
this is where Oakley and REVO 
sunglasses come from - sunglasses 
which, if you are a serious fan, 
lea ve Ra y-Bans standing 

REVO’s frame styles are smart 
T palngtrgam; hut their lwrarea are 
hill of NASA technology - pricey 

but extremely effective. Their H20 
range, for instance, has a 
glare-reducing treatment which 
allows fishermen and water sports 
enthusiasts to see through the 
surface of the water to what's 

Moreover, most REVO’S come 
not with the usual drab black or 
brown lenses but with those 
bearing the most stunningly 
coloured reflective surfaces, 
transforming thpm into objects 
of weird beauty. Expect to pay 
between £120 and £170. 

Even REVO'S, however, have 
a hard time matching Oakleys. 
Oakleys are science fiction: 
radically-styled one-piece 
wraparound shades with 
detachable arms and nosepieces, 
available in an extraordinary, lurid 
rainbow of colours. £110 will buy 
you a complete pair, while a further 
£60 will buy you a different, 
interchang eable lens set. 

They and the other brands 
mentioned «n be found at Sungtaw 
Hut, Selfridge's and good opticians. 

Charles J ennings 


Computers off 
the trolley 

Britain's most successful attempt 
at business sponsorship of schools, 
the Tesco Computers for Schools 
grhAmp, has been extended. 

If yon are one of the millions 
of parents who have been coerced 
by schools tntn collecting vouchers 
for computer equipment, you may 
be relieved to know that the dosing 
date will now be June 26. Schools 
then have until July 15 to process 
their applications. 

Computers for Schools is an 
undeniably successful commercial 
promotion, which analysts already 
beHeve has a noticeable effect on 
Tesco’s sales volumes. 

The retailer is into its third year 
of running the scheme, and it has 
already been copied, with WH 

Smith lamirhing a s cheme for 

buying school books, and Boots 

offering sports equipment. But is 
it the way forward for funding the 
UK’s often undewesoarced schools? 
And does it provide voucher 
collectors with value for money? 

Both of these questions are 
harder to answer. Take-up shows 
there is a demand. Last year n. Q QO 
schools - out of around 40,000 in 
En gland and Wales - received at 
least some equipment under the " 


But schools now have to teach 
information technology as a theme 
running through the national 
curriculum, and banks of computers 
for all pupils to use are a standard 
sight in primary schools. Tesco 
funding might not go that far. 

Cynics can also point to the 
massive basket-loads of Tesco 
shopping which need to be 
completed to earn a computer. The 
cheapest computer available n eeds 
2JS00 £25 vouchers - or £62£00 spent 
at Tesco. 

But the difficulty schools have 
in raising the money forces them 
to work closely with their local 
communities. And, teachers attest, 
that has encouraged parents to 
take a greater interest in schools, 
and, relatively painlessly, to help 
with funding. 

Some schemes linking with local 
employers or community groups 
provide superb learning 
opportunities. For example, St 
Andrew’s Academy in Saltcoats, 
has joined with a local company. 
Craigie Carpets, to start its pupils 
osz computer-aided textile designs. 

And some schools managed 
amazing organisational feats. King 
Edward VI School in Lichfield, 
Staffs, last year claimed five 
computers, and three multimedia 
CD-ROM drives. It had collected 
30,600 vouchers - £765,000 spent 
at Tesco. 

John Anthers 


If you can stand 
the heat 

Eating in the kitchen usually 
evokes images of a rushed breakfast 
or nhildhnnd banishment from the 
dinner table. It’s just the opposite, 
however, at Toronto's stately King 
Edward Hotel, part of the UK-owned 
Forte chain- 

Executive chftf John ffiggms has 
set aside a corner of the King 
Eddy's main kitchen for The Chefs 
Table, at winch he serves a 
sumptuous seven-course dinner. 

But the Chefs Table is more than 
a gastronomic adventure, Higgins 
completes each dish and decorates 
the plates in front of his gneste. 

In Ms t hick Glaswegian awwit 
he introduces each course with 

an ex planatio n of the iw graritonta 

and his reasons for them. 

Guests are invited to stretch their 
legs between the sorbet and main 
course, with a guided tour of the 

Don’t expect the decor of an 
upscale restaurant. A Sterling 
Vineyards poster hangs 
incongruously from the door of 
a steel fridge. The white-tiled walls 
are filled with past guests’ 
appreciative grafitti scrawled in 
gold marker pen. Conversation. 
at the spacious, round table is 
occasionally i nte rrupted by a loud 
bell at the nearby room-service 

Hi ggins riariripg on tfrg mimr[ 
often just a few hours in advance 
of the wmI- Wines (one for 
course) are chosen Mr the hotel’s 
restaurant manager Andrew 
LaEberte. He a point of 

inchidfog at least one selection 
fr om Ontario’s fast-improving 

One recent dinner began with 
gmnkeri Atlantic Bahrain marmatori 

in chopped ginger, and served on 
a mashed potato well filled with 
capers, seaweed and parsley. The 
second course was Quebec foie gras 
garnished with Ontario asparagus 
spears, followed by pan-seared 
portobeHo mushrooms with scallops 
escargots on a garlic tomato broth. 
The main course was spiced, 
roasted venison cutlet with grilled 
yams. Dessert consisted of a 
poached pear an a pool of 
s t rawb er ry ami rhubarb glaze, 
decorated with crisp almond 

Higgins tries to tailor his menu 
to suit the group- On one recent 
occasion, when most of the guests 

were South Africans, he introduced 
an imaginative new flavour to 
gazpacbo with biltong flakes. 

The table is often booked by 
co mpanies eager to make an 
impression on customers or 
out-of-town visitors. Perhaps not 
surprisingly, recent appreciative 
diners have included senior 
managers from McDonald’s, the 
hamburger group, and one of North 
America's biggest doughnut chains. 

The Chefs Table is available only 
for groups of six to ten. Advance 
reservations are essential. The cost 
is C$100 per person, plus C$50 or 
so for wine, depending on selection. 

The King Edward Hotel, 37 King 
Street East, Toronto. Tet ( 416) 
863-9700, Fax (416) 367-5515. 

Bernard Simon in Toronto 

Greyhound Derby semi-final at Wimbledon last Saturday: Up the Junction leads Flag the Fawn into toe first bend. Memories within the Derby reach hack to 1927 

W his Saturday, one of the 
* great English sporting 
events will take place in 
Wimbledon. It will not 
be set upon the green 
;s of the district's heart- 
in the urban streets which 
eyond into unlovely south 
It will receive no front-page 
Monday’s newspapers, but 
paragraph. It will last for 
l half-a-minute. Its winner 
ted by no more than a few 
fans. Yet this winner will 
a proved perhaps the great- 
» world in his or her sport; 
a Wimbledon champion as 
iltely more celebrated one 

evhound Derby - the final 
is befog run this Saturday 
Wimbledon stadium - is 
reat sporting occasion to 
3t follow dog racing. But 
iem it does not resonate at 

. Derby still carries within 
memory of its more gfon- 
and the knowledge that it 
.is much as any other test 
nee. It remembers when « 
irted in newspapers with 
estioning respect giwn to 

sporting occasions; when ft 

-hod by crowds of up to 
,d when the dogs that won 
umK to wttb oBS because 

i scarcely understood the 


Going to 
the dogs 

sport itself could still understand Its 

The memories within the Derby 
reach back to 1927, when the race 
was first run at White City stadium 
(remaining there until it was demol- 
ished in 1984). Just a year earlier, 
greyhound racing itself was first 
staged in England. It was the 
remarkable fortune of both the race 
and the sport that they should have 
been almost immediately hijacked 
by a dog named Mick the MDler. 

Plain and workmanlike, with a 
str eetwise glint in his eye, Mick's 

success was such that he became a 
national celebrity, instrumental in 
raising annual attendances at race 
meetings from 5.5m in 1927 to ova: 

' 20m in 1932. He was so famous that 
he was subjected to a rudimentary 
marketing campaign: he made a 
film and had his fees wmb oased on 

the hack of powder compacts. He 
also won the Dairy in 1929 and 1930, 
a double that was not emulated 
until 1973; and won 19 races in suc- 
cession. a record which was not bro- 
ken until 1974. The definition of 
excellence that he described has 

never been re-written. 

Above aH, he gave to greyhound 
racing, very early in its history, an 
almost unlooked-for focus. The 
assortment of spectators that had 
followed the sport in the first cou- 
ple of years had been woven 
together by Mick the Miller into a 
bewitched entity. This entity grew 
ever-larger as the sport, polished by 
its brushes against the world of 
ftim a, gradually ass umed its famil- 
iar and seductive image of earthy, 
urban. English glamour. 

B y the late 1930s, everyone 
was going to the dogs aris- 
tocracy, film stars, bohemi- 
ans - all of them helplessly desir- 
ous of inhabiting that rich, real 
world of fun and money. By 1945, 
attendances at race meetings had 
reached 50m. From that dazzling 
peak they could only fall, as they 
did almost every year thereafter; 
they are now barely one-tenth of 
that ma gical figure; but the image 
of the sport had coalesced into 
something less destructable and the 
Derby, whfeh would never again be 
attended by the crowds of the 
immediate post-war boom, would 
never lose the power that those 
nights had bestowed upon it 
However, the demolition of White 
City threatened to cut the links 
with the past contained within the 
race. Would it remember still how 

MDe Bush Pride bad won by an 
inch In 1959 or how the anti-post 

favourite, Hi Joe, had been kid- 
napped in 1965, or how Prince Phil- 
ip's winning do g had been booed in 
1968. or how Tartan Khan had won 
at 25-1 in 1975? Would it remember 
Mink the Miller, who had turned the 
race and himself into the stuff of 

It would - because it is through 
the dogs themselves that the gran- 
deur of the Derby persists- That is 
Mick's final legacy. From the 
moment that be revealed his great- 
ness, followers of his sport knew 
what a greyhound could be, should 
be, like; and from then on they have 
always teen looking for another one 
like him, or tetter than him. His 
preriHar fas cination was to have a 
great, unooasrions speed which he 
controlled by a great and conscious 
intelligence. To see the desire to 
jnn being transmuted into a desire 
to win is still, 65 years later, the 
most tbnUiwg sight in greyhound 
raring, and one of the most thrilling 
in sport. 

Most dogs cannot create such a 
sight And most of dog raring is 
workaday stuff, betting shop fodder, 
an endless sequence of numbers 
from which gambles can formulate 
their meaningless equations. Yet 
the strange thing is that one never 
thinks of it in that way, once one 
has teen to the Greyhound Derby. 

Anyone for 

Every restaurant correspondent 
hopes that when he, or she, sits 
down to their word processor it will 
inspire readers to go out and enjoy 
the restaurants that have been 

So it is with a heavy heart as a 
tennis enthusiast (whose greatest 

rfahn to trmnig fnmp Jg tha t be once 

had a most enjoyable lunch In Syd- 
ney with a man who, in his youth, 
played doubles with Rod Laver) 
that I sit down and list some of the 
restaurants in south London which 
may be useful over the forthcoming 
Wimbledon fortnight a heavy heart 
because I hope, like so many others, 
that the w eather is kind that 
you are never forced indoors to use 
thpm But just in case... 

The following are listed by style 
of cooking »nd in declining order of 

British; Jack’s Place. 12, York Road, 
SW11. (228 8519); Ransome’s Dock, 
35, Parkgate Road, SWll, (223 1611); 
Sonny’s. 84, Church Road. SW13, 
(081-748 0393); Buchan's, 62-64 Bat- 
tersea Bridge Road. SWll, (228 
0888k Connolly’s, 162. Lower Rich- 
mond Road. SW15, (081-788 3844); 
Stable, 373, Lonsdale Road, SW13, 
(081-876 1855); Twenty Trinity Gar- 
dens. SW9, (733 8838); York's, 344 
York Road, SW18, (081-877 1633); 
Newton's, 33. Abbeville Road. SW4, 
(081-673 0977); Alma, 499. Old York 
Road, SW18, (081-870 2537); The 
Ship, Jews Row. SW18, (081-870 


9667 y, Brady's, 513, Old York Road, 
SW18. (081-877 9599). French: Har- 
vey's 2. Bellevue Road, London 
SWI8, (081-672 0114); Le Gothigue. 
Trinity Road, SW18, (081-870 6567); 
Le Bouchon Bordelais, 9, Battersea 
Rise. SWll, (738 0307); Emile's. 144, 
Wandsworth Bridge Road, SW6. (736 
2418) and at 96, Felsham Road, 
SWI5, (081 789 3323), Cafe Rouge. 
200, Putney Bridge Road, SW15, (061 
758 4257); Pierre Victoire, 136, Upper 
Richmond Road, SW15, (081-789 
7043). Italian: Riva, 169, Church 
Road, SW13, (081-748 0434);. Del Bun- 
gustaio, 283. Putney Bridge Road, 
SW15, (081-780 9361); Enoteca, 28, 
Putney High Street. SW15, (081-785 
4449); Osteria Antica Bologna, 23, 
Northcote Road, SWll, (978 4771 Y, 
Primadonna, 9, Battersea Square, 
SWll, (223 9737); C. Notarianni & 
Sons. 142, Battersea High Street, 
SWll, (228 7133); Pizza Express 
branches at 230, Lavender Hill, 
SWll, (223 5677). 305, Upper Rich- 
mond Road, SW14, (081-878 6833), 
144, Upper Richmond Road. SW15, 
(081-789 1948), 14. High parade, High 
Road. SW16, (081-677 3646). Old York 
Road, SW18, (081-877 9812), 84, ffigh 
Street. SW19, (081-946 6027). Indian: 
Bombay Bicycle Club, 95, Nightin- 
gale Lane. SW12, (081-673 6217); 
Samratt Indian Cuisine, 18-20 Lacy 
Road, SW15, (081-788 9110); Indian 
Ocean, 216, Trinity Road, SW17, 
(082-672 7740). Thai: Chada, 208, Bat- 
tersea Park Road, SWll, (622-2209); 
Lena's Thai, 196, Lavender Hill, 
SWll, (2283735). 

Nicholas Lander 

Company route to 
drug testing 

Most employees assume that what 
they do in their own time, and to 
their own bodies, is their own 
business. But issues of safety and 
health can sometimes justify 
company intervention in personal 

One such activity which may 
concern employers is drug use. 

In the UK, the idea of testing 
employees for substance abuse in 
the workplace is fairly new. But 
in the US, where drug testing has 
been common since the mid-1960s, 
some 30 to 40m drug (including 
alcohol) tots are performed 
annually in about 4h00 laboratories 
in the US. 

There, testing is not limited to 
Jhdustries where safety is the prime 
motivation for drug surveillance. 

In the financial sector, many 
no mpantea test recruits and some 

will also test incumbent employees 
if they suspect them of abusing 
drugs or alcohol 

In the UK there is currently very 
little information about the extent 
of drug use in the workplace, nor 
has anyone proved a definite 
correlation between drug use and 
performance. But an increasing 
number of companies are not 
willing to take the risk, especially 
in safety-sensitive sectors like oil 
and transport. 

London Transport, for example, 
has been conducting 
pre-employment testing since 
December 1992 and has now 
introduced unannounced testing 
of staff in safety critical- “The 
driving force for implementing 
testing was safety, but of course 

we are concerned about health,” 
says Dr Pat Diamond, director of 
London Transport medical service 

The Faculty of Occupational 
Medicine of the Royal College of 
Physicians is due to publish a 
report this month* which provides 
guidelines for testing for substance 
abuse in the workplace. 

The report draws attention to 
the importance erf setting up an 
acc red it a tion system for 
laboratories, training medical 
officers and providing information 
for medical undergraduates and 
general practitioners. 

It also stresses the importance 
of knowing why a company wants 
to test for drugs in the first place. 

“One of the problems is that a lot 
of companies feel it would be a good 
idea to have drug testing but have 
not identified their objectives 
sufficiently," says Dr Diamond, 
who chaired the working party 
which compiled the report. “But 
there is no point in going into this 
sort of business if you do not come 
up with the results you wanted 
in the first place." 

A company may wish to test for 
a number of reasons besides public 
and employee safety. Other reasons 
include Improving the health status 
of employees, raising performance 
standards, protecting financial 
information, public relations and 
corporate image or the attainment 
of a "drug-free" workplace. 

Once a company derides to 
launch a drug testing programme, 
it must consider what can be quite 


WteN l 53HD MMS£ A 
a QUBJBi fc/WUNKtf 

heavy costs for lab analysis, setting 
up toting areas, lost working time, 
while employees await test results, 
and the added cost of conducting 
unannounced tests on working 

“T think it is very important not 
to rely an a drug testing programme 
to prevent drug abuse,” says Dr 
Diamond. "I believe that drug abuse 
policy awareness, discussion and 
a counselling service are really 
far more constructive ways for 
preventing drug abuse than testing 

“Guidelmes on Testing for Drugs 
of Abuse in the Wartcpiace" am be 
ordered from the Faculty of 
Occupational Medicine, 6 St 
Andrew* Place. Regents Park, 
London NWI 4LB, 071 4873414 


steven Pimlott’s production of Euripides'” tragedy, 

■ o-r( mjaray u rarer m 

mi award-winning production from 

conouccs works by Brahms, Strauss 
and Bartok (247 7800) 

(4473 1300) 

Opera Comique Roberto Alagna 

Paris Etoile, 81 Boulevard Gouvlon 
St Cyr, tel 4068 3042) 




campabnfc a frMrt*: : • 

■ mt o* i L «Pco rcBno to state 

• iw .<-• — — ^ Lw 

; mmwsi o ff moftnorco in 

^^Staar< a»tlwcMintnr < 
tecaBedbythemffita** ... 

.i mwiwow wWgMg 
: aufeaeffog- 60(^000 “ 

■ i fetiM B tSphinwit* sajpf • 

' tftorasw wf iwgwirttwin - ; 
WMOtowtaf irrfvate Bn 

.'•4M* • .. 

R^oride • 

In s tate erf goitemroert - 
.reSbWkp turned coaj^-US . • 

: federal inspectors placed on ; * 
cruise ^b^jatocfgtBCtJBegsi . 

> t m rni gfar te fate been teWrtg. 
femfc and frieocte afoog fosf rag*.- 
or reduce the •: 

Asscdatecf Press:. * . -.• ••"•;• 

; NaKSafctadoR 

Sewtoe agents aSowed tfw», 
OrtW &x»fo pay th*-7 -*v : 

: inspector travel ewpensea . 
.stnSKHd cfaebmertfaliob;' ; ; .. 

requwdfd check 
..«ufeastSjps for jflBewa ^ they ‘ • 

£ reach U& p**te. Sift seme - ; 

t' inspectors tacfc.roihsiJrips that; 
[!|WHHiKit«d|>- Wto ttne atx&d . : 

[ ffterecreaflon?* ■ ••' 

'■'fot^n pottsv tftao «ed for . 

;. ovwftm. pegr, 'X; v " ' • . " 

Jamaican investment 


WfMtmcfced outof*dcJto 

t^ce over Air iarttalcaitMd . 

neuters, ••.•y" '- :• ■■ 

.. Sln«t |s Q]qp«ct«d to 1W 

iiw wj i» M nt» Corn of : 

.. Toroowi wnnunv / 

ib ptM0tt moofs last monm . 
to invent iq»bo$t4ra to the 

aWhw..:: ■'*.'... 


Apafr of globetrotters are tatfrig 
a HoSdaywitfi a difference by ... 
world to fust 80 days. 

Stuart Cheese end David Mow 
wS be tOdng 170 flights anti 7. 
traveffihg 80,000 mites lay lark*, 
see and air in the record bid ; 
vrfdchtheyhope wB rafeo. . ... . 
£250,000 forttw United Nafions 
CHWren’s FUnd. 

eyary country on the globe mm. 
.sot lay two American - *; ~ ' ■: 
' mfesfcmarfas but ttook them 4 V 
years - from 1934 to 1975. - to 

Children hurt 

/ cNMnmmn 
■ Muwd .whca 

"wW - acoach ‘ 

/ - takfeg thorn 

- — : — 1 — home from* 
chtsdh outfng lost control, 
poficesaid today. Tbs 
coach, carrying 31 c U d wn 
sod 13 stoat, ran acme s • 
nwimtahont sod tsww^ 

g ra ss y bank on te A380 xt 
tbs J un ction writfa the Tortwy 
ring road! Devon. 


A breakefown in the 

at-concStianing system of a 

. treoxBo in i mhiwi m wmoK 
before befog released; one 
Ig y er oUgbti— « 

dlMif iiTm ■ *W II II ■■nisi I j-t 

OQiainrn uvwiugin tor 


m miy Tf ^ — 

vraek. One traveller broke e 
wJrxto* 1 cn the Wn, tlrom Paris 
to the southern dty of Tarbeo, 
as heat and bad air became 
ttoisrabfe, French raBway 
An unspecified number Of 
passengers among the 600-700 
making the trijp were taken a 
and required medtaaf treatment 
when the train was forced to 
make ot unscheck^d stop for 
two hours. 

Ukefy weather in the leading business 

Mon Ttm Wed , ^ 


RoAgnng ^ a» ^ 

«w*» &** 

f«*w» HOb* 

e* e.-“. # 


ate': •••;^»: ^b» D.;e 

Mwliwxa wcRpwMim »> Oihh» 
MtomadMMyMtetf »««» <*"«* •» 

A irlines hare discovered a 
new area of competition - 
their executive lounges. 
Set apart from the general 
confusion of the airport te rminals , 
and dedicated to business-class pas- 
sengers, these lounges try to be 
both an office away from the office, 
and a home away from home. 

They provide somewhere quiet to 
work, with plenty of telephones, fax 
and photocopying facilities, free 
drinks, newspapers and magazines, 
and enough comfy seats to allow 
travellers to put their feet up. And 
it's all complimentary. 

within this framework, however, 
there are many variations, as exem- 
plified at London's Heathrow air- 
port (see table). 

The Servlsair executive lounge, 
for instance, provides facilities for 
passengers flying with Alitalia, 
Iberia, TAP, Olympic, Fumair and 
Austrian Airlines, all in one not 
very large room tucked away along 
a corridor in Terminal Two. It com- 
prises an adequate but rather plas- 
tic bar and coffee area, seating for 
about 40, three telephones, a fax 
and (when I looked in) a large, shoe- 
less businessman, unconscious in 

Just lounging around 

front of a television. 

The windows have no views, the 
ceiling a chilly chrome finish 
and you have to use the public loo 
in the corridor outside. 

Compare this with American Air- 
lines' Admirals Club lu Terminal 
Three: the lounge is vast with 225 
seats, two copiously stocked bars, 
many telephones, vibro-chairs, two 
shower rooms and an immense mar- 

ble entrance. Being American, it 
believes that work is as important 
as a good Bloody Mary, so it pro- 
vides 14 individual, comfortable 
workstations, each with a phone. 

The Admirals Club combines the 
indulgent (leather armchairs, dark- 
stained wood, thick carpeting) and 
the utilitarian. (Large, bleak win- 
dows overlooking the apron outside, 
bare walls, the showers kept 

locked). It feels like a luxury 
garage, devoid of personality. 

This highlights a fundamental 
problem: it is hard to find an execu- 
tive lounge that Inspires a sense of 
well-being in its passengers for the 
brief time they are using it - a 
[dace combining business efficiency 
with the virtues of a good hotel. 

Qantas comes close to this ideal, 
with a warm, tasteful, classy facil- 

ity, up the stairs in Terminal Three. 
Japan Airlines 1 Sakura class, on the 
other band, may have 150 seats, free 
beer and a place to play cards, but 
the furnishings are austere. 

There is another option: Virgin 
Atlantic, with its famous Clubhouse 
facult y, has a non-self-service bar, 
staffed by women in red uniforms. 
It has a music room with a £13,000 
hi-fi, a massage and aromatherapy 
suite, and a large library. And it has 
a train set 

The train set is symptomatic of 
all that is best and worst at Virgin. 
It looks terrific, but It doesn't work. 

Where the truck makes a detour 
behind the bar, it fills up wttr 
spilled salt and sticky liqueurs, 
resulting in weeks of closure. Bfc, 
as a Virgin employee explains, <W 
frequent passenger is m keen tn 
model trains that he changes out of 
his suit, mixes 11110 x 011 a drink and 
disappears underneath the train MAT 
to fix it. 

Virgin, it scorns, has subverted 
the whole Men of business travel, 
and tried to make It fun- 

Charles Jennings 




Work places 


Special features 



1 fax 

Outside, pubfle 


Healthy, muto- 
Bngual sateetton 

drinks; biscuits 

Net curtains 

1 tax, 1 copier 

Outside, public 



6 + 

1 fax, 1 oopier 

Outside, pubfle 


Standard British, Good, Franco- 

plus 25 Nswsweeks German and UK 

Reasonable drinks; 
no real snacks 

Magnetic entrance 
key far users 

OK; tong on 
aJcohoHroe beer 

8-sealer conference 
room & separate 
6-seater VIP room 
on ate; neither 
with windows 

1 fax. 1 copier 



8 , well 

Good drinks 
selection but 
cotfee machine 



1 fax, 1 copier 


2. locked 

14, a pleasure 
to use 

Two ban, copious 
drinks selec tio n ; 
light snacks 

2 vibro-massage 
chairs in the 
quiet room; 
daunting space 

2 faxes, 1 oopler 


1 . chBy 

Thin, given the 
size of the place 

16 decent booths, 
with phones 

One bar, heavy on 
fruit juice, coffee 
and peanuts 

S&ding glass 
entrance doors 



1 fax. 1 copier 

Private, pleasant 

6, in adfontog 
Spa Pavttort 


4 small drie s 

Good dories selec- 
tion. ap pe frsmg - 
toakmg snacks 

Private, pleasant 

2 quite ploaaent 
sho wers 

OK drinks 
e eie cfr o n and 
fresh coffee 

Parker -KnoH 
Wdn w; 
genet room 

2 faxes, t copier 

Private, welcoming 

1 shower, 1 proper 
both- tote of fan 

Lymg around; big 
library of books 

4. rather an 

Terrific waitress- 
sanrice bar; not 
much food 

Music room; aroma- 
therapy; massage; 
hato anasec games; 
TV room; may bump 
Mo deny Hal 

1 fax + modem 

Private; appoa&ng 

2. also private, 

Good British and 
Australian choice 

3, smafl 

VWy tempting bar. 
also with cakes, 
fruit and chaoses 

Friend* welcome 


Outside, pubfle 



Nona la apeak of 

Tbtoriah ena ct ion 
of drinks and 

friarxty w rioo m e 

1 (ax 

Private, spotless 


Heavy on Japanese 

None to speak of 

Thtarish choice, 
apart from Sepporo 


Chfldran'a room; 
room; bowR. 
wfo dow f eaa W* 
room at dtocratfon 
of JAL; Telerate 

Business Travel Desk 








An exclusive 
floor for 
business atop 
the city. 

State of the art 
facilities for those 
in high office. 

and cocktails 
to elevate 
the spirit. 

impeccable service 
that everyone 
looks up to. 

Feel the Hyatt Touch. 

















— £295 


£3 89 






























1/3 VViwttourSIrari, London, WTV3TA. 071 439 7416 Fax 071 439 9787 

7’:;: . 

i j r A 0 J : * t 

■ »j 

l- .iv;r>. 1 'r' r-’v 




Agents for 


TEL: 071 538 8273 

Ns>‘i >’CSS :S0 T > 1370 

:C 5US0 3^0 "<*0 13S0 

S* NOS OK ill) 430 1 /00 

HCKGKCNG 410 750 2! 00 

•565 S75 1530 

250 550 '.300 

550 )i?0 23 20 

AUCKLAND 250 1 (90 2320 



SiNGiJPcsf 3.’5 hoc .’ 3:0 


071 637 7853: ANEHKAS 
KB 071 537 8485: UtIRLD OFFERS 
™ 071 4384848: BU500LE 


(Bod OfBn fa Sbnwc] 

Tailor made specialists 
for the Business 
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Direct Return Fares From: 

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Baalfit* £495 £1100 £1700 

Denpten £528 £1100 £1700 

Jakarta £495 £1100 £1700 

LosAngefei £330 £1098 £1540 

Moscow £273 £660 

Tokyo £690 £1550 

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70-71 New Bond Slrert, 
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L on don 071-491-4449 
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fr 65 ACB 8 S OF (iltOUMh) 



GERMAN L) or! »n 


D«*..r» AlW-,„„ f. 

«T 4 ’JM H.moyfJr 

071 8364444 

071 3795212 Padcrlicrn 

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appears every Monday in the Financial Times 
Do not miss ffce market-place for Business Flights, 
Business Travel Agents and any other services 
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Barclays in-house revolution 

by Alan Cane 

Barclays Bank is acceler ating 
ln-house multimedia develop! 
menis designed to keep it com- 
petitive in electronic hanking 
and take it into new business 

It has been shaken by the 
speed with which the major 
have m a na ged to provide 
acceptable multimedia ser- 
vices, such as videoon-demand 
over conventional telephone 
lines. Now it is planning to 
have its first interactive trials 
to some branches by the wnrf of 
the year. 

The bank sees VOD as the 
model tor a range of new, elec- 
tronically-delivered services 
which win transform retail 
wholesale banking over the 
next tow years. Among the pos- 
sibilities are a virtual end to 
branch banking and its 
replacement by video kiosks 
ami interactive television offer- 

ing a broad range of services, 
such as catalogue shop pin g in 
addition to current account 

These threats are not new. 
What is new is the speed with 
which possibilities are becom- 
ing realities. Barclays senior 
management is aware of the 
urgency, Chairman Andrew 
Buxton is insist in g th»» bank’s 
70 top executives fafa multi- 
media awareness training this 

Joseph De Feo, head of infor- 
mation technology at Barclays, 
says: “We thought we had 
time. We planned to have the 
programme motoring by 
1996-97 based on oar estimates 
of the investment in infrastruc- 
ture the telcos would have to 
make to deliver these sarvices. 
They made faster progress. 
Here and in the US, the Mens 
can provide video-on-demand 
over the existing telephone 
network. We don’t have five 
years now and this is 

putting pressure on develop- 

Barclays has its own multi- 
media unit, part of Barclays 
Network Services. It has a staff 
of 15 and a budget of over £Lm 
a year. It is managed by An war 
Shah, an experienced multime- 
dia expert formerly with Sony 
of Japan and VideoLoglc, the 
UK electronics company. De 
Feo believes that only Citibank 
Of the US is a mrnilar 

approach to multimedia. The 
group has already developed 
some pioneering products 
through collaboration with 
partners - an electronic shop- 
ping and banking kiosk with 
the Italian San Paulo hank, an 
electronic shopping catalogue 
through a project pert funded 
by the European Commission — 
but its principal object is to 
prepare Barclays tor the elec- 
tronic future. 

De Feo says: “Our intention 
is to have the know-how inside 
the group to be able to make 

judgments about the right ave- 
nues for us to develop: smart 
telephones, interactive 
television, or electronic 

Barclays is in close discus- 
sions with all the major multi- 
media players, British Tele- 
com, AT&T, Mercury and the 
computer suppliers. An inter- 
nal programme, code named 
“Columbus” is look in g at the 
future: which suppliers the 
hank sho u ld form relationships 
with, winch joint ventures it 
pursue, which areas it 
ghrmlri exploit flrat 
De Feo says that organisa- 
tions like banks will have to 
thtnk radically about how mul- 
timedia win affect them Th ey 
will no longer control the 
delivery nhann^i because cus- 
tomers will no longer go physi- 
cally to branches. So he 
believes Barclays should play a 
part in the new “channel’', in 
the provision of software 
“agents” that will lie between 

the customer and a broad 
range of multimedia sendees. 
These special computer 
systems will be a critical part 
of the delivery rnpnhnnicm , car- 
rying out a range of services 
on behalf of the customer. 
Seeking out a new car from a 
dealer's database automati- 
cally, tor example, securing the 
best insurance and settling the 
deal through electronic funds 

“Multimedia will may» posa- 
ble a range of services, but the 
customer will use an agent to 
gain access to them. The agent 
will be the brand. We would 
not want to get into agent 
work outside thing* we know 
about But we believe we have 
to he a partner with the telcos 
or technology companies in 
developing agent activities. We 
could find that we will get as 
much in the way of revenues 
out of our participation in the 
agent business as we do out of 
banking ” De Feo reasons. 

Designers fear Ladas 
on the superhighway 

By Aten Cane 

Wanted: a top designs- to 
champion the cause of 
excellence in commercial 
multimedia. Fears are 
mounting among designers 
and creative directors that 
the future of mnltlmedia amid 
be blighted unless 
programming quality is 
improved. There are worries 
that the technologists, 
“tekbeads" in mediaspeak, 
are dominating developments, 
while the designers, 
“creatives”, lnngm*h on the 
sidelines, frightened and 
confused by the new 

The danger, according to 
Steve Hmchliffe of Module 
Communications n ™i 
multimedia adviser to the 
Designers & Art Directors 
Association, is a pedestrian 

approach: “The information 
superhighway wifl be 
cluttered with, figuratively 
speaking, Skodas end Ladas.” 

He is dismayed that too 
many early attempts at 
multimedia - encyclopaedias 
and catalogues on compact 
disc, for example - simply 
turned text on paper into text 

By comparison, the mail 
order retailer Freemans has 
been demonstrating a 
multimedia version of its 
catalogue on interactive CD. 

It was developed with the help 
of Barclays Bank multimedia 

mtit (see accompanying 
article) and a grant from the 
European Union. 

in Freeman’s multimedia 
catalogue, models display the 
clothes on offer in fall motion 
video; colours can be changed 
at the press of a button. The 

discs have been distributed 
free to registered owners of 
CD-I players as part of the 

The D & AD’s chairman, 
Anthony Simonds-Gooding 
of Still Price Untas, and 
Hindi liffe are eampaigninp 
to raise awareness of 
multimedia among its 
members, arguing it must 
have a dramatic influence on 
the design community in the 
next five years. 

The Freemans catalogue 
demonstration was part of a 
multimedia show they put on 
as part of this year's D & AD 

festival of excellence held in 
London to stimulate 
collaboration between 
tekheads and creatives. 

“But it will have to be 
driven from the top,” says 
Simonds-Gooding. “We need 
a figurehead." 

US evangelists put 

President Clinton: hard copy an request 

Books: big change to 
the worm’s eye view 

case at 

By Raymond Snoddy 

You can already send 
electronic mail messages to the 
White House. Indeed, some of 
the senior Clinton administra- 
tion officials responsible for 
frying to create a US informa- 
tion superhighway will com- 
municate no other way. 

But from September the 
White House will even start 
sending e-mail messages hark 
- unless of course the corre- 
spondent wants something a 
little more old fashioned. After 
all you can’t frame an elec- 
tronic message from the US 
president and hang it on the 

“Those who want a letter 
from the President can have 
that,” explains David LyteL of 
the US Office erf srieu cp and 
Technology Policy. But those 
who just want an answer to a 
question will get e- mail 

Lytel was one of a group of 
high-powered US superhigh- 
way specialists in London last 
week for a forum organised by 
the Progra m me on Information 
and Communication Technolo* 


In a video conference from 
Washington, the shape of the 
information dream was spelled 
out by M fohari Nelson, a prin- 
cipal adviser to the Clinton 
affminig h -a+inn on the informa- 
tion superhighway. He fore- 
casts that almost certainly by 
2010, and probably by 2005, 
nearly everyone in the US wifi 
be Hwhafl to a national infor- 
mation infrastructure which 
will give Americans easy 
cost-effective access to any 
mprihim - voice, flyfa, imag es 
or video. “From health care to 
education it will Improve every 
aspect of our lives,” said Nel- 
son, who faced considerable 
scepticism from many UK spe- 
cialists. These suspect future 
services on an information 
superhighway may, in fact, be 
delivered by a wide range of 
different technologies. 

The US government esti- 
mates the creation of an infor- 
mation network linking every 
home will cost around $100bn 
- although some forecasts go 
as high as $400bn. Most of this 

investment could occur natu- 
rally and gradually as cable 
and television companies 
upgrade their networks and 
install more fiber optics. The 
burden is to be borne almost 
entirely by business, although 
the US government is already 
providing $26m a year to help 
boost new applications - a sum 
that is now rising to (100m. 

An additional push could 
also come from the US, by 
making sure all government 
information is available elec- 
tronically and priced at the 
cost of dissemination, rather 
than the cost of acquisition. 
Some of the American vision- 
aries who want to see a broad- 
band, high-capacity connection 
into every home do seem also 
to be placing an each-way bet 
on the Internet, the interna- 
tional electronic data network 
that already has some 20m sub- 
scribers and is said to be grow- 
ing at the rate erf 1m new users 
a m onth. 

“We love the Internet and we 
consider it a brilliant success.” 
said Lytel, who believes it is at 
least a model of what a 

national information infra- 
structure ««iH achieve. 

At the end of the London 
Forum a great deal of connect- 
ing stQl needed to be done 
between the almost evangelical 
American search for a global 
superhighway and British dis- 
trust for ideas raised and 
rejected in the early 1980s, 
when the then information 
technolo gy minister Kenneth 
Baker tried to promote visions 
of “the wired city” of the 

As Prof Nicholas Gamham, 
director of the Centre for Com- 
munication and Information 
Studies at the University of 

superhighway is simply chas- 
ing a will o’ the wisp. Gamham 
added that he found it a 
bizarre notion that American 
politicians were planing such 
emphasis on a superhighway, 
rather than an issues such as 
food and housing. 

Mar tin K H/>n another Bri tish 
professor, although now at 
New York University, 
suggested the information 
superhighway was a political 
slogan and as long as it 
remained undefined it could 
remain all things to all people. 
“Once, if ever, it is defined it 
would he likely to create losers 

By Louise Kehoe 

Beading text on a computer 
screen may not have the same 
appeal as curling up on the 
couch with a good book, but 
“electronic books”, on CDROM 
discs, are rapidly gaining 

Among the “best sellers" in 
this new market are reference 
works that take advantage of 
the “navigation” or searching 
capabilities of a personal com- 
puter to provide tniipxing far 
superior to printed texts. 

Microsoft’s En carta multime- 
dia encyclopedia does not look 
as impressive on a bookshelf as 
a collection of leather bound 
volumes, but it provides a 
more useful source of informa- 
tion for those who are already 
familiar with Computers. 

High school students, for 
example, may find the elec- 
tronic “hypertext" - which 
allows the reader to skip 
quickly to related topics - a 
more efficient and inviting 
method of researching an 
essay subject than pouring 
through the pages of a conven- 
tional encyclopedia. 

Microsoft also publishes a 
collection of CDROM reference 
books, called Bookshelf includ- 
ing the American Heritage Dic- 
tionary, Roget’s Thesaurus, the 
World Almanac Book of Facts, 
Bariett’s Familiar Quotations, 
an atlas and other works on a 
single disc. 

As well as the text of these 
books. Bookshelf includes 
sound to demonstrate the pro- 
nunciation of words, and ani- 
mation nmd video dips to illus- 
trate scientific concepts and 
historic events. The multime- 
dia features of CD-ROM 
enhanne the value of home ref- 
erence books, such as the 
Mayo Clinic Family Health 
Book. For instance, if you are 
going to have knee surgery, 
the text provides a description 
of the knee joint, together with 
anatomical diagrams. Click on 
a symbol representing a cam- 
era and you can view a short 
video dip of what the surgeon 
wifi see inside your knee using 
an arthroscope. 

Text books, travel guides and 
do-it-yourself instruction books 
are also well suited to the 
CDROM format. Media Mosaic, 

an Oregon software company, 
plans to publish interactive 
multimedia “how-to” guides 
for sports. Books That Work, a 
California venture, has teamed 
with, the Hearst Corporation to 
expand its line of CD-ROM 
books on home improvement 
and repairs. 

The student of history will 
also find several CDROM pub- 
lications of interest. Time 
Almanac of the 20th Century, 
published by Compact Publish- 
ing of Washington, DC, has 
been widely acclaimed for its 
combination of Time Magazine 
texts, graphics and video clips. 

Few would suggest that the 
CD-ROM will replace the 
paperback novel, but children’s 
illustrated story books are 
being adapted. Young com- 
puter users can move through 
Broderbund’s Living Books, 
such as Arthur’s Teacher Trou- 
bles, at their own pace, listen 
to the story brin g read or click 
on words to explore their 
meanings through animated 
Castrations. For a gener a tion 
reared on video images. CD- 
ROMs can make l earning to 
read books good fan. 

as well as winners. Some inter- 
Westminster, put it “Chasing esting battles can be expected 
the concept Of a information then." 

London forum 

gies, based at Brunei Univer- 




In worship of Pugin 

Colin Amery reviews the new exhibition at the V and A 

A ugustus Welby 

fm Northmore Pugin 

was a phen o men o n, 
f M Bom in 1812 he was 
L -ML dead only forty 
sars later, by which time he 
ad married three times, pro- 
need eight children, designed 
le interior of the Houses of 
arhament - including every 
ick of furniture, built several 
oman Catholic cathedrals and 
lurches, and almost single- 
andedly inspired the Gothic 
evival in English, architecture 
id decoration. 

His manic energy was com- 
ined with intense discipline 
id a deep but simple con- 
art's catholic faith. He was a 
>nius with passion. But his 
ork has never received the 
vel of appreciation it 

That is about to be put right 
t the exhib ition that has just 
pened at Loudon’s Victoria 
ad Albert Museum. “Pugin - 
Gothic Passion" is sponsored 
y Pearson pic, whose interests 
iclude the Financial Times, 
id runs until September 1L 
The exhibition succeeds in 
»ing a sumptuous treat, while 
intly presenting a scholarly 
xount of a life devoted to a 
reative mission. Historically 
u gin suffered from the dislike 
: Ruskin and the kind of Intel- 
ctual isolation that is often 
anded out to creative artists 
j their immediate successors. 
The exhibition at the V and 
is exceptionally ambitious, 
at only because erf its scale 
at also because it has 
tvolved years of original 
search and detective work to 
ack down some 400 artefacts, 
o display them all in such a 
ay that they can illuminate 
ie progress <rf Pugin's life and 
ork is not easy. The task erf 
■signing the exhibition was 
iven to the architects John 
utram and Jeremiah Shee- 
an, who have created from 
te fairly basic set af exrnbi* 
on rooms a series of dramatic 
3 d evocative spaces. They 
ive also devised a way of 
airing great collages of Pug- 
i's patterns - using computer 
chnology in a way that 
ugin. had he been practising 
ow, would surely have 
^ised himself. 

The usual problem of arcnl- 
ictural exhibitions is the 
jsence of the actual build- 
igs. In Pugin’s case this is 
tore than compensated for by 
ie sheer proUgacy of his fann- 


Pugin exhibition: Gothic as an architecture of principle 

tore, ecclesiastical ornaments, 
wallpapers, materials and 
ceramics. Pugin must have 
dreamt patterns. This exhibi- 
tion shows above everything 
else that he was a master of 
flat pattern, and that without 
Pugin there could have been 
no W illiam Morris designs. 

When you step into the first 
room you are confronted by a 
huge version of a drawing of a 
gothic church. This was drawn 
in 1821 when Pugin wa6 nine. 
It shows what was in his mind 
as a child, and he went an to 
become a prodigy designer by 
fulfilling a commission for 
some furniture for Windsor 
Castle when he was only fif- 
teen. Some of this furniture is 
on show, but the great Pugin 
sideboard was destroyed in the 
Windsor fire of 1992. 

Pugin's early passion for the 
Gothic was not a stylistic 
obsession but a conviction that 
Gothic was an architecture of 
principle. It was the only archi- 

tecture that represented truth 
to materials and offered the 
opportunity of true craftsman- 
ship as a form of Christian 
warship. The exhibition is lib- 
erally strung with texts and 
Puginian aphorisms - one of 
the most typical is his state- 
ment: “There is nothing worth 
living for but Christian archi- 
tecture and a boat" 

The sea and sailing were his 
other passion and from his 
home in Ramsgate he fre- 
quently sailed to London, or to 
France, for his sketching and 
antique collecting trips. He 
worked on board his various 
boats and always dressed In 
practical sailing clothes, even 
on land. He dearly responded 
to the ship-shape order of fife 
at sea and he ordered his own 
extraordinary working life 
with as modi precision as the 
captain of a ship. 

Pugin’s greatest monument 
is the Palace of Westminster 
where he worked with Charles 

Barry on the interiors and far- 
nishings. The throne from the 
House of Lords dominates this 
section of the V and A. Much 
of the medieval m ummer y and 
flummery of Parliament must 
be put down to the effect of 
Pugin’s Gothic dream world 
upon our legislators. Pugin 

himself said of his life and 

work: “I indulged in a sort of 
Catholic utopia." 

It is his influence open the 
church that provides the exhi- 
bition with its finest display. 
The re-creation of a church 
interior is at the heart of the 
display - you can rest on a 
Pugin pew to absorb the qual- 
ity of the sort of ecclesiastical 
stage set that he saw as the 
setting for the Mass. It is more 
than a medieval revival 
because of the intention 
behind It to convince the 
emerging nineteenth century 
that heaven was going to be a 
Gothic dream. The quality of 
the metalwork, vestments and 
embroideries here is incredible. 

Beyond this Gothic extrava- 
ganza lay a lot of stem mes- 
sages - and these are most 
often realised in the famiture 
which bears out Pugin’s stric- 
tures about troth to materials 
and simplicity of construction. 
It will come as a surprise to 
discover that Pugin was the 
pioneer of “flat-pack" furni- 
ture. There are some tenuous 
fin Vs madp by the V and A 
with 20th century designers, 
who may have learned from 
Pnghi - 1 suspect most of them 
never heard of him. 

You end your tour of the 
exhibition with a visit to a 
reconstruction of the Medieval 
Court from the Great Exhibi- 
tion of 185L This does not suc- 
ceed as well as the rest of the 
exhibition, perhaps because 
the whole of Pugin’s life and 
work is itself such a miracle 
that the display of it at the V 
and A deserves the title of a- 
great nghihftinn for itself. 

The exhibition is open from 
10 00 to 17 30 Tuesday to Sun- 
day and from noon to 17 30 on 
Mondays, until September 1L 
There is no catalogue as such 
but a special book of essays 
has been published by Yale 
University Press to coincide 
with the show - price £1985. 

A p riv at e mao of the exhibition 
for ftrumdal Times readers 
wiE be held an Thursday, July 
14 at G.30-8J3Q. Tickets, £10 each, 
from Loose Codon-FaxuxB on 
071 873 $563 



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Lane, Wateall, W. Midlands. 12.30 


r~. — 


Aslan Grp. 

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Crane Europe 
Bectric & Gen. Inv. 


Shaw (A) 




RdeBy Japan OTC A Regional 
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Company meetings are annual 

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Please nolo: Reports and accounts 
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appr ox imately six weeks after the 
board meeting to approve the 
preBmfnary results. 

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Italy’s player 
in a different 
world cup 

Guy de Jonquieres talks 
to Renato Ruggiero, who 
seems set to become the 
EU’s candidate as 
founder director-general 
of the WTO 

I taly is not over-endowed 
with experienced public 
figures equipped, by tem- 
perament and back- 
ground, with a genuinely inter- 
national outlook. Fewer still 
can plausibly present them- 
selves as convinced free-trad- 
ers. Exclude the many casual- 
ties of the country’s political 
scandals, and the ranks look 
even thinner. 

Renato Ruggiero is a rare 

A former diplomat, trade 
minister and latterly Fiat's top 
international representative, 
he has spent much of his 
career negotiating in Brussels, 
Geneva, Russia and at world 
economic s ummits 
As well as gaining an inside 
view of the global power game, 
he has picked up a working 
knowledge of half-a-dozen lan- 
guages and been decorated by 
the British and Japanese gov- 

He can also claim to be an 
advocate of an open world 
economy. He played a promi- 
nent role during a crucial 
phase of the Uruguay Round 
trade talks and was one of the 
first Europeans to back the 
idea of a more powerful World 
Trade Organisation to succeed 
the General Agreement on Tar- 
iffs and Trade. 

In just over six months’ time, 
that idea is due to become real- 
ity. The 64-year-old Ruggiero is 
now engaged in an energetic 
diplomatic shuttle to canvass 
support among Gatt's 123 mem- 
bers for his bid to become the 
WTO's founding director-gen- 

The first declared candidate 
for the job. he has won enthu- 
siastic backing from Sir Leon 

Brittan, the European trade 
commissioner, who no doubt 
hopes the I talian government 
will return the favour by sup- 
porting his own campaign for 
the commission presidency. 

In recent weeks. Sir Leon 
has coached his man like a 
boxing promoter grooming a 
heavyweight for a title fight - 
an analogy encouraged by Rug- 
giero's heavy-set physique and 
pugilist's appearance. If all 
goes to plan, his candidacy will 
be endorsed by EU leaders at 
their Corfu s ummi t next week- 

However, both Ruggiero and 
Sir Leon know that that will 
not be enough to win the prize. 
The players in international 
trade are no longer the usual 
old ones,” says Ruggiero. “It 
would be wrong nowadays to 
suppose you have won the 
game if you have US and Euro- 
pean support. You have to pay 
attention to Latin America, 
Asia and Africa.” 

M any developing coun- 
tries - which com- 
prise four fifths of 
Gatt's membership - think 
that after decades of European 
leadership of that organisation 
one of their own should head 
the WTO. 

Brazil has already nominated 
Rubens Ricupero. its respected 
finance minister, and Carlos 
Salinas, Mexico's outgoing 
president, is testing the water, 
apparently with US encourage- 
ment. They may make a virtue 
of their national and regional 

Ruggiero, by contrast, has to 
go out of his way to prove that 
his origins are not a handicap 
- a task made no easier by 

developing countries' suspi- 
cions about the depths of the 
EU's commitment to free trade. 

“The new director-general 
will succeed or fail, depending 
on whether he represents not 
just one set of nations, but a 
much larger group." Ruggiero 

“He will have a responsibil- 
ity to help developing coun- 
tries enter the multilateral 
trade system in a real way and 
not as in the past when there 
was trade among the rich and 
aid between the rich and poor. 
That situation has changed 

He is also steering a careful 
line on the links between 
labour standards and trade - 
an issue which has sparked bit- 
ter controversy in Gatt 

He says that those In the 
west who seek to promote 
stronger workers’ rights world- 
wide need to recognise that the 
objective is best achieved by 
increasing the prosperity of 
poorer countries through free 

Such sentiments seem to 
have gone down well with the 
developing country representa- 
tives he set out to woo in 
Geneva last week. "He seems 
quite folksy,” said one Asian 
ambassador approvingly, while 
emphasising that the WTO 
contest remained wide open. 

Ruggiero believes his stron- 
gest credentials are his record 
as an effective negotiator and 
administrator, and his commit- 
ment to act as “honest broker” 
between WTO members' differ- 
ent interests. 

These qualities, be argues, 
will be invaluable in the early 
stages of the WTO’s existence, 
when the requirement will be 
for efficient management, 
rather than revolutionary 

The top priority will be to 
implement the complex provi- 
sions of the Uruguay Round, 
which runs to 26 separate 
agreements and 27,000 pages of 

Equally important will be 
the proposed creation of stron- 
ger procedures for settling 
trade disputes. The effective- 
ness of those mechanisms will 
determine the WTO's political 
authority and. Ruggiero 
believes, its success in per- 
suading its members - above 
all the US - to forsake bilateral 
trade weapons in favour of 
multilateral rules. 

T he importance of those 
rules will, he argues, 
become even greater as 
global economic change accel- 
erates and world trade policy 
focuses on new challenges. In 
the future, he says, the biggest 
will notbe to resist a relapse 
into 1930s -style trade protec- 
tion, because liberalisation has 
already demolished so many 
obstacles at frontiers. That 
step, he insists, is irreversible. 

Politicians, in Europe or else- 
where, who pretend otherwise 
are deluding themselves: “It 
would be a mistake to believe 
Europe can still choose 
between openness or protec- 
tion. Europe’s options are 
closed. Only one is left - to 


JUNE 22-28 


Executive briefings on World Class 
Management issues, a. Business Process 
Re-Engineering and Workflow 
Automation, b. Re-Engineering the 
Manufacturing Process - towards World 
Class Manufacturing. 

Contact: Vicki Welkin. World Class 
International Limited 
TH: 0705 266133 


JUNE 23 


Innovation matter*. Directors know this. 
The question is how to engineer your 
organisation for the a ppropriate levels of 
innovation? Chaired by Robert Heifer, this 
one day conference is organised by Tbc 
Strategic Planning Society. 

Contact: Jo Mai nee. The Strategic 
Planning Society Tel: 071 636 7737 


JUNE 28 


A CBI/Ernsi & Young seminar on 
domestic and intcnational relocation to 
explain: the new tax rules and employ ere 1 
reporting obligations-, bow organisations 
are reviewing relocation policies and 
prac ti ce s ; and the resales of a major survey 
on company practice. 

Contact; Sandra Aidrcd CHI Conferences 
Tel: 071 379 7400 Fax: 071 497 364* 


JUNE 28/29 



Training course covering treasury 
derivative markets. Currency Options. 
SAFES, FRAs, Futures, Interest rate swaps 
and related products. For Corporate 
Treasurers, bank dealers and marketing 
executives, financial controllers, systems 
and supp ort £4190 » VAT. 

Lywood David Internationa] Lid. 

TeL 0959 565820 Fax: 0959 565821 

JUNE 29 


For budnew and syrtems analysts led by Ihc 
Bank of England CREST Project Team 
which examines technical aspects of the 
CREST system development This half-day 
cna f enmoc features workshops on Networks 
and Security Rcgjsiraiitm, Instruction. Inpn 
and Access to Information. Price: £75 
+VAT. Contact: Sally-Ann Bezant - 
Securities Irattime I Serviced Ltd. 

TeL 071 626 3052 Fax: 071 626 3062 


JUNE 30 


A Workshop for Family Business 
Evaluating members of sUfi is particularly 
difficult wben they are also family 
members. This wodabop will explore the 
assessment of family members and ways to 
encourage them to develop their skills in a 
way congruent with tbc needs of the 

Contact Fria Ttoffali. Sivy Centre for 
Family Business, 071 466 5688 


JULY 1 -2, 7-8 
This program both analyses tbc LLC form 
of business organization and places it in an 
international context. Speakers are from 
Europe and the United States. London 
luncheon speaker is G.E.A. Kentfield. 
Chief Cashier, Bank of England on 
Guidance Notes for Investment Business - 
Money Laundering. 

Contact: Smith & Partners 

Td: 071-487 4444 Fax: 071 487 4480 




Policies. Procedures, Legal Issues and 
DivenuGcaikm Opportunities 
A Itigb level seminar with US speakers bom 
the Washington -based British American 
Business Council; the American Bar 
Associative the first secretary (oomswcnl) 
of the British Embassy and speakers from 
Coopen A Lybrand and the University of tbc 
West of England. 

Contact: Richard Deanery, RDA 

CommimkuiorG Strategy 

Tel: +44 275 856700 Fax: +44 275 858569 




Statutory ESOPs were radically improved 
in the L994 Finance ACL Thin half day 
conference, aimed al professional advisers 
and private companies, explains the 
significant changes to statutory ESOPs. 
Stephen Dorrcll, Financial Secretary to the 
Treasury. utiU launch the event. 

Contact: Freddie Hurtaun. ESOP Centre. 


JULY 4-6 


Using, pricing, trading and managing 

For recent entrants to the swops markets. 
The course provides a comprehensive, 
structured introduction to the components 
of swaps, while examining trading, p ri c in g, 
arbitrage and risk management 

Contact: Carrie Race. IFR Publishing 
Tel: 071 815 3879 


JULY 4 & 14 

THE 1990s: Concepts & Cases 

Two lathed workshops designed to explore 
leading edge thinking about Strategic 
Procurement. Each event will combine the 
work of senior practitioners and leading 
academic* to mix fundamental concepts with 
practice. They on: intended u act ae departing 
point for new purchase forrnn. 

Contact: The Contracts & Procurement 
Research Unit. University of Birmingham 
Tel: 821 4J4 322I Fax: U2I 414 3217 



An Executive Overview 
Focusing on the need for practical risk 
analysis techniques for project deendoos. fa 
will higblighf what Is necessary to 
introduce Risk Management Practices inn 
commercial decision making. Current 
successful practices in a range of different 
industries will be discussed. 

Contact; Dawn Meads. 

The APM Group Limited 
Tel: M94 452450 Fox: 0494 459559 

JULY 5/6 


Highly participative training coarse 
covering traditional FX and money 
markets featuring WIN DEAL a realistic 
PC based dealing simulation. For 
Corporate treasurers, bank dealers, 
mtriteting exeenrives. financial controllers, 
systems and support personnel. £480 + 

Lywood David International Led. 

Tel: 0959 565820 Fax: 0959 565821 


JULY 5 & 7 

The one day seminar aims to help 
executives who are experiencing problems 
communicating effectively with IT 
professionals. Employing the minimum 
jargon. Peter Gyngdl will take participants 
through Strategic Business Planning, Data 
Management etc. 

Contact; London School of Economics 
Tel: 071 955 7969 Fax: 071 071 955 7385 
( A discount is available to FT readers! 




Bankers, regulators and users discuss 
supervision, capital adequacy, new product 
development and problems in tbc markets. 
Sponsored by CSF1. Total Bank Europe. 
Arthur Andersen. Freshfields and Lombard 
Risk Systems. David Mullins Keynotes. 
Detaib Cram: Cnyforum Ltd 
Tel: 0225 466744 Fax: 0225 442903 


JULY 6 & 7 



The Times and the Centre tor die 

Study of Financial Innovation are arranging a 

high level conference on the International 

Bquxy Markets. The aim is to provide a high- 

level forum for mode exchanges, regulators, 

market practitioners and investors to debate 

the evolution and future structure of the 

wNyt ttaii fMfoii equity marten 

Enquiries: FuxtDcz&I Times 

Tet 08 1673 9000 Fax: 08 1 673 L335 


JULY 12 


This conference focuses on problems 
facing employers seeking to expand Ibcir 
part time workforce. It offers practical 
advice on and solutions for implementing a 
pari time workers strategy Bad for 
maximising the efficiency of a part time 


Further details from International 
Professional Conferences Ltd 
TeL - 071 233 7733 


JULY 12 & 13 

FT MULTIMEDIA - Vision and Rea&ty 
This major busmens forum wtH focus an ±e 
key issues fading one of the fastest growing 
industries, the regulatory and legal 
framework for Industry development, 
financing Ihe multimedia future, assessing 
real bnsuiess appUcatiotai amt poeemiaJ and 
the rote of stralega: aUtmcm in responding to 
tbc developing multimctSa marketplace. 
Enquiries: Fi nanc i a l Times 
Tet 431 673 WV Fax: 081 673 1331 


JULY 13 

The Accounting Requirements 

CR1/1CAEW Seminar addresses die basis on 
which financial information should be 
collected and whether the information is 
sufficient for regulatory decision 
Spcakets incfadcSir Bryan Catsberg. Office 
of Fair Trading and Professor John Kay. 
Lffri pp Economics. 

Oontacr. Leigh Sykes, CRJ 

Tet 071 895 8823 Fate 071 895 8825 


JULY 14 

This one day workshop will analyse the 
basic principles of Article 85 (anti- 
competitive agreements) and article 86 
(abuse of market power) and intellectual 
property rights interspersed with practical 
workshop sessions on distribution 
agreements and patent licences. 

Further details from International 
Professional Conference Ltd 
Tet 071 233 7733 


JULY 21 


Organised by tbc Centre for Policy Stufies. 
A conference ex am hung lire privatisation 
record so far. future privatisation 
opportunities in tbe UK A Europe, 
regulatory systems and foreign 
opportunities for UK advisers and 
investors. Speakers include Michael 
H esc lime A Stephen DotrelL Sponsored by 
Nuclear Electric. 

C on t act : Oooagh Goodman. 

The Waterfront Conference Co 
Tel: 071 730 « 10 Fax: 071 730 0460 



The conference wifi foens on the 
challenges facing the industry in tbc next 
century, how it is restructuring for the 
future id achieve growth, together with the 
impact of government policy. 

Enquiries: Financial Tunes 
Tel: 081-673*00 Fax: 081-673 1335 

SEPTEMBER 14 & 15 

This high-level loium will examine the 
outlook for nuclear power in North 
America and Western Europe, assessing 
the impact of cnricnt government 
mrvaioria and review growth potential in 

the Asian-Pacific report. 

Enquiries: Financial Times 

Tel: 031-673 9000 Fox: W1-67J IJ35 


SEPTEMBER 21 & 22 

The meeting will debate the opportunities 
and challenges racing the retail industry, 
cocudemtg both current issues and future 

Enquiries: Financial Times 

Tel. UKI-673 9000 Fax: 081-673 1335 



An imrodoaorj comae covering regulation 
issues m the utilities and other seam and 
demands no prior knowledge. Topic* 
include: reasons for regulation; evaluation; 
strategies; en for cement; price controls, cost 
of capital; ssset valuation; quality 

Farther details are available from: Short 

Coniscs Office. LSE- 

Tbt071 955 7227 or fine 071 955 7676 


OCTOBER 13 & 14 

A delegation from Russia, including the 
President of Gazprom, Rem Vyakhirev and 
Anatoliy Shatolov, Deputy Minister of 
Fnel and Energy, will review the 
oppor tunities in the CIS gas industry. 
Contact: RDA Tet 071-957 5701*298 
Fax 071-321 2045 



JUNE 26-27 

- Infomercial Teleshopping “94 
N1MA lacernatknafs taetsstinoal mn friw im 
featuring top direct response television 
executives Emm North America and Europe. 
In depth 1 1 - — Km on legnLiloty I sro eit and 

current DRTV trends, followed by six 
workshop sessions. Carina: Vivien Waltax 
Tet 071-630 9977 Fax: 071-630 9806 
-Not aflHXBd w«h 


JUNE 28 & 29 
IT Security, Indnstrial Espionage and 
Fraud Prevention Conference. The 
international meeting place for company 
executives concerned with IT security. All 
aspects of IT protection will be covered by 
world- renowned experts in Aia field. 
Soctefo Gtndrale de D6vrtoppcmeuf SA 
Tel 0322 512 46 36) Fai (+322 512 46 53) 





This major event will review recent 

developments in intellectual property 

rights and update on competition law. A 

high quality panel of speakers with 

considerable expe r tise in their field of law 

have been brought together for this 

symp o siu m . 

Farther details from International 
Profosnanal Conference LM 
Tet 071 233 7733 


SLP i EMBER 27-29 
Competition in combination with open 
access will force utilities id introduce more 
advanced tncheologies Sucb as: 
Ai this conference A ex hib i tio n the latest 
development will be discussed and shown 
by the major comp an ies and onlines. High 

Contact: RanAVeflCJtE 
Phone: •31-30-650.963 
Fax "3 1 -30-650.928 


prepare industries and their 
management for global compe- 
tition. There is no other way. 
We have already lost too much 

In his view, the WTO’s cen- 
tral task will be to organise a 
framework for that competi- 
tion. The biggest threat Ruggi- 
ero sees is from regional trade 
blocs. Though the barriers 
around their markets are fall- 
ing, he says, there is a risk 
that regions will try to use 
their political muscle to 
impose trading rules on the 
rest of the world. ' 

He also believes the WTO 
will need to take a lead in 
de fining international competi- 
tion policy disciplines. 

H Until now, Gatt has been 
mainly concerned with the 
interests of governments. The 
future system must also take 
into account the attitudes of 
big multinational companies, 
some of which have sales big- 
ger than the GDP of medium- 
sized countries.*’ 

Ruggiero is less forthcoming 
about how that prospect is 
viewed by Flat - and the sev- 
eral other big companies which 
he serves as director or 

However, he insists that 
should he fail in his bid to 
become the trade system's 
global gamekeeper, he would 
be content to return to hunting 
with the corporate pack. “I 
have a position which satisfies 
me completely. I am not 
looking far a change of job.” 
But he swiftly adds: “I am 
looking for this job." 

Lamb to set up 
listening bank* 

Grumblers may complain that 
Britain often seems like a third 
world country, writes Peter 
Norman. But that is not why 
the World Bank is boosting 
its presence in London and 
instaffing a foil-time senior 
official in its eyrie in New 
Zealand House this summer. 

The Bank is sending Geoff 
Lamb, one of its high flyers, 
to the UK to build up 
relationships with Whitehall, 
the City, universities and 
non-government organ- 
isations and tap UK expertise 
on development issues . 

By setting up a "listening 
bank" in the UK, the Bank 
hopes to strengthen its 
capability to deal with such 
thorny issues as development 
and environment on its home 
turf in Washington. 

A youthfuHooking 50, Lamb 
was a dose aide of and 
speech writer for Barber 
Conabte, the Bank’s president 
in the late 1980s. He is 
currently In charge of the 
Bank's policy on public sector 
reform in former Communist 
countries and the Middle East 

Lamb is no stranger to the 
British Isles He is an Irish 
citizen, having been exited 
from South Africa m 1965, and 
win be responsible for relations 
with Ireland in his new job. 

He was deputy director of the 
Institute of Development 
Studies at Sussex University 
before joining the Bank 

There are also family ties 
in London. Lamb is married 
to Caroline Atkinson, a former 
economics correspondent of 
The Times and daughter of 
Sir Fred Atkinson, the 
government’s chief economic 
adviser in the late 1970s. 

With the move to London, 
Atkinson will have to leave the 
IMF, where she is responsible 
for Italy and Greece. But a new 
career beckons - probably 
at the Bank of England. 

mood for 
Gerard Worms 

Wheefing and deafeig Is part 
and parcel of corporate Ufa 
at Suez, Iho sprawflng. 
French holding comp a ny; 
yet Gerard Worms, its 
chairman, can have greeted 
few deals with quite so much 
relief as last week’s sale of 
AbeUe R6, toe retnsunmee 
business, to toe SCOR 
group, writes Alice Rawsthom. 

The deal marked toe end 
of three years of arduous 
negotiations over the 
disposal of Vfchme, the 
French insurer that owned 
AbeOe R6 and was recently 
add to the UK’s Commercial 
Union. It also marked a 
turning point for Worms 
himself who, having spent 
his first four years as 
chairman embroiled In 
disposals, is now free to 
indulge In expansion. 

Worms, 57, is an easy man 
to underest im a te , as his 
fellow French financiers now 
realise- His genial air and 
mild manner prompted some 
to dis mis s him as a paler 
shadow of Jean PeyreJevude, 
Ms former boss who is now 
chairman of the CnSdit 
Lyonnais banking group. 

He did Mttfe to confound 
his critics during his fast few 
years at Suez when hissing 
wfth toe task of instffling 
some sort of strategic 
direction into its vast and 
varied int e rests. But he soon 
showed his mettfe by fiercely 
resist in g toe attempts of 
Feyretevade (then head of 
Umon des Assurances de 
Paris) to achieve an easy - 
and cheap - takeover of 
Co Ionia, toe German insurer 
controHed by VSctoJra. 

The two men finaBy struck 
a deal late last year but 
Worms was gerteraBy seen 
as having struck the better 
bargain. He then went on 
to auction off Vlctolra and, 
having completed that task, 
can now settle down to 
convincing his critics that 
he is as good at buying as 
he was at eeRIng. 

Caio says hello 
at Omnitel 

Francesco Caio, a 36-year-old 
former McKlnsey consultant 
who has an MBA from Irtsaad, 
has become the first chief 
executive of Omnitel Pronto . 
itafia, which won the licence 

to become Italy’s second 
cellular telephone operator In 
March, writes Andrew HfB. 

Caio, a computer science 
graduate from the Pofitacnico 
di Milana, was head of the 
telecom and multimedia 
division of Olivetti, the Italian 
computer group which is the 
lead member of the Omnitel 
Pronto consortium. Other 
members include Beil Atlantic 
and Pacts! of toe US. and 
Mannesmann of Germany. 

Omnitel Pronto I tafia has 
pledged to invest up to $1 bn 
In developing its network in 
the first two years, and 
expects to launch its service 
in the Anal quarter of 1995. 

The Omnitel Pronto Italia 
group learned that it had won 
the licence just before the polls 
closed fa the Italian general 
election. Berlusconi’s Rninvest 
was part of the losing Unite! 
consortium, headed by the 
Hat industrial group. 

Saeki to lead 
Sanwa Bank 

Though Japanese banks ae 
stfll suffering from the worst 
loan crisis since the second 
world war, Sanwa Bank has 
taken toe business community 
by surprise by moving up to 
second place in the list of the 
country’s top earners, writes 
Emflco Terazono. 

And behind this rise is 
Naotaka Saeki, who 
masterminded Sanwa's drive 
to cut costs and produce an 
early recovery in earrings. He 
takes over as president from 
Hiroshi VVafeanaba. . 

Some critics suggest that 
Saeki may be "too dry”, 
Implying that he disregard s 
the old-boy network, which 
counts for much in Japan, but 
he has a strong following 
within the bank thanks to his 
straight taflting. - 
- Haring made Sanwa's the 
largest domestic netwbrk, ' • 
Saeki w3l now try to ehange 
Its down-to-earth Image 
engendered by its Osaka 
industrial, base into that of a 
quality lender. 


Afl Advertisement bookings am 
accepted subject to our current Terms 
and Cootflrwtts Ripwatof which are 
available by writing to The 
Ativenisciitcnt Prodaction Director. 
Tbe Financial Taaea. One So utWaik. 

Bridge, London SE1 9HL 
Tet 071 873 3223 Roc 071 873 3064 

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S • ■ - Vfev '. 
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SViy'S ’ 

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Si i 







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i vPAfcr&fci 



:iMES MONDAY JUNE 20 1994 

DartdStor?/6 : t970 p$ay “Home". •; 
a Royal Court classic, returra to 
London tomomwWh^ifop^ at ■ 
WytKfham’s.The parts orfgtndiy 
p^edtiyRa4)hF8chaf*on.and . 

> John Gteigtid are now taken fay 

ffefaard Briers . 
"old Paul Bdcfington 
-(Ear.rigW}; This'te thetWrd : ■ 

tima Btetogfort has stepped 

into. a.Glelgud-creeted rote, " 
[ Having appeared beskfa 

^Gfe^udfrrWorigM . . .. 
J.sfeglrigcrfAiaft Bannetfs - . 

[ TForty Yssre Otfyhe taler 
.took the <3I#gud rolp at, .. . 
.OhfchestSyand two years . 
iagti, he and. Harold Ptntef . ' 

- >^ttteGtalgurt*nd .. \ 
f8chart*gpn.rotes ■ 

• PWefs-pto Mafi'g.'Cahpr.". 



Sir (an McKefen premteesfeone- 1 - 
man-ahoiiftiAT^^rt Out at foe ... 
Lyceum* on Broad^ tomorrow- 
■The stowt is desorjpqd as "a mlxtuw 
of dand-op, dassfca} adir^ and .'■■ 
gay activism.” ft i& on&of over 80 
evews'mmelQ-day Cultural ‘ • 

Festival of Gay Garries IV, which ' '• 

. maric-the^thanrtvocsary of-the- 
1969 StonewaB ria tsih Nsw Yorit ' . 


■■ Itafy^ bMWsnown^nd moa.'.'- 
fesWonabie festivat opens on ' : - 

' Wwfciewtay' wrift a Pduteric double- 
WB, poking Wssarraa^ opera *Les 
marneSeSrde Trasife” With a 
reconstruction ofNiJInska's original 
cboreograpty for. “Las Bikes'. 

Spoteto is small, hot and very: 

■■ busy T but -the prograrnme offers 
someWngtor'everyt^ the 
-Martha Graham Dance Company, 

' an' Kafe&T&Agungie production of 
ArtWfcffleris Thekast YfaaKeeV . 
anew stagingof Beil's “Wozzeck*' 
and concerts oh the piazza.- . . 


The 1 5th Festival da Jazz Django 
Reinhardt opens on. Friday for the 
weekend j Weid oq an island In the . 
river. at'Sarxiots stir Belne/two 
mSastwn Fontefnblew, the event fa 

amecca for gypsy guitarists from 
at over Europe Sofo.Manouche . 
and <3tane tribes- tfiapiay their 
different accousticatytea and . 
BaWk Reinhardt, Django's son, a 

Martouche. takes the tradition' • 
electric. • ' • 


London City Ballet startsa season, 
fit Sadler's Wfefis tonight with' their 
Jolty staging of "Coppefia”. 
independent and sidled at making 
sponsorship work for both troupe 
. and generous donor (ADT), the 
company is indomttabto. 


After decades of delay and 
dispute. Edinburgh is at last 

about to celebrate the 
opening of a theatre worthy 
of the city end Its festival. 

The old Empire Theatre, built 
in 1928 and formerly Used as a 

- bingo halLhas undergone a 
major re-buikiing. As the new 
Edinburgh Festival Theatre, it 
will seat around 1.850 and Is 
sad to have the largest aid 
best-equipped stage In 
Britain, able to receive 
productions from any 
company In the world. The 
gala performance, on Saturday, 
will be Scottish Opera’s "Tristan 
und Isolde". 

Death throes 

Opera/David Murray 

Strauss back 

or death wish? 

The demise of the British film industry is said to be 
inevitable. But, argues producer and director Ismail 
Merchant, we may only have ourselves to blame 

B arely a week passes 
without another lamen- 
tation: tite British film 
industry, according to 

hand-wringing obituar- 
ists, is mouldering in the grave. Yet 
earh year Britain manages to pro- 
duce at least two or three films that 
shatter box office records cm both 
sides of the Atlantic. Merchant 
Ivory did tt with A Room With A 
View and nowards End. Last year it 
was The Crying Gome and The 
Remains of the Day, and now it is 
Four Weddings and A FimeraL Each 
year a steady stream of British 
films like Shadowlands, In The 
Name of the Father and Much Ado 
About Nothing achieve critical 
acclaim and commercial success. 
All these films compete trium- 
phantly, both at the box office and 
at awards, with the best in the 
world. This does not seem to indi- 
cate even a symptom of ill health, 
let alone death. 

And how could it be otherwise 
when British cinema can draw from 
the best writers, the richest source 
material, the finest actors and 
excellent technicians? In addition, it 
has an enormous advantage over its 
European neighbours in sharing a 
common language and culture with 
the United States, so British films 
are immediately acc e ssible to one of 
the largest movie audiences in the 

The morticians of the industry 
complain that there is no money for 
films here. As a producer who has 
spent most of his life parting finan- 
ciers from their money I believe I 
am qualified to state with some 
authority that there is money here. 
You have to go and get it, and it 
isn’t always easy - but it is there. 
Despite all the recent vicissitudes 
London is still a major financial and 
commercial centre; it is also recog- 
nised worldwide for its pre-emi- 
nence in the performing arts. It 
shouldn’t take a great leap of the 
imagination to connect the two and 
develop the possibilities. I have 
managed to fund not only British 
productions, but also Indian and 
American productions with City 
money. You have to work at it but 
it can be done. 

Film-makers in this country 
accuse the government of not ade- 
quately supporting and funding the 
film industry. Of course the govern- 
ment should provide incentives and 
subsidies, but it doesn’t So why 
does the industry look to a weak 
and ineffectual government for help 
when it has been made clear that 
the arts are not a priority and 

Ismail Merchant (above) and 
left, defying the Jeremiahs, 
scenes from recent British 
box office successes 

barely even on the agenda? The 
energy that goes into lobbying the 
government for greater state Inter- 
vention is wasted, and could be 
channelled more productively into 
making movies. Film-makers must 
take responsibility for their indus- 
try. and become more aggressive in 
fi ghting for their films. 

What has died in Britain is not 
the film industry, nor indeed any 
section of the arts, which are 
demonstrably alive and nourishing, 
but rather the indomitable spirit 
that once characterised this nation: 
the enteprising spirit that estab- 
lished empires, the unyielding spirit 
that stoically endured the hardships 
of war without a whimper of 

The passive, negative attitudes 
that are prevalent now, the con- 
stant moan of complaint, are not 
just tiresome but a tragedy for this 
country. Since I first came here 

some thirty years ago I have 
noticed, particularly in the past 
decade, a gradual deadening of the 
spirit of the country. Goals, ideolo- 
gies and even thought ywn to have 
died. It is as if a shroud has 
descended on this island and every- 
one is resigned to living in this 
cocoon instead of ripping it apart 
and letting the sunlight to. Even as 
Britain has united with Europe it 
seems to be Isolating itself from its 

When I work here I can tolerate 
the climate, the skittish fluctua- 
tions of the economy, the food, »«( 
even the ridiculous rigidity of shop- 
keepers who smugly slam their 
doors in your face punctually at 
dosing time even if you are waving 
a fistful of money at them; 1 can 
d eal with any crisis and calamity, 
but Tm becoming less tolerant of 
the pessimism and bleakness of 
spirit that has permeated every 
aspect of life here. Yet people still 
gravitate to Britain from every cor- 
ner of the world seeking a better 
life. If so many foreigners can see 
how much Britain stfll has to offer 
why are the British so blinkered? 
When you start to believe that your 
country is second rate, you are only 
a step away from creating a second 
rate country. 

Equally damaging is Britain’s 
capacity for disparaging her own 
achievements. When we made A 
Room With A View in 1988 everyone 
was delighted with the extraordi- 
nary success of the film. By the 
time we made Howards End six 
years later, critics were picking 
holes in Forster’s work and ques- 
tioning why we even bothered to 
film his novels. But those two films, 
together with our production of 
Maurice and David Lean’s A Pas- 
sage to India, brought 28 Academy 
Award nominations, 10 Oscars and 
a heap of other awards, as well as 
considerable revenue and kudos to 
Britain. No author in the history of 
finema ran claim as much. Any- 
where else Forster would be cele- 
brated as a national hero, a public 
holiday would be declared on his 
birthday and streets would be 
named after turn. But in Britain his 
reward is to be picked over by soi 
disant intellectuals. 

The British film industry should 
applaud its achievements and build 
on t he m, British cinema has the 
talent and the ability, but it needs 
to rediscover its spirit The grave 
diggers should put their shovels 
away before the death of the British 
film industry becomes a self-fulfill- 
ing prophecy. 

at Garsington 

O nce the home of Lady Otto- 
line Morrell and her hus- 
band Philip, Garsington 
Manor is now the mini-Glynde- 
bourne of Oxfordshire. The Morrell 
gardens, more romantic than 
Glyndeboume’s, are superbly kept 
up; and this year for the sixth Gar- 
sington Opera season the terrace- 
auditorium has been expanded and 
equipped with a retractable canopy. 

Emboldened by the success of 
Richard Strauss's Ariadne auf 
Naxos last year. Garsington has 
mounted his Capricdo as the open- 
ing 1994 show. No mean undertak- 
ing: old Strauss's “conversation- 
piece for music in one act" is in fact 
a substantial opera in length, sing- 
ing personnel and orchestra. Ideally 
it requires more seasoned stars 
than Garsington can afford - and a 
singable RngHuh version (half the 
audience kept their eyes glued to 
the bilingual text, until it became 
too dark for reading). That said, 
however, this brave performance 
was full of sympathetic charm. 

The conductor Elgar Howarth 
found just, unhesitating tempi, and 
balanced his modest Garsington 
Opera Orchestra with expert 
finesse. Except in the lovely open- 
ing string sextet - but anyhow the 
producer-designer David Fielding 
chose to counter that with onstage 
distractions. Not content with the 
basic joke, that the Capricdo we are 
watching is the very opera that Its 
participants are deciding to write. 
Fielding has made it into a practical 
dress rehearsal, with the "director” 
La Roche constantly fussing at the 

That slightly spoiled Countess 
Madeleine’s final monologue too. 
where she havers exquisitely 
between Words (the poet Olivier) 
and Music (the composer Flamand). 
Yet Edith Pritchard, tall and svelte, 
had a warm grip on its sense; all 
she lacks so far Is the long-breathed 
amplitude for its most celestial 
phrases. Her Olivier was Nicholas 
Seats, with a disaffected touch of 
the Gary Oldmans and a sharp 
white suit; voice forceful at cli- 
maxes, dry elsewhere. When Fla- 
mand first appeared in the comfort- 
able, spreading person of Richard 
Morton, I took him for the Major- 
Domo. but he displayed a nice lyri- 
cal intelligence. 

If Glenville Hargreaves looked a 
bit senior for Madeleine’s roui 
brother, his easy subtlety with the 
German words and the music sur- 
passed everyone’s. Contrariwise, 
young Patrick Donnelly has to play 
SO years older for La Roche, but 
cleverly. Other roles were well 
filled; all very pleasing. 

In repertory until July 8. with 
Haydn’s L'bicontro improyviso and 
Rossini's Bartnere dt Shngtia {Gar- 
sington 0865 361 636} 

• Since the premiere of his Tryst 
at Peter Maxwell Davies' Orkney 

Festival five years ago. James Mac- 
Millan - 35 this year - has become 
one of the most successful and 
sought-after composers or his gener- 
ation. His 1990 Proms commission. 
The Confession of Isobel Gowdie, 
was a palpable fait; and at the begin- 
ning of last season the Philhar- 
monia made him their Visiting 

This week he conducted them in 
two of his pieces - respectively old 
and new, both very striking: Into 
the Ferment from 1988, and the 
trumpet concerto Epiclesis he wrote 
last year for John Wallace. 

Both of them celebrate states of 
blissful intoxication, the one on 
malt whisky (inspired by a Burns 
ballad, “Willie brew’d a peck o’ 
maut") and the other on the mys- 
tery of the Eucharist MacMillan is 
a devout Roman Catholic with a 
musical sense of humour. Into the 
Ferment, a Scottish Chamber 
Orchestra commission, belongs to 
that burgeoning genre, music 
designed for a youth orchestra - 
here the excellent Rent County 
band - stiffened with some profes- 
sional players. 

It is a model of its kind. It rollicks 
seriously, if not soberly; gives its 
younger performers plenty to do 
(notably a trio of reeling trom- 
bones); and deploys the grown-up 
players only where they count, not 
so as to reduce the band to mere 
accompaniment-status. The nine 
movements of Into the Ferment are 
audibly well-argued as well as 
funny, and they amount to a little 
epic of unexpected breadth and 

Epiclesis is expressly about tran- 
substantiation, unlikely though 
that may seem. MacMillan’s device 
is to set up two distinct musical 
strands, an impassioned explosive 
one and a rich, grave one based on 
Gregorian chant, and let them inter- 
penetrate little by little by osmosis. 

The solo trumpet, wild and bril- 
liant, serves as a first-person-singu- 
lar protagonist (Wallace was 
superb), with a long, questioning 
cadenza-reverie. The large orchestra 
- six horns, a plethora of percus- 
sion - runs from sonorous mystical 
background to hammer-fisted 
blows. The trombone trio of Into the 
Ferment acquires a tuba, the better 
to intone the candidly hymn-like 

MacMillan's sophisticated rhyth- 
mic tricks take on a towering, exu- 
berant force as the music moves 
into ecstatic dance-mode: not unlike 
Messiaen's comparable movements 
in spirit, but Tar less ritually formal. 

It is a mystery why British com- 
posers should be at the fore in 
enhancing the meagre trumpet rep- 
ertoire, but they are. Along with 
Birtwistle’s Endless Parade and the 
recent Maxwell Davies concerto, 
MacMillan's Epiclesis sounds like a 
permanent gift to virtuoso trumpet- 






Philharmonic Hartmut Haanchen 
conducts C.P.E. Bach Orchestra 
in tonight’s programme of baroque 
symphonies and concertos (826 
4727). David Zirtman conducts the 
Berlin Philharmonic Orchestra on 
Wed. Thurs and Fri in works by 
Haydn, Weber and Schumann, with 
bassoon soloist Stefan Schweigert 
The federal President's concert 
next Toes, conducted by Carios 
Kleiber, is already sold out (2548 

Schausptefoaus The Staatsoper 
Orchestra and Chorus, conducted 
by Haenchen, give a concert of 
works by Weber and Schubert on 
Wed and Thurs. Achim Zimmermann 
conducts Berlin Symphony 
Orchestra and Chorus In a 
Mendelssohn programme on Fri. 
Rafael frtihbeck de Burgos 
conducts Berlin Radio Orchestra 
and Chorus on Sun in Matter's 
Second Symphony (2090 2156) 


DeutscMandhalfe Steven Pimlott’s 

arena production of Carmen, 
conducted by Jacques Delac&te. 
runs daily tfB Thurs with alternating 
casts headed by Agnes BaJtsa/ 
Denyce Graves, Jos6 Carreras/Mario 
Malagnini and Simon Estes (3038 

Staatsoper unfcer den Linden This 
week's highlight Is a song recital 
tomorrow by Felicity Lott and Ann 
Murray. Anna Tomowa-Sirttow sings 
the Countess in Jonathan Miner's 
production of Capricdo on Fit and 
next Mon. and Michael Gielen 
conducts the Berghaus production 
of Peiteas st M6tisande on Sat and 
next Tubs (200 4762/2035 4484) 
Deutsche Oper Tomorrow's 
performance is the Schaufoss 
production of Swan Lake. Richard 
Margison and Julia Varady head 
the cast in Don Carte on Wed and 
Fit Karan Armstrong sings the title 
role in Katya Kabanova on Thurs 
and Sun (341 0249) 



• Broken Glass: set in New York 
in 1938, Arthur Milter's latest play 

is a short, discursive and compelling 
study of paralysis in the face of 
crisis (Booth, 222 West 45th St 
239 6200) 

• Three Tan Women: a moving, 
poetic play by Edward Albee, 
dominated by the huge, hade 
performance of Myra Carter. She. 
Jordan Baker and the droH and 
delightful Marian Sefdes represent 
three generations of women trying 
to sort out their pasts (Promenade, 
Broadway at 76th St, 239 6200) 

• Medea: Dame Diana Rjgg gives 
a magnetic performance In this 
production of Euripides’ tragedy, 

an import from London’s Almeida 
Theatre directed by Jonathan Kent 
Final week (Longacre. 220 West 
48th St 239 6200) 

• AH in the Timing: six spariding 
short plays by David Ives add up 
to one enchanted evening (John 
Houseman, 450 West 42nd St 239 

• Angels in America* Tony 
Kushneris two-part epic conjures 
a vision of America at Ihe edge of 
disaster. Part one is Millenium 
Approaches, part two Perestroika, 
played on separate evenings (Walter 
Kerr, 219 West 48th St, 239 6200) 

• Four Dogs ate a Bone: John 
Patrick Shan toy's satiric comedy 
about movie-making and power 
plays in Hollywood (Lucille Lortel, 
121 Christopher St, 924 8782) 

• Laughter on the 23rd Root 
N eil Simon's 27th Broadway play, 
about a group of writers frying 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) 

• The Stoters Rosensweig: Wendy 
Wasserstein's most successful play 
to date, a comedy with serious 
undertimes about the reunion in 
London of three American Jewish 
sisters (Ethel Barrymore, 243 West 
47th St 239 6200) 

• Krteertransport Diane Samuel's 
drama in which e young German 
Jewish girl is separated from her 
parents and brought to England 

to escape the war. A Manhattan 
Theatre Club Stage 1 production 
directed by Abigail Morris. TUT June 
30 (City Center, 131 West 55th St 
581 1212) 

• An Inspector CaHs: JJ3. 
Priestfey's 1947 mystery thriller in 
an award-winning production from 

Britain's National Theatre, directed 
by Stephen Dakfry (Royale, 242 
West 45th St 239 6200) 

• Merrily We Roll Along: a new 
production of the 1981 Stephen 
Sondheim/George Furth musical 
about three college friends whose 
relationship disinteg rates. A York 
Theatre production directed by 
Susan Schulman (St Peter's Church, 
619 Lexington Ave at 45th St 
Citicorp Center, 534 5366) 

• She Loves Me: the 1963 Back, 
Hamick and Masteroff musical is 

a delicate, unabashedly simple story 
with all the humaiity. Integrity and 
charm that Broadway’s 
mega-musicals lack (Brooks 
Atkinson, 256 West 47th St 307 

• Carousel: Nicholas Hytneris 
bold, beautiful National Theatre 
production from London launches 
Rodgers and Hammerstein towards 
the 21st century (Vivian Beaumont 
Lincoln Center, 239 6200) 

• Tommy: a musical written and 
composed by Pete Townshend, 
based on the 1969 rock opera by 
The Who, about a withdrawn young 
boy who becomes a PfnbaH Wizard 
(St James, 246 West 44th St 239 

State Theater New York City 
Ballet's Spring season winds up 
this week with the Balanchine 
production of A Midsummer Night's 
Dream, daily from tomorrow till Sun 
(870 5570) 

Carnegie Hall The Solti Orchestral 
Project a professional training 
workshop, gives its second and 
final concert tomorrow. Georg Solti 
conducts works by Brahms, Strauss 
and Bartok (247 7800) 

• Vernal Bagneris offers a 
substantial tribute to Jelly Roll 
Morton at Michael's Pi*, where 
Woody Alien continues his job as 
clarinet player every Monday £211 
East 55th St 758 2272) 



Palms Garner Paris Opera BaRet 
is currently showing two 
programmes of 20th century 
classics. The first consisting of 
Harald Lander’s Etudes (1952), 
Jerome Robbins’ in the Night (1970) 
and WBSam Forsythe’s In the Midcfie 
(1987), has a final performance 
tomorrow. The second programme, 
comprising works by Antony Tudor, 
Paul Taylor and Kenneth MacMillan, 
can be seen tonight and Wed, then 
daily except Sun till next Tuea. The 
Nureyev production of La Bayadere 
has a two-week rut at the Bastifie 
opening June 29 (4742 5371) 
Theatre de la V9e Compagnie 
Philippe Genty is Inresidence from 
Sat till next Thurs (4274 2277) 


Op6ra BastIBe Carmen runs till July 
23 with changing casts including 
Marta Senn/Kathryn Harries/Beatrice 
Uria-Monzon in the title role, Sergey 
Larin/Afoerto Cupkto/Dattel 
Galvaz-Valteja/Vinson Cole as Don 
Jos6 and Alain Vemhes/Gtoo 
QuiliCQ/Hanry Peelers as Escarrello. 
The conducting is shared by Serge 
Baudo and Cyril Diederich, and foe 
staging is by Jose-Luis Gomez. 

This week's performances are 
tonight, tomorrow, Thurs and Sat 
(4473 1300) 

Op6ra Comique Roberto Alagna 

and Nuccfa Focfle head the cast 
in Gounod’s Romeo et Juliette, 
opening on Fri for eight 
performances. Michel Plasson 
conducts a staging by Nicolas Joel 
(4286 8883) 

Cft&telet A new production of 
Wagner’s Ring, staged by Pierre 
Strosser and conducted by Jeffrey 
Tate, opens with Das Rheingold 
on Sat (repeated June 29, July 2) 
and Die WalkQre on Sun (repeated 
June 30, July 3). The cast is headed 
by Robert Hale, Sabine Hass and 
Karon HuffetodL The final two parts 
of the cycle wiH be staged in 
October (4028 2840) 


SaBe Gaveau Tonight, Fri: 
Montserrat CabaB6 sings opera 
arias. Thurs, Sun, next Wed: 

Ruggero Raimondi sings II Maestro 
di Capefla (4953 0507) 

SaBe Pleyel Tomorrow: Maurizio 
Poilini piano recital (4561 0630) 

Saint-Denis Wed (Basilique): 

Mstislav Rostropovich conducts 
Orchestra de Paris and Chorus in 
Britten's War Requiem, with Sena 
Prokina, David Randall and Benjamki 
Luxon. Thurs (Legion cTHonneur): 
Teresa Berganza song redtaL Sum 
Josd van Dam song recital (4813 
1212 ) 

Palais Gamier Sat Gwyneth Jones. 
Gay Lakes, Yuri Bash met, Roberto 
Alagna, Viktoria Mullova and others 
are soloists in a concert for the 
benefit of Aids research (4261 2970} 

T.S. Monk, son of Thelanious, is 
in residence this week at Lionel 
Hampton Jazz Club. (Hotel Meridien 
Paris Etolle, 81 Boulevard Gouvion 
St Cyr, tel 4068 3042) 


Monday: Berlin, New York and 

Tuesday: Austria, Belgium, 
Netherlands, Switzerland, Chi- 
cago, Washington. 
Wednesday: France, Ger- 
many, Scandinavia. 

Thursday: Italy, Spain. Athens. 
London, Prague. 

Friday: Exhibitions Guide. 

European Cable and 
Satellite Business TV 

(Central European Time) 
NBCVSuper Channel: FT Busi- 
ness Today 1330; FT Business 
Tonight 1730, 2230 


NBC/Super Channel: FT 
Reports 1230. 


Euronews: FT Reports 0745, 
1315, 1545, 1815. 2345 


NBC/Super Channel: FT 
Repots 1230 


NBC/Super Channel: FT 
Reports 1230 

Sky News: FT Reports 0230. 


NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430. 


Clinton v Friedman M 

— _ beenwidesp 

on welfare ssi 

H ow attitudes 
towards the poor 
have changed. Just 
over 30 years ago, 
iedraan proposed a 
povel way of coping with pov- 
erty, which he dubbed the 
“negative income tax". He 
argued that government 
Should establish a “floor'* stan- 
dard of living. Families with 
incomes below the floor would 
receive credits while those 
with incomes above it would 
hay taxes in the normal way. 
fw Britain, gm^ iar schemes are 
advocated by proponents of a 
guaranteed “basic income*' for 
all citizens. 

Friedman saw many advan- 
tages in a negative income tax. 
It would be a transparent form 
Of poverty relief since the 
appropriate “floor” standard of 
living would be openly 
debated. It would be simpler to 

ftjfoninigtffr than the pTOfUSkm 

pf different benefits then avail- 
able. It would be non-judgmen- 
fa»t- indiv id uals would qualify 

S y by virtue of being poor, 
would not have to plead 
case before sceptical offi- 
cials. Rough calculations even 
indicated the scheme would 
save money by cutting through 
layers of unnecessary bureau- 

My put-pose is not to argue 
™t a negative income tax is a 
perfect - or even practicable - 
scheme. Studies suggest the 
work disincentives associated 
with any form of basic income 
teould be far higher than Fried- 
man assumed. In practice, 

K benefits would have to be 
id to the specific dream* 
Stances of poor families. My 
ji nint, father, is to rmttarllru* 

the extraordinary nhnng n in 
attitudes that has occurred 
since the 1960s. hr that optimis- 
tic era, even conservatives 
believed that a rich society 
such as the US could, and 
should, make unconditional 
payments to poor familie s. 

Now consider the welfare 
teform plan, published last 
week by President Bill Clinton. 
Set against the Friedman pro- 
posal it is a depress ingly 
authoritarian document. Mr 
Clinton has no qualms about 
coercing welfare recipients, 
mostly single mothers and 
their children. The goal is to 
force young mothers (those 
bom since 1371) into the paid 
labour force as quickly as pos- 



stole. The plan approves of any 
kind of work except, of course, 
something as socially irrele- 
vant as childrearing. The 
stale's role is not to provide a 
floor standard of living, but to 
act as an “enforcer” of disci- 
plined work habits and respon- 
sible behaviour. 

The Clinton plan would 
impose dozens of new condi- 
tions and requirements for 
receipt of benefits. Mothers, 
iwriiiAfng some with children 
as young as three months, 
would be required to accept 
any Job offer in. the private or 
public sector, no matter how 

impnngenrrifll to the individual 

in question. If, after two years, 
they had not made a sufficient 
effort to find employment, or 
had proved unco-operative, 
benefits would be terminated. 
What would happen to famines 
who ran fool of welfare offices 
is hi* made clear. But ginftp 
there are no plans to create 
state orphanages or other insti- 
tutions, it seems that some 
children would end up in card- 
board boxes. 

Yet the public desire to crack 
down on welfare mothers is so 
Intense that many Republicans 
and conservative Democrats 
last week dismissed the Clin- 
ton plan as a timid half-mea- 
sure. Nobody seems to have 
doubts about the proposed 
extensio n fo the discretionary 
powers of public officials - 
something that Friedman was 
anxious to reduce. The com- 
plaint instead is that the two- 
year time limit is illusory 
because mothers who “played 
by the rules" - obeyed orders 
- would be allowed to remain 
in subsidised workfare pro- 
grammes indefinitely . The crit- 
ics, if they are to be believed, 
would throw mothers and chil- 
dren cm to the streets the min- 
ute the two years is up. 

What explains this sea- 
change in attitudes: why are 
leftwingers such as Mr Gtinfem 
embracing policies that conser- 
vatives would have recoiled 
from in the 1960s? The nation, 
after an, is much richer and , 
therefore, more capable of pro- 
viding an unconditional safely 

There is no folly convincing 
answer. The shift partly 
reflects bitter disillusionment 
with the results of the “war cm 
poverty” that began in the late 
1360s. A haphazard system of 
means-tested benefits, which 
bore no resemblance to Fried- 
man’s negative income tax, 
was expanded. White possibly 
reducing material poverty, this 
appeared to aggravate the 
social pathologies associated 
with the urban, “underclass'': 
out-of-wedlock births, crime 
and drug abuse. By the 1380s 
sodal critics were complaining 
of a “cycle of dependency” 
involving second and third 

gwiytrafinn sin g le mothers. 

This led naturally to the 
“new paternalism’’ of the 1990s: 
the notion that government 
must modify the behaviour of 
young mothers by imposing 
work requirements, dictating 
where and with whom they 

Eve wi/l imposing fines in the 

hope of ‘reforming” their char- 
acters. If poor women, could 
respond to market incentives, 
the argument «rn. they would 
not be on welfare. Hence the 
need for training and disci- 
pline: today the preferred 
model for welfare is not Fried- 
man’s Bmh dispenser but the 
US Army , an institution that 
many argue has done more to 
help the underprivileged than 
any poverty programme. 

The Clinton plan is thus a 
child of the times. The fact 
that left-leaning Democrats are 
so keen to force people into 
pai d employment - even young 
mothers who are raising chil- 
dren - is a barometer of the 
sour public mood. Friedman, in 
his way, embraced the permis- 
siveness of the 1960s - the 
belief that a rich society 
should be tolerant of lifestyles 
that contravene middle-class 
norms. Ironically, Mr dinton, 
a product of those years, is 
em bracing a philosophy closer 
to that of the Victorian work- 
house. And the public, like the 
audience in a Roman amphi- 
theatre, is screaming for more. 

M ass higher educa- 
tion in the TJK is 
already a reality. 
While there has 
beat widespread support for its 
expansion, dehate on bow best 
to organise it and how to fond 
it is now gathering heat 
The proportion of 18-year- 
going into hi gher educa- 
tion has more than doubled In 
past 15 years, from 13 per cent 
in 19S&81 to 31 per cent this 
year. This growth has been 
engineered by the government 
which had arm s to raise the 
numbers in higher education 
to 33 pa cent by 2000. Higher 
education in the UK now 
reaches almost as many 18- 
year-olds as in Germany @1 
per cant) and the US (38 per 

But such rapid growth raises 
questions over the qualify of 
Mghftr ftHprat i pn, and whether 
the courses an offer are appro- 
priate to today’s needs. 

They are not suitable, 
according to Professor Peter 
Toyne, vice-chancellor of liver- 
pool John Moores University, 
who suggests the system is 
out-dated. “We are at an impor- 
tant point in history where we 
are struggling to keep a system 
afloat which is based on past 
assumptions, if it’s going to go 
farther forward, reform has got 
to be radical," he says. 

Many employers feel that 
universities in the UK, despite 
their wpandnn, are StDl 

organised along lines devel- 
oped to educate a much nar- 
rower elite in fate 13th century. 
They fear that univ ersities do 
not take account of the grow- 
ing demand from employers for 
a differ ent, more flexible, con- 
cept of higher education. 

For maniple , the Confedera- 
tion of British Industry says in 
its report. Thinking ahead, 
published this month, that 
there needs to be more flexibil- 
ity in universities so that they 
Ofier access to people at all 
stages of their careers, not just 
for three years after leaving 
school. “Higher education is, 
and must be seen, as a 
resource few those in employ- 
ment to update their know- 
ledge and skills as it is for 
young people," it says. 

The CBI wants students to 
be able to transfer easily 
between universities, to take 
career breaks and to follow 
courses while working. It also 
wants the proportion of 18- 
year-olds in higher education 
to rise further to 40 per cent 
But Mr TTm Boswell, higher 
education minister, insists 
there must be “no reduction in 
standards”. He recognises that 
tiie problem for policymakers 
is that extra flexibility might 
lead to adulteration of quality. 

W hen it conies to 
developing, con- 
structing and operat- 
ing natural gas projects 
around the world, Enron is 
world class. We proved that 
in 1993 by completing the 
world's largest gas- fired 
cogeneration power plant in 
only 29 months. Today, were 
still moving fill I speed ahead 
by fulfilling yet another, 
different energy need - 
“fast-track" power. 

Enron has just completed 
its second "fast-track" power 
project in the Philippines. In 
only 1 1 months we construct- 
ed and brought on line a 116 
megawatt plant in Subic Bay. 
We now operate and maintain 
three facilities there, selling 
the power generated to die 
Philippines National Power 
Authority. For developing 
countries such as the 

Philippines, Guatemala and 
India, Enron Internationals 
ability to respond quickly to 
critical power needs helps 
alleviate brownouts, blackouts : 
and slowed economic growth ■ 
due to inadequate energy 
resources. For yet other 

nations, we're able to step in 
and provide immediate power i 
solutions as more and more 
utilities become privatized. 

In addition to "fast-track" 
power solutions, Enron is 
known the world over for our ■ 
unequalled technical expertise ; 
and uncompromising dedica- : 

tion to performance. Enron 
Operations Corp. designs, 
constructs and operates the 
bulk of Enron's physical assets 
including power plants like 
those at Subic Bay,- our gas 
processing facilities and ser- 
vices,- our clean fuels opera- 
tions,- our liquids pipeline and 
44,000 miles of natural gas 
pipeline. Enron Operations 
Corp., in fact, bears commer- 
cial responsibility for six 
different Enron pipelines on 
two continents. 

Quick response to immedi- 
ate power needs. Pipelines 
and gas processing facilities to 
develop infrastructure. And 
plenty of the clean-burning 
natural gas that makes it ail 
possible. They're all part of 
Enron's vision of becoming 


fet natural CORP. 

gas major. Houston, Texas 

Fresh formula for 
complex equation 

John Anthers on ways of making higher education 
in. the UK more appropriate to greater numbers 

Last week saw an important 
attempt in the UK to square 
this circle. The Higher Educa- 
tion Qualify Council, a self-reg- 
ulatory body of vice-chancel- 
lors which has government 
backing, published a report. 
Choosing to Change, which 
advocates a new, flexible sys- 
tem of academic credits and 

Large degree courses would 
be split into discrete subject 
nwify or modules- yia^h mod- 
ule would then be worth a 
fixed number of academic cred- 
its. This would create a “com- 
mon currency" for accumulat- 
ing credits towards a degree - 
regardless of whether the cred- 
its were obtained in conven- 
tional higher education or 

WygHmial t raining . 

The report also recommends 
the creation of an “associate 
degree" mainly via vocational 
training. With extra credits 
fids could be upgraded into an 
eventual honours degree, nor- 
mally gained by three years of 
purely academic study. The 
associate degree would also 
give students a qualification 
they could use to look for 
employment alter anfy a short 
period in higher education: 
later, they could return to com- 
plete a superior, honours 

Such a system is an the way. 
Around 85 per cent of UK uni- 
versities now have seme sys- 
tem of cr edit accumulation, or 
plans to tutradnee it. Agreeing 

a ffiirnmnw s tandar d should 

thus be possible: 

To Tnaka this system work, 
the report, drafted by Professor 
David Robertson of Liverpool 
John Moores University, rec- 
ommends that universities 
should also adopt a standard 
national transcript on which 
tutors and lecturers would fill 
in details of students’ progress 
upon completion of e a ch mod- 
ule. Thus students could trans- 
fer more easily from one uni- 
versity to another, while 
employers would have a better 
grasp of a potential recruit’s 
university career. 

The CBI is keen on the idea, 
and believes it would enhance 
qualify. According to Mr Tony 
Webb, the CBTs director of 
education policy: “Degree 

courses should ensure inffivid- 
uals take control af their learn- 
ing and develop their core 
skills. A final grade cannot 
capture this development ade- 
quately. It needs to be comple- 
mented by a record of achieve- 

But many in the academic 
community believe the HEQC 
report goes too far. For exam- 
ple Professor Robertson 
atfeirbi some modular co u rses 
which have already Wn intro- 
duced in the UK as “phantom" 
arrangements. These split 
courses into modules, but 
“without necessarily permit- 
ting any greater internal 
choice or flexibility”. 

Several vicechancellors have 
implemented the “phantom 
arrangements” which Prof 
Robertson attacks, and fear 
that allowing great®- freedom 
to “pick and mix" would lead 

to weak® qualifications. Pro- 
fessor Ron Johnston, vice-chan- 
cellor of the University of 
Essex says his institution will 
introduce modular courses in 
1995. But it wUl be for adminis- 
trative convenience and to 
make life easier for mature stu- 
dents taking a degree while 
continuing a career. A core of 
compulsory modules will he 
maintained to ensure students 
do not avoid important but dif- 
ficult courses - for example 
Chaucer In an English degree 
or maths in an economics 

Prof Johnston says: "A lot of 
students benefit from the tradi- 
tional degrees even though 
they aren’t equally desirable 
for some other people. My fear 
is that the possibility of a sus- 
tained three-year period in 
higher education which is lin- 
ear and structured could be 

Sq » Ut who is nervous 

about the more radical 
S * the HEQC report f 
Professor Mike Brown. eWa 
executive of De Montfort Um 
versify of Leicester, the fash** 

expanding university in west- 
on Europe- He also has intro- 
duced modular courses out 
places limits on students 

choices. . . 

“We would not want to 
encourage people that they 
could just take things off the 
shelf. We need them to do 
something which meets the 
marketplace’s needs," he says. 
tfMng that American academ- 
ics now seem nervous that 
choice has become too varied, 
and want to instal more con- 
trol over the choices students 

T here are other reasons 
to fear that quality 
wifi be adulterated. 
Trying to ensure that 
credits are fully transferable 
between institutions means 
s tan dards may sink to a “low- 
est ffwwman denominator" . 

Prof Robertson sets out to 
answer these objections. He 
wants more guidance for stu- 
dents, and a qualify control 
“kite-mark" scheme for educa- 
tional brochures, to ensure 
that students do not misuse 
their freedom to choose 
courses. Assurance of quality, 
he suggests, should be an insti- 
tutional responsibility but it 
should be buttressed by a cen- 
tral evaluation service for aca- 
demic credits, a consultative 
forum with professional bodies 
and employers and an annual 
conference on higher education 
an* fee labour market. 

The higher education com- 
munity will spend the next few 
months analysing whether 
these safeguards are adequate. 
Rigorous qualify assurance, if 
it can be achieved, will be the 
key to malting university 
expansion work for emp- 

The government, in the form 
of Mr Boswell, welcomed the 
contribution the report has 
made to the debate and hinted 
at government support for the 
transcript proposals. But for 
now foe interest of the higher 
education world is on how the 
government plans to fund the 
expansion in numbers due to 
resume In 1997. 

The debate among politicians 
over who should pay for mass 
higher education - hi particu- 
lar whether students should 
bear soda of the extra burden 
- has hardy started. With cur- 
riculum reform and restructur- 
ing likely to be costly, such 
issues cannot be Ignored for 
much longer. 


Number One Southwark Bridge, London SE1 9HL 

Fax 071 873 5938. Letters transmitted should be deafly typed and not hand written. Please set fax for finest resolution 

In banks’ interests 
not to offer dual 
role to accountants 

Front Ur Derek Sack 

Sir, I read with interest Mr 
John Jackson’s letter "Con- 
cerned by banking practice” 
(Jose 16). 

This bank has for same 
pursued a policy of not 
appointing investigating 
accountants as receivers if, as 
a result of their investigation, 
they recommend receivership. 
This has certainly reassured 
customers that the accoun- 
tancy investigation is in their 
best interest, and has led to a 
reduction in the number of 
recommendations to pursue 
this course. 

ft is not always possible to 
do this because; for example, 
there are occasions when we 
are part of a lending syndicate, 
but in almost every case we do 
divide the roles with only a 
tiny number of exceptions. 

Our intention is to appoint a 
receiver only if there is no 
alternative course of action, 
and this is supported by the 
redaction in the number of 
receivers which we have 
appointed, down to 150 during 

1993 compared with 420 in 1992. 

I support Mr Jackson’s sug- 
gestion that the Institute of 
Chartered Accountants should 
consider its policy on this 

Derek Sach, 

director, sp ec ialised lending 

Royal Bank of Scotland, 

67 Lombard Street, 

London JSC3P 3DL 

From Mr Stephen BdzeU-Smitk 
Sir, I read Mr John Jackson's 
letter with great interest As a 
specialist fond manager in the 
very smallest capitalisation UK 
companies, I have personal 
experience of the pressure 
which hanks can exert on com- 
pany managements. I would be 
Interested to hear why a firm 
of reporting accountants 
should not automatically be 
disqualified from acting as 
administrator or receiver. 
Stephen Haaefl-Smith, 
managing director, . 

Rutherford Asset Management, 
99 Charterhouse Street, 

London ECUS SHR 

Toyota plant’s impact will 
extend beyond Midlands 

From Sir George Barrett. 

Sir, Your article, “Toyota 
plant fails to boost Midlands 
economy” (June 15), gives a 
rather short-term view. It is 
important to stress that when 
our work was completed in 
February this year the first 
phase of the plant was only 
just moving to a second shift. 
The impact to date has been 
entirely in line with Toyota’s 
own commitments. 

When the investment was 
first announced, it generated 
what were, perhaps, rather 
. unrealistic local expectations 
and concerns. Our study was 
commissioned precisely 
because there was lack of reli- 
able evidence from which to 
project the impact of such a 

However, it is important that 
we do not move from a posi- 
tion of unrealistic expectations 
to one where we are overly dis- 
missive. The plant remains one 
of the largest projects to be 

attracted to the region, and the 
UK, in recent years. Only a 
limited part of its likely 
longterm impact has yet been 

Thera is also the potential 
for the plant to exert a wider 
impact beyond the employ- 
ment income and trade links. 
It brings innovative training 
and reenritment policies which 
may provide useful models for 
other employers. 

On a wider basis, Japanese 
qualify demands are having an 
important Impact on the com- 
petitiveness of the UK compo- 
nents supply industry. It also 
has to be said that the arrival 
of the plant has provided a wel- 
come boost to confidence at a 
time which the regional econ- 
omy was at a very low ebb. . 
George Barrett,* 

Ecatec Research & Consulting, 
Priestley Bouse, 

2834 Albert Street, 

Birmingham B4 70D 

Tribunal is not best means 
of resolving City abuses 

From Lord Sperts. the 54th day (the last working 

Sir, Lord Alexander of Wee- day before Christmas 1391). 
don. in his address to the 1994 Thid fundamental and 
Commercial Bar Association, utterly relevant evidence 
suggests the collapse of the showed that the 1988 tribunal 
second Guinness trial (among had found that no false market 
others) gave “rise to a sceptical had teen created and no 
view af the CSfy” (“Bank chief breach of S151 had been 
presses for. City battle on effected. Evidence under oath 
crime”, June 16). He goes on to had been, taken from the then 
advocate a tribunal of City rag- director of the Takeover Panel 
ulators without juries to deal (something that did not hap- 
with “market abuse”. pen In the first Guinness trial). 

Lord Alexander can be for- What is stiff, to me, surprising 
given for his relative inexpert- is that tins evidence bad not 
mice in the CSfy and for his been disclosed to the inspec- 
ted* of knowledge of the facts tore investigating the Guinness 
of the Guinness trials; indeed I affair nor to the Bank of 
wander it he. is aware that England - both were in total 
what he recommends Is exactly ignorance, apparently, of this 
what occurred in those trials, judgment and its affiliated evi- 
Unknown to affbnt a few, a deuce. 

“RoskiU” type tribunal was I am satisfied that, had this 
convened in December 1988 evidence been made available 
with a distinguished QC as to the first Guinness trial it 
c h ai rm an or judge and two too would have ennapyd and 
equally distinguished lay none of those defendants 
assessors drawn from the would have been convicted, 
senior ranks of City lawyers The scandal of the Guinness 
andaaxrantants. trials lay in the almost total 

TOe p^pose of fids tribunal ignorance of City mechanisms 
Ite ^^yed * y ^ trial judge 

Prosecution barristers in 
unyestinenls) Act 1958 from an fundamental areas such as 
.order of tte secretary of state stock exchange regulations 

the TaSan settlement 
from a registered licensed system. 

dealer who dealt fin- me in a Indeed, in so far as the Take- 

ESSES Code was concerned, tte 

121 ^ese transactions trial judge was to interpret 

! 2 s J5? 8< iS?^& i ? nfiSS 111686 rtSU himself with no 
was regard to established™ 
<mch, S®* dents. He even went so far as 
", - a kJyj to role that the stodfc exchange 
and breaching S151 of the A»firwK<m of a ufoJse market” 
Act IMP. wTwte Street 

should not 



dwr) and not revealed to the Sums 

trial until forced out of the 
prosecution on the evening of 

I am satisfied tha t, had this 
evidence been made available 
to tbe first Guinness trial, it 
too would have collapsed and 
none of those defendants 
would have been convicted. 

The scandal of the Guinness 
trials lay in the almost total 
Uparance of City mechanisms 
displayed by the trial judge 
and prosecution barristers in 
fundamental areas such as 
stock exchange regulations 
and the Talisman settlement 

Indeed, in so far as the Take- 
over Code was concerned, the 
trial judge was to interpret 
these rules himself with no 
regard to established prece- 
dents. He even went go far as 
to rule that the stock exchange 
definition af a “false market" 
was quite incorrect 

Lord Alexander should not 
be so sure that his system 
would come up with the 
“right” result - he might well 
be surprised. 




Rent TN172DT 

CBI surveys a gre mlin 

- w 

From Mr Sudhir Jujumkar. 

Sir, A gremlin seems to have 
entered Gillian Tea's thought- 
ful article, “Business survey 
fans found mainly In City** 
(June 15) on the Confederation 
of British Industry's business 
rorveys. For the record, our 
distributive trades survey 
which was published earlier 
last week, usually gets about 
500 responses from a sample 
mailing Hst of, 1,500 ^ ^ 

15,000 companies as stated. 
However, foe companies which 
participate in our surveys 
cover 15,000 outlets in retail- 
lug, wholesaling and tbe motor 


Sudhir J unankar , 
associate director, economic 
analysis, - “ 


Centre Point, 

108 jViae Oxford Street, 

London WClAWO 

' V S 


behind his 

\ ‘ (! 

- k x 

J nuirMi 

• i » r 

i ■■. >, v 

FINANCIAL TIMES MOMnAY n r\rv on 1994 


Number One Southwark Bridge, London SEI 9HL 
Tel: 071-873 3000 Telex: 922186 Fax: 071-407 5700 

Monday June 20 1994 

Hard slog 
in Russia 

The government of Mr Viktor 
Chernomyrdin is making an unex- 
pectedly v aliant effort to stainhse 
the Russian economy. Bat the 
effort could easily foil and does, in 
any case, still foil for sheet of true 
stabilisation. If Mr Chernomyr di n 
is indeed a man with whom the 
west can do business, it maVog 
sense to do the decisive business 
now. To wait may be to lose the 

As former head of a large Soviet 
gas enterprise, Gasprom, Mr Cher- 
nomyrdin the political clout 
lacked by the younger reformers, 
Mr Yegor Gaidar and Mr Boris 
Fyodorov. What he lacked, was 
their understanding. But he does 
seem to have come a long way, 
particularly for someone who pro- 
claimed early this year that the 

era of “market romanticism” was 
over. It was he, after all, who 
wrote in the FT last month that 
“it Is vitally important that every 
member of the Russian govern- 
ment fully understands that a 
strong rouble is the indispensable 
condition for the revival of the 
Russian economy, and the Rus- 
sian state as a whole". 

So for has the government come 
that Mr Michel Camdessus, man- 
aging director of the Internati onal 
Monetary Fund, was persuaded in 
March to advance the Slibn sec- 
ond tranche of the systemic trans- 
formation facility. Negligible in 
itself this sum was an important 
sign of confidence in the Russian 
government Nor has that confi- 
dence appeared misplaced. Mone- 
tary policy has been tight while 
inflation has been kept down - to 
just &8 per cent in May, following 
10 per cent a month between Feb- 
ruary and ApriL 

Unfortunately, partly because or 
a 25 per cent decline In industrial 
output since last year, govern- 
ment figures show tax collection 
15 per cent below budget in the 
first quarter. The deficit has been 
kept under control mainly by non- 

payment of spending obligations, 
measures that are neither desir- 
able nor sustainable in the long 
term. Meanwhile, there are strong 
pressures for more spending from 
lobbies for the military, the mili- 
tary-industrial complex, agricul 
tura! interests (strongly repre- 
sented in the Duma) and the 
northern territories. 

The limited success so for may 
well not last But it would not be 
good enough, even if it were to. 
Output has already fallen so far 
that successful stabilisation might 
bring a strong tornround in the 
economy next year. But first there 
needs to be not just a prolongation 
of the present long drawn out 
squeeze, but a serious effort to 
break inflationary expectations. 

What is needed, in fact, is true 
stabilisation. That could be 
achieved through a programme to 
peg the exchange rate, combined 
with elimination of inflationary 
financing of the budget deficit. 
More funding would be needed 
than is now available. Much of it 
could be raised domestically, some 
in higher domestic revenue and 
some in domestic borrowing, but a 
precondition would be more west- 
ern finance. Some 4-5 per cent of 
Russian gross domestic product in 
external assistance, for two or 
three years, might do the trick. 
The bifl for the west would be 
perhaps $L4bn a year. 

Judged by aid budgets this is a 
large sum. Judged by the more 
relevant standard of military 
spending, it is small What needs 
to be understood is that Russia is 
not merely an aid problem. Stabi- 
lising its economy offers probably 
the most significant current 
opportunity to make the world a 
better place. Mr Chernomyrdin’s 
determination offers the west yet 
another chance to help, but it may 
not last While such an opportu- 
nity may come again, it would be 
sheer folly for western leaders to 
act on that assumption. 

Pension funds 

Last week’s decision by the 
European Commission to shelve 
the deregulation of pension fund 
management is a fog setback to 
the creation of a single market in 
the European Union, it is possible 
that liberalisation can still be 
achieved if the Commission brings 
proceedings to enforce the free 
movement of capital promised by 
the Treaty of Rome. But that will 
take years, at high cost to taxpay- 
ers and pension fund members of 
countries tha t t namtam controls 
over fund management. 

The cost to taxpayers arises 
from the higher bond yields that 
will be required to finance budget 
deficits in such countries. Con- 
trols on pension fund investment 
ensure a captive market of buyers 
for government bonds and share 
issues involved in privatisation 
programmes. But funds can gener- 
ally be raised more cheaply from 
the global savings pooL 

The cost to pension fund mem- 

bers comes in the form of 
increased risk resulting from inad- 
equate portfolio diversification. 
Diversification improves the 
return that funds achieve by giv- 
ing access to growing markets. It 
Is also a less risky strategy than 
investing in a single country. 
These are benefits that no Euro- 
pean country can afford to neglect 
as pension costs rise with the age- 
ing of populations. 

Capital market restrictions are 
likely to prove ineffective in the 
long run. The financial services 
industry will find ways to create 
synthetic exposure to foreign mar- 
kets for pension funds. So will the 
sort of cross-border mergers in 
insurance and pensions seen this 
week with the purchase by Com- 
mercial Union of French insurer 
Groupe Victotre. But it would be 
better to purge Europe of pension 
fund investment restrictions and 
reap the benefits of an integrated, 
efficient European capital market 

Costly research 

The topic of research and 
development, and British indus- 
try's supposed aversion to It is 
back in the news again. Last 
Thursday the UK Department of 
Trade and industry published the 
latest version of its “R & D score- 
board", showing that Britain still 
spends far less on R & D than its 
main competitors. The data also 
suggested that British companies, 
uniquely among the big industrial 
nations, spend less on R & D than 
on dividends to shareholders. 

The comparison between R & D 
and dividends is particularly topi- 
cal, since the UK government 
seems to be toying with the idea 
of redressing the balance: for 
Instance, by taking the income of 
the pension funds, thus making 
dividends less attractive by com- 
parison with cash reinvested. At 
worst, this could do industry more 
harm than good. Either way, it is 
largely beside the point. 

The debate about the City's 
alleged reluctance to invest in 
British industry goes back at least 
to the late 1970s, when it was 
examined by the Wilson Commit- 
tee. The answer was clear then, 
and it is clear now. If industry 
fails to invest, it is not primarily 
because of lack of funds. It is more 
often because it cannot find sensi- 
ble projects to spend money on. 

Nor is it true that R & D is 
self-evidently good and dividends 
bad. Take a simple example from 
the world of high technology. Both 
Philips of the Netherlands and 
Microsoft of the US spend mas* 
sively on R & D, and neither paid 
a dividend last year. Philips could 
not afford to: its huge spending on 
research (over $lbn annually) has 
proved largely profitless, and the 
money would arguably have bear 
better handed to shar eholders. But 
shareholders in Microsoft - one of 
America’s most spectacularly suc- 
cessful companies - have no rea- 
son to want dividends. Thar com- 

pany’s growth record is such that 
they can count on reinvested cash 
bringing a far higher return than 
they could get an their own. 

The bask fallacy is to suppose 
that high R & D spending is the 
cause of commercial success, 
rather than the result Britain's 
drug companies have traditionally 
spent lavishly on research, and 
have also enjoyed rapid profits 
growth and high stock market rat- 
ings. This is because the British 
have a talent for discovering use- 
ful medicines, so the cost of dis- 
covering them has been money 
well spent Now, as it happens, 
this may be changing. The glory 
days of conventional drug discov- 
ery appear to be over, and Glaxo is 
spending almost as much on divi- 
dends as on R & D. Merck of the 
US - the world's biggest drug 
company - is actually paying 

In seeking to mafep the more 
mature sectors of British industry 
spend more on R & D, the govern- 
ment may thus be flogging a dead 

horse. Indeed, proposals to penal- 
ise dividend payments by taxing 
previously tax-exempt pension 
funds could actually be harmfuL 

The paymasters of the pension 
Rinds, after all, are largely the 
p^wipantog themselves. If their net 
receipts were reduced, their collec- 
tive response would have to be 
either an increase in dividend pay- 
ments or a rise in pension contri- 
butions. Either way, they would 
have less to spend on R & D. 

Alternatively, the Treasury 
could opt for fiscal neutrality, for 
instance by reducing the basic 
rate of corporation tax in compen- 
sation. The net effect might be a 
mfld stimulus to R & D spending, 
and that would doubtless do no 
harm. But it would not do to 
expect too much. When it comes 
to productive R & D, it isn’t what 
you spend, it's the way that you 
spend it. 

A S Silvio Berlusconi, the 
new prime minister of 
Italy, devises the poli- 
cies of his administra- 
tion, a secretive and 
powerful banker, Enrico Cuccia, is 
right behind him, watching every 

The answer to the question of 
whether the premier or the 86-year- 
old Sicilian-born banker has the 
most power is finely balanced. Is it 
Berlusconi, head of the government 
and owner of three television net- 
works, which together attract half 
of Italy’s viewers? Or is tt Cuccia, 
the founder of Mediobanca, Italy's 
only big ™<n-f-hant hank , and spider 
at the centre of a web of powerful, 
interlinked companies? 

Possibly tipping the balance in 
his favour, Cuccia has, in the past 
six months, acquired considerable 
sway over Berlusconi's vast and 
overborrowed business empire and 
thus over the prime minister’s per- 
sonal wealth. This inflngq rp could 
be useful in preserving Medio- 
banca’s near monopoly of advising 
and financing Italy’s biggest compa- 
nies. Members of the government, 
particularly representatives of the 
Northern League, are determined to 
weaken Mediobanca. 

They want to undermine the "Sal- 
otto Buono” - the ‘good salon’, or 
network of powerful business 
dynasties, mr-lndmg the Agnellis of 
car group Fiat, De Benedetti of com- 
puter company Olivetti, the Pirellis 
of the eponymous tyre group - 
which, though frequently competi- 
tors against each other, are sup- 
ported by Cuccia and which support 
him. They believe Mediobanca's 
power is holding back the develop- 
ment of Italy’s economy. 

By contrast, Cuccia is extending 
the reach of the Sal otto Buono by 
persuading his corporate anit* to 
taka sbtkpR in the su ccession of Ital- 
ian companies being privatised. He 
is seeking involvement in new busi- 
nesses because the recession has 
eroded the financial strength of 
some of his most long-standing 
allies, such as the Agnellis and De 
Benedetti With this end in view, 
Mediobanca is raising at least 
LL500bn (£626 -56m) from a share 

So Italy^s privatisation pro- 
gramme - incTiidmg - fta les of state 
banks, telecommunication and elec- 
tricity companies - has became the 
battleground between Cued a and 
many government members. Ber- 
lusconi has yet to show his col- 

Neva part of the Salotto Buono 
hvmarif , Berlusconi has indicated he 
wants to impose a 5 pa cent share 
ownership ceiling for groups of 
related investors in future privati- 
sations. But there has been no test 
case yet Berlusconi may be waiting 
to see the outcome of Cuccia’s other 
big struggle - against the judiciary. 
Magistrates are investigating 
whether Mediobanca has committed 
a criminal offonce by allegedly fail- 
ing in its duty to ensure that accu- 
rate accounts were filed last year by 
Ferruzzi, a long-standing client, just 
prior to the refinancing of the huge 
industrial conglomerate which had 
been crippled by debt 
Magistrates have already shaken 
public confidence in many of Medio- 
banca’s clients - from Fiat to de 
Benedetti to the king of Milan con- 
crete. Salvatore Ligresti, until last 
year a member of Mediobanca's 
board - by alleging their involve- 
ment in assorted financial scandals . 
Until now. Mediobanca itself has 
always been above the fray, remain- 
ing aloof from the corruption 
charges that have touched almost 
all other corners of Italian business 
and political life. “In Italy it is a 
crime against God even to think 
had firings about Mediobanca." said 
Francesco Mieheii, an independent 
financier who in the early 1990s 
foiled in his attempt to create a 
rival to Mediobanca 
With a horror of publicity, Cuccia 
has made Mediobanca the para- 
mount financier of Italy’s commer- 
cial and industrial aristocracy. Its 
financial muscle is enhanced by its 
125 pa cent controlling stake in 
the giant insurance company, Gen- 

“Mediobanca is always at the 
crossroads of all business,” said 
Mario SarrineBi, the chairman of 
the state-controlled bank, BNL. 

Cuccia has held the reins for the 
48 years of Mediobanca’s existence. 
The “honorary" tag in his title of 

An intricate web 
of influence 

Robert Peston explores the links between 
Italy’s Mediobanca and the interests of 
Prime Minister Silvio Berlusconi 

“honorary chairman" is deceptive. 
He is still to be found every day at 
the bank’s headquarters in a con- 
verted 16th century convent, beside 
Milan’s La Scala opera house. Its 
inconspicuous exterior hides airy, 
white-washed salons, dotted with 
Renaissance artefacts. 

In other respects too, appearances 
mislead. It has just 87 executives 
and a total staff of 307. However, its 
net assets are worth LlO.SOlbn 
(£42bn), at market value, making r 
a substantial financial institution. 
The UK’s biggest investment hank 
S.G-. Warburg, by comparison has 
net assets of £Llbn. 

The relationship of Mediobanca 
with the Salotto Buono is one of 
mutual advantage. In return for 
supplying equity and long-term 
loans to anyone in the group, it 
expects members to return the 
favour when either Mediobanca or 
another group member needs capi- 

This system is beneficial for a 
handful of big companies - of 
which Fiat and the other interests 
of the Agnelli family are the prime 
example - because it provides them 
with a stable, long-term source of 
capital However, Mediobanca has 
virtually ignored medium-sized 
companies, which have had to rely 
on short-term funding from the 
commercial hanirg. 

“How can yon have democracy if 
not all companies have equal access 
to capital?" asfcad ann thpr hankm- 
who has tried for years to create an 
investment bank to compete with 

The power of the Salotto Buono 
has also acted as a deterrent to the 
creation of independent sources of 
equity capital. When Mediobanca 
and its allies act in concert in a 
company's affairs, other sharehold- 
ers have no voice. There is, 
therefore, little incentive for those 
outside the Mediobanca circle to 
invest alongside the bank and its 
friends. “Mediobanca ignores minor- 
ity shareholders,” said Romano 
Prodi, the economist and departing 
rimmnan of hi, the state holding 

For Prodi and Mediobanca’s crit- 
ics in government and h anking , 
Cuccia is standing In the way of the 
development of the Italian stock 
market. Even the Bank of Italy, 
long regarded as a supporter of Cuc- 
cia, accepts the case for greater 
competition. "What we need is sev- 
eral Mediobancas,” said a senior 
Bank official. 

The first big test of whether the 
government will confront Medio- 
banca will come this autumn with 
the privatisation of Stet, the tele- 
communications monopoly. Medio- 

Cuccia has acquired 
considerable sway 
over Berlusconi’s vast 
business empire and 
thus over the PM’s 
personal wealth 

banca, in partnership with Pirelli, 
wants to take control of Stet, 
according to a banker close to 

However, Berlusconi is under 
pressure from other members of the 
government to prevent this. For the 
current privatisation of Loa, the 
state insurance company, the gov- 
ernment has put in place rules pre- 
venting groups of connected inves- 
tors - or individual investors - 
from acquiring more than 5 pa cent 
of the shares. Mediobanca bad little 
interest in taking control 

Cuccia’s tentacles 

Shareholdings loans 


% Mediobanca f 


4* •' 

| [ CradHanstaft 


17 % 

Comit f— 

of Ina because of its Generali inter- 

It is unclear how vigorously these 
restrictions wiQ be applied in forth- 
coming privatisations, especially 
that of Stet. Clearly, much will 
depend on Berlusconi’s stance. He 
has never been close to Cuccia. 

“Cuccia and Berlusconi are so dif- 
ferent.” commented a banka who 
knows them both. “Berlusconi is 
like a pop star, a showman. Cuccia 
is more like a priest, not interested 
in the trappings of power but in 
power itself." 

Cuccia decided five years ago that 
Mediobanca would not have any 
direct financial involvement with 
Berlusconi's operations, because 
“he did not Bke the risks", in the 
words of a banka who knows Cuc- 
cia well. Cuccia was particularly 
concerned about the trillions of lire 
which Berlusconi was investing in 
film and TV fi ghter 

“Cuccia said the rights were just 
hot air [or valueless]”, said a busi- 
nessman dose to both Berlusconi 
and Mediobanca. 

So Berlusconi turned to Italy’s 
commercial banks. By borrowing 
from timm he was able to expand 
Fininvest, his holding company of 

mt»rtin and financial services inter- 
ests, into one of Italy’s three biggest 
private sector groups. 

In the end, however, he took an 
too much debt, about L4£00bn at 
the end of last year, as the recession 

of the past two years put a brake on 
revenue growth. 

At the same time as Berlusconi 
started his campaign to become 
prime minister at the end of last 
year, he was forced to initiate a 
complicated restructuring of Fin- 
invest, designed both to reduce 
indebtedness and also to move bor- 
rowings from the top holding com- 
pany into the operating companies, 
which generate cash. 

The Sicilian -bom 
banker has made 
Mediobanca the top 
financier of Italy’s 
commercial and 
industrial aristocracy 

Without the cooperation of Ber- 
lusconi's bankers, the reorganisa- 
tion will not succeed: and Cuccia 
has, ova the past six months, man- 
oeuvred himsplf behind the bank- 
ers. He has acquired indirect con- 
trol of Banca Commerciale Italiana 
and Credito Italiano, known as 
Comit and Credit, two of Finin vest's 
five biggest bank creditors. 

Cuccia has already exploited his 
relationship with these two banks 
to acquire direct influence over Ber- 
lusconi’s business. In the spring, 
Comit and Fininvest asked Medio- 

banca if it would organise the flota- 
tion of a 53 pa cent stake in Monda- 
dori. which owns Berlusconi’s mag- 
azine, book publishing and 
newspaper interests. This is the 
first important asset disposal in the 
Fin vin vest restructuring. 

Ironically, it was the previous 
Italian government's failure to pre- 
vent Mediobanca acquiring indirect 
stakes in Credit and Comit, when 
they were privatised, that now gives 
it a role in the new prime minister's 
financial affairs. 

Cuccia took control of Credit and 
Comit at the turn of the year and in 
spring respectively. He had been so 
confident that the government 
would be unable to block his raids 
that he disclosed his intentions at a 
meeting last summer with Prodi. 
who was in charge of the hank sales 
as head of lri. Prodi urged the gov- 
ernment to restrict the size of 
shareholdings in the privatised 
banks, to block Mediobanca. Single 
investors were banned from owning 
more than 3 pa cent in either. 

However, the curbs proved futile 
because Mediobanca rarely takes 
direct shareholdings in companies 
bigger than 2 or 3 per cent. Cuccia' s 
technique is to persuade each of his 
corporate friends to buy 1 or 2 per 
cent of a target company and then 
vote in concert. 

The graphic shows the compli- 
cated relationship of mutual depen- 
dency between Mediobanca and the 
two “syndicates", or groups of com- 
panies, which bought shares In 
Credit and Comit Mediobanca owns 
shares in these companies and 
many of them also own shares In 

The syndicates determined the 
composition of Comit's and Credit’s 
boards through their voting at the 
annual meeting. Shareholders must 
appear in person to vote, as there is 
no proxy system, so Mediobanca's 
syndicates, whose members always 
attend, can call the shots. There are 
few otha sizeable holdings in the 
banks to counter their influence. 

There is a commercial imperative 
for Cucda’s interest in Comit and 
Credit. Mediobanca has tradition- 
ally raised much of its finance by 
selling certificates of deposit 
through its branch networks. It 
needed an assurance that this fund- 
ing would be secure far the long 
term. Cuccia got his way. Both have 
extended the contract to sell Medio- 
banca’s certificates of deposit until 
the end of 2001 and at a reduced 

H owever, control of 
Comit and Credit also 
allowed Cuccia to 
envelop Fininvest, at 
a time when Berlus- 
coni's political star was waxing but 
his business was unda increasingly 
heavy financial pressure. It was a 
no-lose bet. Even if Berlusconi was 
not elected Cuccia could nonethe- 
less exploit Fininvest’s financial 
predicament to bring his TV and 
publishing interests firmly into the 
Mediobanca sphere of influence. 

Comit and Credit have loans to 
Fininvest of L5Q0bn and L3Q0bn 
respectively. Cuccia also has sub- 
stantial influence over a third credi- 
tor. Banco di Roma, which is owned 
by a charitable trust bat which is 
also a substantial shareholder in 
Mediobanca (as are Comit and 
Credit). Banco di Roma lent LSOObn 
to Fininvest 

Berlusconi’s businesses therefore 
rely more on Cuccia’s goodwill t h an 
on any otha si n gl e financier. “Cuc- 
cia can turn on the tap to give Fin- 
invest access to credit,” said a 
senior Italian banka. “Or be can 
turn it off." 

Berlusconi thus faces a possibly 
insoluble dilemma. If Mediobanca’s 
syndicates continue to acquire stra- 
tegic holdings in privatised compa- 
nies, especially Stet, he could be 
accused of acting leniently towards 
Mediobanca to protect his private 

If, on the other hand, he is aggres- 
sive in implementing the new rules 
to block the Mediobanca syndicates, 
he could equally be vulnerable, to 
the chaige of using government 
office to pressure Mediobanca Into 
supporting Fininvest's restructur- 

His advisers say be is working 
assiduously on the problem of how 
to erect an effective wall around his 
business interests. The future of 
Mediobanca may depend on 
whether he succeeds. 


Who dares, 
loses out 

■ Britain's defence cuts are really 
starting to bite when the elite 
Special Air Service sustains an 
attack even it cannot withstand. 

Observer has learned that defence 
minister Malcolm Riflnnd wants 
50 pa cent reductions in the two 
part-time SAS regiments, SAS 21 
and SAS 23, leaving them with 
significantly less than 700 men 
combined. This comes on top of 
proposals - leaked earlier this 
month - to lop 10 pa cent from 
the full-time SAS 22 regiment 

In June 1993 RiQdnd said he 
would be sacking some 4 ,000 UK 
army and naval reservists, but 
made no mention of shrinking the 
SAS. So low is SAS morale that 
one senior SAS offica reckons the 
British army now has “less 
operational capability than 

Dumping half the SAS reservists 
will save MoD less than £3m a year. 
Hardly a princely sum. In fact, half 
the cost of one British tank. It looks 
like cheese-pa ri ng of the daftest 
kind; after aQ, government 
spending on oil reserve forces 
amounts to Iras than 3 pa cent 
of the MoD’s budget The MoD 
prefers an opaque reticence. It says: 
“Quantifying cost effectiveness 

is not a simple exercise in statistical 
analysis" - whatever that maang. 

Slashing SAS 21 and 23 also sits 
rather oddly with Rffkind's recent 
trumpeting of his determination 
to use the Territorial Army 
Volunteer Reserve (TAVR) - of 
which SAS 21 and 23 ore considered 
the fighting spearhead - to plug 
gaps in the ML-time army. 

As a defence policy it sounds 
like one step forward, two steps 
back - a marrhfrng rhy thm 
unfamiliar to most British soldiers. 

Stage exit 

■ “Nothing happens, nobody 
comes, nobody goes, it’s awfuL" 
Irish playwright Samuel Beckett’s 
words, from Waiting for Codot, 
don’t apply at present to Dublin's 
Abbey Theatre - though its current 
box office of 60-65 per cent could 
be improved. Bat they may be 
apposite this winter when the 
theatre is threatening to lower the 
curtain until the spring - the first 
closure for 90 years. 

Though the Abbey is guaranteed 
stat e aid u nder Ireland's 
constitution, the arts council is 
reducing its support from 55 pa 
cent of the theatre’s Income - I£2m 
- to 50 per cent in 1995. 

The arts minis ter Michael 
Higgins, under whose benevolent 
tutelage Irish music and film are 

‘Which one's Stanley Matthews?’ 

flourishing, insists that the Arts 
Council is an autonomous body 
and he cannot interfere. His wife, 
the actress Sabina Coyne, may have 
something to say about that . . . 

Send on Lou 

■ Despite the odds against winning 

the world cup (500 to one) Saudi 
Arabia is sparing no effort to make 
sure that press coverage of Us team 
is favourable. The squad's 
spokesman is one of its Washington 

based diplomats, Adel al-Jubeir. 
He’s renowned for his affability 
ant? the favourable spin he can put 
an awkward stories, like cash 
shortages and defecting diplomats. 
However, be knows little about 
soccer. So to overcome the 
deficiency the kingdom has hired 
the services of promoter Lou 
Goldstein. “Everyone knows Lou." 
says al-Jubeir. “He's the best” 
Lou’s first challenge is today when 
the Saudis play the Netherlands. 

Gerry joins up 

■ The vacuum at the top of the 
Institute for Public Policy Research, 
the left-leaning think-tank, is to 
be filled by a middle-aged City 

Gerry Holtbam, 49, Lehman 
Brothers’ international economics 
guru, has been leant on to take 

file job after the fro nt-runne r - 
Patricia Hewitt, the TPPR’s 
telegenic deputy director - went 
off to make some money as a 
management consultant 

HoUbam has a lower pink profile 
than the likes of Goldman Sachs 
millionaire Gavyn Davies or 
Citibank's Nell Madrimnon. But 
he has a sound, if unexciting, 
pedigree - 10 years with the OECD 
in Paris, and he was an adviser 
to the shadow Treasury team. 

If HoJtham can get the IPPR to 

figure more prominently in 
Labour's economic policy debates 
be might be rewarded with a 
walk-on role in any future Labour 
administration. In the mpantime , 
his departure leaves a big hole in 
Lehman’s economic think-tank 
since Ruth Lea, the chief UK 
economist leaves at the end of the 
month to be Channel Four’s 
economics editor. 

Really smelly 

■ Brazil's long-awaited new 
currency - the real - is designed 
to kill inflation and inspire pride. 
But It’s got off to a poor start A 
bag of reals was found in a rubbish 
bin in the capital, Brasilia. 

The money, in the form of 
apparently genuine new 1 Rea! 
coins - equal in value to SI - was 
found by a couple of scavengers 
combing through a rubbish heap. 
They spent some of the cash to 
pay off debts and buy cigarettes 
and alcohol - even though the 
currency is not legal tender until 
July 1 - and were caught when 
they tried to deposit the remaining 
coins at a local bank. 

Brazil's inflation has eaten up 
four otha currencies since 1986. 

It is therefore customary to find 
old notes in the bin: though a trifle 
unusual to find them there before 
they have even been launched. 



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Monday June 20 1994 

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Bowens whhwimwiuk 

Jericho awaits the president 

By Julian Ozanne in Jerusalem 

First Voice: “Do you think he wiE 
come today?” 

Second voice: “Yes I am sure he 
will come. " 

In recent weeks it lias been easy 
for many people in tiie Holy Land 
to believe they have got caught 
up in a conversation between the 
characters in Samuel Beckett’s 
play Waiting for Godot 

Waiting for Yassir Arafat has 
become an obsession. 

Every day brings a new 
rumour that Mr Arafat, the vet 
eran FLO ehaftmpn and almost 
mythical embodiment of Palestin- 
ian TiaHnwalism , is about to set 

foot in Jericho. And at the end of 
every day there is renewed specu- 
lation about tomorrow. 

Everybody is waiting for him - 
the Palestinian people, the inter- 
national press, the embryonic 
Palestinian government and th e 
Israeli authorities. Almost every 
project seems to be on bold until 
Mr Arafat's triumphant arrival - 
billed as one of the greatest 
media events of 1594. 

But nobody knows when or 
how he is going to show up. Per- 
haps even Mr Arafat does not 
know him-arif. 

Mr Arafat was widely expected 
to return to Jericho shortly after 
signing the May 4 Israeli-PLO 
peace agreement for Gaza and 
Jericho in Cairo. Last month, he 
said he would not go to Jericho 
until international aid donors 

Yassir Arafat is keeping the world 
guessing as to when he will finally 
arrive in the Palestinian homeland 

produced their promised funds. 
Hie donors gave the PLO $42m 
earlier this month, and Mr Arafat 
has since maintained a solid 
silence about his plans. 

The most convincing explana- 
tion about Mr Arafat’s indecision 
is that he is worried that as soon 
as he steps foot in Jericho the 
decades of myth and legend that 
have surrounded him will begin 
to wear off. “He is going to have 
to govern on a practical 
day-to-day basis and with every 
day he will diminish," said a 
senior PLO official. 

Despite the uncertainty, almost 
every Palestinian official claims 
to have spoken to him "just 
hoars ago” and to know the date 
of bis arrival. “Of course I know 
when the president will came," 
said Col Jibril Rajoub, head of 
the PLO internal security forces 
in the West Bank. “The question 
is not when President Arafat will 
come bat whether 1 wfil tell you. 
I certainly won't tell you." 

Even in Tunis, among Mr Ara- 
fat’s closest confidants, there is 
widespread confusion about his 
plans. Almost everybody, includ- 
ing Saha, his wife, has packed 
their bags in anticipation of mak- 
ing the journey home at short 

notice on the whim of Mr Arafat. 
“The truth is that Arafat will 
probably make a decision in the 
early hours one morning and we 
will all be given a couple of hours 
notice,” said one senior PLO offi- 

That's his way of doing things 
to prolong the mystery he likes 
to surround himaatf with. Usu- 
ally not even his pilots are told 
where we are going until we are 

Speculation about the method 
of Mr Arafat’s arrival is also rife. 
Will he come by aircraft, by road 
or by helicopter? Win he cross 
from Egypt or Jordan? Many Pal- 
estinians insist he wQl first go to 
pray at the A1 Aqsa Mosque and 
Dome of the Rock on the Temple 
Mount in Jerusalem, Islam's 
third holiest site, before going to 

Israeli television reported last 
week that Mr Arafat would arrive 
with Kin g Hassan of Morocco and 
King Hussein of Jordan, both 
descendants of the Prophet 
Mohammed, and with President 
Hosni Mubarak of Egypt Israel 
has officially denied any plans to 
allow Mr Arafat an early visit to 

In Jericho, where Mr Arafat is 

known by the nickname “The 
Traveller, " the arrival of the 
president is taken more philo- 
sophically. Today, tomorrow, 
oat month - it doesn’t really 
matter," said Mr Isaac Sbawa, a 
storekeeper. “We are used to 
waiting. He will come ~ that is 
the only thing known." 

Meanwhile everybody is cash- 
ing in. Stores around the central 
square are doing a brisk business 
in Palestinian flags, stickers and 

Journalists are scrambling for 
roof space above the square to 
record Mr Arafat’s every move. A 
one-square metre piece of roof, 
just big enough for a tripod, is 
going for three thousand dollars 
for photographers. Television 
networks are paying $20000 to 
$30,000 for a whole rooftop to set 
up satellite link-ups for a live 
broadcast of Mr Arafat’s return. 

But as Mr Arafat continues to 
delay, patience is wearing thin. 
Some major television networks 
reportedly threatened that unless 
he came soon they would pack up 
their expensive equipment and 
teams of technicians and engi- 
neers and go home. Others 
warned that the World Cup and 
Wimbledon would take up most 
of the air time awl resources. So 
Car this threat has proved an 
empty one and Mr Arafet dearly 
isn't listening anyway. 

So everyone is back to waiting 
for Mr Arafat, hoping he may 
come tomorrow. 

Kohl set 
to veto 
Dutch PM 

Continued from Page 1 

the UK are said to be opposed or 

The choice of the Commission 
president is traditionally settled 
In secret by unanimity among 
the 12 heads of government A 
stalemate increases the champs 
of victory by a compromise can- 
didate, either Sir Lean Brittan, 
chief EU trade negotiator, or Mr 
Peter Sutherland, outgoing head 
of the Gatt world trade organisa- 

Greece, which holds toe rota- 
ting EU presidency, fears that 
controversy over the Delars suc- 
cession could poison the summit 
atmosphere and overshadow the 
visit of the Russian president, Mr 
Boris Yeltsin. Mr Yeltsin arrives 
in Corfu on Thursday to sign a 
trade and political agreement 
with the EU. 

Senior diplomats in Brussels 
said a compromise could be 
reached in the form of a “package 
deal” covering, not only the Com- 
mission. presidency, but top posts 
at the Western European Union, 
the ED’S defence arm, the Euro- 
pean Council secretariat, as well 
as the North Atlantic Treaty 
Organisation, and the Organisa- 
tion of Economic Co-operation 
and Development 

Mr Kohl, who has emerged as 
the principal EU powerbroker, is 
said to be wOlfng to consider sup- 
porting Mr Lubbers as successor 
to the ailing Mr Manfred Woerner 

Tighter security called for 
as six shot dead in Ulster 

By Tim Coone in Dublin and 
David Owen in London 

The British, government was 
yesterday under pressure to step 
up security in Northern Ireland 
after loyalist gunmen shot dead 
six Roman Catholic men in a bar 
as they watched the Republic of 
Ireland’s opening World Cup soc- 
cer match on television. 

The six died when two gunmen 
fired indiscriminately with auto- 
matic weapons into a crowded 
bar in the largely Catholic village 
of Loughinisland in Co. Down. 

Sr Patrick Mayhew, the UK’s 
Northern Ireland secretary, con- 
demned th e Mnmg a as “inhuman 
savagery" and said the gunmen 
would achieve “no political pur- 
pose". He pledged that the Royal 
Ulster Constabulary would never 
give up the hunt for the attack- 

Mr Dick Spring, the Irish 
Republic’s foreign minister, said 

the incident had brought him 
“very close" to despair. London 
and Dublin were working 
“against the odds” to produce a 
political settlement that both the 
Cathode and Protestant commu- 
nities in Northern Ireland could 
live with. 

The attack, the latest in a 
recent upsurge in sectarian tit- 
for-tat killing s, came less than 48 
hours after Mr Spring warned 
that a framework agreement on 
new constitutional arrangements 
for Northern Ireland was 
unlikely to be completed in time 
for next month’s Anglo-Irish 

However, Mr John Major, the 
UK prime minister, and his Irish . 
counterpart Mr Albert Reynolds, 
are expected to meet at the Euro- 
pean Union’s summit in Corfu on 
June 24-25. 

Mr Andrew Hunter, chairman 
of the UK Conservative party's 
backbench Northern Ireland com- 

mittee. called for the introduc- 
tion of selective internment as 
part of a package of new security 
measures. He urged the govern- 
ment to “lift" 30-40 republican 
and loyalist terrorist ringleaders 

Mr Hunter also called for more 
troop battalions to be deployed 
on the province’s streets.’ 

However. Mr Kevin McNamara, 
shadow Northern Ireland secre- 
tary, cautioned against the rein- 
traduction of internment liken- 
ing such a move to “putting a Kd 
on the cauldron" and saying it 
would derail any prospect of con- 
structive peace talks. 

Responsibility for the attack 
has been claimed by the Ulster 
Volunteer Force, the same loyal- 
ist paramilitary group that a 
month ago placed a bomb - 
which failed to explode - in a 
crowded pub in Dublin fre- 
quented by republican support- 

Berlusconi faces clash with banker 

Continued from Page 1 

Banca Coramerciale Italians, Cre- 
ettto Xtalfano and Banca di Roma 
- which between them have lent 
LL300bn ($816m) to Mr Berlus- 
coni’s businesses. 

Mr Romano Prodi, who 
recently announced his intention 
to resign from the chair manship 
of JRL, the state holding company 

that controls Stet, said it was 
“naive” to ask whether Mr Cue- 
da would try to use his role in 
respect of Mr Berlusconi's private 
interests to influence government 
policy. “Of course he does,” he 

Mr Berlusconi has not 
responded to questions pot by 
the Financial Times on Medio- 
banca’s influence over Fininvest 

Meanwhile, a banker close to 
Mr Cuccia said Mediobanca 
wanted to form a group of inves- 
tors to buy a strategic stake in 
Stet and force management 

“Stefc is very important for the 
industrial base of this country," 
the banker said. “I do not believe 
it will become more efficient if is 
owned by a diverse group." 


Europe today 

Temperatures win exceed 35C In northern 
Greece and Turkey. Onshore breezes will 
keep coastal districts several degrees cooler. 
Central Spain writ also stay hot but afternoon 
and evening thunder storms win bring some 
relief. Sea breezes will cause cloudy and cool 
condtions along the north-western aid 
western coast Frontal zones win Unger over 
the UK and the North Sea providing rain 
clouds In northern Ireland and In Scotland. 
Thundery show/era will slowly move east over 
Alpine countries bringing a risk of local 
downpours and gusty winds. Sunny periods 
will prevail in Germany, Poland and southern 

Five-day forecast 

Sunny and hot conditions wiH persist in 

southern Europe but isolated thunder wifi 
occur throughout the week. Frontal zones wffl 

stay active oyer the UK causing doud and 

periods of rain. High pressure over the 
continent w^l cause fair conditions with a 
wanning trend over the Benelux, Germany 
and south-east Scandinavia Francs wHI 

become hot wife temperatures rising to 35C 

in the south. 

today’s temperatures 

Situational 12 GMT. TemfiemunamudmumfurdBy. Foteca&by Ktetto Consult tf the totthevtands 

Abu Qua 









sun 42 

thund so 

sun 33 
fair . 31 
sun 33 
Mr 33 
fair 18 
doudjf 20 
Mr 33 
sun 28 






Cape Town 





























































ir Airl 




r_ er man Airlines 

L. Angelas 


















26 MatiM 
28 Majorca 
24 Malta 

30 Manchester 
19 Manta 

22 Melbourne 
17 MftdcoCtty 
28 Miami 

31 hCan 

32 Montreal 
31 Moscow 
IS Mwfcft 
35 Nairabl 


24 New Yak 
22 Mar 






















32 Rangoon 
29 Ray^avik 

32 Rio 
IB Roma 

33 S.Fraeo 
16 Seoul 

21 Singapore 
32 Sto ck holm 
29 Strasbourg 

28 Sydney 
16 Tangier 
25 TelAvfv 
24 Tokyo 

29 Toronto 

32 Vancouver 

30 Veriea 

27 Vienna 

33 Warsaw 

22 Washington 

28 Wellington 
18 Wmrtaeg 
28 Zurich 


cloudy 28 
shower 12 
fair 24 
Mr 28 
sun 24 
sun 27 

tab- 28 
Mr 18 
sun 23 
sun 33 
shower 28 
Mr 32 
fair 21 
shower 28 
fair 29 
fair 24 
fab- 33 
Cloudy 12 
aim 29 
shower 25 


The drooping dollar 

If tovimp central banks thought they 
bad fixed the dollar problem with 
their intervention in April, they must 
be disappointed. The currency (s again 
slipping is foreign exchange markets, 
reaching new lows for the year last 
ureek against the D-mark and other 
European currencies including ster- 
ling. Assuming tire absolute level of 
POTbf m g p rates matters to the central 
bfiwits , that would call for another 
round of concerted intervention. In 
the short time since their last effort, 
rhrmg h a number of banc assump- 
tions have chang ed which may make 
the central hanks less keen to step in. 

Not only has the Federal Reserve 
declared a" period of hiatus in its mon- 
etary tightening but also economic 
recovery has become established in 
Germany, which reduces the impoa- 
tive for rate cuts there, ft is thus 
banter to argue that the dollar is mov- 
ing against what ought to be its funda- 
mental trend. There is less concern 
that the dollar's weakness will upset 
the t'S Treasury's funding pro- 
gramme. whDe the continuing over- 
shoot in German money supply must 
make the Bundesbank reluctant to 
intervene in currencies. 

As long as the dollar’s fell does not 
turn disorderly, these arguments may 
mill hold. It helps, perhaps, that there 
is less talk now of a US desire to drive 
the dollar down against the yen. The 
yen itself is probably prevented from 
showing its true strength by Korean 
nuclear worries as well as by some 
discreet intervention from the Bank of 
Japan. Yet while the broader commu- 
nity of central banks may be unworr- 
ied for now, Friday night’s steep fell 
suggests they may eventually have to 
become involved. One cannot imagine 
the dollar’s decline remaining orderly 
below DML6Q or YenlOO. 

Pension funds 

Free movement e ( capital within the 
European Union has died a quiet 
death. A proposed EU directive defend- 
ing the right of pension funds to 
invest overseas was dropped last week 
after three years of disagreement. 
There will be little immediate impact 
on rinara-al markets*, of the ESOObn 
held in EU pension funds, the vast 
majority fe m UK and Dutch schemes 
which are free to invest as they 
choose. With other countries edging 
towards funded schemes, thoi%h. the 
long-term impact on European capital 
markets could be profound. 

It is difficult to justify any blanket 
limit on overseas investment. An 

kittiwt latw 

Gannwn awnpnOi money tew OS aquMtont 

equity portfolio containing around 30 
per cent overseas dares is often seen 
as offering the optimum balance of 
ride and return. UK pension foods cm 
average hold 25 per cant of their assets 
in overseas equities and 5 per cent in 
foreign bonds, but that level of over- 
seas investment is not without risk. 
As UK funds mature, such a large 
mismatch between foreign currency 
assets and sterling UabUttiea will be 
more difficult to justify. 

The government’s proposals for a 
solvency test for pension funds, expec- 
ted this week, could bring matters to a 
brad. Under the test, liabilities would 
be valued with reference to UK bond 
and equity yields. Overseas equities 
are unlikely to feature in the calcula- 
tion. Older schemes which are less 
well endowed will question whether 
the risk of falling below the solvency 
threshold is worth the additional 
returns from investing abroad. That 
does not alter the case against an 
explicit cap on foreign investment but 
the drift of UK piston fund assets 
overseas may bare reached its peak. 

UK water 

As the regulatory squeeze on the 
water industry gets tighter, sharehold- 
ers will demand more by way of effi- 
ciency. That extends beyond control of 
operating costs and delivering capital 
projects within budget. The net debt of 
the 10 privatised water companies is 
likely to rise by around Egbn through 
the second half of the decade. The cost 
to shareholders of borrowing at unat- 
tractive rates could be great 

So far the companies have had 
access to cheap debt through the Euro- 
pean Investment Bank. Perhaps a 
quarter of alt capital spending can also 
be ftmded through leasing deals. But 
the EIB will only lend so much, while 

underground me Is such as pipes an 
unsuitable for teasing. Bond market 
borrowing fe therefore likely to play a 
greater rote, even though the owns* 
ales' efforts have produced mixed 
results. Only Welsh water borrowed 
in the public markets whan bond 
yields were at tbefr trough earlier tide 
year. Anglian's £«Wm stating bond 
issue in December 1990 now looks 
expensive, although the company’s 
Index-linked bond six months before 
has proved better value. 

With revenues linked to inflation, 
index-linked should be an Weal form 
of finance fw water companies. There 
are tax proMema to overcome, but the 
bigger hurdle may be companies' 
belief that they can out-guess the bond 
market on inflation and get cheaper 
funds by borrowing at fixed rates. 
Given their dismal rec o rd at most 
activities exited* water and sewerage, 
shareholders might {wafer a more risk- 
averse approach. 


The fete of Eurotunnel’* ttC8m res- 
cue rights issue, which doses on 
Wednesday, is touch and go. Last 
week the share price collapsed to 388p 
- perilously dose to the rights issm 
print of 265p. The value of the nil paid 
shares slumped to tap in heavy vol- 
umes. There must now be a real dan- 
ger that underwriters wiH be left with 
a large slug of shares. And given that 
institutional investors have shown lit- 
tle enthnstemn for the stack to date, 
that could depress trading after the 
issue. If Eurotunnel's shares remain 
subdued in the longer term, the com- 
pany could oven find itself back in 
financial difficulties before long. 
Nearly half Its financial cushion is 
predicated on the assumption that 
Investors will exercise £20Qm of war- 
rants next year. But that is unlikely 
unless the shares bounce. 

There is a more comforting scenario, 
based on a repeat of what happened 
during the previous 1900 rights issue. 
Then too, the share price fell to within 
a whisker of the rights price but recov- 
ered in the nk it of time. Subsequently 
the shares raced ahead as speculators 
who sold short woe caught cm the 
wrong foot Some brokers detect the 
same pattern of ahart-seUlng this time 
round. But others believe the shares 
would have fallen even further if the 
issue's supporters had not been buy- 
ing the shares during much of last 
week. Given the current swirl of spec- 
ulation. it is hard to tall which sea- 
nario is the more credible. 

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Markets are notoriously bad at 
assessing political or security risks. 
Yet the issues cannot be 
sidestepped. For instance, would 
the dollar be lower and US bond 
yields higher wtthout the row over 
North Korea's nuclear intentions? 
How far do the rises in commodity prices reflect 
concern over global flashpoints? Page 22 



4^- Privatisation is sweeping the 
developing world. The World 
TffSSgE Bank's latest World Development 
fHBBHT Report implies that this is part of a 
j||Mr k revolutionary redefinition of the 
M economic role of the state, not 
Mk least in infrastructure. Page 22. 


So far this year, the international equities market 
has seen $45. 7bn of new offerings, putting it on 
target for another record year after last year's 
$73.7bn. Tracy Corrigan starts a weekly 
international equities column in today's FT. 

Page 25 


Fears over (tafy's swelling budget deficit have 
undermined bond markets, which are waiting for 
Silvio Berlusconi's government to unveil plans to 
tackle the country's debt Page 24 


A bullish breeze is beginning to blow again through 
the Malaysian stock market, which doubled in 1993 
but has dropped 20 per cent this year. Page 23 


Analysts expect the markets to push the dollar 
down against the D-Mark to try to test central 
banks’ resolve to take action. Page 31 


The aluminium market is anxiously awaiting today's 
production statistics to check that voluntary cuts in 
output agreed by the big producing countries 
earlier this year are continuing to bite. Page 22 


Technology Pic, a subsidiary of ICL, the UK-based 
computer manufacturer owned by Fujitsu of Japan, 
has been relieved of its responsibility for ICL's 
UK-wide pc distribution. The abrupt change of 
strategy underlines the difficulties faced by full-line 
computer manufacturers as they struggle with the 
economics of a market dominated by inexpensive, 
low profit margin personal computers. Page 20 


Liberty Ufa, South Africa's largest proprietary life 
insurer, is to launch the first global offering of 
convertible bonds for a South African company. 
Page 21 

Base lending rales 31 

Company meetings 13 

Dividend payments .... —13 

FT-A World IntSces 31 

FT Guide Jo currencies — 23 
Foreign exchanges 31 

London recent Issues 31 

London share service . 32-33 
Managed fund service 27-31 

Money markets 31 

New int bond issues ...._ 24 
World stock mfct indices... .28 

SBC tightens 
controls and 

Opec ministers trade frowns 
for smiles as oil prices rally 

sacks dealers 

By lan Rodger in Zurich 

Swiss B ank Corporation has 
sacked three foreign exchange 
dealers and three of their super- 
visors from its Zurich trading 
centre for unauthorised trades 
that turned sour and could cost 
the bank up to SFrlOQm ($70m). 

The punishment is unusually 
harsh and rapid for a big Swiss 
bank, but Mr Georges Blum, 
appointed SBC chief executive a 
year ago, has made clear that he 
aims to tighten management con- 
trols throughout the hank. 

Swiss banks have had a reputa- 
tion for handling stair lapses 
gently. SBC acquired a reputa- 
tion for slack management in the 
early 1990s when it got caught 
out with large bad loans to sev- 
eral prominent collapsed groups, 
including Maxwell. Olympia & 
York, Omni and Polly Peck. 

Mr Blum said sacking was the 
best way to handle infractions of 
dealing limits set by the bank's 
directors. “We have a big trading 
machine, and the culture in that 
Held is different from that in 
investment banking or private 
h anking ," he said. 

The irregularities occurred in 
common spot and forward for 
eign exchange contracts, not in 

the exotic future and option prod- 
ucts which have been attracting 
the concern of central banks and 
other regulatory authorities. 

SBC is one of the largest and 
most successful international 
hunkft in the derivatives field. 
The foreign exchange transac- 
tions in this instance were made 
with a troubled Turkish bank a 
few months ago. 

When it came time to settle the 
contracts. SBC fulfilled its pay- 
ment obligations. Because of the 
time difference between the two 
centres where the deals were 
made, it was unaware that the 
Turkish bank would not com- 
plete its side of the deals. 

An SBC spokesman confirmed 
that the failed deals could cost 
the hank up to SFrlOOm, but Mr 
Blum said it was too early to talk 
about specific figures. The bank 
has been in discussions with the 
Central Bank of Turkey for two 
months aimed at achieving a sat- 
isfactory settlement, he said. 

Even in the worst case, the loss 
would not be particularly damag- 
ing to SBC. It achieved profits 
before taxes and provisions last 
year of SFr4.5bn, and Indicated in 
April that it expected the busi- 
ness trend for the remainder of 
this year to be satisfactory. 

Cott warns of cola 

By Bernard Simon in Toronto 

Cott Corporation, the fast- 
growing Canadian maker of pri- 
vate-label soft drinks, has cau- 
tioned that an intensifying count- 
er-attack from Coca-Cola and 
PepsiCo may dampen its earn- 
ings growth this year. 

Cott said in its annual report 
that price competition from 
national brand soft drinks abated 
during much of its fiscal year to 
January 1994. But Coke and Pepsi 
have hit back hard in recent 
months by cutting prices, widen- 
ing retailers’ margins and reduc- 
ing the cost of cola concentrate 
to bottlers. 

Cott said it expected the strong 
response to continue throughout 
the coming year in the UK and 
Canada, and "sporadically" in the 
US and other countries. 

Rising sales volumes, produc- 
tivity improvements and cost 
controls would only partially off- 

set downward pressure on North 
American prices, Cott said. 

Net income almost trebled last 
year to C$35.4m OJS$2S.6m) and 
sales doubled to C$665.4m. The 
strong growth rate continued in 
the three months to April 30. 

But Cott's shares lost almost a 
quarter of their value on the 
Toronto stock exchange last 
week, tumbling from C$26 to 
C$19.75. Some analysts have 
raised concerns about the 
start-up costs of the company’s 
expanding European operations, 
as well as narrowing margins, 
especially in Ontario where the 
battle between Cott, Coke and 
Pepsi is at its fiercest. 

Cott's critics also question its 
accounting practices. According 
to the annual report, one of the 
mainsprings behind a 91 per cent 
jump in assets last year was a 
quadrupling of “prepaid contract 
costs", which some analysts say 
should be treated as expenses. 

Production ceilings have played their part, writes Robert Corzine 

F resh optimism that 
short-term oil prices are 
on their way up was 
clearly reflected in the smiles 
and jaunty steps of oil ministers 
at last week's meeting in Vienna 
of the Organisation of Petroleum 
Exporting Countries. 

Gone were the tense negotia- 
tions and mutual recriminations 
that accompanied abortive 
attempts last November and 
March to prop up collapsing 
prices. They were replaced by 
satisfaction with the present 
strategy of maintaining Opec’s 
production railing at 2A52m bar- 
rels a day until the end of the 
year, and perhaps even beyond. 

Last week's price rally, which 
saw the benchmark Brent blend 
reach $17 a barrel, more than $4 
above February’s five-year low, 
may have had little to do with 
the ministers' decision to recon- 
firm their adherence to the ceil- 
ing. The news from Korea and 
supply bottlenecks in the fast 
growing US market were mare 
important factors. But ministers, 
and most independent analysts, 
believe Opec’s present course 
should help to underpin prices as 
long as the strong pace of US 

econo mic growth is maintain pri 
One Gulf Arab delegate last week 
thought prices could rise by 
annthpr $3- $4 by year-end. 

Many analysts still expect 
some short-term price volatility, 
in part because of the presence of 
hedge funds. Most would agree, 
however, with Mr Vahan Zan- 
oyan. an analyst with the Wash- 
ington-based Petroleum Finance 
Company, who says “all market 
sensitivities are on the up side” 
The Centre for Global Energy 
Studies in London believes 

“prices could rise steeply towards 
the end of the year if Opec con- 
tinues to restrain output” in the 
face of sharply rising demand. It 
recently warned that sudden 
price rises were possible because 
stocks held by oil companies are 
likely to fall sharply by the 
fourth quarter. 

Cambridge Energy Research 
Associates in Paris believes the 
inventory strategies of companies 
in the s econd and third quarters 
will play “a key role in avoiding 
strong upward price movement 
later in the year”. 

Oil companies will obviously 
welcome the stronger cash Hows 

which higher prices bring. But 
few are likely to drop their cau- 
tion over longer-term prices. And 
there is iimb likelihood of a new 
wave of i n vestment in the North 
Sea or elsewhere. 

The link between prices and 
investment is changing, . accord- 
ing to Ms Jo Armstrong, econo- 
mist at the Royal Bank of Scot- 
land. She says recent price 
fluctuations have caused compa- 
nies to focus an factors which are 
within their control, such as cost 
cutting, when reviewing individ- 
ual projects. 

“Companies try to identify the 
break-even price of oil for a proj- 

ect,” and a judgement is then 
made as to “whether or not such 
a price level is likely within the 
critical time frame”, she says. 

It also makes companies less 
reliant on future Opec actions for 
their profits. In spite of last 
week’s stnifeg, the outlook for the 
organisation is not altogether 
rosy. The presence In Vienna of 
the Iraqi ofl minister for the first 
time in several -years was a 
reminder that Opec has yet to 
face what could be its biggest 
test the need, perhaps early next 
year, to reintegrate Iraq, one of 
its biggest exporters, without 
«msing prices to crash. 

Magnet case damages could hit £lbn 

By Andrew Jack in London 

Advisers and bankers to the 
ill-fated management buy-out of 
Magnet, the fitted kitchens 
retailer, face potential damages 
of up to £lhn, those involved in 
the litigation said yesterday. 

The total value of the claim is 
only likely to be settled by the 
courts, but with interest and 
costs may substantially outstrip 
the £629m ($943m) cost of the 
original MBO in 1969. 

Parties involved include Bank- 
ers Trust, leader of the banking 
syndicate, Arthur Andersen, 
adviser to the management, and 
Arthur Young, Magnet’s auditor. 

In its day Magnet was the larg- 
est MBO ever and the first 
involving “mezzanine” finanra. 

The case, which is due to be 
beard in the High Court in Octo- 
ber, involves two separate sets of 
writs: GE Capital suing Bankers 
Trust, and Bankers Trust in turn 
suing professional advisers. 

It win raise a series of impor- 
tant legal precedents about the 
nature of diligence on acquisi- 
tions, and the duty of care of 
• corporate finance advisers and 
lead banks to syndicate members. 

All parties involved yesterday 
vigorously defended their posi- 
tions and maintained that the 
dispute was unlikely tij be 

settled on the steps of the court 

Bankers Trust is expected to 
argue that it believed it had a 
contract with Andersen to verify 
the figures which allowed the 
MBO to proceed. 

However, . Arthur Andersen 
says there was no such agree- 
ment, that its duty was -entirety 
to the management team of Mag- 
net and that there would have 
been a conflict of interest if 
it had also acted for Bankers 

Mr Chris Nmm, a partner with 
Andersen, said: “This is a pretty 
outrageous example of a deep 
pocket action. It is so outrageous 
that it makes some look respect- 

able. Ow role was never what 
those suing us have claimed. H 

As part of Its defence, Ander- 
sen ban drawn, in to the litigation 
Arthur Young, now part of Ernst 
& Young; which was auditor to 
Magnet and approved a series of 
profit estimates. 

Bust & Young said: “Arthur 
Young had peripheral Involve- 
ment in the exercise confined to 
reporting on a profit estimate 
prepared by the directors for the 
benefit of existing shareholders. 
It did not have a duty of care to 
the investors.” 

One adviser said: “People’s rec- 
ollections of what happened are 
not exactly symmetrical.” 



Dissidents seek 
outright sale of 

Kmart shareholders are anxiously 
awaiting the outcome of tomorrow’s 
board meeting amid expectations that 
Mr Joseph Antonini, the embattled 
nhairman and chief executive, will 
push for the approval of a restructuring 

Mr Antonini is convening the session 
a fortnight after the discount store 
group's annual meeting, when 
disgruntled investors soundly rejected 
bis plan to create new shares linked 
to the performance of four profitable 
specialty chains. The sale of the stock 
would have generated much needed 
cash while allowing Kmar t to retain 
control of the businesses. 

The defeated proposal - centrepiece 
of a strategy to revive the company's 
fortunes after years of decline - 
represented a st unning personal defeat 
for Smart's boss. It was a triumph 
for institutional investors seeking more 
control of corporate decision-making. 

The dissidents are pressing Kmart 
to opt for the outright sale of the four 
riming - OfficeMax, Borders- 
Waldenbooks. The Sports Authority 
and Builders Square. This amounts 
to asking Mr Antonini to repudiate 
a decade-long effort to diversify. 

Instead, they want management to 
concentrate on recapturing market 
share lost to Wal-Mart and other rival 
discount department stores. 

Las t week, the company refuted 
reports that Mr Antonini had decided 
to submit to the board a new proposal 
to offer minority stakes in the four 
subsidiaries to the public. Such a move 
would distance Kmart from the 
businesses, which would have separate 

It is far from certain whether a public 
offering would satisfy shareholders. 
thoug h their endorsement is not 
necessary. The company would still 
retain control But it is equally 
uncertain whether the board would 
approve such a proposal. 

British Steel 

Shane price relative to the 
FT-SE-A All-Share Index 

1993 94 

Source; FT Graph** 


Profits put a shine 
on future prospects 

This time last year. British Steel was 
unveiling its worst set of results since 
privatisation in 1988. Today, things 
will be very different. 

The company’s £l49m pre-tax loss 
for 1992-93 was the result of recession 
and falling demand in the UK and 
abroad, and price reductions caused 
by excess production capacity in the 
European steel industry. 

Since then. British Steel has started 
a long climb back into the black. In 
November, it reported first-half pre-tax 
profits of £27m (S40.5m), reflecting 
improvements in prices and in 
operating performance. It restored 
an interim dividend of 05p. 

Today, even the most pessimistic 
of analysts expects pre-tax profits of 
£60m ( $90m) for the year to March, 
and forecasts range as high as £95m. 
The majority believe a maintained 
final dividend of Ip per share is likely. 

While the expected results remain 
a long way short of the record £733m 
in 1989-90. the company is at least 
making profits and generating cash. 

At the interim stage it reported that 
UK demand for steel had recovered 
markedly, but noted that this was due 
largely to an increase in inventory 
levels and the underlying improvement 
was modest Continental markets 
remained “very depressed”, with no 
recovery expected in the second half. 

This time, the outlook should be 
much brighter. 


Nail-biting finish for 
Eurotunnel underwriters 

At 3 o’clock on Wednesday. 
Eurotunnel’s £853m (Sl29bn) rights 
issue will close, and it is going to be 
a race to the finish for the 
underwriters. Last week saw a 
significant increase in the selling by 
small shareholders on both sides of 
the Channel. Having started the week 
with a 77p cushion above the rights 
issue, the margin had dropped to 23p 
by Friday evening, as the shares closed 
at 28$p. Today is the last day of trading 
for the nil paid rights, and this will 
provide a pointer for the likely take-up 
of the issue. Any further fall in the 
price could prove costly to the 

■ Colon! a; Tomorrow morning Mr 
Class Kleybolt, chief executive of 
Colonia, will unveil what are expected 
to be healthy increases in profits and 
earnings per share at Germany's third 
largest insurance group. As indicated 
at the half-year stage. Colonia has 
benefited primarily from improved 
results in the mainstream “technical 
insurance’’ area. Mr Kleybolt is also 
likely to spell out more details of the 
restructuring plans which he first 
unveiled last autumn, although it is 
too early for these figures to have had 
much of an impact on ea rning s. In 
1992, Colonia. which is now part of 
the French Union des Assurances de 
Paris, made net profits of DMllOm 
<S65.8m» on premium income of 
DM12. 17bn. 

Eurotunnel Units. 

Share price feence} 

■ The Federal National Mortgage 
Association (Fannie Mae): The US 
mortgage agency, will price a $1.5 bn 
issue of 10-year bonds, its first global 
offering of securities, on Wednesday. 
The bonds, arranged by Merrill Lynch 
and JP Morgan, are likely to yield about 
25 basis points more than the 
comparable US Treasury bond. A global 
offering for the other large US mortgage 
agency, the Federal Home Loan 
Mortgage Corporation (Freddie Mac), 
arranged by via Salomon Brothers 

and Goldman Sachs, will follow in the 
coming weeks. 

■ Rothmans International: The UK 
based tobacco group, now shorn of 
its luxury goods interests, is expected 
to report a lower annual profit on 
Thursday due to the £48m costs 
associated with the demerger of 
Dunhill. BZW, the broker, is forecasting 
a pre-tax figure of £440m (S660m), down 
from a pro forma £4 70m the previous 

Companies In this issue 



Ba» Partnership 


Krta-Nlppbn Bank 




Confederation Ufa 


Liberty Life 














Shokusan Bank 


Sumitomo Bank 






Swiss Bank Gorp 


Bamo Pacific 


Independent News 


Tokuyo City Bank 



Health Clubs 

£ 10 , 600,000 

Management Buy-Out 

Led and arranged by 

Nat West Ventures 

Equity provided by 

NatWest Ventures Mannai I n ve s tment Company ' 

Gartmorc Venture Capital 

Senior debt end working capital provided by 
Midland Bank pic 

Advisers to management and the company 

Advisers to financing Institutions 

Travers Smith Braithwaire Manchcs & Co 

jaques & Lewis Coopers & Lybrand . 


NatWlst Vi xturj > 

Nw«bt ^ortUmuriAMtBlntflMKOlt^tfNatnaMar^corpoimMInniBaauiaBki.q. 


rr . . MONPAY row 


ICL to spread the load 
of its pc distribution 

braif AilUlna mmnirtdi* remained (rfnhhrtWlfe efaonfl! 


By Alan Cane 

Sluggish sales and frustration 
among customers have forced 
ICL. the UK-based computer 
manufacturer owned by 
Fujitsu of Japan, to abandon, a 
controversial personal com- 
puter marketing strategy 
which left responsibility for pc 
distribution throughout 
Britain in the hands of one 


Technology, a wholly owned 
ICL subsidiary, has been 
relieved of its responsibility for 
UK-wide pc distribution. A new 
sales and marketing organisa- 
tion, ICL Client-Server Systems 
Trading, is being established to 
supply ICL pcs and servers 
(medium power computers) to 
.distributors, dealers and 
systems houses. 

The abrupt change of strat- 
egy undo-lines the difficulties 

Swiss banking 
licence for 
Hinduja group 

By Bethan Hutton 

The British-based Hinduja 
international trading group 
has been granted a banking 
licence by Swiss authorities for 
Amas. its Geneva-based 
finance and asset management 

The new bank, Amas Bank 
(Switzerland), is expected to 
focus on niche markets, provid- 
ing private banking and portfo- 
lio management services to 
wealthy individuals, and capi- 
talising on the group's In dian 
links to advise an investment 
opportunities in India. 

Amas’ application for a 
banking licence was overshad- 
owed by allegations of drug- 
money laundering, but these 
were dismissed as nonsense by 
the Hinduja family, as Amas 
was not a deposit-taking busi- 
ness. The fact that it has now 
been granted a banking licence 
could be seen as confirmation 
by Swiss authorities that the 
allegations were nnfhrmderi- 
The private Hfndqja group is 
run by four brothers of the bil- 
lionaire Hinduja family, with 
interests apart from finance, 
jnflhiding ' trading, manufactur- 
ing, and infrastructure. 

faced by full-line computer 
manufacturers as they struggle 
with the economics of a mar- 
ket dominated by inexpensive, 
low profit margin personal 
computers. Given adequate 
technology, success is this 
market is tied to low cost dis- 
tribution to retailers, dealers 
and value-added resellers who 
add software and services to 
the basic hardware. 

ICL’s answer was the pur- 
chase two years ago of Tech- 
nology, then one of the UK's 
largest pc distributors. It was a 
controversial decision because 
it meant Technology would be 
distributing ICL pcs alongside 
competitive products from 
International Business 
Machines, Digital Equipment, 
Compaq and Sun. IBM, for a 
time, terminated its distribu- 
tion contract. ICL’s UK pc mar- 
ket share, however, has 

remained stubbornly stagnant 
at about 5 per cent Mr Nigel 
Croisdale, who has been 
appointed to run the sew dis- 
tribution company, believes it 
has to double its UK market 
share to be a credible per- 

Giving Technology exclusive 
distribution rights put intolera- 
ble strains on the company's 
physical ability to handle the 
volume of business. “Fre- 
quently. we did not have 
enough inventory to meet 
demand. We were failing to 
meet delivery dataa and this 
upset customers," Mr Croisdale 

Technology took on the roles 
of agent, reseller and distribu- 
tor which significantly reduced 
the amount of credit in the sys- 
tem. This is important for 
many resellers who depend on 
credit from their distributor. 

O’Reilly again gets the bounce of the ball 

Raymond Snoddy on the international media ambitions of the former rugby player 

. . . Crt f»r imiv between 19 

M r Tony O'Reilly first The performance on the 
shot to fan™ as an South African rugby field and 
18-year old in South on the Johannesburg Stock 

BET incentive gives 
directors £4.6m boost 

By David Blackwell 

Executive directors at BET, 
the business services group 
which returned to the black 
for 1993-94. stand to gain 
£4.6m from an incentive plan 
established during the year. 

The annual report also 
shows that the total remunera- 
tion of Mr John Clark, chief 
e xe c u t iv e, rose by 30 per cent 
from £708,000 to £924,000, 
Including £281,000 in bonuses 
and £163,000 in pension contri- 

The report says that the 
group, which is rev i ew in g its 
! remuneration strategy for 
j senior executives, “continues 
to view share-based incentive 
schemes as a key motivator for 
them to deliver superior per- 
formance and increases in 
shareholder value”. 

On Friday the Shares closed 
at USp - Jost 2p above the 
year's low. 

The group's remuneration 
committee, led by Lord Tebbit, 
operates the medium-term 
incentive plan, which is 
described as a key component 
of its revised strategy. It has 
set target benefits for 60 eligi- 
ble executives “to recognise 

the performance and contribu- 
tion of participants daring the 
t um rou n d period (1991-93) and 
their continuing superior per- 
formance during the next 
three to five years”. The group 
has an initial provision 
of £2m. 

to order to trigger the bene- 
fit the share price must reach 
“a minimum predetermined 
threshold” and exceed the FT- 
SE-A All-Share Index “by a 
challenging margin”. How- 
ever, details are not given. 

Awards will be made in BET 
shares bought at the market 
price. Recipients win have to 
hold the shares for at least six 

Last month BET announced 
pretax profits of gfttm in the 
year to April 2. compared with 
losses of £9 .8m. 

• Sir John Egan, chief execu- 
tive of BAA, the privatised UK 
airports group, was paid a 
total of £544,000 last year, up 
33 per cent on 1992-93, the 
annual report shows. His per- 
formance-related bonus 
increased from £82,000 to 
£119,000. and he received pen- 
sion contributions of £11,000 
in addition to salary and tax- 
able benefits of £414,000. 



June IP, IW4 


.Ml thac Soiu kHkHbtH sold, thn 
atlnaiUL-mcal appear! « » matter of 
rtrcmtl only 



Ans talr des attenthchen Rechts 


DM 400,000,000 

Floating Rate Notes of 1994/1999 



(IX-utschlaiid) AG 

ThnxvMoncJur-DM Li BOR. payable quarterly In arrears on 
March 10, June 10, SupicmiKir 10 and December 10 of each year 
June 10, 1999, iu par 
Dusscklorf and Frankfurt/Main 

Trujkaus & Burkhardt 

KmwiMmfltftndtacfa«ft oof Akdcn 
Bank Brussel Lambert N.V. 

Bayeriscbc Vcnnnsbank 

Deutwbc Girozcntralc 
- Daatxchc Knnununalbank - 

ZctMmlhank A(i SronjSan 

Roiflcfecnbauk Klwmvulsertnl 

Suiniiomo Bank 
(Deutschland) GmbH 

Comment bank 


Deutsche Gcnosscmchofcshank 

Ilnmbur^btahc Landcsbank 

Schwdzeriscbc Bank&cscUschoft 
(Duutsohlund) AG 

Werftfeafeciic Landes bunk 

Baycrischc Uiulabank 

Deutsche Book 
AlutamcnUscfe n ft 

Orcsdner Bank 

1KB Deutsche lodustricbank AG 

GcomacntcftafahZoatia&mfc AG 



Cqw”<3acliBft»^8cn m ai nn kcO 


3i Group pic 

(formerly called - Investors in Industry Group pic) 

(the "Company") 

£75,000,000 Floating Rate Notes 1994 
(the "Notes") 

NOTICE IS HEREBY GIVEN that, pursuant to Condition 5(b) of ibe Terms and Conditions of tbe 
Notes, the Company will redeem all outstanding Notes on July 21, 1994 at their principal amount. 

Payments will be made upon presentation and surrender of the Notes at tbe principal offices of 
Morgan Guaranty Trust Company of New York in London or Brussels or Frankfort am Main or the 
principal office of S.C. Warburg & Co. Ltd. in London or tbe principal office of Basque Internationale 
a Luxembourg S A. in Luxembourg. Such payments will be made in pounds sterling at the specified 
office of tbe Paying Agents in London or, at the option of the bolder, at any specified office of any 
Paying Agent by a pounds sterling cheque drawn on a Town Clearing Branch of, or by transfer to a 
pounds sterling account maintained by the payee with, a bank in tbe City of London. 

Notes should be presented for payment together with all unmatured Coupons. 

3i Group pic 

By: Morgan Guaranty Trust Company 

at Principal Paying Agon Baled: June 20, 1994 

M r Tony O'Reilly first 
shot to fame as an 
18-year old in South 
Africa, as a member of the 
British Lions rugby tears 
nearly 40 years ago. The ball 
bounced wed for him, aad for a 
time at least, the unknown 
Irish teenager, was considered 
the best wing threequarter in 
, the world. 

The ball is bouncing well 
again in South Africa for Ur 
O'Reilly, chairman and chief 
executive of HJ Hefny: and also 
rhabman of the madia com- 
pany he controls. Independent 
Newspapers of Ireland. 

Aro und the same tim** as the 
Dublin-based company was 
ma)ring its play for Newspaper 
Publishing, the lossmaking 
company that owns The Inde- 
pendent in the UK. and buying 
a 29 3 per cent stake, it pulled 
off a far more significant deal 
in South Africa. 

Mr O’Reilly agreed to buy 
nearly a third of Argus News- 
papers of South Africa, argu- 
ably the most influential news- 
paper group on the continent 
from Anglo-American Corpora- 
tion and Johannesburg Consol- 
idated Investment 
Tbe key initial 31 per cent 
stake cost the Irish about 
I£20m (£l9.6m). Mr O’Reilly 
will pay Rll.50 a share, but 
with the shares already trading 
at up to R15 there is already a 
paper profit of more than I£6m 
for Mr O’Reilly. 

The performance on the 
South African rugby field and 
on the Johannesburg Stock 
Exchange 40 years later are 
connected. When Mr 0 ‘Rally 
charged down the wing in the 
crowd was a Mr Manriria. A 
young player in one of the 
warm-up games before the 
big match was a Mr de 

The Irish businessman’s 
position in Africa was later 
consolidated when as Heinz 
chief ex ecu tiv e he derided to 
construct a food plant in Mr 
Robert Mugabe’s Zimbabwe. 
When Anglo-American decided 
they did not wish to be in tbe 
media in South Africa any 
more, they came to Mr 
O’Reilly, as a newspaper pub- 
lisher likely to be acceptable to 
a new South African govern- 
ment to see whether he would 
be interested in investing in 
the Argus group, whose titles 
include The Star and the Sun- 
day Tribune. 

"There are 15 high speed 
presses in all of Africa and we 
have got 11 of them. The equip- 
ment they have could print 
12m papers (a week). We’re 
printing 5m. We have vast 
spare capacity* says O’Reilly. 

Before the recent South Afri- 
can elections it was a move 
that could have been risky. It 
looks much less so now. 

Mr O’Reilly believes be will 
be able to produce there a com- 
pany with a market capitalisa- 

Tony O'Reilly: Argos buy 
worth I£&m paper profit 

tjpn of £200m- The move into 
South Africa is the most dra- 
matic example so far of the 
international m ed ia ambitions 
of both Mr O’Reilly and the 
Independent Newspapers 

At its recent annual meeting. 
Mr O'Reilly, who bought con- 
trol of Independent for £Um 
21 years ago. was able to tell 
shareholders that I£I,000 

invested then would, together 
with dividends being rein- 
vested in the company, be now 
worth IE154.0Q0. Pre-tax profits 
rose 81 per cent last year to 

Mr O’Reilly moved on Friday 
to strengthen the management 
of the group's Irish newspapers 
by appointing Mr David 
Palmer, former chief executive 
of the Financial Times group, 
to the vacant post of managing 

Yet apart from the core busi- 
ness in Ireland, which now 
includes investments in cable 
owl microwave television dis- 
tribution, as well as newspa- 
pers. the company has expan- 
ded into France, Mexico, the 
UK and Australia. 

The investments range from 
billboards in Mexico, through 
local and regional papers 
and advertising on buses to 
local newspapers and the stake 
in The Independent In the UK. 

Mr Brenden Hopkins, who 
runs the UK business and is 
responsible for international 
acquisi tions , notes the change 
in the nature of the group. 
"Three years ago we were an 
Irish group with international 
interests and now we are an 
international group with inter- 
ests in Ireland, Australia, 
Fiance and the UK,” says Mr 
Hopkins. He hopes he will be 
able to buy more in the UK 
regional press in the next 12 
mnnths or SO. 

so far only between « tad 
is per cent of the company 1 ) 
shares arc htfd in London, 
although it says London stock- 
brokers are storting to taka 
more intercut following the 
acquisition of the stake In The 

M r O’Reilly plans to 
cake a more direct 
interest in running 
the company when he retires 
from Heinz in about two 

At the moment It is to toe 
hands of Mr Liam Hedy, the 
quietly spoken, bat 
tough-minded chief executive 
who to is worked far the group 
for 30 yearn- 

Mr O’Reilly hopes ha can ore- 
ate a group with a total capital-' 
isution of £ibn within the next 
three years, although that 
would include consolidating 
existing minority stakes. 

He is also ambitious to 
expand his newspaper inter- 
ests, possibly including United 
Newspaper*, publishers of the 
Daily and Sunday Express. 

‘If someone like Michael 
Green (chairman of Carlton 
Communications) wanted the 
Daily Express as the standard 
bearer far Ms commuateattas 
company and t could find a. 
way in which he wouM buy at 
a higher multiple and l got the 
(United’s) regional* at a lower 
multiple, it would be a good 
deal." says Mr O’Reilly. 

Baxi down 25% Pru completes 
to £6.87m £160m deals 

Baxi Partnership, which makes 
domestic heating boilers and 
claims to be tiie UK’s largest 
employee-owned manufacturer, 
made profits of £6 57m before 
tax and profit-sharing in the 
year ended April 2. down 25 
per cent on last year's £9. 16m. 
writes Ian Hamilton FOzey. 

Turnover was 8 per cent 
higher at £77m. primarily 
because of a six months' con- 
tribution from recently-ac- 
quired HS Group. The profit 
fall was cansed by intense com- 
petition in the UK heating mar- 
ket and development costs in 
aluminium mstinp: . 

The poorer performance 
means employee shareholders 
will get an 18 per cent (20 per 
cent) share of profits, or £2 .23m 
<£L87m). ‘ --- 

Prudential, the insurance 
company, is e xp e cted to com- 
plete two pi o pe i t y deals worth 
more than £268m wit hin the 
next 10 days, writes Bethan 

One deal, worth an esti- 
mated £90m. is for Wh&pey’s 
50 per cent stake In Little 
Britain, a central London 
office development The other 
is for a half-share in the 
Cwmbran shopping centre is 
south Wales, for which it wflZ 
pay Lidbroke Group about 

Prudential indicated ear) ter 
this year that it had op to 
£ibn to invest in commercial 
property daring 1994. The 
completion of these two pur- 
chases will mean it baa spent 
almost half that amoosL 

BT (UK) 

Franc* T a Ucot n (Francs)/ 
Dsutacfas TsMcorn 

Royal Bank of Scotland 


Sprint (US) 





Quincy Saving* Bank (US) Barfwg 

Trana Quebec (Canada) 
MBf HoKOnga (Mateyata) 

Varfty (US) 

Cairn Energy (UK} 

Wte w b (F ra n c o) 

BCE (Cnxky 
Hong k on g Tateoooi p*Q 

Editions Mondial** 

WR Carport* 

(Papua Now Guinea) 
Qomwn Beetle (UK) 




ap prova 

20 H Stake 

Further US 

SB-ttta deal 

E n g to ear tog 

Smith Offshore Exploration Otf & Gao 


Cash buy da 
HK am 

Buy vtt Partdna 

Buy born 
Harvard Group 

Sutton* Seed# (UK) 

Garean products nf» 


l M/ diB.siA.Jaa 

nK onmnm 


Jjn, It. t‘ , *l 

.ra tint Vilr,lr.|k.g(hii iiu.1. IWi 

^J.kRiitfliuir JiTtor* n a aunt, oi 

Bayerische Landesanstalt 
fur Aufbaufinanzienmg 


DM 200,000,000 

Floating Rate Notes of 1994/1999 



fflx-Momhj.-DM-I.IBOR lets fl.OSS pj., payable semi -annually in arrears 
on June L7 and December IT of each year 

June 17. par 

TViiikaus & Burkhardt 

KommoreUlftCK&'cbafi oof AfeWn 

Omunerabank GS First Boston Deutsche Bunk 

AkUcnAndlKitali AJuJcnawflsuhaft K&xlcuhank AktienjJescilscIiaft Akikmftsidhdnir 

UGRANK GZB-Bank Ilamburtiscbc I-sniledumk 

UcoHehe Ccnosscnacfaaftbbaiik Gemw^itwlti/ibchc ZcnmBnok .V! SruQ&m Girosraitrnlc 

Roiffidscnhank Kk-immbertai i^eixeri^^ Sebmteriscber Banktwdn 

.Uuta*c*dbctaft iDcntaehlnad) AG (Uculadiland) AG 


SoJwvshkuuctK: l V»«xi*Ljn tCv£vn traUxmfc .V ’■ 

WcstdcutMcJic tamkabank 

Stadnpukmc Kuln 

Sumitomo Bonk 
(Deutschland) Gmhll 


UesoJoBochc r^aonunefciAa.&aoallwnli «<; 

Yasutla TVust and Banking 
(Luxeniboarg) &A. 

USS 50,000^90 
Floailii* Rate 

Gwaatecd Notes Doe 2000 
wUi Fixed Rate Option 
Guaranteed by 

Tbe Yasufa Tntuand Banking 
Company, Unntod 

in a a e a t d ree e with die provisions 
of the Note*, notice b hereby given 
that ibe rats of interest for the 
interest period 20th Jane IV94 to 
I9th December 1994 has been 
fixed at 5-275* p-a. Tbe coupon 
araonm payable on 19th December 
1994 will be USS 133-34 per 

FriuoarYteArebyKrettotoaiwSA L w reba x psoas 
to fund a loan to ba mods by ««o 


btitato par to SvBuppo Eoonomico 

US1 150l000j)00 Hosting Ruts iMotas du» 1997 

In accor dan ce with the terms and Conditions oi too Notas. nooca »s 
hereby gn«n that for ihalntBresiPBnod bom June 20. 1994 k> Decem- 
ber 19. 1994 the Notes wdcwiy an Interest Rsai of 5 per hymu. 
The Cotpon Amount peytote on iheieiewt JmerestRiymentOat* 
December 1R 1994 wi be USS 142.13 per USS 5.000 pnnapai amount 
ol Nw^ USS 2,84375 per USS 100,000 principal amount of Note and 
USS 1A218.75 per USS 500.000 principal amount of Note. 

Tlw Agent Rani. 

fotiefbar&SA Luxambou t geoae 

Istituto Bancario San Paolo di Torino 

London Branch 

„ _ US$ 150.000.000 

Hosting Rate Depositary Receipts due 1937 

in accordance with the Conditions of the Recoiprs. nonce is ho*o- 
hlGrestI ¥<*x* from Jure 20. T99d to Decom- 
oer at, the Receipts vvffl cany an Intorost Roto of 5.09375% 

per annum. 

The Co upon Am ount payebte on the Relovant Intorost Payment 
Date. December 20. 1994 wiO be USS 1.294.6G per RewSre^ 
latmg to a Deposit of USS 50.000 rwcopi 

and USS 6.47&31 per Receipt tro Ague Bank 


European investment Bank 

Notice of redemption to Bondholders of 
Italian Lira 150 Bn 10.75% 1388-27.07.1996 
(Code 583512} 

Notice is fteraty guen that purauam d clause RedempHonct the Terna 
and Conditions of fae Bonds, the Issuer has elected to redeem and 
prepay aS outstanding bonds, ie. m. on July 27. 
1394 at the redemption price of 101% of the principal amount 
thereof . On and after the redemption date interest on the Bonds w# 
cease to accrue. 

Bonds shottf be presented and surrendered for payment with all 
coupons attached appertaining thereto mawing after July 27. 1994 
at the offices of the foOowtng paying agents- 

KrwEetbank SA Luxembourgoobe 
43. boievard Royal. 2955 Luxembourg 

Coupon Amount per USS 10.000 Aooh Bank 

PW5«pal amount of Note frjhfr& ^ . . 


Bare Conuneulnle ItaSana 



Kredtetbank N.V. 
7. Aranbergstraat 





Liberty Life plans global 
convertible bond offering 

By Tracy Corrigan 

Liberty Life. South Africa's 
largest proprietary life insurer, 
is preparing to launch the first 
global offering of convertible 
bonds for a South African com- 

The issue marks an impor- 
tant step in the country’s 
return to the international 
fin a ncial markets, following its 
first non-racial elections in 

The plan to raise up to $50Qm 
globally la ambitious, given the 
relatively low profile of South 
African companies among 
international investors. How- 
ever, the deal should benefit 
from the inc rease d weighting 
of South Africa in many inter- 
national investment portfolios. 

The convertible bonds are 
likely to have a relatively ni gh 
coupon of about s per cent, 
given the large size of the 
transaction, and a maturity of 
10 years. 

The bonds win be convet- 
ible into liberty Li fe shares at 
a premium of 10 to 12 per cent. 

according to Robert Fleming, 
the UK investment bank 
charged with arranging the 

On Thursday, Fleming will 
lead a visit by underwriters 
and investment managers to 
South Africa. Subsequently, 
roadshows will be held in Sing- 
apore, Tokyo and Bong Kong 
as well as in the OS awrf 
Europe, over a two-week 

Liberty life, South Africa’s 
fourth largest company, was 
chosen to take a leading role in 
the country's return to the 
international capital markets 
because of its particular attrac- 
tions for international equity 

As well as its stakes in top 
South African companies like 
Standard Bank, South African 
Breweries and Premier Group, 
the group also has substantial 
offshore holdings. The inter- 
ests of its 57 per cent-owned, 
UK-based subsidiary Transat- 
lantic Holdings include Son 
life, the UK life insurer, and 
Capital Shopping Centres, the 

retail development company 

which was recently listed on 

the London Stock Exchange. 

It is planned that around 
jlOOm of the bond proceeds 

will be used in the develop- 
ment of Liberty Life's business 
in South Africa and about 
$ 200 m will be used to repay 
gristing debt. 

The company “has required 
a lot of meammiae borrowing 
for the last 15 years," which 
will now be replaced with lon- 
ger-term financing , according 
to Mr Donald Gordon, chair- 
man. He added that he would 
expect the bonds to be con- 
verted into equity quite rap- 

With regard to the remaining 

proceeds of the offering, Mr 
Gordon commented that "we 
like to have a bit of a war 
chest”. He declined to com- 
ment on any specific targets, 
but observed that the reversal 
in the American Interest rate 
cycle has increased the recep- 
tiveness of companies which 
until recently were unwilling 
tO enter info iWaa^nna 

Japanese bank merger off 

By WRBam Dawkins In Tokyo 

A Japanese regional hawk has 
pulled out of a fiwawwa minis, 
try-inspired merger with two 
competitors, a setback to gov- 
ernment attempts to reorgan- 
ise the weakest local financial 

Mr Yukio Shhnndatn manag- 
ing director of Kita-Nlppon 
Bank, in Morioka, northern 
Japan, announced over the 
weekend his decision to with- 
draw from a proposed merger 
with bad debt-laden Tokuyo 
(Sty Bank and Shokusan Bank. 
The merger would have threat- 

ened the survival of Kita-Nlp- 
pon, he marofa»iT»Ari- 

The plan, proposed in April 
by Kfta-Nippan with MoF back- 
ing, ran into mtanaft opposition 

from customers and busi- 
nesses, on the grounds that 
Tokuyo’s bad debts would 
weaken the other partners. 

A Kita-Nippon consumer 
group had collected 20,000 sig- 
natures opposing tile scheme, 
in an ghn«gt unheard of con- 
frontation with government 
policy. Unions were also anx- 
ious that the costs of writing 
down same of Tokuyo City's 
estimated YlOObn bad debts 

would hit bonuses and add to 
the risk of branch closures. 

This was to have been the 
largest of a soles of regional 
bank mergers orchestrated by 
the MoF in an attempt to 
encourage tbam to share costs 
in the fees of growing compete 
tiOXI in local h anking from 
Tokyo-based city banks. 

Most regional banks have a 
«nHH piimf base of local busi- 
ness borrowers, but some sec- 
ond tier hanks have built up 
problem inana from over-lend- 
ing in the late 1980s. The three 
In the aborted merger are seo- 

nnri tier hanks. 

Court rules 
in favour 
of AT&T 

By Richard Waters 
in New York 

AT&T, the largest US 
long-distance telephone com- 
pany, has won a Supreme 
Court ruling which will force 
smalle r rivals to continue to 
publish commerdaDy gen shi m* 

The Federal Communica- 
tions Commission, the indus- 
try’s regulator, had earlier 
ruled that MCI, the second 
largest carrier, need not pub- 
lish details of agreements 
which did not match the com- 
pany’s published tariffs. 

The ruling, though, was 
overturned in a federal appeals 
court, a decision that has been 
confirmed in the Supreme 
Court. The courts ruled the 
FCC had exceeded the discre- 
tion it has under statute 
to alter the filing require- 

Life company farms out 
derivatives management 

By Tracy Corrigan 

Confederation Life, Canada’s 
fourth biggest life company, 
bag passed on tbp manggamen t 
of its derivatives portfolio to 
Sumitomo Bank Capital Mar- 
kets. " 

Many companies have 
become increasingly nervous 
about using derivatives, follow- 
ing losses in recent months by 
Metallgesellschaft, Procter & 
Gamble, and others. 

While it is highly unusual 
for a company to farm out all 
its derivatives management to 
an outside specialist, the grow- 
ing need for sophisticated oper- 
ational controls and computer 
systems when using deriva- 
tives has made it in cre asin gly 
difficult for companies to man- 
age risk effectively in-house. 

SBCM win take over the risk 
management activities of Con- 
federation Treasury Services 
under guidelines and policies 

set by the company. “We win 
manage their books, but some 
transactions will require 
authorisation, ** said SBCM. 

It will use its Prism front-to- 
back office system, developed 
in-house, to perform services 
such as daily valuation, risk 
analysis, trade c on firmati mw 
payments and rate resets. 

Prism supports SBCM’s cur- 
rent portfolio of over 10,000 
swap transactions in 17 curren- 
cies. SBCM’s Derivatives Prod- 
ucts Group has 170 employees 
in New York, London and 
Hong Kong, having poached 
teams from Pru-Bache and 
Security Pacific in the late 

• Fin ex Europe, the Dublin 
floor-traded currency fixtures 
exchange which is part of the 
New York Cotton Exchange, 
traded 8£00 contracts, worth a 
total of 2861m, on its first day 
of operation last Friday, writes 
Tim Coone from Dublin. 





By Tony Walker in Be$ng 

Anheuser-Busch, the biggest 
brewer in the US, is continu- 
ing thp international a spwW 

on China’s bear market with 
the planned takeover of the 
Zhongde brewery In Wuhan on 
the Yangtze River. 

The group, which produces 
Budweiser beer, has 
announced that ft would take 
an 80 per cent stake in the 
Wuhan b re we r y and expected 
the deal to be completed by 
the end of this year. 

Last year, Anheuser-Busch 
secured a 5 per coot stake in 
the Tstngtao brewery, China’s 
best known brewer and one of 
nine companies selected for a 
listing on the Hong Kong 
Stock Exchange. 

The US company’s invest- 
ment in the Wuhan br ew er y 
will be made through 
Anheuser-Busch International 
and is part of aggressive 
expansion plans in emerging 


ft is certain to pay a pre- 
mium price for its stake in the 
zhnw phi Chinese-German joint 
venture, which was estab- 
lished in 1988 and produces 
the Steinbran brand. It plans 
to use Wuhan as a base fin* 
production of Budweiser. 

Anheuser-Busch last year 
acquired a 17.7 per cent stake 
in Grnpo Model o, Mexico’s 
largest brewer for 1477m. The 
Wuhan investment would be 
its first majority stake abroad. 

Foster’s Brewing of Austra- 
lia and Anheuser-Busch are 
leading the charge among 
international brewers to 
secure a niffc* 1 in t he Chinese 
market, but they are for from 
the only players. 

San Miguel, Carls berg, 
Becks, Pabst Blue Ribbon and 
Holstein are among foreign 
companies who have either 
established joint ve uln re s or 
licensing arrangements with 
local brewers. 

China is the world's third 
largest and fastest growing 
beer market. Per capita con- 
sumption at 8 j 4 litres is negli- 
gible compared with 92 litres 
in the US and 158 in Germany. 

China last year produced 
12m tons of beer, passing Ger- 
many to become the world’s 
second biggest producer after 
the US: 

Spanish clothier 
to raise Ptal7bn 

Cortefiel, a leading family- 
owned Spanish clothing group 
with more than 800 retail out- 
lets, is to make an interna- 
tional public offer early next 
month which is expected to 
raise some Ptal7bn ($120m) 
writes Tom Boms in Madrid. 

Goldman Sachs, the US 
investment bank and global 
co-ordinator for the group’s 
stock market debut, said up to 
30 per cent of Corteflel would 
be offered in two tranches. 

This announcement appean as a matter of record only 

31st May, 1994 


The Co-operative Bank p.l.c. 

(i/Korporoitrd with limited liability In England with registered number 990937) 


Euro Note Programme 


UBS Limited 

Schweizerische Bankgeseflschaft (Deutschland) AG 
Programme Dealers 

Merrill Lynch International Limited NatWest Capital Markets Limited 
UBS Limited S.G.Wirburg Securities 

for DM teas 

Schweizerische BankgeseHschaft (Deutschland) AG 

Japan Leasing 

US $50^)00,000 
Guaranteed Heating Rato 
Notes due 1995 
Notice Is hereby given that. In 
a ccor dan ce with lhe provi si on s 
ot the above mentioned Floating 
Rate Notes, the rate of interest 
tor the she months period from 
June 20, 1994 to December 19. 
1994 (182 days) has been fixed 
at 5.175% per annum. 

Th8 Interest payable on 
December 19. 1994 wdl be 
US $13,081 25 In respect of each 
US $500400 Note. 



pwa i a ifn 

Fiona ba afetaed. tat «4ttt eOad tan 
14 txataas days after the dtfs o» «* 
oofaa. CHfflrtt HA. ha* been rapiaeed 
by In dependent RegisMrs Group 
Umhad as Rag tear on the above 
Boncfa. Any conasparidMee rB&ning 
me Bonk should be dreaod Bx 
lndipande«flB|frtiara Gio upll n«w d 


390388 Hghftad 

AMSion: Section 5 
Tcfc 0B1 4788241 
Fttc061 4288876 
Yours faVftfly 


Jbne 20, 1894 




Notice * tarty given Hal to the been 
period ben 20th June 1994 » 20th 
Deceober 1994, lbs ate of tester wiU 
he 150% per eaan*. The interest payable 
os Ok 20th P cOTn bcr 15794 trill be Yea 
195^34 per cacti Yea lO/HUJOO. Noco 

Age* feat 

The MbiiTM ate Banking Co. Lid, 

T / wri ng 

Timber group in $lbn alliance 

By Kteran Cooke 
fn Kuala Lumpin' 

Indon esian and Malay sian 
corporate interests are to form 
one of the world's biggest tim- 
ber concerns in a complex deal 
valued at around £Lbn. 

Barito Pacific Timber, one of 
Indonesia's largest companies 
and the world's leading ply- 
wood exporter, will purchase 
about 70 per cent of Construc- 
tion and Supplies House group 
(Cash), a relatively small, loss- 
making building supplies com- 
pany listed on the Kuala Lum- 
pur exchange. At the same 
time Cash is to buy a 30 per 
cent interest in Bartto Pacific. 

The deal Is the biggest cross- 
border transaction so Ter 
between listed companies in 
southeast Asia. Malaysia and 
Indonesia account for more 
than 90 per cent of global tropi- 

cal plywood production and 
analysts suggest the two coun- 
tries could be seeking greater 
control of plywood prices 
through the alliance. 

Barito Pacific has timber 
concessions In Indonesia of 
more than 5m hectares - an 
area larger than Switzerland. 
The company is controlled by 
Mr Prajogo Pangestu, an Indo- 
nesian Chinese who has 
become <me of Indonesia’s lead- 
ing corporate figures. 

Apart from Barito, Mr Pra- 
jogo has a 10 per cent holding 
in Astra -International, one of 
Indonesia's biggest conglomer- 
ates, and has business partner- 
ships with two of the children 
aT President Suharto. 

Last year about 12 per cent 
of Bartto was listed on the Jak- 
arta stock exchange and the 
company now accounts for 
more than 10 per cent of the 

stock market’s total capitalisa- 
tion. Private family interests of 
Mr Prajogo control the rest of 

At a news conference in 
Kuala Lumpur, Mr .Prajogo 
said the niHanry with the Cash 
group was the first step in 
plans for Barito to go interna- 
tional. Analysts feel Mr Pra- 
jogo has other reasons for the 

Recent industrial disputes 
and riots in Indonesia have 
made the small but economi- 
cally powerful Chinese commu- 
nity nervous. The Cash deal 
effectively moves a large part 
of Mr Prajogo's private assets 

By injecting a substantial 
part of his private interests 
into a listed Malaysian con- 
cern, Mr Prajogo will take 
advantage of the high, price/ 
earnings ratios commanded by 

timber companies on the Kuala 
Lumpur stock exchange. For- 
eign fund managers are also 
seen to favour Kuala Lumpur- 
listed companies over those 
listed in Jakarta. 

On completion of the deal, 
Mr Prajogo will still retain con- 
trol of Barito and own more 
than 60 per cent of Cash. The 
newly enlarged Cash will 
become one of the biggest tim- 
ber companies on the Kuala 
Lumpur exchange. 

The terms of the transaction, 
valued at M$2.59m (Slbn). 
include Mr Prajogo injecting 
privately held Interests in 
Papua New Guinea and China 
into Cash in exchange for 
newly issued Cash shares. 
Cash will use a combination of 
rights issues, cash and irre- 
deemable, convertible unse- 
cured loan stocks to purchase 
30 per cent of Barito shares. 










Cdn. S 60,000,000 














US. $125,000,000 
Cdn. $12^000^)00 














Senior D ebent ure s to mature November IS, 1993; ( 

Senior Debentures to mature June 1, 1998; 

Bonds 1983-1993; 

Senior Debentures to mature March IS, 1995; 

Bonds 1985-1995; 

Senior Debentures to mature September 13, 1995; 

Senior Debentures to mature October 1, 1996; 

Bonds 1987-1999; 

Senior D eb e n t ur es to mature 1995; 

Senior Debentures Due Jane 22, 1999 and 
Senior Debentures Due June 22, 2009; 

Senior Debentures to ma t ure 1997; 

Sen*”’ Debentures to 1995; 

Floating Rate Notes to mature 1995; and 
Senior Debentures Due June 18, 1996; 

(collectively, the "De b ent u res”) 

NOTICE IS HEREBY GIVEN that, pursuant to an aider of die Court of Queen's Bench of Alberta (the “Court”) dated May 10th, 
1994, as ■"wwxifri by a Anther order of the Court dated May 25, 1994, and fay a farther older of the Coat dated June 13, 1994 (the 
"Second Amended Order"), an ad jo urn ed meeting (the "Dcbentniuho|dexs Meeting”) of die balden of the Debentures (the 
"Dcbcatnrehddeis”) of Trace Corporation Ltd. (the “Company") will be held in the Bankas Han Auditorium, 315 - 8th Avenue S.W„ 
P-3 Level, Calgary, Alberta, C an ada on tho 5th day of Jnty, 1994 at the boor of 3e30 o'clock pjn. (Calgary time), for the following 

1. to consider, pursuant to the Second Amended Order, and if deemed advisable, to pass, a resofaxtion (the “Resolution") to 
a p p rov e an ar rang em ent (tho "Plan of Arrangement”) pursuant to section 192 of the Canada Business Corporations Act, the fall 
text of which Resolution it set out m Appendix “B” to tho Management Prosy Circular mailed or otherwise made available to 
Debenturduddcn; and 

2. to transact such other business as may property be brought before the Debestmcholdcrs Meeting or any adjournment thereof. 

At fee Debeoturebokten Meeting, each balder of Debentures will have one vote for each Cdn. 31,000 principal amount of such 

Deb en t ur es held (the principal of Debentures payable in other currencies for such purposes to be converted using exchange rates 

prevailing as of April 25, 1994, being U.S. Dollars 13813, ECU 13859 and SFR 3646 as specified in the Second Amended Order). 

The Court has sot the quorum for tho De b e n t u rcbofaicrs Mooting as two or more persons entitled to vote in person or by proxy bolding 
in the aggregate at a majority of the outs t an ding pinaft amount of the Debentures d e t e r min ed in Canadian dollars as provided 
above. - - 

The r ecor d date for entitlement to notice of fee Ddrentmeholden Meeting is fee dose of business on May 1 1, 1994. The record date 
far entitlement to vote at the Dobenturoholdrri Meeting has been established as 10 days prior (excluding the dale at the DebcnturehaMen 
Meeting) to the date of the Dcbentnrehoidere Meeting and only those Debcatnrcbaldera who (i) as registered Deb e utu r ch oldcn are 
rntr m i qo the applicable register of Debentures or (E) as holders of unregistered De b entures, have complied with the deposit procedures 
re f e rred to below, are entitled to vote in pe r s on or by proxy. 

Holders of Debentures in unregistered or bearer form Aewrfng to attend and vote fn person or by proxy at the De fa c utui e fa olden 
Meeting or any adjournment thereof, without producing such Debentures, m ay deposit same wife a custo di an listed below and «D1 receive 
in exchange a Voting Certificate (s) wtecfa wiD e ntit le the holder named therein to be present and vote on behalf of the holder at the 
Dcbcat ureh oldoa Meeting and at any a djournm ents thereof or to appoint a proxyholder to represent and vote on behalf of the 
Debenturabokkr at the DabeafimMdas Meeting end any adjournment thereof Debentures so deposited will be held on deposit until after 
the Debentnreholdcn Meeting and any adjournment thereof and will only then be returned to the deposit or on presen t ati on of the receipt 

A Dchcntnre h nld or may at te n d the DebenturefmUers Meeting in pea» or may appoint another person as proxyholder. To appoint a 
perron to attend as proxyholder, a Pcbc n t mcfa oklcr most deposit wife the Company, c/a Montreal Trust Company of Canada at the 
address specified below, an i nstrument appointing the proxyholder, signed by tire Debenturehalder or an attorney or die Debeatnreholder, 
prior to SA0 pm. (Calgary time) on the second day (Saturdays, Sundays and holidays in Calgary excluded) p rece din g the date of the 
D cb c nture hohtera M ee tin g or any adjournment thereof or with the Chair of the DcbcartnrehoWera Meeting prior to the commencement 

The forms of proxy , which a cc o mp a ni ed fee Management Proxy Circular, name Kevin E. Benson and Willard J. L'Heureux, each a 
d ir ect or and officer of fee Company, as proxy no m inees. Dcbentnrebokkrs may appoint another person as proxyholder by inserting the 
Dime of such person in the space provided in such form of proxy or by completing another valid form of proxy. Persons appointed as 
proxyholders neod not be Debenturehoideis. Doben ture faoldaa may not appoint. ‘klontreal Trust Company of Canada, the trustee for the 
Debentures, as proxyholder. 

The vote req uire d to pass the Resolution is, subject to further order of the Court, the affirmative vote of not leas than two-thirds of the 
votes cast by the Dc beuluroholdcre, voting as a tingle dass, in respect of the Resolution. Tho Plan of Arrangement is subject to tbc approval 
of the Court. The matter is scheduled to be heard before Ml JuaticeGJt Forsyth at The Court House, 611 — 4fe Street S.W., Calgary, 
Alberta, Canada at 930 am. (Calgary Time) on July 19, 1994. Adc&kmal details oonoernigg taefa bearing are set forth in the Management 
Proxy Circular. 

If Dcbcatnreboldcrs have any questions about the p ro ce dures to be followed to qualify to vote at the Debcatureholden Meeting or 
about obtaining, anti d e p ositi n g proxies and voting c er t ific a te s, they should ooutact Montreal Trust Company of Canada at 

(403) 267-6893. 

DATED at Calgary, Alberta, this 14th day of June, 1994, 

By Order of tbc Board of Directors, 

(Signed) Karen & Jackson 

Senior Vice President, General Counsel 
& Corporate Secretary 

DebeBtureboktes who are aaable to attend the Pabenturs h oi d en Meeting in pessoa are reqnested to date tad sign the applicable 
form of proxy which the Management Proxy Circular and dtfaer deUra or mafl it la the envelope provided to Trixec 

Corporation Ltd. e/e Moatreal Trust Company of Canada, 411— 8th Avenue S.W., Calgary, Alberta, Canada, T2P 1E7, prior to 
&08 jun. (Calgary time) on the second day (Saturdays, Sundays sad holidays la Calgary excluded) preceding the date of the 
DebattureboMea Meeting or asy ad Jonmneaf thereof or deposit aaare wit* the Chair of the Pebeatu i eh u Mmr Meeting prior to the 
commencement thereof. The time limili for depoaitiag proxies frier to the Debentnrefcolden Meeting may be waived by the Company in 
Ita discretion without notice. 

Copies ot this Notice and the Management Proxy Ortnhtr containing the Resofatioa and suitable forms of proxy are being or hare 
been by first prepaid mail to all hofdss* of folfy registered Debentures nod D e be nture s registered as to priadpa! only. 

Additional copies of soch documents and testroctious aad forms of voting certificates Had proxies for the purpose of enabling fee holders 
of unreg istered Defeatures to be preseat and rate at fee DefeatnreboMos Meeting in person or by proxy may be obtained from the 
following qistodiaira hi respect of the aeries of.mmgbtered Debentures Indicated: 


(a) For all ariei of Debe ntur e s la i 

Montreal Trust Company of Canada 
411 — 8th Avenue S.W. 

Calgary, Alberta 
Canada T2P 1E7 

Attention: Corporate Trust Department 

Eurodear Cede! S-A. 

Boulevard E-Jacqmria, 151 67 Boulevard Grand 

B-1210 Brussels, Belgium Duchesse Charlotte 

L-133! Luxembourg 


Montreal Trust Company of Canada 
510 Barren! Street 
Vancouver, British Columbia 
Canada V6C3B9 

Attention: Corporate Trust De par t men t 

Montreal Trust Company of Canada 
151 Froat Street West 
Toronto, Ontario 
Canada M5J 2N1 

Attention: Corporate Trust Department 

Montreal Trust Company of Canada 
Place Montreal Trust 
1800, avenue MoGQl College 
Montreal, Quebec 
Canada H3A3K9 

Attention: Corporate Trust D e pa rt ment 

r«n«fi«n Imperial Bank of Commerce 
309 — 8th Avenue S.W. 

Calgary, Alberta 
Canada T2P2P2 

(b) For SFR 100^600 6fM Bonds 1983-1993 
SFRUMOQJN 5ft% Boris 198M995 
SFR lQQjOOQj0OO 5* Boris 1987-1999; 

Swiss Bank Corporation 
B acrengas s o 16 
CH-80I0 Zurich 

(e) For ECU SCfiOOflOO 9%% Safer Debentures to aatnre September 13, 199& 

Sodetc Gcrirek 
AJsaOKSBC de Basque 
15 aven u e Basic 

L-2420 L ux em b our g 








Markets are 
notoriously bad 
at assessing 
political or 
security risks. 
Nor Is it easy 
for investors to 
know just how 
far markets are 
discounting such risks in 
advance. Yet the questions 
cannot be sidestepped. 

Would the dollar now be sub- 
stantially lower and US bond 
yields higher without the row 
over North Korea’s nuclear 
intentions? How Ear do recent 
rises in commodity prices 
reflect concern over global 
flashpoints? And to what 
* »xfr j»nt are the more mundane 
political worries of the devel- 
oped world exerting upward 
pressure on global bond yields? 

It is hard to believe that the 
dollar can be playing much of 
a safe haven role when east 
Asian markets have resolutely 
failed to panic. Even in South 
Korea share price declines 
have been less than cata- 
strophic, given the nature of 
the threat An£ there are more 
fundamental questions, any- 
way, about what constitutes a 
safe haven in today’s circum- 

If the threat from rogue 
nuclear powers in the third 
world is one of global incinera- 
tion, there is not much point in 
markets seeking to discount it 
But for the outward-bound sur- 



Global Investor / John Plender 

Oil becomes a security risk barometer 

vtvabsts who persist in pack- 
ing shotguns «wh baked beans, 
the currencies of the remoter 
reaches of the southern hemi- 
sphere would seem a better bet 
than the dollar. If, on the other 
hand, the threat is one of 
destabilising regional conflict 
the economic consequences 
may not be wholly adverse. It 
was, after all, the Korean War 
which set Japan on the path to 
its economic miracle. 

As for commodities, the tra- 
ditional bolt hole, gold, has not 
been notably buoyant. But is it 
really a safe haven any more? 
In a high-technology world 
where financial transaction 
costs have collapsed, it is much 
easier to transfer finanniai bal- 
ances from one end of the 
globe to the other at the press 
of a button than to shift bars of 

The barbaric metal, as 
Keynes called it, may be a 
hedge against political or infla- 
tionary risk In third world 
countries with, underdeveloped 
financial markets Yet the mar- 
ket which nowadays seems a 
more plausible barometer of 
security risk is oiL 

indices robwed 

‘ to yeair'boiidim^'iHHio yn**- 

y 7 .Bilw "• 

siewfO^ w iM fr /: .•“'■v • 

The threat of conflict in 
Korea could be expected to 
lead to precautionary stock- 
building. And now that there is 
a fully developed market in oil, 
complete with derivatives trad- 
ing and the rest, hedge funds 
can ad d financial leverage to 
the equation. Sure enough, the 
oil price was rising strongly 
last week. It may not be quite 
the same as a safe haven, but 
it clearly struck some specula- 

;; avfc- 

Al uminium figures awaited 

The aluminium market is 
anxiously awaiting today's pro- 
duction statistics from the 
International Primary Alumin- 
ium Institute to make sure that 
the voluntary cuts in output 
agreed by the big producing 
countries earlier this year are 
continuing to bite. 

It is widely anticipated that 
the IPAI figures will show pro- 
duction in May, in countries 
outside the former Soviet 
Union, fell by about another 
600 tonnes a day. This follows 
a drop of 570 tonnes a day in 
April and one of 632 tonnes in 

Marr.h, By April the annual 
production rate had fallen to 
14.4m tonnes, a drop of 3^ per 
cent and equivalent to 486,000 
tonnes of aluminium. 

Mr Angus MacMillan, 
research manager at Bffiiton- 
Enthoven Metals, says further 
falls in the daily output rate 
can be expected in June and 
July. Nevertheless, he suggests 
that there will be no substan- 
tial fall in the highly- visible 
London Metal Exchange stocks 
- now standing at more than 
2m tonnes - this summer. 
Although the aluminium 

industry has started on the 
road to recovery, he recalls 
that when aluminium seemed 
to be recovering from the last 
recession in the 1980s LME 
stocks stopped falling and 
prices slumped again. 

Mr Stewart Spector, who pro- 
duces the Spector Report on 
the aluminium industry, says 
the IPAI statistics show that 
many smelters have not cut 
output as quickly as their for- 
mal am n nwf-flmgnt.q suggested. 
“However, because production 
IS dpc r KnTTig and demand is ris- 
ing faster than anticipated, the 

all round 

v ...j" a* cl 

“Great Portland has rarely been in better shape. Our basic strengths 
are apparent - sound finances , security of income from 
quality properties within a well diversified portfolio , and able and 
experienced management. We shall continue to build on 
these strengths and we face the coming year with confidence." 

Richard Pcs kin, Chairman and Managing Director 

Great Portland Estates 

P I. c 

For a full copy of rh* 19*4 RcponaihJ Actounb, plcfctt wide to AeSeaesaji Knighton House, 36 Mortimer Snert, London W1 N 8BD. 

Total return In local currency to »«84 

- Cast* - 

. Month , 
• - -Yahc- 

Bond*. 3-6 V 

— «- 

• TvOUft . 

Month - 
' • year. •• 




•A M*:: te»4-' - Jjtf. 

tons, as well as cash buyers, as 
a safe bet. But where stock 
markets are concerned, past 
history suggests that investors 
prefer to address global Cash- 
points when the bad news 
actually occurs. 

■ Tectonics 

That is not to say that shifts in 
the global and regional politi- 
cal balance are unimportant 

Kenneth Gooding 

... -047“. . 0.219 • -1.22 , -2.M .-4A0' -1UO 

•"■MonOh -0.79 -1J99 -a-45. -4-82 -7X1 .... -3-00. 

• : . Year . - . -Ufl3 . 7Jn -2jfT ■ 1.13 MX2- . 2-16 

F i p *WT ' 

■: odfr - ; - o& -as -4^ 4.T,.-4i' 

Mooch ' 4X. a.7 -04 -ia4. -12.4 •• *2-| 

Y«V ' ■ ■ 6.0'- - 02 • 20.6 ■ . 8.g 30-S ■' a* . 

SoucKCarttS. Bomb -liftman BMW*. 

Tha FTViiau^ V7o*tlncaow -» Job*, owned tw Tlw RnincM TTkn» UmA.4. • 
OoWnu Stadia a Ca. Bod HaONM 8aaud8aa UrwML 

end results will be the same. 
There will be a fall industry 
recovery in 1995 and produc- 
tion in 1996 will be nearly 100 
per cent of capacity." 

Also today in Moscow the 
second round of negotiations 
will take place between De 
Beers, which controls 80 per 
cent of the uncut diamond 
market, and Russian officials 
about a new contract with the 
cartel organised by the South 
African group. Some Russians 
are seeking large changes and 
it is unlikely that agreement 
win be reached quickly. 

Usually they are reflection of 
longer run rftmngag in underly- 
ing economic strength. And a 
farther lesson from history is 
that when' a hegemonic power 
goes into political and eco- 
nomic decline, and is forced to 
cede its role to another leading 
actor, the transition can be 
associated with volcanic 
upheavals in markets. 

Between the wars, when the 
US turned isolationist and was 

1 Between 1988 

and 1992, 25 
undertook pri- 
worth, in 
total, no less 
than $61.6bn. 
Of these $19J3bn were of infra- 
structure - telecommunica- 
tions, power generation, 
power and gas distribution, 
railways, roads, ports and 
water supply. Furthermore, 
almost three quarters of the 
total privatisations and two 
thirds of the privatisations of 
infrastructure occurred in 
1991 and 1992 alone. What is 
happening is little short of a 
redefinition of the economic 
role of the state. 

These fascinating figures 
cone from the Worid Bank's 
latest World Development 
Report, out today* Just how 
big a change this is X can 
recognise from personal expe- 
rience. When I joined the staff 
of the World Bank in 1971, the 
old orthodoxy - that develop- 
ment amply demanded higher 
resource mobilisation and 
investment - was already 
being modified by concern 
about price distortions and by 
calls for better project apprais- 
als. But few questioned the 
state's role in the running of 
such industries as steel, let 
alone power. 

This is true no longer. The 
reason for the change is the 
shocking waste. This waste is 
particularly significant in 
infrastructure, because infra- 
structure is itself so impor- 
tant Without clean water, 
sewerage, roads, railways, 
ports, energy and telecommu- 
nications, life is intolerable 
and development inconceiv- 
able. Ironically, it is the cen- 
tral place of these activities 
that was used to justify the 
state’s role as provider. Too 
often this has meant that the 
more vital is the service, the 
worse it has beat run. 

On average, says the report, 
40 per cent of the power-gener- 
ating capacity in developing 
countries is unavailable for 
production. Only 60 per coat 
of locomotives were available 
for service In Latin America 

reluctant to see the dollar take 
over sterling’s role in the 
global system, international 
capital flows were subject to 
Interruption, trade friction 
turned into rampant protec- 
tionism, stock markets crashed 
and currencies woe prone to 

tputhnlrmri misalignment, fa the 

1980s and 1990s the transition 
is more complicated. To the 
extort that the US is passing 
its economic mantle, it is not 

to a single hegemonic power 
but to more than one country, 
with the developed worlds 
only big creditor, Japan, reluc- 
tant to be primu s inter pares. 

We also have the additional 
hazard that the relatively sta- 
ble bipolar nuclear world has 
given way to a more fluid and 
less easily defined political 
order. It is not surprising then 
that over the past two decades 
or more, when the Japanese 
have given in to US pressure to 
support the dollar, the world 
has once again seen constant 
interruptions to capita] flows, 
growing resort to bi l ateralis m 
in US-Japanese trade relations 
and a Japanese version of the 
1929 Wall Street Crash. 

One lesson is that when the 
global system is coping with 
huge adjustments in the bal- 
ance of power, currency mar- 
kets need to be free to act as 
an escape valve for the pres- 
sure. The collapse of the Bret- 
tan Woods system was. after 
aU, a symptom of what the his- 
torian Paul Kennedy Identified 
as imperial over-reach in the 
US. The point applies with 
equal force to regional power 

Economic Eye / Martin Wolf 

the world 

How privatisation of tolscommintteatioiis 
leads to gams 

Total welfare gains* as o percentage of wwwelsafat JW; 

,0 20 40 60 » 100 • 120 140 ' T 


- British Tefacora 

• Wattare gain* are The sum erf gains accruing to ail parties - enterprises, 
warfare and consumsre . 

Sauna: Mxtf OMtapmeu Report 

in 1991. fa suhRaharan Africa, 
almost $13bn worth of roads - 
one third of those built in the 
past twenty years - have 
eroded because of lack of 
maintenance, fa a 1988 study 
of Nigerian manufacturers, 92 
per cent were found to own 
their own power-generating 
equipment because of the 
chronically unreliable public 
sendee. But these were operat- 
ing at only 25. per cent of 
capacity, because the govern- 
ment forbade them to sell 
their surplus power. 

Whom the gods wish to 
destroy , they first make mad. 
Nor is the price of such follies 
small Developing countries 
invest |200bn a year in Infra- 
structure, which accounts for 
almost 60 per cent of total 
public investment in the mid- 
dle-income countries. But fail- 
ure to charge adequately for 
power, water and railways 
imposes an annual fiscal bur- 
da of some $120bn. the bene- 
fits of which accrue dispropor- 
tionately to the better off. 
Improved efficiency could, 
argues the Bonk, also increase 
developing country gross 

domestic product by f55bn. 

As the chart shows for pri- 
vatisation of telecommunica- 
tion^ the gate* from a trans- 
formation can be enormous. 
This is why the policy agenda 
on infrastructure has moved 
away from concern with 
investment towards concern 
with service as “the goal and 
measure of development in 

The report’s main message 
is that “the causes of past' 
poor performance, and the 
source of improved perfor- 
mance, lie fa the incentives 
facing providers”. Its main 
recommendations are: first, 
manage infrastructure litre a 
business, not a bureaucracy; 
second, introduce competition 
wherever feasible; third, give 
users and other stakeholders a 
strong voice; and, fourth, nur- 
ture public-private partner- 
ship, notably In 

How can these improve- 
ments be made? Infrastruc- 
ture, notes the report, can be 
provided in four main ways: 
by public ownership and oper- 
ation; by public ownership, 
with private operation; by pri- 

sbifts, such as German rwnffi, 
cation. At times IBce tUs/tfa 
tectonic plates are sot prow to 
obey the dictates of fixed 
exchange rata systems. ; 

■ Southern 

In contrast bond markets fata 
year have not only felted toad 
as an escape valve, but have 
added to political risk, at tea* 
fa the short run. Take ftafo 
where the yield on 10-year 
benchmark bonds have topped 
10 per cent The resulting ugh 
real interest rates savagely 
impair the Berlusconi govern- 
ment’s ability to stabilise a 
huge Inherited public sector 
debt stock. Spain, whose bond 
yields have also topped TO per 
cent faces a comparable fated. 

Yet these are countries with 
a dism al record In 
their public finances. The Ital- 
ian administration consists of 
a motley collection of parti- 
tions, short on experience; the 
Spanish government is dbered: 
ited by scandal and corruption 
If the effect is to stiffen tea 
sinews of the politicians sad 
force them to confront the 
need to raise taxes and . cut 
expenditure, the longer run 
Impact will prove benign. The 
alternative - a prolonged bond 
market strike and hyperinfla- 
tion - Is not a recipe for stabi- 
lising anything. 

vate ownership and operation, 
often under regulation; and by 
community and user provi- 
sion. The first, though the 
classic approach, is the least , 
effective by far. Admittedly, 
public entities do sometimes 
perform well for a time, but 
they usually succumb to polit- 
ical interference in the end. 

The others alternatives all 
have some merit, depending 
an circumstances. But private 
nation is the obvious route 
wherever competition is feasi- 
ble. Contrary to the views of 
many economists, privatisa- ; 
tion can also be tine best alter- < 
native for monopoly services. 
This is mainly because priva- j 
tisation automatically creates 
separation from government, 
along with a powerful coun- 
tervailing force to politicians, 
in the form of shareholders. 

As with any revolution in 
Us early stages, there remains 
much to be learned - about 
how best to regulate priva- 
tised utilities, for example, or 
how to involve the private sec- 
tor in infrastructure provi- 
sion. But this is already a 
hugely encouraging transfor- 
mation, not least because it | 
dethrones the foolish belief 1 
that the level of aggregate 
investment matters more than 
where and how investment is 
i m pl e m en t ed. This folly is the 
main reason why the real 
income per head of the Czech 
Republic, 60 years ago among 
tha most industrialised coun- 
tries in Europe, is only 40 par 
cent of Austria’s, despite 
decades of high, but largely 
wasted, investment 

The report is, fa fact, almost 
as relevant to advanced indus- 
trial countries as to the devel- 
oping ones. Just how relevant 
can be judged from the con- 
centration, particularly fa the 
political left, on the need for 
higher investment While use- 
ful, higher investment does 
not begin to be enough. This 
report shows that, incentives 
must also lie transformed, to 
ensure that scarce resources 
are used far less wastafully 
than hitherto. 

* World Development Report 
Infrastructure for Devel- 
opment (Oxford University 
Press, for Uw World Bank) 


JoMy compflW by Th* Hnandaf Timm UO, Gcttman. Sods & Oa and NoWtetf S kuHh Lid. in confunotfon vMx tha hattuta of Actuaries am the Faculty of - -' | ,- r 


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Norway (23) 

Singapore (44} 

South Africa (98) 

Spa** (42) 

Sweden (38) — 

Switzerland (47) 

United Nngdom (206) 
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EUROPE (720) 


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Europe E*. UK (515) . 




The Emerging Investor / Kieran Cooke 

Kuala Lumpur mirage may prove fruitful 

Tea baa* p erformin g stocks 





WBekN nwk 

Gunsy BbacOk 





AJarko Holding 





Koc Hokfrtg 


a 9003 



Eczadbasi Yatirtm 










Cukurova Bektrk 





Metaysfon Afetoe System 




















When Nomura Securities 
announced early last week that 
it was setting up a multi-mill- 
ion dollar fund to invest in the 
Malaysian stock market, Kuala 
Lumpur traders thought the 
rescue boat had finally 

The Kuala Lumpur market 
was one erf the world's hi gh 
flyers last year, rising 98 per 

This year the story has been 
different Analysts said that 
the new Nomura fund could be 
investing as much as M$7bn 
($2.7hn) in Malaysian stocks. 
There were hopes of an upturn 
in a market that had dropped 
20 per cent since the beginning 
of January. 

In the event it was all some- 
thing of a mirage. 

Somewhere along the line 
someone had got the figures 
wrong. Yes, the Japanese were 
investing - but the figure was 
closer to M$70ftm than M$7bn. 

Yet a bullish breeze is begin- 
ning to blow through Kuala 

Daily trading volumes have 
increased from only 50m 
shares at the end of May to an 
average of more than 300m last 
week. Foreign institutions 
have become cautions about 
what is regarded as one erf the 
most volatile bourses in the 
region, but locals are piling 
back in. 

“The amount of liquidity in 
this market is fairly amazing," 
says Mr Ijim Ming Jang of Phi- 
leo Peregrine Securities in 
Kuala Lumpur. 

"It was the retail sector, not 
the institutions, which drove 
the market to all-time highs at 
the end of December and in 
early January. After a few 
months rest it Looks like the 
individuals are into the 
nwrlwt again - the diffarrmro 
now is that while volumes 
have increased there has been 
no big jump in values." 

1993 was the year Kuala 
Lumpur firmly established 
itself as the leading market in 

south-east Asia. The retail sec- 
tor caught stock market fever. 
On same heady days last year 
t rading volumes hi Knaia Lum- 
pur exceeded those of New 

Kuala Lumpur became a 
favourite off-loading point for 
foreign ftmds searching for 
investment opportunities in 

Out of an estimated total of 
$ 20 hn that was transferred 
from developed markets to the 
bourses of Asia Pacific over the 
year, about $4bn went to Mal- 

Kuala Lumpur's market capi- 
talisation. rose more than 150 
per cent in 1993 to MJ820hn: 
the KT5CR now ranks f ifth fa 

terms of market capitalisation 
in Asia Pacific behind Tokyo, 
Osaka, Hang Kon g and Sydney. 

Kuala Lumpur aisn has a sig- 
nificant influence on the 
smaller Singapore bourse. It is 
estimated that up to 60 per 
cent of Singapore's daily trad- 
ing volumes are in Malaysian 
stocks, traded on an over-the- 
counter basis. 

After the euphoria of last 
year and the sharp correction 
in early January, there seems 
wttip wirififlngiifl nn future mar- 
ket trends. 

Mr Eugene Morals, a 
regional director at Baring 
Securities, says that with the 
Malaysian economy expected 
to grow at well over 8 per cent 
this year he is advising 
clients to overweight Knaia 
Lumpur stocks cm a regional 

“The good quality rather 
than the more speculative 
stocks are the to go for in 
this quiet period" says Mr 

Mr Mann Bhaskaran, a 
regional analyst with Crosby 
Securities, has a more cautious 
view. "Kuala Lumpur is still 
Hio most market in 

the region with p/e’s naming 
at 23 or 24 thnw In the long 
term prospects are good but 
investors should be waxy." 

Most of Malaysia’s economic 
fundamentals look good. 

Exports grew about 20 per cent 
in the first two months of 

After a sharp drop in both 
foreign and domestic invest- 
ment last year there was a 
large jump in lnvestinents in 
the first quarter of this year. 
Officials are confidently pre- 
dicting arrmrg] growth Of WOK 
than 7 per rent over the nert 
25 years. 

The government h ng commit- 
ted itself to a multi-hill km dol- 
lar infrastructure programme. 
Infras tru c tur e related stocks 
are same of the hottest items 
on the market 

On the negative side, 
imports, nr iy h of which com- 
prise capital equipment like 
aircraft and power generation 
materials, have singed this 
year, inflation is edging up to 
near the 5 per cent cent level. 

In the past local investors 
have paid scant regard to ftm- 
da niHn Lais. 

In Malay sia ppHrire and hnci- 

ness are closely interlinked. 

Political connections are often 
viewed as more im po rt a nt than 
balance sheets. The shares of 
companies with known or per- 
ceived links to figures in the 
government hierarchy were 
the star perfbrmas last year. 

A mam reason for the recent 
retail rally has been talk of a 
general election, possibly as 
early as August 

The government led by Dr 
Mahathir Mohamad, is in no 
danger at losing its strong con- 
trol aver virtually every aspect 
of the nation's Hft» 

Elections, however, are a 
time when so called “money 
politics” comes to the tore, of 
the granting of favours to polit- 
ically supportive groups and 


A combination of rising 
interest rates in the US and 
falling bond prices caused a 
sizeable chunk of foreign AttmIq 
to be withdrawn from the 
Malaysian market year. 

Many institutional fund 
managers, frightened by thp 
highly speculative nature of 
the market, baled out before 
the plunge in share values. 

One factor that haw mad a 
foreigners wary of Koala Lum- 
pur has been a number of 
abuses in share transactions 
and the lack of market trans- 

In recent months a newly 
formed Securities Commisskm 
has made considerable prog- 
ress in righting cfim<i of the 
more blatant ilsfirianriwi of tha 
market. The SC has issued 
strict new guidelines on corpo- 

rate manoeuverings such as 
reverse takeovers and back- 
door listing s 

Locals have blamed the SC 
for this year's market malaise. 
“There is no use having a clini- 
cally dean market if it's a dead 
market," -said m» broker. 

“ Mi B hi f n n n a Kiin and wm nnr 

mongeri ng. not regulations, 
stand in the way of a funda- 
mentally sound market,” 
countered Mr Mohamad Abdul 
Majid, the SC’s chairman. 

TnfprnnHnnnl fund mnwagpr s 

say policy changes by Bank 
Negara, the central bank, have 
been a dampener on market 

In January Bank Negara 
started imposing a series of 
measures to prevent foreign 
speculation on the ringgit, toe 
Malaysian dollar. 

Fond managers say a 1nr * lr of 
consistency in Bank Negara 
policy, coupled with trouble- 
some regulations on the move- 
ment of currency, has deterred 
many foreign investors. 

The Japanese, however, 
seem undeterred by the nega- 
tive factors. 

The amrnmt of funds from 

Japan being invested might 
not be as spectacular as at first 
envisaged but it’s still bring 
seen as a significant move. 

"We are very bullish on the 
Malaysian market," «mid one 
Japanese fund manager. 

Not everyone will follow 
Japan’s lead. Late last year 
Japanese investors plunged 
into the Malaysian market - 
and got badly burnt 

■ Strategy 

Having caught the top of the 
emerging market bubble before 
the storm broke at the start 
at the year, reducing 
allocations In, for example, 
Hong Kong, Thailand. Turkey 
and Poland, Foreign & Colonial 
Emerging Markets now 
believes that the time is right 
to move back in. 

Mr Arnab Banerji, F & C's 
chief investment officer, notes 
that the downturn in 
perfo rmanc e experienced this 
year has left exceptional scope 
for outperformance 
henceforward. He remains 
bearish on Hang Kong, 
favouring South Korea and 
Taiwan. In Latin America 
Argentina and Peru feature, 
while he is neutral on Brazil 
for the time being. Elsewhere, 

F & C favour Portugal, and 
have slightly increased 
allocations in South Africa 
and Zimbabwe. 

■ Cairo 

An acceleration of the 
country's privatisation 
prog ramme is planned, with 
toe sale of assets worth up to 
K£3-2bn between now and the 
end of toe year, Reuter reports. 

Mr Atef Obeid, toe Public 

Sector minis ter, said the 
reform programme now had 
its own momentum and 
slowing down was out of the 

He said the government had 
exceeded its privatisation 
targets for the period up to 
March 1994, selling assets 
worth E£3.5bn and offering 
for sale assets worth E£62b. 

■ Jakarta 

Indonesia’s total foreign 
investment approvals reached 
$5.1bn in the tost five mrmtvtc 
of 1991 and should exceed 
SlObn for the foil year, the 
Antara news agency said. 

■ Harare 

Zimbabwe has said that it 
intends to speed up the 
privatisation of those 
state-owned companies which 
are a drain on the economy. 
Last month the government 
said that it would 
commercialise the operations 
of the Dairy Marketing Board, 
the Cold Storage Commission 
and the Cotton Marketing 

• Emerging markets coverage 
appears daily on toe World 
Stock Markets page 


Markets focus on dollar under pressure 

Foreign exchange markets win 
continue to focus attention on 
the dollar, which was under 
severe pressure last week as 
US Treasuries fell and the out- 
look for recovery in Europe 

In the absence of conc erte d 
central bank intervention after 
the dollar plunged below sig- 
nificant technical lows against 
the D-Mark last Friday, ana- 
lysts expect the markets to 
posh down toe US currency In 
an effort to test the resolve of 
central banks to take action. 

Traders will be watching for 
changes in the US and Euro- 
pean bond markets for clues on 
bow currencies will perform. 
Some observers say bearish 
sentiment will dominate global 

bond markets with inflationary 
concerns causing jitters in US 
Treasuries and worries about 
excessively strong growth in 
Germany hitting toe bund mar- 

In recent weeks the dollar 
has been linke d to US Trea- 
suries. Although the US cur- 
rency showed an upward trend 
last Friday as failing commod- 
ity prices gave US bonds a lift, 
the Fed ha*» not WWH TnfluHnn. 
ary concerns and Treasuries 
are likely to remain vulnerable 
next week, bringing the dollar 
down, with them. 

In Europe, where the link 
between currencies and bond 
markets is reversed, the 
D-Mark and the Swiss franc are 
likely to benefit from the 

fall in European bonds. 

Without any key statistics to 
guide the market this week, 
foreign exchange traders win 
look to the release erf the Fed’s 
tan book on Wednesday, which 
helps it evaluate the US econ- 
omy in advance of the July 55 
FOMC meeting. 

Although figures which 
emerged from the US last week 
suggested a iruytoatinn in the 
pace of expansion, officials are 
still worried about inflation 
and analysts expect the tan 
book will jto. .nothing to 
dampen expectations of further 
tightening by the Fed during 
toe summer months. 

The markets will also be 
watching Mr Alan Greenspan’s 

Budget Committee next 
Wednesday. Mr Chneenspan will 
be discussing inflation and 
interest rates, giving currency 
traders an indication of US 
monetary policy. 

in Germany, analysts are 
expecting data next week to 
show further strong growth in 
the M3 money supply measure 
for the month of May. M3 
growth rates have this year far 
exceeded the target range of 4 
to 6 per cent 

Increasing optimism about 
German recovery have caused 
-expectations of a German 
interest rate cut to recede, giv- 
ing s t re ngth to the D-Mark. 

Sterling may have trouble 
rising above SL52 as markets 
have been reluctant to buy toe 

pound above that level. This 
trend is also keeping stating 
down against the D-Mark. 

testimony before the House 


Baring Securities emerging markets indices 



Week on week mwement 
Actual Percent 

Month on month moramenl 
Actual Percent 

Yeer to (tola movement 
Actual Pereent 

Worid (264) 

Latin America 

— 15552 







Argentina (19) 








Brazil (21) 








Chile (12) 








Mexico (24) 








Lata America (78) 









Greece (14) 








Portugal (14) 




-1 031 




Turkey (22) 








Europe (50) 









Indonesia (20) 








Korea (23) 








Malaysia (22) 








Pakistan (10) 








PtinSppinas fll) 


-12-39 . 



• -227 



ThaBand (22) 

229 A8 







Taiwan (30) 








Asia (138) . 

— 20069 







Al Mere in S mm Jretay 7»i 1BB2 

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Rarendan m far Mtai Slat PI Yemeni 

It's three times as many 
miles to Japan. 

Triple mileage credits are available on ail international JAL flights 
until 30th June 1994. Cali for details about JAL Mileage Bank Europe 

Japan Airlines 




The ThshoMfesef Be Wfcptf cent C ureantte d I Tnlre i nililr CbowbUHc Preference 


! on 26th Majr 19M pniwant to which Dtooon 
I toe ipvpcaHan of Ua ga aranhf of the pay- 
i monies payable in reaped of tbr Wi per oent 
1 Ptefcre no e Stem 2004 ("Preference Stem*) 

NVOtelMMO (aa contained in dacoe 2 of the deed 
as of 19th lanuoy 1909) with effect from 26th July 
that the Preference Stem remming oattfzncfing On 27th 
DskT) wO be redeemed at ptod op vritus, together with 
paid on the Preference Stem at aacfedale. 

Holden of the Rri wtB w Stem ahoold preaaai the oartLBates in reaptxt of the 
P r ufaen ec Shares held b y Hot together wtth mun ahued cwpotn tela Hug thereto, 
to wy o f tba paying agents noted below on 27lh June 1994 fix jaywejd. Payment 
wiB be taade aytot preaentation and wnniilw of the relevant share certificate and 
eonpom at sndh office, by atesbng cfaaqno drawn on. or by transfer to a sterling 
account roafadained by the payee with, a town dewring branch of a bant in London, 
ftymntfwa be nbiKl In all cm toaayappficabie fiscal or other laws and tegakdom. 
On re daanpMtattelaaoer wffl cancel the Preference Stem and the etete ccrtiBcatea 
tearing (faexeto. together with aB nnaatared coupon. 

Hotdcia of the P refe r ence Sham should note that their rights to convert the 
Preference Sham into ordinary etarcs in the capital of Dawson have now ceased. 

By rader of (he board 

Dawson Finance NV 

facoqntated wife Bailed IbWdty la toeNethedanda AntUea 

Citibank, hLA. 



Paying Agents 

Ottonp Inreat werdBanfc CMcarphmstmentBank 
(Swfaedand) (Lua eotan g) SA, 

Oaluiliuftirarer 63. 16/aran n aMaire'Didrtae. 

□14021 Zurich L£tg L win b nm g. 

(This arvusutttmaa appear* at a manrr of record onirj 


N.V. Koninklijke KNP BT 

with official seat in Maastricht, the Netherlands 

Issne and Admission of 59,340452 bearer depositary receipts with limited exchangeability 
for emulative preference shares ofNLG 250 ooaiind vMne at a price of NLG 7^0 per 

t wimlelbe preference share 

Issue and Admission arranged by 

Internationale Nedeifanden Bank N.V MeesPierson N.V. 


June 1994 

MARKETS: This Week 


Patrick Harverson 


Peter Norman 


David Waller II TOKYO 

Erniko Terazono 

any important economic 
releases this week should allow 
them to catch their breath. 

likely to have much of an 
impact upon prices are the 
April trade report and the May 
durable goods orders. 

The trade numbers are out 
tomorrow and Donaldson, 
Lufkin & Jenrette, the Wall 
Street brokers, predicts that 
the trade deficit of goods arid 
services will have widened 
from $7.5bn In March to f&Sbn 
in April The firm expects the 
deficit to have widened 
because it believes the recent 
slowdown in ec o n o mic growth 
wffl have led to a larger fall 
in exports than in imports. 

Normally, this would not 
prompt much of a reaction in 
Treasury prices, because the 
bond market does not pay a 
great deal of attention to the 

trade figures. Yet, given the 
fact that the weakness of the 
dollar helped to undermine 
Treasury prices last week as 
investors are always wary OF 
Imported inflation, any larger 
than expected widening In the 
t rarip Hwflnf t mnH yrmattln 

the US c urren cy, and with it 
Treasury prices. 

As far the durable goods 
orders, DLJ forecasts a modest 
increase in orders erf 0.2 per 
cent in May, compared with 
growth of OJ. per cent in ApriL 

There seems little in prospect 
this week to help Britain's 
confbsed and uncertain gflts 
market recover its poise 
against a background of weak 
bond markets world-wide. 

In the face of investor 
rehictance to buy fixed-coupon 
bonds, the Bank of England 
played safe on Friday by 
flnrimmdng the a uctio n 0T1 

June 29 of floating-rate gilts 
due 1999. 

However, Instead of 
welcoming the announcement 
as a stop to protect the 
fixed-interest gQts market from 
further supply, the market slid 
sharply an tire h»iinf **»»* the 

durininm Mg hH ghtwri Tiw 

n qpfi d PTwy in conventional 


The stage is set far a volatile 
few days in the bund market 

ahead of two significant events 
later this week. 

On Thursday, the 
Bundesbank's policy ■making 
council holds Its traditional 
"out of town" meeting, this 
year in the east German city 
of Potsdam, near Berlin. As 
usual, the meeting will be 


■2^ ■ 

1 m 

prices have been weakening 
in tandem with international 

bond markets, but have also 
been hit by rising expectations 

of an economic recovery. 

gfajft* in funds from bonds 
to stocks are likely to continue 

□w Hihn w rk yWd carve (Mf 
ITAW— MorthiQo = 


With few domestic economic 
indicators due this week, 
today's broad money and M4 
lending figures for May will 
be scrutinised for inflationary 
implications. The best that 
can be said is that they should 
cause little concern if they 
turn out close to the consensus 
forecasts of &8 per cent annual 

growth far M4 and £L9fan for 
hank and building society 

Following last week's 
warning from Mr Eddie 
Georgs, the Bank of England 
governor, of higher interest 
rates at some point in the 
future, it will be a big surprise 
if Wednesday's rnfamtea of his 
May 4 monetary meeting with 
Mr Kenneth Clarke, the 
chancellor, do not chronicle 
the end of the "bias towards 
easing” in monetary policy. 

in which Mr Hans Tietmeyer, 
the Bundesbank president, is 

WrwTy +n mmrnmif on the gtata 
of the German economy and 
field questions on the course 
of monetary policy. 

At around the time 
- perhaps at the press 
co nfer ence Itself- the 
Bundesbank is set to unveil 
details of M3 money supply 
in May. After growth of more 
than 15 per cent on an 
annualised, seasonally 
adjusted basis in the previous 
two months, the consensus 
forecast is for a modest 
reduction in the rate erf growth 
to about 14 £ per cent 

Any more than that and the 

market will be disappointed. 
Evidence of a slowdown in 
v lwniHwg or a pick-up in 
long-tom capital formation 
will be deemed positive. 

Far the past two years the 
out of town meeting has gone 
hand-in-hand with, a piece of 
good news. Last year in 
Leipzig, the Bundesbank cut 
the discount rata. This Is 
unlikely to be repeated on 
Thursday but the central bank 
may have other surprises up 
its sleeve. - 

foreign and domestic 

Institutions depressed the No 
164 lb-year government bond 
last week pushing up the yield 
to 4A1 per cent, the highest 
since June last year. 

Economic data to be released 
this week is likely to conflm 
such views, placing further 
pressure on bond prices. The 

di ffusion index for April the 
leading indicator far business 
sentiment, which is scheduled 
to be released tomorrow, is 
expected to be sharply higher 
fliBn the "boom or bust” fine 
of 5a 

The weakness in the 

government bond market 

promp t ed the ministry of 
finance to postpone its 
four-year bond offering for the 
third consecutive week. The 

rnn i 1 1 *• 1 . 

■fir: B yun iftv » 

Tin yttd* mart* eonwtrtw - 

10-year bonds next week and 
traders now regard the 
medium-term bond as u nlikely 
to be issued this month. 

"Recovery fever Is gripping 
the market,” says Mr Marshall 
Gittler, bond analyst at Merrill 
Lynch in Tokyo. He expects 
continued weakness in the 
bond market this week, with 
the yield curve steepening, 
as the central bank is likely 
to Tpaiwtain short-term interest 
rates at the current low levels. 

Capital & Credit / Graham Bowley 

The real reason behind rising yields 

Band markets have had a bad 
year. In the UK, government 
bond prices have fallen by 
more than 20 per cent, while 
yields have risen foam below 
6ft per cent to more than 8ft 

Why have yields risen so far? 
Fears of rising Inflation and 
highor inter est rates only 
be part of the answer. Yields, it 
is becoming increasingly clear, 
are rising because of a global 
capital shortage. 

The demand on the world’s 
supply of capital is beginning 
to grow just as the lenders erf 
that capital have deserted the 
market place. 

Bond investors hate foliation 
and rising interest rates. When 
the Federal Reserve raised US 
interest rates on February 4, 
yields, especially on US and 
UK bonds, already on their 
way up, rose further still and 
the consensus h^d it t hat this 
was because expectations of 
inflation had increased. 

There was same justification 
for this view. The gap between . 
the yield an a conventional gilt 
and that on an index-linked 
gilt, a useful measure of infla- 
tion expectations, had jumped 

to almost 4 per cent, while 
actual inflation was rmmiiig at 
almost half that rate. 

However, a rise in inflation 
expectations can only be part 
of the explanation for the rise 
fo hmti yields. 

"It is Interesting,” says Mr 
Simon Briscoe, an economist at 
S. G. Warburg, "that since then 
most inflation forecasts have 
actually fallen.” 

Investors must also be com- 
pensated for risk and uncer- 
tainty. The Bank of England, 
In Its latest inflation report, 
estimates that volatility in the 
gilt market doubled between 
January May of this year. 
The Conservative party’s 
protracted political woes, as 
well as currency risk and 
uncertainty about the strength 
of economic recovery are 
responsible for that 

The British government's 
handling of economic policy 
has also been blamed. Cer- 
tainly, the UK base rate cut an 
February 8, which. It was later 
revealed, Mr Eddie George, the 
governor of the Bank of 
England, had argued against, 
was taken very badly by the 
gilt market 

No doubt it was further 
unnerved by recent talk of tax 
cuts to boost the Conserva- 
tives' standin g . 

Increased risk, however, is 
not pnnrigh to explain the rise 
fo yields. This leaves one other 
ex planation: yields have risen 
because the real yield, the 
yield over and above inflation 
and risk, has Increased. 

Last year, funding the large 
European government budget 
deficits was easy. A scarcity of 
other worthwhile investments, 
with most of Europe still in 
recession, and relatively low 
financing costs - due to falling 
interest rates - meant that 
Investors willing to buy gov- 
ernment bonds were easy to 

Mr Sanjay Joshi, head of 
bond research at Daiwa 
Europe, estimates that last 
year £16bn erf gilts were bought 
fay overseas investors, mainly 
the Japanese, the Americans 
and hedge funds - large pools 
of speculative capital which 
are switched between financial 
markets to exploit short-term 

Now all that has (hanged. 
The hedge funds, having 

pushed up bond prices to 
unsustainable heights, have 
takwi their profits and moved 
on, to commodities, it seems. 

Meanwhile, the Federal 
Reserve has put up short-term 
Interest rates, the US economy 
is growing strongly, and there 
Is evidence that the European 
economic recovery is well 
under way. 

US investors, afraid that the 
dollar win soon begin to rise, 
and the Japanese, seeing the 
yen continue to strengthen, 
have dropped bonds denomi- 
nated fo European currencies 
and fafepTi their money home. 

“That colossal increase in 
government borrowing, which 
we Ignored while there was all 
that leveraged money around 
to mop it up, is now coming 
back to haunt us with a ven- 
geance.” says Mr Kit Juckes, 
international economist at 
8. G. Warburg. 

Mr Joshi estimates that the 
hedge funds alone have taken 
back about $40bn they had 
invested fo bonds and equities. 
To say that the bottom has 
dropped out of the bond mar- 
ket is perhaps not an exaggera- 

But it may even be worse 
than that The government def- 
icits have not gone away. On 
top of heavy bond sales by 
investors this year, there is 
stffl more new stock arriving 
cm the nwrimt. The UK alone 
win probably have to issue 
about £4flbn of gifts to finance 
its tiria year. 

“Just who is going to buy the 
bonds that are stm to be auc- 
tioned?” asks Mr Joshi Some 
commentators have even spo- 
ken of a funding crisis. 

This, however, may be miss- 
ing the point Real yields have 
certainly risen. - to about 4ft 
per cent in Germany and to 
more than 5 per wrt fo the 
UK, by some calculations. But 
this is not necessarily just 
because the supply of capital is 
drying up. 

This leaves one final expla- 
nation. World economic 
growth is picking up speed, 
most Importantly in the US, 
and capital will be needed to 
fuel that growth. 

Bond yields have risen 
because of an impending global 
capital shortage. The bond 
market’s had -year looks set to 
continue. - 

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International / Conner Middelmann 

Italian deficit keeps investors at bay 

Italian bonds took a pounding 
last week on fears over Italy’s 
swelling budget deficit. And 
until Prime Minister Silvio 
Berlusconi makes a dear com- 
mitment to cutting the coun- 
try’s debt, investor confidence 
is unlikely to return in a 

The first iniWMtinn^ of Kin 
government's fiscal stance are 
Kkely to be unveiled within the 
next six weeks, when it pres- 
ents its economic imfl financial 
pr ogramme to pariiament, set- 
ting the guidelines fin- budget- 
ary policies for the next three 
years. The document was to 
have been presented at the end 
of May, but was delayed as the 
government had only taken 
office a month earlier. 

Moreover, just as the pro- 
gramme was ready for publica- 
tion, the country’s constitu- 
tional court surprised 
policy-makers with a ruling 
requiring the state-run pen- 
sions system to pay LSO^lOObn 
compensation for under- 
payment of pensions since 

This fuelled fears that Italy 
would be unable to meet tins 
year's L144,00(Jbn deficit target, 
which is already set to over- 
shoot by Ll5,000bn, without a 
supplementary budget to cut 

t frp ghnrfcfaTI. 

"They have to revise then- 
whole fiscal outlook as a result 
of the ruling,” said Mr JosA 

Luis Alzola, economist at Salo- 
mon Brothers, who expects the 
three-year plan to be 
announced by mid-July. 

While the impact of the pen- 
sion ruling an tins year’s fund- 
ing may be moderate - if only 
because the government may 
spread payments over the next 
few years - it has served to 
highlight the market's unease 
over Italy’s deficit outlook. 

“After the euphoria follow- 
ing tha ejections, the 
was reminded that the key 
issue remains flw budget defi- 
cit and the debt outlook,” said 
Mr Graham McDevitt bond 
strategist at market analysts 
IDEA. "The pension r uling 
magnified those risks.” 

Salomon Brothers’ world 
government bond fade* shows 

Italian gove rnment bonds Ml 
by L9 per cent last week, the 
sharpest losses in Europe. 

The yield on the 8% per cent 
government bond due April 
2004 had jumped to IL03 per 
cent by Friday afternoon, from 
9-93 per cent a week earlier. Its 
yield spread over German 
bonds widened to 388 basis 
points on Friday from 310 a 
week earlier, fo. late April tire 
spread had narrowed to around 
250 basis paints. 

"That level reflected an over- 
shoot - there was too much 
euphoria after the elections 
without real news on the bud- 
get front,” says Mr Alzola. 

However, he foels that the mar- 
ket has now "over-reacted on 
the negative side” and sees lit- 
tie reason for further substan- 
tial spread widening. On the 
other hand, *1 don’t think we 
will see a ai giiifiiguit narrow- 
ing of the spreads until thq 
economic plan is released and 
restrictive fiscal measures are 
Implemented,” ha says. 

Having been elected on the 
promise of eventual tax cuts 
Mr Berlusconi is likely to focus 
on spending cuts, rather than 
tax Increases, to trim the defi- 
cit And what better place to 
start than the state pensions 
system, which, before the rul- 
ing, was set to cost the govern- 
ment around 14 per cent of 
GDP this year? 

“Painful measures are likely 
to be needed, as well as a shift 
towards private pension funds, 
so as to curb the increase in 
expenditure,” says Mr Colin 
Warren, European economist 
at HILFE, a political and eco- 
nomic research house in Lon- 

The government last week 
announced plans to promote 
the development of private 
pension funds. There are also 
plans to raise the ret ir ement 
age from GO to 65 for irwm aq fl 
from 55 to 80 for women. 

“If they convince the market 
that they're send us about cut- 
ting spending, fin- instance on 
pensions, the market could 

reward them with lower yields 
- which in turn could lower 
the interest burden on their 
debt," says Mr Alzola. 

But a far-reaching pension 
reform will take ronslderable 
time to implement, and some 
observers are arguing for indi- 
rect tax increases to boost rev- 
enue in the short term. 

"An increase in indirect 
taxes . . . would have the 
greatest immediate effect,” 
argues Mr Warren at HILFE. 

However, higher indirect 
taxes could threaten the infla- 
tion outlook, further depress- 
ing bonds. 

Dealers will be closely 
watch ing thin week’s release of 
June CPI data which may see 
the year-on-year inflation rate 
fell below 4 per cent for the 
first time this year. 

In its budget plan, the gov- 
ernment is also expected to 
address the problem of refinan- 
cing next year's masses of 
maturing debt 

Around L295,000bn of gov- 
ernment debt matures next 
year, of which some Ll90,000bn 
is long-term. In comparison, 
this year has seen redemptions 
of L80,000bn. 

The government was hoping 
to pre-fund some of this reS- 
aanefag this year, but given 
the current condition of the 
bond market, “it is doubtful 
they win he over-funding this 
year," said one dealer. 


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financial times Monday june 20 1994 




Opinion splits 
on the Dow’s 

Has the four-month correction in the 
bull market run its course, or is the 
Dow destined to revisit its mid- April 
lows? Wall Street analysts are divided 
in their opinions, but there is a general 
consensus that the market could plod 
higher over the next few days. 

At issue is whether stocks win begin 
a sustained tferito ft in the faen of 
unpleasant surprises, or whether the 
market will show the kind of resilience 
which slowly carried share prices to 
record highs last year. 

Certainly, the action last week 
seemed like a reprise of the good old 
days which preceded February's shift 
in monetary policy. As expected, 
volatility increased, but when the dust 
settled after Friday’s “triple witching 
hour", the Dow had managed a net 
gain of 3 points on the week. 

Cyclical stocks, such as CaterpDIar 
and Alcoa were also reinvigorated. 
“More market participants are 
becoming comfortable that the Fed 
did not abort the recovery, and it’s 
showing 19 in renewed interest in 
economically sensitive stocks, ' says 
Alfred Goldman, an analyst at 
A G. Edwards in St Louis. “That's 
going to drag the market upwards, 
just Uke in 1993. The bottom line is 
we are returning to a difficult, 
stock-picker type of market" 

Thomas McManus, a stock strategist 
at Morgan Stanley, acknowledges that 
the cyclicals have begun to return to 
their old form. However, he views their 
strength as one sign that the market 
is riding too high and ready for a felL 
He fears investors have become too 
complacent in recent weeks. Their 

Frank McGuitv 

overconfidence has In turn increased 
the downside risk to share prices. 

As evidence, he points out that many 
of the “put” options taksi out during 
the bearish days of April were not 
renewed after their expiration. 
“Investors have decided they don't 
need the protection." 

On technical grounds, the positive 
mood should carry stocks forward, 
he says. The fact that investors have 
let their puts expire creates support 
for the market, because hedges sold 
against those puts are bought back.” 

So why worry? Because the market 
Is In a lose-lose situation, says Mr 
McManus. If the economy cgntinnes 
to resist the Fed’s efforts to slow it 
down, look for a further tightening 
and a fresh sell-off. The more likely 
scenario, be says, is that the central 
hyptr already pushed rates hi gh 
enough to cool the economy, putting 
a ptrwh on corporate earnings. 

If so, look for more companies to 
join PepsiCo, Hasbro, Unisys and others 
which issu ed profits warnings last 
week. “This is the time when corporate 
America begins to confess,” the Morgan 
Stanley analyst says. “Indeed, it is 
really this period, before the reporting 
season, which Is the most dangerous 
fix- stocks.” 


index stands 
firm against 
summer storms 

The stock market has run into a series 
of summer storms and can take comfort 
from the fact that the FT-SE 100 
3,000 mark has been retested and held. 
This week should have opened against 
a more reliable domestic background 
than for some time; at least, the 
European and UK by-elections are out 
of the way. But the chancellor of the 
exchequer and the governor of the 
Bank erf England have managed, 
between them, to scare the market 
by ruling out tax cuts now and 
threatening hi gher interest rates 

The stock market perhaps should 
have been hurt by the combined 
Mansion House effect, but in feet was 
not Mr Bichard Jeffrey of Charterhouse 
TOney characterises Mr Mrfie George's 
speech as “innocuous ... a 
precautionary statement of the 
obvious". The market knows that 
interest rates may rise this year and 
is more interested in assurances that 
the move can be postponed as long 
as possible. 

It is not possible to be equally 
sanguine about the blow delivered 
to global bands by the negative turn 
in ttw> ViMtwn situation. Unfortunately, 
nor is it possible to say whether the 
same situation could blow markets 
about this week. 

Several City analysts Identity one 
significant feature of the Korean 
shakeout “Despite political rrvnrgmg 
the US dollar has not gained ground," 
says NatWest Securities, addirig that 
US bonds would be unable to continue 
outperforming core European bonds 
if the dollar continued to disappoint 

Terry Byland 

FT-re-A A fl-St wra igdc* 

Given that healthy bond markets are 
the key to healthy equities, the Korean 
factor could benefit UK share prices. 

Nomura Research refuses to see the 
North Korean developments as any 
sound reason for a withdrawal from 
Far Eastern markets but warns that 
Japanese funds still see US bonds and 
equities as the best buys. 

In spite of the problematical outlook 
on thp. international front, underlying 
faith in the current levels of the London 
equity market remains sound, even 
if some of the reasons may surprise. 

Mr Albert Edwards of Kleinwort 
Benson does not accept the view that 
base rates will rise. The UK economy 
is set to weaken sharply. Higher base 
rates are not justified,” he says bhmtiy. 
Kleinwort has reined in its forecast 
for earnings g row th in the nom- flnanci al 
corporate sector to only 10 per cent, 
compared with a market consensus 
forecast which started the year at 12.6 
per cent and has now been raised to 
around 13.4 per cent 

Most analysts see the UK stock 
market continuing to move within 
its existing range fra* the Footsie of 
3JJ00 to 3,050 - an extremely narrow 
range by recent f ** Ym p gr » c * Tnn - Stock 
Rvrhang p volume Statistics confir m 
that institutions are willing traders 
at these levels. 

International / Tracy Corrigan 

Heading for record year 

The bearish sentiment which 
has dogged most financial roar- 
kets for the first half of 1994 
has foiled to suppress activity 
in the International equities 

White the lacklustre perfor- 
mance of most stock markets 
has forced companies to price 
new share offerings more 
cheaply to attract investors, 
the broad trend towards 
distributing equity offerings 
internationally - or adding 
international tranches to 
domestic offerings - shows no 
sign of abating. 

So far this year, S45-7bn of 
new international equity offer- 
ings has been absorbed, 
according to IFR Securities 
Data, which puts the market 
on target for another record 
year, after last year’s $73.7bn. 

The trend for international 
offerings was kick-started in 
the mid-1980s, when a number 
of governments keen to sell 
large amounts of equity 
through privatisations found 
that they could get better pric- 
ing by targeting foreign inves- 
tors. Keen to facilitate their 
own deals, regulations restrict- 
ing such offerings were rapidly 

Deals such as the UK's Brit- 
ish Gas and Spain's Telefonica 
in the late 1980s proved that 
paper placed overseas did not 
always drift back to the domes- 
tic market 

Re-examining their policies 
on asset aTinnatinn, ftmd man- 
agers began to Increase the 
weighting of international 

equities in their portfolios. In 
particular, the massive US 
market became more outward- 

“Historically, US investors 
had been r unning with 3 to 5 
per cent of their assets in 
non-US stocks. That has cow 
risen to 7 to 8 per cent, and we 
think it could easily double 
again in the next three years,” 
said Mr Tom Davis, head of 
equity capital markets at Mer- 
rill Lynch in New York. 

The market for global offer- 
ings was also boosted by the 
introduction of book-building 
techniques developed in the US 
domestic market, which helped 
improve transparency. 

However, the market has not 
been reliant on US issuers. In 
fact, many participants are 
sceptical, about international 
tranches, usually comprising 
10 to IS pcs* cent of the total 
transaction, tacked on to US 
offerings, often for league 
table, rather than distribution 

This year, the normally 
active new issues market in 
the US has suffered from the 
relative weakness of stock 
prices, causing many public 
offerings to be cancelled. 

However, “a lot erf the slack 
in the US calendar has been 
picked up by the explosion of 
activity in Europe,” according 
to Mr Davis of Merrill. 

The flow erf prime European 
namM tm the privatisation cal- 
endar has been little affected 
by more fliffimit market condi- 

Many governments, con- 
cerned about deficit financing 
problems, are willing to scale 
down their pricing expecta- 
tions, while companies may 
prefer to wait for more fevoor- 
able conditions. 

A more competitive environ- 
ment for deals is also the 
result of the proliferation of 
privatisation programmes 
among European countries - as 
well as what one banker 
describes as “a ton of smaller 
corporate deals". 

Nevertheless, the second half 
of the year is likely to be domi- 
nated by a spate of large priva- 
tisations for the likes of Ina, 
the Italian Insurance company, 
Repsol in Spain and Lufthansa 
In Germany- 

Emerging market transac- 
tions, which suffered from the 
sell-off in those markets earlier 
this year, could also stage a 
come-back, although at more 
realistic pricing levels, while 
some analysts expect the stran- 
ger performance of the Japa- 
nese market to pave the way 
for a resurgence of Japanese 
convertible offerings. 

“There is a global market for 
stocks now,” says Mr Ian Han- 
nam, director of Robert Flem- 
ing, with London as the main 
centre for the origination and 
distribution of these interna- 
tional offerings. 

An international equities col- 
umn will run in this space 
every Monday. Our weekly 
derivatives column will now 
run on Thursdays. 



The key event for German 
equity markets next week is 
the opening of subscriptions 
for the near DM3bn rights 
issue from D aimler -Benz, the 
German automotive, 
engineering and aerospace 
group. It priced the issue 12 
days ago at DM640 a share, 
a then 20 pa- cent discount 
to the existin g share price of 
DM804.50, writes WUHam 

Since then, notes Mr 
Eckhard Frahm of Merck 
FTnck in DflsseldorL Daimler 
has dropped to DM72S. in line 
with a thoroughgoing 
correction in German cyclical 
stocks, and the discount 

has narrowed accordingly . 

Th e Dafmler imtip fnrms part 

of a projected equity raising 
total of DM24bn to DM28bn 
in the German markets this 
year, compared with DM15hn 
to DMlBbn hi 1993. However, 
says Mr Frahm, it is thought 
that major shar eholders like 
Deutsche Bank, the 
government of Kuwait and 
Stefia, a holding company 
owned by large German 
industrial and financial 
companies - owning an 
aggregate of 51 per cent of the 
Daimler equity - wifi take up 
their rights, easing the 
potential pressure on 
institutional investors. 
Strategists will also be looking; 
on Tuesday, at the latest M3 
money supply figures. 


Bints of imminent 
transformation at Kfektrow at t 
and Motor-Columbus, 
Switzerland's two big quoted 
electric power generators, have 
been buOding in recent 
months, and more may emerge 
tomorrow whenElektrowatt 
repeals its interim results, 
writes Ian Badger. 

The big questions are 
whether the two will merge 
and. if so, who w£Q take over 

Oddly, both are controlled 
by one of Switzerland's big 
banks, Etektrowatt by CS 
Holding, Motor by Union Bank 
of Switzerland, so Zurich 
gnomic pride could play a big 

UBS haw maria clear Hiai it 
does not regard its Motor 
hnlriing tm strategic, and 
M oto r's ehiaf gypr-nth m Rrna t 

Thomke publicly nndged the 
bank two weeks ago to put an 
end to the uncertainty. In 
March Oskar Bonner, the new 
Elektrowati; chief executive, 
said the group's main future 
growth would come from its 
industrial division. 

As for the likely trend of the 
interim results to March 30, 
the electricity division 
probably enjoyed buoyant 
export sales, thanks to 
unusually heavy precipitation 
in Switzerland last winter. 

The market win be awaiting 
publication this week of 
consumer price indices for 
Basle and Geneva. 


Worries about the economy 
and the prospects for higher 

interest rates conspired to keep 
the pressure on Milan last 
week. The weight erf 
forthcoming capital calls and 
privatisations, estimated at 
more than Ll0,000bn, also 
preyed on the market as the 
new account began last 
Thursday. This Saturday will 
see the price set for one of the 
privatisations, the 51 per cent 
of shares being offered next 
week in Ina, the insurance 

The Treasury has already 
confirmed that the price win 
be In the range of L2JM0 to 
L2.700 per share for the 2.0flm 
shares on offer. 


The market has been on the 
downturn since early this 

nwnfh and thg tr end harin g 

a foehninai rally, looks set to 
continue throughout the 
month. After reaching an 
all-time high in early February 
the market has 
under-performed the rest of 
Europe, partly due to the rise 
in US interest rates and the 
draining erf liquidity for 
privatisation issues. Yet the 
economy is sound and recovery 
is well under way. Mr Michael 
Woodcock of Nzkko Europe 
thinks investors may have 
some time to wait for recovery, 
with interim results in the 
eariy autumn perhaps sparking 
new interest 


The results season continues 
with figures today for the first 
four months of the year from 
Repoia, Finland’s largest 
industrial group, which 
rebounded into the black last 
year after much improved 
performances from its main 
forestry and engineering 
activities. Meanwhile, 
parliament votes today on the 
supplementary budget, which 
incl uded gn wrnment plans 
to cut state ownership in 
Finnair to as little as 50.1 per 
cent from its current 72 per 
<ynt Nokia holds an 

pyfT-anrri inary shareholder s 

meeting on Thursday to 
approve the issue of 6m 
preferred shares. 


While share prices face a 
short-term correction following 
the rally in early June, 
increased trading by retail 
investors seems to hold the 
key to a further rise in the 
Nikkei index this week. 

However, since participation 
by individual investors has 
been based solely on a 
recovery in sentiment, rather 
than an improvement in 
economic fundamentals, Mr 
Alex Kinmoot of Morgan 
Stanley says the improvement 
remains vulnerable to negative 
news. Meanwhile another fall 
in bonds may prompt a 
further shift in fonds to 

This announcement appears as a matter of record only. 




The undersigned underwrote and 
funded the US bridge financing together 
with the working capital and letter of credit 
facilities to enable Compass Group PLC 
to acquire Canteen Corporation 


June, 1994 

This announcement appears as a matter of record only 


has acquired 




The undersigned initiated this transaction, 
assisted in negotiations, and served 
as financial advisor to 
Compass Group PLC. 


New Broad Street House, 35 New Broad Street, London, EC2M 1NH 
Tet 071-638 8888 

June, 1994 


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Get the information advantage by reading the 
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YES. I would (ike is subscribe to the Financial Time*, and cnlov mv (ini 12 'mm. r~z. ■ n. _ 
before itdiKiy of my firg copy. Please enw my snbscrijxiofl for 12 moodis a )fc falbwin^nijp«| 0W *^* ** 2 

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Read tomorrow's newspaper today. Check your Pulse. 

The City news stories that will make tomorrow's front 
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Dot. biu\.fcicra te 

No anfrr dmpnd t&m * 

Financial Times. Europe’s 

- • so* 


20 1994 







(Bch) 17.4821 *<xo«03 731 - 910 

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Taiwan (TS) 27X635 400017 ( 

Thoiand (Bf) 25.1800 +0003 ! 

tSOR rats Hr Jun IS. BUMS* —wW In ms Dob 
but are Strafed by curere tM rats*. UK Mand 
































































































811 -820 
292 - 302 
860 - 726 
470 - 520 
936 - 943 
388 - 900 
000 - 000 
606 - 503 
330 - 340 
495 - 510 
500 - 700 
600 - 000 
626 - 546 
500- 700 

1X880 1X602 
7.7308 7.7292 
31X726 31X850 
103X00 103X80 
2X966 2X925 
1X952 1X872 
27X000 28X000 
3.7500 3.7606 
1.6350 1X328 
3X690 3.6346 
4.7700 4.7600 
906.000 608.700 
27X646 27X826 
26.1700 25.1500 
ahovetoy dia Htn 
uetad h U8 sum 

-OX 1X821 -0.1 1X866 -OX 60X 

0.1 7.7317 -ai 7.7469 -XX 

-3.1 31X938 -2.9 - 

2X 102.57 2.4 100X96 2.7 146X ■ 

3X 2X633 1.7 2X143 -OX 

-IX 1.8957 -IX 1.7174 -1.7 

-OX 3.7633 -OX 3.7BB -OX 

as 1.5328 OX 1X346 -0.1 

-8.1 3X941 -4X 8.7708 -3X 

-SX 4X526 — 7X - - 

-4X 814X6 -3X 832-75 -3.1 

-OX 27.1135 -OX - 

-ax 26X8 -ax 26X4 -2.7 

pisGM. Rsnrort rasa we not dtaotty quota tojjw mwtat 
i n un* el Mesa Jot 18. Bass orereoo laso-iOb 



June 17 























































































































































































































































































































































June 17 0«« 


Belgium 5> 

week ago 5j 

I O as dld i Manor per ‘ 

I (IMM) DM 12SXOO pv DM 


Sett price 





Open feiL 

























i Raid, Escudo, Lira i 



Jun 17 Over- 7 days 

mght nndna 

One Three Six 

month m o n ttn months 

M SWISS FRANC KniRBS (IMM) Sft 125.000 per SFr 
























bunbank Starting 4*j - 3^ - 4* 

Starling CDs 
Trensuy Oh 
Bank BKs 

Local authority depa. 5\ - 5*g 4H - 4}J 
□boount Market daps 4^-3% 4, 7 « - 4ft 

4ij - 3Ja 4H-4A 4U-4H sd-fife 6,1 -SA si -SH 

f -4M 5A-5 6U-SV 6-5% 

4% -4a 

4U-4Q 4}}-4» 5%-5A 

Sk-SH 4H-4& 5 - 40 Si. -5 A 5% -5ft flA - SQ 












































































































































































































3 % 






I Yon 12X per Yen 100 


Sett price 



. Uta 


Open InL 

























■ STB3UHQ 7UTUR08 (IMM) £82X00 per E 

UK darning bank base lotting rata 5V par cant from February 8. 1994 

Up to 1 1-3 $X 6-4 9-12 

mon th month month. months moniha 

Cwts of Tax dap. (£100000) 1>a 4 3% 3% 3*2 

Owta at ttac dap. uidsr £100.000 la 1%po. Ospodis tottvtam tor cam Vpo. 

Aua. and* rats of deoount 4X735po. ECGD Rued rwa Sag. Export Branco. Matte its tfcy May 31, 
IflM. Aoaadmtefer period JUi 2& HW M Jut 23. 1W, Stfwm— « 4 B a^rpa Ib damoe is* tar 
padod Ap-30. 199* to Mpy31, 1994, Sehemea IV & V Sk222pC Hnnce House Bam Bata S^pc (ram 
Jun 1, 1094 


week ago 


week ago 
week ago 


weak ago 
weak ago 

Interbank Adrg H 4J 4% Eft 

week ago - 4i 44 4H 6« - - 

US DoBor CDs - 4.16 4X8 4X6 6X4 

weak ago - 4.16 4X8 4X9 6X1 - - 

SOR Unkad Da 3% 3ft 344 4 

weak ago 31ft 34 W 4 

BCU Unkad Da mU rata 1 mlh: eg; 3 mda: BS; « nMc S& 1 yaw; a*. • UBOR Hwbsric 1 
ratae n dlbrad ram tor 9lom<ynM to tfieraalM by tar rateenes bade <t llamaodi wa 
day. The benta ana Bank a ra TVuet, Baft of Tokyo, Bad e* aid NWfcnd WM G id W. 

MM ram ora shown tor th* ttanasac Msnay Rem. US 5 CDs aid BOR Urtad Depoata fh). 


Jun 17 Short 7 daye’- One Three ’ sbe One 



1J5168 1^352 


jfi niRA 








Jui 17 

JUS 10 

Jwi 17 

Jon 10 


■ 1 JKmC 


+U.U mo 


■ i*WJO 






BK aa oflsr 



Tap accspM rata 



■ PWLADCLPWA SB 9/SOPTKWa E31X50 (cents per pound) 





- CALLS - 



— PUTS — 














































Total g( mpBaikn. 
Tow akntal 
Uln. aocoptBd .Ud 
AUotaant at min. laid 

El 390m El 650m 
£98.780 E9B.7B5 

Am. medderain 
Amge yMU 
Oder m not Wider 
Mn accent bU iffi deya 

4.8739% 4X517% 
4X334% 4X111% 

Belgian Franc 
Daniali Krone 
Dutch GuDder 
French Franc 
Potugueea Esc. 
Spartth Peoete 
Series Ftwc 
Can. Dolor 
US Dolor 
ItaBan Urn 

Aston SShg 
Short tam ram ■ 



5- 4^ 

6- 41! 

7& - 7U 
3* -3* 
43. • 41. 

3% - 34* 
ra ad tathe 

GH-fi 6ft 
61,-S«| 8 

s- 4 i 5 - 

5-4fl B ■ 
612-0. 02 
1BH - 15V 17ft 
Tk-TH 7H 

4%-4H 4fi 
3H-3H 4- 

6^-6% SA 
*ft - 4ft 4ft 
7k -7k 7H 
2ft -2ft 2ft 
3k - 3* V. 

US Ddta and Ym 

-5ft 5ft - 6ft S%-6>2 

- 6k 51.-5% 6% -6 

4% 6 - 4% 5ft - *li 

4(1 S-41 S-4B 

-5% 5*Z-6% 63.-8% 

- 16% 15ft - 144| 14 - 13ft 
-7ft 73-7% 8ft - 7% 

.* S: 2 i % % 

-53 6%-«* 7% -8% 

-4ft 4ft - 4ft 4% -4\ 
-7fl 9-7% 8ft - 8ft 
-2ft 2ft -2% 2ft -2ft 

-4ft 4%-4% 5ft -5ft 
, ottiera: two cbya* nottce. 

B% - 63 * 
5 %- 5 % 
5 ft - 5 ft 
5 %- 5 % 
13 % - 12 ft 
eft -53 
4 %- 4 % 
7k -7h 
6ft - 6ft 
2 % - 2 % 

■ THRBS Bnomf BmODOLLAfl (MM) Giro points of 100M 


The FT Guido to World Cunenctee 
table can be tound on tha Enlarging 
Marttstepaga In today's edtkm. 

Piaricu deya «eL CMb 5&4M Pus B^aa . Am. eta's open M, OMs 410/Ma pm 3S7X40 

■ Hi i — . .I ha - - tf+JL 

— to»9 ■«*aaa 

Jm 17 — On — -Pnjv. doae- 

Espot 1X349 1X200 

1 am 1X337 1X192 

3n0i 1X342 1X180 

1 yr 1X250 1X120 


Wk« Ana Meat 
IMss Pita? +7- On duo 

last Cfe 
to few 

VX% Ana kite eit 

Notes Pries f *f- Em due 

Lad CRT 

at fee 

Wk% And Usmst Met Qtr 

Notes Price E +f- On dot to few 


Sett price 




Eat vd 

Open int 

























■ us nuMauRYtaunmmat pmm) simper 100% 

























•ato 1 (Una qita Bn Wan) 
traas-ioocla 1994#_ 100 — 1X00 

Dtb 12^1094 100% -1.1 1X40 

Trees 9pc 1994# 101 JJ -.1 1.900 I 

12|R 1985 104 -2 2X50 

Fx*3pc Gas 30-85 »■« — 214 

10%{C1B95 10+ya -X 2X00 

TrcBizJiKiggs# — inn -x aao i 

14K 1900 11»A* -X 770 

IS’+Kiaem, 17413 -x 1.150 

art taupe toaatt — rif*a -■* «ni 

Omenton lOpc 1998 — 10% S 3409 1 

CHh7KlWm BB0 -X 20X00 

Td» 13 V, DC 1897# — 113AJd -X 1,290 

Bcfl lQljpclOS? m\ -.4 3700 

ITOtoBliK 1997ft HEi -X 5X50 

Encrusts; IM* -x too, 

BhK199B 1WIW -X 3X50 

iron 7V,pe 199m 97» -X 7X50 1 

Tra3e5\pc 199S-06t£— 95f. -J 1X00 

14K’»-1 118*. -.6 070 1 

Trass iS'jpc’OBtt 125*8 -7 935! 

Bltt>12pc 1990 11211 -.7 3X09 I 

rraes9*apc199Btt TIMM -X 1X00 

Rie 10 FStad Tears 

Enb12>«pe1B99 H4H -.7 3.050 

Itaa lOVzpc 1999 107U -x 1X50 1 

Dee Ope 1999 tt 901. -X 5X00 

CoWBrsta 10V,pc 1«S_ 107A -IX 1,798 1 

TratoRMRto'SB 10BA — 0 

Spc 2000)4 191% - 1 - 0 5X58 

Trees 1 Jpc2000 _H9)*d -IX 3,171 

1 ope 7001 1®B -ix 4X0B 

TpcUl tr 91ft -IX 3X50 

7*91 A 91A -IX 2X00 

9V, DC 2002 IIMB -IX 6X27 

fee 2003# 85*+ -1.7 7X00 

17.1 1283 
20.12 1294 
283 1309 
B.4 1255 

1 fee 2003 

Trues 11 >2pc 2001-4 — 
Rising 3*fl)C9(M 

Chnnnkn 9*2PC 2004 

Trees M*c 2004# 

Con* . ^ pc 2005 

Titos 12*®c 2005-5 — 

Bfe 2002-60 — — — 

Ttra nkpc20B3-7 

Dm 8*20 c 20070 


Tran fee 20080 

1083 -IX 
112*1 -13 

73%M -13 
104b -IX 
871* -Z0 
104% -IX 
120*j -IX 
93ft -U 

95 -IX 

iisiid -ix 

98 -IX 
1Z7A -IX 
JD2fl -IX 

2X03 IfeSSsS 
1X20 Mrl9Sel0 
643 J)14Jy14 
3/12 Ap2S0c25 
8350 ay2BM»2B 
4X42 flpIBOclB 
2300 My21 H*21 
3X00 IMSeB 
2X00 fe50c3 
3.150 Ja22Jy22 
5.497 JaTflJyl* 
1X50 M28SB20 
5321 Ap130c13 

Spc’BB (673) 198% --1 1X00 BMBSeia 7X1313 

4%pc-9BO J13SX) 107*4 -.4 BOO flpZ70cZ7 213 - 

2’apc’Ol (783) 164U -IX 1X00 Mr24 5*24 15X1316 

2'jpctn (78X1 160% -IX 1X50 Hy20N*20 1141317 

4HpcWO n3S.B) 108** -IX 1X00 0021 0c21 214 - 

2PCTH (etX)166%d -IX 1X50 Jl19Jy19 13X1314 

2*jpcD9 (78.8) ISO*. -IX 1X50 Uy20Mr20 1141311 

2*jpc'n (74 X) 155% -IX 1X50 FeZ3flu23 17.11319 

2%*13 (592) 127H -2.1 2J00 FelB/lu16 181 1320 

ZbpcTfi (BIX) 1£% -2X 2X50 JdBJy26 20121321 

2%pG*Z0 J83U) 129(1 -23 8400 felOOclB 1031322 

2*WC74» (97J)107%jd -23 2X00 JBl7Jf17 1061323 

4*pic-30)t — {138D107AB) -2.6 1300 Ji16Jy22 15X - 

(10 Rgwes in parensmes show rpi base lor mdaxlng (to 8 
moniha prior to toeu^ aM have boon adjusted to reflect rebarang 
Of RF1 to 100 In Jrauary 1987. Comraralon factor 3X45. RPI tor 
October 1983: 141X and tor May 1904: 144.7. 

to Opai beam Hgo. ora ta pravtouartoy 




Dm fee 2009 

Tim 6 U4pc 2010 

Con* fee La 201 1 ft 

Trass fee 201 2t) 

Tim fee 2013ft 
7%K2m2-15tt — 

D*9S S%K 201 7)t 


94% -1.7 
80% -21 
HBUad -IX 
103% -1.7 
73U -27 
V# -1.7 
93% -13 
1027. -17 
130A -TX 


War Loan 3>jjict± 


Than 3pc *88 M 

CBSW3 2>2PC 

Trees. 2*2PC 

45% -3.7 

41% -ax 

57lj -1.1 
33U -X* 
29% -X 
29% 1.1 

3,100 U2S5025 
2XSQ - 
4373 k12Jy12 
5.150 FeBAuO 
1X00 IfrlOSefO 
4X50 10276027 
BOO JB28 Jy2B 
6X50 Fe25fe2S 
1X00 JsISDelZ 

3SB Fal Aral 
1X09 JelOel 
119 OpIOei 
275 5fefeJ|0c 
475 All Del 

164 - 

31.12 1701 
IX (330 
1BX - 
20.12 1332 
10.1 1582 

264 1352 

Other Fixed Interest 

MtanOevim 2010— 

AitoiDef id*4pc2309_ 

Btore 11 %pc20i2 

WmQto8%pe*iO— _ 

9R Cap 1998 

1 fee "97-2 

Hjitnj Quebec 1 fee 2011, 

Iavb13%pc 2005 

LSmrpod 3*ipc hred. 

ICC 3pc XO Aft. _____ 
MasAesKr 1 1 %pc 2D07_ 

Uatwr fecD* 


4%pc 9. 2024 

Udlta Sam 1B%K ZOOS 

I17]i -IX 
110U -IX 
117% -1.6 
101 -1 
109% -7 

141% -1.4 
126% -IX 
38% -20 
32% _ 
112% -2.1 
66% -J 
131% -13 
12X% -X 
138 -1.4 

50 Ja4Jf4 
IDO M24Se» 
45 Hf15N*l5 
303 flplOel 
«25 JaSOfeJO 
315 All Od 
40 Ufjl Nt 30 
40 felOcl 

5 UaAueOc 

29 TJRJeSeOr 

6 Ap250c25 
25 Hri Sal 
60 Jsajyaa 

50 MSI Sal 

Pihfic dspos ka 
Bankara deports 
Rssene aid otfwr acoo u nto 

Govammant aecurittea 
Advance aid ofher accaotta 
Pramtoa. eqtipment and other 1 




Notes h ckoutotton 

Notes In Banking Papartmert 


Govammant debt 

Other Government secwhtoa 

Other Securities 

Jura IS, 1994 




















tncraaaa or 
dacra a sa tor w«ak 










- 197 X 09 




• Tap' stock, tt Tsx+TOe to nan-raddons ai qppscaaara E Auaton bests, cd Ex (Mdend. OcMng ietap>toei we shown to rounds. WMMy pem e ntage elungu am cstafelad on a Friday to Friday basis. 


Jun 17 Jtoai 16 

FT-® tOO 30228 30301 

FT® MU 250 3527.1 3534X 

FT-® fed 250 at ITl 3S27.0 35343 
FT-SE-A 350 15233 152BX 

FT® StoOCbp 1B50J3 1852X9 

FT® SnaOsu e> (Ta 182737 182936 
FT®-A M-Sbare 151601 151830 

— 1B94— Stocs amp. 
Jwi 15 Jun 14 Jun 13 Ktfi Lo* Hgb Law 

30453 30393 30553 35203 293)3 35203 0853 

35507 35707 30083 41523 3527.1 41523 13704 

35603 3564.4 36153 41807 3527 0 41607 13703 

1535.4 15349 1544X. 17703 1489.1 17703 6843 

1857® 185023 1863.17 209498 185073 209488 1383.79 
183394 183694 183018 20E8XZ 1825X9 206072 136179 
152839 1528X3 1535.01 17B4.11 148433 1764.11 8192 

FT® Emtrack 100 
FT® Etaoneck 200 
FT Oast Sectaifles 
FT R«d Herast 
FT Odd Mnes 
Predecessor Gold Mnes 

Jun 16 Jon 15 ■ 
1 1355 78 137041 : 
’ 139107 140938 1 
I 23814 23893 
) 91.50 92X8 
' 108.73 109.12 
! 1978.13 198533 1 
I 231X 2SJ 

— IBM— Stare 1 
Law Kgh 

’ 154018 1350X4 154018 
> 1807.10 138937 1687.18 
i 27133 7321.2 27113 
I 107.04 9134 12730 

I 13187 108X7 13187 
I 23873 178232 2387JM 
i 2773 185-0 734-7 


Adam&CoTgany — 5X5 

ABod TiubI Bark — 5XS 

AJS Bark .... 6X5 

•HenyAnsbachor 6XS 

Bark ol Brands .... — 5X5 

Banco BfcwVfcEaya- 5X5 

Banked Cyprus 3L» 

BardtoMrataid -sas 

Barked Inda 6^5 

Borkof Sadtond Oa 


Brit BkalMd East — 025 

•Brown SHpfay & Co L3LS25 

CL Berk Nederland.. -5X5 

CCbankNA 5X5 

OydasdetoBank 5X5 

Tho Cotopetdkfi Bank. OXS 

CcuUs&Co- — - 5X5 

Crock Lyanrtaa 6^ 

Cyprus Popular Bar* -5X5 


Duncan Lawria 5X5 

Beats Bar* Limrod ... axs 
RrandalAGenBark- 6 
•Robert Ftotrdng & Co _ 5X5 

Girobank 5X5 

•Gutams MNion SX5 

Hat* Brak AG aurWi . SXS 

•H ai i flj roa Bark 5X5 

HerBafato 6 Gan Imr Bk. 5X5 

•HBSanueL 5X5 

C. Hoars & Co 625 

ttongtang S ShanghaL 5X5 
Jutom htodgs Bank . — 525 
4Njeoptttd JoBqtti 6 Sons 5X5 

Lloyds Bar* 5X5 

Meghre( Bank Lid 5X5 

MUtandBank - 5X5 

* Mount Bunktog G 

Ccrpartaan LMtod is no 
longer autiariBBdaa 
a ban ki ng wtttidtai. a 
Royal Bk td Scoiand - 525 
•Smtoi 6 VWbnsn Sets . 5X5 


•Untted Bk t/KuwaB _ 525 
Unky Trust Bank Pic... 5X5 

Western Tiusl _5X5 

Vintsaway Lakflaw — 5X5 
YoriaNnsBerik 5X5 

• Members ol Brittoh 
Merchant Banking & 
SecurlHas Houses 


leaua Amount Latest 
price part Ranua 1094 
E up data Ffigh Low Stack 

Cfcasmg +or- 

96 95 Britton Cv. Pf. 95 

96 78 Cneston Land ape Cv. Ln. 78 

103 ICO Flecd Preps. 7*2pc Lit 2020 100 

117>2P 98*2P MAI 59p Cv. Pf. 102*2P 








H0h Urn Stock 















123 115*2 Asm. Hamm 










160 Array 


INI 98 








256 Aigeni 










100 Automotbe Frees 










100 Base GUM Shn C 










150 Brawftt DotpNn 





















107 CLS 










143 Cased 










34 Okra Comma 











133 Dsnby 











90 Raring tndbn 











42 Do Warrants 










22S hten iiadteto 










65 JF H Jrawi tats 











5 Kays Food 










200 {London Clubs 










98 MflhHrefcn}: 










130 125*2 Noreor 










118 Redraw 










90 Scuddw Larin 









43 Da Wrts 










96 Stores HY Slrir C 










108 Spank* Cons 


LI .6 








98 rn Eura Gwth C 









82 TR Prop Inw C 

93*+ »1h 









108 UPF 








17 : 




Jaa 1 


% at 

yMd % 

52 MO* 

Htah Law 

Gold Maas Mn (35) 




47 32 



2367X0 192268 

■ ftaetato maces 


281 5J9 






344090 180233 

AuanLeu (8) 




14 71 


301389 1693.18 

ttnnti America fll) 





51H7 ’ 


2039 65 136100 

Hie Property Finance Sourcebook 1994 

The ultimate Property Finance Directory showing exactly who is leading what 
in p r op e rty reday. Complete with lending criteria and contacts. Absolutely 
indispensable tor anyone mtercsted in UK property. Cal] 071 495 1720. 

Oooynght Th* Financial Tima Urnlad IBM. 

Ffeina to bod« allow runbnr or canxwmn. Bara US Dokn Bom Mis Ji/IM; 
P ra d B C OM or Onto Mn* la dwc J uno 1 7: 2303; « aam chanoK -124 pom; Yew ago: 1803 
CONSTITUENT ADOmON WITH EFFSCT 3MWi 3ana Fo Pacific GcM Cop (NUi Amencaf. 

TKr nuflrLil taol tot ih« Hflgu. tntnii 


London stock exchange 


issue Amount Latest 
Orica port Renun. 1994 

p up data High Low 

150 W - 6pm 5pm 

2 KB 2377 4pm i%pm 

180 KB 20/7 23pm 3pm 

265 KB - 65pm 13pm 

425 M - 35pm 18pm 

105 M 2017 2pm 1pm 

230 Ni - 34pm 19m 

205 M 18/7 2fipm 7m 

100 Ni 297 11pm 2>2pn 

S Ml 2177 9pm 7m 

24 w - i2m iOm 

250 M 2777 38m 20pm 

73 W 57B 3m 1*B»n 


■{Cop. Senri ce a 
Dbcon Motors 
Emm Hstahaw 
Higgs 6 KB 
Jarrts Porta 

Watos Ctty td Lon 

Oostog +or- 





i3m -io 



7pm -4 


20m -a 

1>ap m 

Money Market 
Trust Funds 

" k! 

bw 0* Mtr 

m4B lOW 


■no Aral a m or 

+3 S.W I 432 S? 

aja tun I 1* 

?79 UN I Z78 oa 

Tbs CUF CtartHa 


Cast. Bd. of Rn. of Chanh <d 
3 fen taMUoden EOT RM 
nramat . ,i ago 


Money Market 
Bank Accounts 

fetm mot 

IS I 4321 as 

M | 13S W 

a *84 n 

IB I +32 1 V 

00 490 US 

re *31 f UJ 

rs ui l uo 


nanao » ■ Im im I usl oa 

an ira in 
w u w 

ill u Hi 
UO 407 IB 
119 Ut UR 

SSSA=dS3“ m\ri* 

HtbWUMMai- UD IS n Wl 

S SS Hi S 

Lttwds Bonk - tamtamKrt Accotot 
7iiE5sN auatm aap ns 

rd6LLaU>iEC3Pn8 027Z4S3S72 

■dS0M_ US 994 US Italy 

■ £5 aoa Liim 

: jo* 171 Boo kwv 

IN I AZalreSy 

mtotaT^ 0«2 

AX0QOO+. 3JD U1 in 

ut ur 

Eno sjs Bsa 

uo vn u 

SJS - OlN 

Mb Bag to - fliral B-N umtnr 

SJ is SS 

ts IS S£ 

890 ua Ml 

Bardin PAmAcmmI KtCA, 

PO Bra 125 B a tt n iao 

2X0 MMl 2X7] Or 

£71 208 ( 17fl| Or 

a u ui I axol tar 


ss3=s=a3ss sara a 

Catadntan Baak Fte 

anAtoiwisMntBHBNaavF ,itaiB 
— + 1 4*ii MBS I -Ivrartf 


2aBheU9Lara.imiaBcsyBtM on-aa2are 

« Kts am i unf ua 

nmttautrn. *J0 -] im ms 

ommfitmum * — I ire -I axil nr 

i remooiurn— jBWTOH. iPVMdno 

SSS3S Ss”5S a IS z 

mmm-smjoao a in ui m 

ewuno+ Uo ui ur Hi 

b3m«sw_ 2X0 IX re • 

ISSSfciS IS s ts 

sd£ooo+. 8X1 ut uo to 

nan im iniailwi— Wk rriksik— 



SSSffifflS SI iSI 8 

waBtafalta xu I ox! I o» 


CtoBtAwwr- )« 

Tomn*diY«a 4j 

TBBHtaHSh— l«j 

a as m 

Ml - 1 4X0 MBi ■ 

Own hh EUnooi 1 2XB ztib xsa Or 
HaaOORK^. X7N 2412 13X08 ttr 
MMeiQOOOO+w- 8X76 2X00 8X32 Qtr 
TpaHiBsta lean - 1 4x47 1 an 

i fe ta ta taaBntatotoWMWB. UTwaodOM 
RCUOOB40dVMacs.|xre 848 BXzla-HOi 
raM UnA MB. 740 5X3 [ 744 0-MBl 

mnoo-irow lias x«l -I irony 

TWtal ItaraMraw Tnnt IM 

roBraSOg Satawtota la n ra . 08U»« 

TOM I US -I- -lltav 

NHfeta-MfesMentaJtam •. 

AHMHllto. -. .148 0 M l Mil Mr 

ts 844 I X8Z|B-MR 

05000448X90— 4X0 3X0 4X0 S-Wk 

enUHMSUN— 440 840 I OJK O-MR 

tyka-tsjukt 840 Z2S 1 inzla-ut) 

UB 3X4 0L82 B-HB 

4X0 8X0 I AXDiB-Wk 

440 80S I 4JH|8-«fe 

840 228 I' 842lX-Ut> 

53T xxi j 3xa(8-m 

U3 244 I aXBlMHk 

2X8 1X0 I 2X0l8-m 

oi na l 4aa]0Bw 

ewxa-emaao * — boo xs aaz xxbb 

pm immun ram -278 201 J 277 0-HB 

eno-euHs xxi ixal xxalo-tn 

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Ti rtiiMtl a n al Prpnallai j llrrripli 

Brldandig BnoflcU CcitDestas ' 
rqpotaHrifei VB96 nito (nd MO *xiti) 

Notice is hereby ghron m (be Uni tbofajcn Ural DAEHAN INVESTMENT TBOSX 
dcdaiod a dutribution of Won Z7QJXX) per EDR of IjXXHJbtilS (Won 27,000 per 1DR 

of 100 uda) payable an ar ate Jn|y IS, 1994 in Ilk Jtapnbac af Korea oa wnD nlBL. 

pouabiBy. natfl August 24. 1994 of raiaw a ting in new IDRs od 100 Oaiti afl or part 
of the iBstrBrotiun in wbicb biAtea am retflrtnri 

ra ym m Bof oonpcti no. 9of die intamn i iin a l De p o aiUiy Bacdpo wiBbe madoonta 
ate July IS; in US dollani at one of Out CoDowiag offices of Moigan Guaranty 
Trust Company of New Yoik. 

- Brussels, 35 Avenue Dei Art* 

- New York. 30 West Bntahray ’ 

AmWiin 44 4 4 Uaim+t I n m lUrma n 

- Zurich, 38 S torkmrtiW He 

The amount of daHaia stall be the net proceeds d the sale of the Wen anioani In s 
Korean Endtangp Bank in the Bopublic of Korea at dm anzant ndling rate on the day 
of mtdamxx by the tad wiO be distritx&xl to the (AtftboUasin proponjon 

to their respective cwittenraniis ate deduction at aO taxes and chargss of the 

Holders residing in a country taring a double tnstfcm treaqr with die Republic of 
Korea may obtain payment of ibeir aropons at a tower rate tjf the Korean non-rofetent 
withholding, tax. on cooifition they 6mn*h to ciltaT the Depositary or dnond* ooo of 
die designated safe-paying ogam a ccnffkate showing (beb rerideace tdgcdwwdha 
copy of passport for bKfivtdnb. Those doa n xwi t s are requested by the Korean 
Nratonal Tax A dm i ni a irat iott Office as evidence of i tdfcsn and witbout lhem Ok 
full rate of 2&87.S pet Korean noa-ceildeitt w'rthhn l riin g lax win be retained. . 

Fbr iCMfaata of dwUottod Kto^kmi, toe bust intends » oppiy for rflstdbatlng status 
Iter each finondxl year. UKTbeaeScliztoa wtB in most dnamMaaces be liable ta (ax 
cm ihc tistrftgtkto whether re ln vea te dor not. 

If sny holder shall fail in request foe dtatritHrtfcm by die ead of October 1994. the 
tuneqnested amouoi of dtatribsthm will be taint to the Depositary in rtak nflrer 
d tdn c dop af26^7S pel txit lover Oran the end of Ncw miboi 1994. . 

JFar S years, the deposiiaiy will taq> foe amoum for delayed tSs&fintiim mpeao.Tba 
nnctaimed money dull letatn to the oast at On end of 5 yean Eraia tbe endaf such 
a txn u nf ntg period. - 


All reinvestment request* in a whole multiple of 100 Urdu are to-be tent hot later 
than Armor 24. 1994 together sidi tbe sbose’mniiriniMil mifihWl iinminwiWj w — — ■ 
of the fbOowiog addresses 

- If the IDRs are held in Enrodearr ro Buroctesr Operations Center, 
Equities Department, Boulevard Emile Jicqmain 151,1210 BrnxaeU 
(pbonc non*ei: 32 2204 14 60, telex 61025). - • 

- If the IDRs ate held outside- numJeai: to Mtn^h.Oftuaiity Trust Company 
New York. Securities Department, 35 Avenae Des Arts, 1040 Brussels 
(ph on e n umber: 322 506 8643. trier 21752)- 

Thc issue price for reinvestment vriU be' the act asset value per anit on 
August 29, 1994. 

In cam where reinvested t&stribetiom are net nmldptes of 100^ Unta, the Unit header 
cm request a partial retavestteent and a paoifll cash dtatdbntioiL 

The nanvestnxni rinfl be mode on September 2. 1994 and the km and deUvery of 
IDRs ta the persons entitled to itamahnad aa Sqttcmber 30, 1994. 


£200^00,000 _ . 

MFC Finance No. 1PLC 

Mortgage Backnd HoMtag »«>• Natas Doa 0ebdMr20Z3 

insceardanea wltftrhe Terms and Conditions of the' Notes 
nodes is hereby given. that the new hriaraet. rates and periods Jn 
respect of the subfacc Notes ere ea foHovira:-. . 

tata * roXMtM+MJrirlSlt - OT* . SoriwD WJn itoi 25? 

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belson hotel 

When you stay with us in 


stay in touch - with 
your complimentary copy 
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A subscripiion hand delivery is available in the whole of the Grand Duchy of Luxembourg. 

Wc will deliver your doily copy of the FT to your home or to your office at no extra, charge to you. 
If you would like more information about subscribing please call Philippe de Norman 
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Fstwam an 7 im 9% 8% g A 

052 7 2766 24% 24% 24& ~h 

156 IT 108 47% 47% 47% 

45 7 7% 7% 7% +% 

25 417 21% 20% 21% A 

16 541 0% 6% 0% 

109 164167 6% 6 A 

1096374274 A A A A 

106 10 568 32 31% 31% A 

121925 13%d12% 13 














Boole SB 
Boston Bk 
Boston Tc 
Brady* A 
Brunt S 
BTSbtaB 0.48 
Bun town 

15 13 
078 6 55 


30 +1 

30 2974 
9% 8% 

35 35 35+1% 

A 8% A -A 

068 18 75 48% 44% 46% +1% 

020 28 272 12% 11% 12% A 

024 15 2675 7% 7% 7/, 

076 9 23 28% 27% 27% 

8 20 3 3 3 

263814 18d17% 17% 

24 34 14 1A 13% 

30 re 9 A A 

58 19 31% 31% 31% 

6 8 25% 24% 25% 

Cautfl Med 
CsSringn 107 15 
rji*»»«rvrarfisn jt 



Cal Mem 


- C - 

183 110 28% 23% 25% 

9 625 A 7% 8 A 

38 27% 27% 27% A 
21 17% 17% 17% 

Canai toe 




117 815 7% 67 7& 

225 7 2179 12% 12% 12% 
221783 2* 23% 23% 

1 1035 1% 1% 1& 

1 52 A A 3% 

1 18 2 1% 2 

000121 28057% 88% 87% 

2 4 3% A A 

112 25 144 46% 46% 46% 

161 22 53 28% 36% 26% 
am 20 274 21% 20% 21% 

008 183832 12% 12 12 ft 

4 621 A 6ft 6JJ 
8 334 19% 18% lA 

19 36 12% 12% 12% 

77 35 11 10% 10% 

5 5795 12 11% 11% A 

1.12 12 297 32% 31% 32% A 

23 1122 11%mo% 11% A 
8 20 4% 4,1 4,1 
060 8 308 23 22% 22% A 

aoo 14 2893 1 A 1 A 1 A A 
*2 47 U6% 8ft A 

is 5 io% iA iA 

1 290 % d% % 

12 14 3% d3% A 
81001 A 4 4% A 
58 6485 62% K% 59% -2% 
108 12 486 54 53% 54 

117 32 671 33% 32% 33% +IJ 
338206 31% 2A 31% +% 
128 379 2% 2ft 2ft -ft 
13ZB2 24% 24 24% -ft 
100 16 167 29 28% 28% 

28 338 A 7% 8 

43 107 12% 12% 12j£ +ft 
81108 5% 4% 4% .% 
CUcaCataB 100 17 21 28% 27% 28% 

Coda Eng>r 1321157 AAA 
27 148 11% 10% 10% 

20 0196 IA 612 12U 

105 B2 11% 11% 11% 

15 47 13 12% 12% 

73 707 lA 17% lA -1% 
CrinlCae 106 13 50 21 20 21 A 

COH top 060 0 24 23% 2Z% 23% A 

Comalr 004 13 1770 19% 19 1 A A 

Cmatt 009 184928 16% 18% lA -ft 

CmestflSp 009 38T0523 1 A 17% 18% -% 

CamnBkstaUB II 120 32% 31% 31% 

Comma 070 97 23 1 A 1 A 1 A 

CBmprUta 377 293 11% 11% lift 

ComstWB 56 63 12% 12 12% 

QxnskakR 431140 4 3% 3S 

ConPap 108 29 759 *A 42% 42% -1% 

Contain 7 91 a 6 E -% 
104 16 5026011% 1 A II 
32 115 16% 16% lA 

14 141 10% B% 9% 

050 19 658 20% 1 A 20 

83 310 IA A 10 

201463 <A 46% 4A 
48 ITBulA IA 16ft 










































Cop Or A 





Cracker Bx 002 32715 34% 23% 24 

1% ift ift 
8 A a 
A A s% +ft 

Cray Corap 

37 741 
4 1583 

Dal tom 

D at a aop e 

- D - 

1316400 22% 2A 30% -1% 

013 71 7100 
13 949 
35 3B9 
16 BEZ 

79 78 79 

2fa 3% 2% +% 
a A A -% 

U17 lA 18!1 +ft 

Vossmto 032 12 IBS 38% 25% 28% 4% 

Ftoneflane 130 33 26 34% 34ft 34% 

Foster A 








39 496 A A 3ft 

104 12 996 31% 30% 30% -% 

140 8 220 16% 15% IA 

1.18 10 139 28 27% 27% A 

068 23 454 n% 35% 35% 

068 12 67 UZ2 21% 22 

104 18 9 15% lA 14% 

47 5 5 5 



■ G - 

7 200 4% 3% 3% 

m 21 588 14% 13% 14% 

0 192 A A A 

11 19 4 

1181 56 152 0% 

140 17 10inB% 

18 580 uS% 









Garnet Ra 
Grid (to 

GcnriaRi 4 2388 I2%d10% 11% 

SentaxCp 400 43 824 2A 25% 25% 

Gems Inc 129 215 4 3% 3% 

Eenjyma 86 585 29% 28% 28% 

GtoamGt 140 10 822 17% 17 17% 

112 17 1672 23% 22% 23% 

180 17 73 IB 15% 16+1% 

11 8 5 5 5 -% 

16 1918 13% 12% 13 A 

GotMsPmp 000 19 230 22% 22% 22% -% 

toadCOSp 37 402 2% 2% 2% 

Granite 000 76 568 23% 23 23 -% 

Green AP 001 11 14 19fl 18% 18£[ +A 

Good Guys 

Oil Crap 

0 9» ft u ft 

0 973 2% 02% 2% 

681 248 13% 13% 13% 

7 38 11 10% lA 

6 12S9 ulO A 10 

- H - 

58 5 6% 



HonnngA 59 5 6% A A 

Hortenrix W t M zi% 21% 2>% 

taper Gp 020 14 117 15% 15 lA 

116 20 1375u31% 30% 31% 
167B01 lA IA 18% 

on 21 ao iA iA 12% 

9 108 6*2 A A 

13 499 A A 8 

Karidnger 116 27 1201 u1B% lA lA 

Hridnd 7 11% 10% 10% 

HefenTnqr 6 29 15% 14% 14% 

Hart* 172 19 290 23% 23% 23% A 

Hogan Sys 015 31 412 lA lA IA -% 

Hriagto bi 87 12 11% 11% -% 

Home Bent 080 9 12 21% 21% 21% +1% 

tana Otca 072 25 251 u2l 20 20% 

Han kata 144 21 249 30% 39% 29% -ft 

Hvnbeek 163670 lA IA 14% -% 

HoreabHes 144387 30 4 3% 3% 

ten JB 12D 17 970 18% 17% 17% 

Huritngtax 180 11 BIG Z7% 27 27% -% 

Huco Go 008 0 7 2% A A +% 

HririiTerii 45 1386 27% 26% 27% +1% 
18 94 5% 4% 4% -% 

W 8k 
e met 

Hpi ia* las Qkf 


KSrtsi 00611 13 22% 22 22% 
Roman Cp 044 5 781 A 68% 9 

K*»*r(to*a« 12 477 20% 20 2D 









7 1240 7% 7% A A 
072 231091 28% 27 07% +{; 
111 12 Z100 7 7 7 

084 14 93 25% 24% 2S% 

14 158 7 6% A 

482854 35% 33% 3*% 
4 528 9 8% 8% 

0 218 A A % 

172 3895 19% 18% 19 

a 1053 13% 13% 13% 

Ladd hen 


012 44 421 9 7% 7% 

30 2443 27% 25% 27 

X 164 21 181 49 48% 48% 

Lance toe am 18 306 18% 18 18 

LntekGph 37 660 29% 2fl 29% 

LkMptfcs 10 84 7% 7% 7% 

LnnqM 61 102 5*2 5% A 

LaUcaS 15 1428 19 16% 19*2 

Pr 048 171113 23% 23 23 

21728386 15% d14 15% 
118 1 295 4% (□% A 
17 848 14 13% 14 

LU Cp 
Legent (to 

Bk. E 

la* Ln Ckea 

Plata B 012 7 990 18^ 17% I A A 
Pyramid n 979 7% ?% 7% 

QusdroLog 10 762 A 6ft 6% 

OuakaOin 063 75 36 18% IS 16% 
tort Food 120 16 101 23 22*2 22% 

♦ % 




BI 3394 1 A 13% 13% 
19 203 IA 13 13% 
22 1486 34 33% 34 




- R - 
















































Rep warn 












fours* £24 151423 




flexor Inc 






RMTFflx 160 10 


36% : 






17 3455 30 29 % 28% -1% 

UbtyNtoex 178 15 467 32% 32% 32% 
Uh lerii x 000 16 10 18% 18% TB% 








Z1 21 4% 4% 4% 

an is iso 14% i4 uh -% 
101 006 119%118%119*2 *% 
152 15 406 16 15% 15% 

13 33 32 31% 31% -% 

12* 381799 45% 43% 45 

040 18 3 »% 36% 36*2 *2% 

Lnreril CpxKE 28 253 23JJ 23% 23% +.06 
Lone Ster 21 134 7% 6% 7 

4117239 53% 50% 51% 
LTXCp 1 633 2% <C 2% 

LVW 005 4 10 30% 30% 30% 

■ 2 % 

MCI cm* 005 21 was 24% 23% Z3% -ft 
MS Cart 17 481 21 20% 20% .-% 

ItecMl 000 37 93 12% d12 1?ft -ft 

MriaonGE 106 14 42 33% 33 33 -% 

Magma Rar 13 461 29% 20% 29% +A 

MavnGrp 116 12 310 19*4 1B% 19*« +% 

Marine Dr 
Martel (to 

13 444 A «7% 7% -% 

30 109 10% 10% 10ft +ft 

151102 5% A 5% A 

9 13 40 30% 39% -% 

0 8 1% 1% 1% 

19 399 6jJ 8% 8?a A 

MarrirSmkA044 ID 4 UPa lA lA 

060 11 725 21% 21 21 A 

10 537 A 8% A +i‘« 

Karim ia <2 1858 98% 55% 55% 
Maxtor (to 0 1745 5% A 5% 
Iktoun R 044 13 6 17 17 17 

McCUradc 048 172543 21% 21% 21% 
ItaCMC 495189 53*2 52% 5?}2 
kkdhng 0 14 ft % ft 
Martel Be 018 16 64 13 12% 12% 

UadCheS 048 13 190 22% 22% 22% 

004 7 35 6% 5% A 

Mentor Cp 016 45 20 14% 13% 13% 

■tonkG 024 22 2746 11% 11% 11% 

MranLB 068 11 568 20% 20% 20% 

ftreay GxCLTD 8 140 30% 30 30% 

Mrildtel in 121790 33 32% 32% 
Mnisri 94210 AAA 

MritntaA 008 181472 16*< 15% 15% 
Meted F 000 18 423 12 11% 11% 

McblUfi £00040 250 78 74% 75 










10 12 A 3% 4% A 


■Hanoi IB STB 21% 20% 21 +% 
Maocom 52108 A 6 6 A 

Mcrgra!* 16 930 7 A A A 

M ay fl i 2 262 A A 5ft -ft 

Mean 1524292 53% 52% 53 -ft 

UMMIM 48 7389(156% 54% 55 +% 

MHtedtc Q/U 11 908 30% 233+ 23% A 

Mtfwtoato 050 28 32 34 34 34 +% 

MhrH 052 19 463 28% 26% 26% A 

558 M 23% 23% A 
toe* 14 13 11% 10% 10% A 

MMMW 44 7420 17% 17% 17% A 

Molten CD 020 19 603 7% 7% 7% 
UodtoeM 002 19 193 27% 2B% 26% A 
004 98 38 35% 36 A 

Mriaxhc 004 Z7 11(B 37% 36% 36% A 
Mnscoma 004 12 664 7% dS% A 
HDrinaeP 036 23 26 32% 31 31-1% 

Mr (toflae 18 743 15 14% 14% A 

MTSSyex 058 11 8 28% 28 28% 

132254 31 29% 29% 

4 99 11% 11 11 

in 22 1743 68% S7% 67% 

112 13 B4 6% 8% A 

056 4 1816 19% 19 1 A +% 

115 3 1899 17 16% 17 *ft 

JtoasStrx 020 11 822 14% 14 14 ■% 

RriECMM 25 114 30% 20 20% A 

ftausfi* 166 m 409 19% IP 10% ♦,» 

OS 20 383 16 17% 17% -% 

146 14 01 U24 23% 23% 

14 2158 7% 7% 7% A 











106 8 1634 59% 58% 58% 

Srattoasna 000 13 116 17% 17% 17% 

Sctenbar* 130 19 482 27% 26% 26% 

Sd HUH L 7 1782 26*4025% Z5!i 

SQSystm 11 340 14% 13% 14 

SdM G 365 7 6% 6% 

ScitaCp 052 7 477 17 16% 16% 

Sena Bra 81914 B% 8 8% 
SeaneU 100 48 26 39 38 38 

1010578 22% 21% ?lft 
016 24 511 20 18% 18% -1% 

(LM 1 162 1% 1% i% 4ft 

1.12 15 73 25% 24% 25 
70 2829 15% 14% T4% 

23 650 3fl U3% 3ft 
12 266 8% d7% 6% 

20 11 3% 3% 3% 

17 2u1B% 18% 18% 



Sara Tech 
Stem On 







084 18 299 25% 25% 25% +% 














2 153 A A A 
26 584 17% 17% 17% 

10 61 11% 10*2 11% 

15 121 19 18% 18% 

2 B7 3% 3% 3% 
003161609 41% 40% 40% 

1 1050 7 d6% 6% 

006 53 155 utl 1D% 10% 

33 2069 11% 11% 11% 

058 271750 22 21% 21% 

37 468 B27 28% 26% 

64 4885 24% 24% 24% 

1 399 5 4% 5 

OK IB 3826 22% 21% 22 

am 10 1937 21% 20% 20% 

020 48 289 22% 22 22% 

SUudaMd a40 114517 29 27% 27% 

StPteBe 030 101121 22% 21% 21% 

1 291 2ft d2% 2% 

41 2004 29 27 Z7 -1% 

am 177810 42% 41% 41% Al 
11 3129 16 15% 15% 

008 14 206 22 21% 21% A 
OLOB 20 209 18 17% 18 

SWdyUSA 020 37 5B7u10% 10 10 A 
SUN 135 *100 19 19 19 

1.10 12 386 20% 20 20% A 

21 1587 10% 10% 10% 

028 2332*3 29% 29 23 A 

22 857 15% 14% 14%. •% 

SaribanaB am 25 12 24 2Z% 22% -1 

SriiraBBc 084 14 394 22% 22 22% A 

State Str 

Steel Tec 










WC Rex 016 13 1B3 31% 30% 30% 
NariiFnrii 072 11 18 18 17% 17% A 

KriPtea 12 281 5% A A A 

HriGomptaOSB 73 1206 12% 11% 11% A 

MlB Sin 000 21 152 14 13% 14 A 

12 11 16% 16% 111% 

KG 0.46109 80uB3% 02% 63% +1% 
» 710 27% 2A 25% -1% 
NebritGan 26 2034 lA lA i A A 

NetekS 96 577 7% A A -ft 

Hauragen 25 3 A A A 

007 20 263 2A 19% 19% 

MaoEBua am 22 38 lA ifl lA 

Newtoiaoe 0 558 11% (A IA A 

2617077 38%d34% 34% -1% 

Nmprtfto 004 12 63 nA A 5% 

HriXaDn 23 2574 7% A 7% 

lionteai on 25 100 58% ss% 55% 

040 254429 44% 43% 43% 

I 13 124 17% IA 17% 

KStarUn 4 37 A 5% A 






NontaiTMaam 14 2137U4A 42 42 -1% 


NSC Carp 

14 1048 i A 1 A IA 
78127624 15% 15% 15% 
284382 32 30% 31% 

B m A 03% 3% 



- I - 

in sys 



Imparl Be 




49 70 

5 488 
32 52 

4 sm 

140 n 27 

8% 7% 

A 8A 
A <S% 
A A 
A A 
19 18% 








te Trial 

1.16 20 604 41J3 41% 41% 

124214 113 15% OT5 15 

17 852 15% 14% 14% 

18 5303 16 15 15% 

1U 15 82 11% 10% 11% 

31 0411 27 25% 26ft 

» 505 11% 11% 11% 

0 121 A 2% A 
an 1127364 60% 59% 60 
8 80 2% 2% 2% 
an 31 5468 19 16 18 

21 42 10% A 9% 

104 18 91 12%dT2% T?% 

3 531 9% 9% 9ft 
7 116 5% 5% 5% 

4 77 12 11% 11% 

133815 8 7% 7fJ 

14 1t0iH6% 17% 17% 

am 20 11 3ft 3ft Sft 

437 IK 8% A 8% 

20 20% a 
2% 2% 2% 
19 17% 17% 


Bft -il 
6 A 

A A 

19 A 










001 W 177 
1 217 
18 418 






Mtakado 1.17 36 4198%197%19B% 

- J - 

14 2438 13 12% 12% A 

026 16 63 11 ID 10% A 

110 » 387 33% 32 32% -% 

58 5 24 23% 23% 

10 IK 13ft lA 13ft 
Jones lied miO 16 609 11% 10% 11 
JoriynCp 100 12 247 25*4 24% 25% 
JS8A1 004 18 17Bta5% 28% 20% 
JuxtLigx 008 IB 240 19% 18% 18% 

Jurikt 116 9 226 12% 12 12% 

Jason me 
00 tad 

Jotatson W 
Jonas tor 






Octal Con 





- O - 

a 48 18 17% 



14 3025 19% 18% 18% -1 

14 BK 14% 13H 14 +% 

9 *100106% 26% 26% +1% 

1.46 6 900 30% 29% 30% 

1.16 10 541 34% 33% 34 

an 16 58 36% d36 36 

OtdrancarpXl0O 81154 33% 33% 33% 

One Plica 14 7 19% 18% 18% 

OpriedR a 47 22 21% 21% 

OrariaS 5312675 37*2 36 36% 
OrbSorce 50B57B 20% 10 19% 

OteoBCtl 199 22 a 0 8 8 

Ordxfiupp 10 2 14% 14% T4% 

OregoWei 031 It 184 A A 5% 
osbap 8 IB 2% 2% 2% 

QteftBA 141 4213141 13% 13 lA 

OtamriiT 190 11 14 11 lA K>% 

DUarTaX 1.72 15 78 33% 33 33% +% 










- P- Q- 

Pacear 100 12 0897 46%d4£% 46+1% 

PacOridopxl® 12 89 12*2112% 12% 
PTakm 1021B 485 25% 23% 25 +1% 
a 284 58 50% se% A 
31 7482 Z7% a 26% 

004 392971 31% 31% 31% 

21 11 0*4 8% 8% 

050 39*100 0 d9 9 

B 15 14% 14% 14% 

100 22 4 33% 32 32 -1% 

072 18 131 36% 36 36% -ft 
14 13 5ft dS% A A 
000 241030 22 21% 21% +% 

024 13 1388 13% 13% 13% A 
1.12 17 95 32 30% 31 

25 116 A 8 A 

25 3H 5 4% S 
(MB 4 39 10%tflA IA 
30M17 15 13% 14% 

» 427 10015% 15% 
PkareoGp am 27 66 40 38% 40 
069 231515 X 34 34 
DLM 14 360 3% 24% 25% A 
5 500 8 7% 8 

17 57 A A A 
000 3 869 7% 7 7 

107 602 29% »% 3 
2211096 1 5% IS 15ft 

<22210 AAA 

17 5 U9% A 9% 

Prod Ops 024 24 616 27% 2B% »% 








Rax* Fed 


Pride Pd 






Sunni Te 

Sun Sport 



Sybase tec 







39 1364 aft 27% 29% +1% 

14*100 A A A A 
1111351 20% 20% 20% 
351553 u34% 33% 34% 

58 7865 52% 5A SA 
31 4894 12%d11% 11}2 
038 18 7 19 18% 18% 

.65 93 A 3% 3% 

2 916 9% A A 

56 60 14 lA 13% 

146075 16% 15% lA 





SystmSaft ai2 161515 14% lA 13JJ 
Sprinter® a 1019 17%«5% 15% 
Systanad 26 1881 i«% A 6ft 












- T - 

T-CMSc 7 78 4 A 3% 

TjwmPr 052 19 943 31 38% 30% 

TBCCp 17 691 lA 12% 12% 

TCRGatde 044 a 1768 S% 22% 2% 

TeridMa 10 2731 lA lA lA 

TaaanariixOm 14 136 K% 54 SA 

dec £ is A A A 

Trim Sys 9 848 1 A 12% 12% 

TtacmanA 3tzmm 22% 2t% 21% 
Tetri* 86033 A A 5*2 

is 2229 99 31 30 30% 

Total Cp 001 79 563 lA 14 H% 

Tabs Tee TO 475 9 A A 

TenPMDfl 020 a 303 24% 24% 24% 

Three Cbm 3234040 46ft 43% 46% +1% 
TJtot 022 37 701 »% 24% 24% A 
Trios Mad 2 160 A A 4ft 

Tokyo Mar 032 39 2 04% 64% 84% 

TnmBrnob 60 134 lA *A *A 

Tapps (to 0083754514 uB 7% 7% 

TR Enter 3 386 7% A A 

Trararid ID 200 10% 10H 10% 

TrmriCiix 100 12 49 42% 41% 4?% 

Trtcore 9 95 3% 3 3 

Trtmtda 52 117 lA ID 10 A 

TiustooBkC 100 1! 137 22 21% 21% A 

Tseng Lob 020 12 SB 7% 6% 7ft A 

TysAH (UB 173341 22% 22% 22% A 













- U - 

am 141643B 43 41 

2 1475 A 5% 

100 13 ED 15% (A 15% 
2m 12 99 52% 51% 51% 
040 0 1S6 11 10% 10% 

004 21 7uZ7% 27% 27% 

1.40 22 167 41% 41 41% 

USBencpx am 102692 27% 20% 2A 
US Energy 30 10 4% *ii 4% 
USI Cop 1.12 10 590 14 lA 13% 

us Tat 
unted SI 



41 -1% 

A A 









II 856 7% dB% 7 
11 31147% 47% 47% 

18 30 A 5% A 



- V - 


030 33 289 15% 14% 15% 



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34 34% 


18 728 17% 





32 787 22% 




Vtcor plte 

61534 14% 

14 14% 


21 1665 17 16*2 



via Tecti 

31 1615 14% 13% 




084 16 77 90% BA 69% 




- W - 

WamerBi 110 22 774 a% 27% a +% 
73 92 4ft 4ft 4ft -ft 

WeshUdSBam 71288 21% 20% 20% 
WsartFoSL 160 S 332 22*4 22 22% 

122 10 205 2S% a a 
MteitePMjdtn IS 420 2A 25 25% 
9)0-40 £00 15 79 39% 38% 39% +% 

WeflBk 21 157 4% A 3% A 

West One 072 121052 31% 31% 31% 

9 684 12% 11% 11% 

1 GO lA<n3% 14 

12 GOB 3*4 2% 3 

098 233321 48% 47% 47% 
MnSmom 78 T8S0 35% 34% 34% A 
WoW* L 008 12 31 14%d13% 14% A 
Whngt MO 25 1837 2120%%% A 

HtPPQuiiaaiS ?i 6io A 3ft A A 

wy«aarvGdna4fl 3 775 A 6 8ft +ft 


Met Sum 






»a 24 3545 37% 

XfltM Cm 2 83) 3^18 

VMM 094 27 1974 1 A 
YartFbdi 141 775 4% 

acnsUOto 1.12 10 22 042 

<08 37% 

3 A 
18 18% 

4 *% 

41 42 














Union leaders meet Kohl 

Talks on Hong Kong 

Close to peace partnership Japan presents budget 

European trade union leaders will 
meet chancellor Helmut Kohl in Bonn 
to urge Germany to give top priority 
during its forthcoming presidency 
of the European Union (which begins 
on July 1) to strategies of job-cre ation, 
economic expansion, and social protec- 

Unice, the European employers’ 
organisation, today publishes Making 
Europe More Competitive The report 
calls on EU members to acknowledge 
and take on board the details of its 
action plan: to reverse Europe's declin- 
ing competitiveness, to create growth 
and generate new Jobs. The report 
has the backing of the Confederation 
of British Industry. 

Britain and China are to hold a meeting 
of the Joint Liaison Group, the bilateral 
body which is overseeing Eat® Song's 
transfer to China in July 1997 (to June 
23). It is the first such meeting to be 
held since December last year. 

The talks come amid signals from 
Beijing that China wants to improve 
relations with Britain. What this means 
for bilateral talks over Hong Song 
remains to be seen, but hopes are high - 
that the colony’s project to build a 
multi-b illio n dollar airport will benefit. 

US Secretary of State Warren 
Christopher Is to meet In Brussels 
with Mr Andrei Kozyrev. Russian for- 
eign minister, before a meeting of the 
North Atlantic Council at which Russia 
will formally signup for Nato’s mili- 
tary cooperation programme Partner- 
ship for Peace. 

Italy's foreign minister, Antonio 
Martino visits Bonn to meet his Ger- 
man counterpart Klaus KinkeL Cesare 
Previti, Italy’s defence minister is also 
visiting Germany and Paris to meet 
his respective counterparts. The visits 
are seen as a public relations exercise 
by Italy’s right-wing coalition govern- 

US vice-president A1 Gore and 
Russian prime minis ter Victor Cherno- 
myrdin begin three days of talks in 
Washington on mutual economic coop- 
eration. The meeting could be topped 
by the signing of a $9bn deal to develop 
ofl reserves on Sakhalin Island. Mr 
Chernomyrdin is also expected to sign 
Loan documents for four World Bank 
loans totalling nearly glbn. 

Tennis: The Wimbledon Lawn Tennis 
Championships begin (to July 3). 

Vaclav Havel, the Czech president, 
begins a two-day visit to Romania 
where he win sign a friendship treaty 
between the two countries. It is Mr 
Havel’s first visit to Romania as presi- 
dent. Mr Havel, who will travel on 
to Bulgaria, has previously declined 
to Visit Wrowarria, mainly rim* to the 
country’s human rights record. 

South African budget 

Ills budget 
day for South 
Africa's new 

of national 
unity: interna- 
tional investors 
will be watch- 
ing closely 

pa fj yianrp rrrirv . 

ister Derek 
Keys balances 
fly? de m a nds 
of the country’s post-apartheid recon- 
struction and development plan, while 
yppping the budget deficit to the tar-, 
gated six per cent of GDP. 

The long overdue budget for the year 
starting April 1 is expected to clear 
Oie upper house of parliament the 
final hurdle, today. This brings to an 
aid a political amnesty between the 

opposition and minority government, 
setting the scene for another round 
in Japan’s perennial party political 
power struggle. 

Germany's Bundesbank council, 
heads for Potsdam, near Berlin, for 
its annual meeting hi the east. 

For once, the question of whether 
M3 and prices statistics will be ready 
in Hma for the council meeting is not 
of pressing interest. Central bankers 
have maria p iam their short-term dis- 
count and Lombard rates are to stay 
for the time being. However, May M3 
data due this week is expected to show 
higher growth than the Bundesbank’s 
4 to 6 per cent'target range. The con- 
sensus forecast is for 14 per cent 
against 15.4 per cent in ApriL 

World Bank Report: Developing 
nations must reduce inefficiency and 
waste in their use of infrastructure, 
according to the World Bank. This 
year's World Development Report, 
published today, argues that the 
savings from more efficient use of 
infrastructure over a three-year period 
could generate sufficient resources 
to proride safe drinking water for lbn 

Ba loroown Sotheby's in London offers 
its fifth sale of manuscripts from the 
library of David Solomon Sassoon 
(1880-1942) this afternoon. Among the 
76 lots is a medieval Spanish Hebrew 
Bible in contemporary binding, esti- 
mated at £150,000^200,000. The sale 
of western manuscripts and miniatures 
includes the most important classical 
text on vetinary medicine, written 
and Illuminated for Ferrante 1 of Ara- 
gon, King of Naples 1458-94. This royal 
manuscript (detail below) also belonged 
to Lorenzo the Magnificent and is esti- 
mated at £80,000-£120.000. 

Alan Greonspan, the Federal 
Reserve chairman, testifies before the 
House of Representatives budget com- 
mittee. Financial markets will be 
looking for confirmation that the pace 
of economic growth is slowing, making 
interest rate increases less likely. The 
Fed's “beige book” assessment of 
regional business conditions will also 
provide data on economic conditions. 

Germany’s opposition Social 
Democrats hold an extraordinary con- 
gress in Halle. Party leader Rudolf 
Scharping may face criticism of his 
Leadership , held responsible for a poor 
performance in last week’s European 
Parliament and local government elec- 
tions. However, he will likely be nomi- 
nated as the party's candidate for chan- 
cellor, as it has no obvious alternative. 

FT Conference: A two-day 
conference an European Telecommuni- 
cations - Responding to Change is 
being held at the Inter-Continental 
hotel in London. The need far and 
impact of liberalisation of the market- 
place are among issues being discussed. 

"Harry and Loidae” return to US 
television screens for another round 
in the ferocious lobbying campaign 
conducted by the Health Insurance 
Association of America against the 
Clinton health care reform plan. Hard- 
hitting television advertisements feat- 
uring the yuppie couple are credited 
with much of the weakening in public 
support for the plan. 

UK monetary policy: The minutes 
of May 4’s meeting between Kenneth 
Clarke, UK chancellor, and Eddie 
George, Bank of England governor, 
will be studied for a shift in monetary 
policy from the previous “bias towards 
earing " to a neutral or more rigorous 

Belarus, a nation of 10m on Russia's 
western border and the least-indepen- 
dent minded of former Soviet republics, 
is to hold its first presidential election. 
Front-runner for the new past is 
Vyacheslav Kebich, the neo-Cammunist 
prime minister. 

Mr Kebich 
(left) has the 
advantage of 
the full support 
of the state- 
media; he con- 
siders his other 
ace to be his 
for a monetary 
union with 
Russia, which 
he Haims will save Belarus’ unre- 
formed economy from disaster. 

Mr Kebich enjoys an advantage over 
his competitors if only because of his 
media exposure, yet it is not clear 
whether he win ov ercome widespread 
discontent with his government 

USA's first match 1-1 draw with Switzerland may not have been enough to awaken American interest 



EU holds summit in Corfu State poll in Saxony-Anhalt 

Morihtro Hosokawa, Japan’s former 
prime minister, is to testify in the Diet 
about his personal finances - the issue 
that forced hhn out of office in ApriL 
He will be questioned about a YlOOm 
($9,523,000) loan he took from transport 
company Sagawa Kyubin in 1982. 

Before Corfu: Christian Democrat 
leaders from member states meet in 
Brussels to try to agree on a candidate 
to succeed Jacques Defers as Commis- 
sion president Germany’s Chancellor 
Helmut Kohl is expected to try to per- 
suade Ruud Lubbers, the Dutch pre- 
mier, to give way to Belgian prime 
minister Jean-Luc Debaene. Mean- 
while, Socialist leaders meet in Corfu 
to agree their position on. the succes- 
sion, and on how to operate in the 
European Parliament, where they are 
the dominant group. 

WTO bids: Switzerland and Germany 
push their respective bids to host the 
World Trade Organisation, due to suc- 
ceed the General Agreenent on Tariffis 
and Trade on January 1 1995. Germany 
applied last week far Bonn to become 
the site of the secretariat Switzerland’s 
offer for the trade watchdog to remain 
tn Geneva is the only other candidacy. 

Golf: The French Open 

FT Surveys: Electricity in Europe 
and Spain; Banking and Finance. 

Holidays: Argentina, Bangladesh, 
Cyprus, Greece, Pakistan. 

Anti-semttfami repent: The Institute 
of Jewish Affairs in London releases 
its annual Anti-semltism World Report 

Romanian trade unions and 

government have set a deadline far 
today for agreement over the collective 
labour contract 

The competition 
begins at the National 
Golf Course in Paris 
(to June 26), when 
Europe’s top players 
get a little relaxation 
after Oakmont 

EU beads of government will try to 
choose a successor to European Com- 
mission president Jacques Defers at 
their two-day summit on the Greek 
island of Corfu. Two Christian Demo- 
crat prime ministers from the Low 
Countries, the Dutchman Ruud Lub- 
bers and the Belgian Jean-Luc Dehaene 
are the front-runners. Neither appears 
willing to step aside for the other, 
ipt-pppriflg- thp rhanras of a d eadlock. 
and possibly an extra summit to settle 
the issue. 

The 12 will also sign a wide-ranging 
partnership agreement with Russia’s 
president Boris Yeltsin, opening the 
way to an EU-Russia free-trade zone 
by the Hid of the century. A similar 
accord was reached last week with 
the Ukraine, and a priority at the sum- 
mit will be to follow this with a nuclear 
safety plan, aimed at closing the Cher- 
nobyl reactors. • 

The eastern German state of 
Saxony-Anhalt votes for a government 
on Sunday. The first result since the 
recent European Parliament poll, it 
should provide an indicator (or the 
October federal elections. 

The Christian Democrats, governing 
In coalition with the Free Democrats, 
as In the federal government in Bonn, 
are attempting to retain power. The 
party lost only 2 percentage points 
in the recent local government elec- 
tions, despite a spate of corruption 


Ukraine’s prasidmtial poH on 

Sunday sees incumbent Leonid Krav- 
chuk fi ghting a close race against hia 
former prime minister, an industrialist 
who favours closer ties with Russia. 
C ommunis ts and extreme nationalists 
are figuring prominently in simulta- 
neous local elections. 

Turks in Bosnia: The first 
contingent erf Turkish troops is due 
to set aft to join UN peacekeepers. 

FT Survey: Korea. 

FT Surveys: Indonesia and Norway. 

Germany's pres ide nt Richard von 
Weizsficker visits Poland on Saturday 
on the last foreign trip erf his presi- 
dency, before Roman Herzog takes 
over on July L 

Hol ida y s: Algeria, Bombay, Pakistan. 

Holidays: Sri Lanka. 

Holidays: Estonia. Latvia, 

Holidays: Estonia, Finland, Latvia, 
Sweden, Thailand, Venezuela. 

Cornpiled by Patrick Stiles cmd Angela 
Bleasdale. Fax: (+44) (0)71 873 3194. 


Other economic news 

Statistical to be released this week 

Monday: Recent monthly 
figures for UK bank and build- 
ing society (M4) lending have 
moved erratically, so it is no 
surprise that analysts' fore- 
casts for seasonally adjusted 
M4 lending in May range from 
£600m to £4bn. 

The consensus forecast of 
£l.9bn compares with actual 
lending of £500m in ApriL 

Tuesday: US trade in goods 
and services is expected to 
notch up another significant 
deficit in ApriL with analysts’ 
forecasts ranging from $7bu to 
$9.5bn. However, the consensus 
forecast, at $7 jam. Indicates no 
change from the March out- 

Friday: Final first-quarter 
UK GDP and current account 
balance of payments figures 
will be last economic in- 
formation published before 
release of the government’s 
revised forecast for the econ- 
omy on June 28. 

First-quarter GDP is expec- 
ted to grow year-on-year at 2.6 
per cent, above the 2JS per cent 
growth forecast for 1994 by the 
Treasury last November. 

The consensus forecast for 
the current account points to a 
first-quarter deficit of EL2bn. 
an improvement on the £2.6tm 
seasonally adjusted deficit of 
the 1993 fourth quarter. 

B at — ad Country 

June 20 UK 

June 21 US 

June 1-10 wh'seto price IndK ■ ' , 

May Mt* • '• 

May M4- ' 

May M4, tancBng • 

May bdp arty net near oommfta 

Apr ratafl aalwf 

Apr tnda, goods & sendees 
Apr marchandbe, trade - census 
Ditto, export - carats 
DWo. Import - cens u s 
Ditto, frada balance at payments 

1st gtr currant a/c 

May treasury budget 


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May consumer prices indx, finer* 
May trade balanoa ax-EC 
Apr merchamase, exportart • 
Ditto, Imports*? 

Ditto, trade supius . 

Apr w holesale traded 

Mar labour tncome’t 

June consumer price indx. cities"* 

' • Jiata ' 

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Apr personal c’frarXft' axperktore" 
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l Hundred and ten confused 
about point of origin (6) 

4 Pre-match practice 18) 

9 Former champion, first class, 
sags badly in the middle (6) 
30 Inherent, for example, in 
refusal 18} 

13 Take off a statesman (4) 

13, 14 Fine to criticise a racke- 
teer’s four majors (5,4) 

17 Generously sincere member 
ted astray at start of year (12) 
20 One so focused might not con- 
template mixed doubles (W) 
23 Uam about the present era 

£ Prize Party <5) 

25 Political group in Serb local- 
ity (4) 

28 Unable to produce good 
player on the French ship (8) 
28 Group placed around small 
extension (6) 

30 Ayr obtains money to provide 
volunteer (8) 

31 Took port as herd is rounded 
up (6) 


1 Strongly support the winner 

2 Pure East End may hen ttdM 
up (6) 

3 Remains to sleep (<0 

5 bo - even a scene from Sina- 
tra movie (6,6) 

6 Crude sounding laughter (4) 

7 Half the clergy follow the 
French here, in frozen col- 
umn (6) 

8 Polish reflections? (8) 

11 Code breaker (12) 

16 Seat many in front of lock (5) 

16 Spent about a pound for 
northern cloth (5) 

18 Worshipper who seems to pro- 
crastinate (8) 

19 Developed a team leader In. a 
cultivated manner (8) 

21 Inform on youth leader - 
characteristic of Wimbledon 
courts (6) 

22 Overlook half of Bonn, a good 
point of view (6) 

26 Argument for parking on field 

27 I object to quiet In network 


No.8,484 Set by COURTIER 

A prize of a PeHkan New Classic 390 fountain pen for the first correct 
solution opened and five runner-up prizes of £35 Pelikan vouchers will be 
awarded. Solutions by Thursday June 30, marked Monday Crossword 8,484 
on the envelope, to the Financial 'nines. 1 Southwark Bridge, Loudon SEl 
9HL, Solution on Monday July 4. 

€ B€ L 

the architects of time 


Arefabfe for BKnttd wants is UctgoM, 

avdabte on strap or bracelet Water-res&ant 

to 30 metres. High performance quartz movement 

For illustrated catalogue and a list of nationwide axKtssionai- 
rcs, pltase telephone J.W. Benson ltd on 0800 303303 




Monday June 20 1994 

A choice of power - and 
the power of choice 

The European Commissioners are frustrated over the slowness of 
electricity deregulation. Utilities say they are widening customers’ 
choice but they also have other priorities, reports Michael Smith 

V iewed from the lofty 
heights of the European 
Commission, electricity 
most seem one of the slowest, 
most obdurate industries imag- 

But the companies which 
make up the European power 
industry regard themselves as 
part of a East moving world in 
which some will struggle to 
keep pace. Both sides have a 

The Brussels view reflects 
the Commissioners’ severe dif- 
ficulties in deregulating the 
electricity and gas sectors. 
While they have successfully 
pushed through the liberalisa- 
tion of telecommunications 
and aviation, energy has suc- 
cessfully resisted serious 

Most power companies fear 
the consequences both for 
themselves and their custom- 
ers. and some are backed by 
their governments. But change 
is on the way. A small but 
growing number of European 
countries, both in and outside 
the EE, are opening up thoir 
electricity markets. 

The deregulation process in 
many cases has been prompted 
by privatisation of public utili- 
ties. Countries that have 
already privatised or inland to 
privatise parts of their power 
networks include the UK, Italy. 
Portugal. Hungary and the 
Czech Republic. 

However, even in countries 
which have not introduced pri- 
vatisation, electricity compa- 
nies face a series of tough chal- 

These challenges will be 
under review at this week's tri- 
ennial conference in Birming- 
ham of the Union of Electricity 
Producers and Distributors 
(Unipede). The 1,000 delegates, 
mainly European, will also be 
only too aware of the contrast- 
ing growth prospects of eastern 
and western European coun- 
tries and the attendant prob- 
lems of environmental pollu- 

The industry faces five main 

• eastern Europe. The former 
Soviet-bloc countries, having 
broken with command econ- 
omy principles, need western 
allies to invest in new plants 
as they embark on far-reaching 
modernisation programmes. 

The Czech Republic, for exam- 
ple. is likely to invite foreign 
companies to take shares of 15 
per cent in its regional distri- 
bution companies later this 
year or next 

• internationalisation: this 
trend is growing as western 
companies find their own mar- 
kets saturated and seek oppor- 
tunities in other countries, east 
and west Share swaps are pos- 
sible and the trend should help 
the idea of a pan-European 

inter-connected grid. 

• costs: public concern about 
pollution and nuclear safety, 
especially in central and east- 
ern Europe, is raising costs at 
a time when consumers 
demand greater price transpar- 
ency and the lowest possible 
tariffs. Western countries and 
companies are helping through 
means such as the European 
Energy charter, agreed by 49 
states and thp European Union 
in 1991. The charter provides a 

framework for western invest- 
ment in central and eastern 
europe and far exchanges of 

• health scares: there have 
been widespread fears about a 
possible link between cancer 
and electric and magnetic 
fields (EMF) associated with 
high-voltage grid linns. Indus- 
try-sponsored research has 
found that there is no link 
between EMF and « nn»j but a 
growing number of cases are 

coming to court 
• deregulation: important 
though, all of thpop factors are 
for the future of the sector, the 
issue which will cause most 
controversy and potentially 
make the largest impact is 
deregulation within the Euro- 
pean Union. 

Until recently, virtually 
every European power com- 
pany operated as a monopoly, 
and most were restricted from 
expanding outside their core 

business. The UK Conservative 
government broke this mould 
when it split up the mammoth 
Central Electricity Generating 
Board as a prelude to privatisa- 
tion of the whole industry. 

The cause of reform was 
taken up in earnest by the 
Commission in the early 1990s. 
It has no view on whether pri- 
vatisation is a good or bad 
thing but it argues that a sin- 
gle European market only 
makes sense if competition can 
be applied to electricity and 

“It is clearly unfair for indus- 
tries in energy-intensive sec- 
tors Hit* chemicals or nmtak to 
be obliged to compete without 
having access to energy on 
similar conditions," Mr Claus- 
Dieter Ehlermann, director- 
general in the competition 
directorate, told a recent con- 

“It is the competitiveness of 
the whole European industry 
which is at stake." 

The Commission is pushing 
for a system called negotiated 
third party access (TP A) which 
would cajole monopoly suppli- 
ers to open up their grid net- 
works to enable trade between 
large industrial power consum- 
ers and another power sup- 

The system’s many oppo- 
nents, includin g most compa- 
nies, most countries and most 
MEPs, argue that such a mar- 
ket would be unable to dis- 
charge public service obliga- 
tions such as guarantees of 
supplies and uniform prices. 
Electricity de France, the 
French state utility, fears that 
long term planning would be 
mad** more difficult, endanger- 
ing plans to build nuclear 
power plants. 

Electrabel, one of Belgium’s 
electricity companies, agrees 
that TP A would makp planning 
difficult and that the Commis- 
sion is going too quickly. It 
says an precondition 

for deregulation should be the 
harmmiicgtin n of environmen- 
tal and fiscal enmditinng in the 
countries, claiming that other- 
wise some countries would 
have an unfair advantage over 

The Commission and TPA 
opponents may reach a com- 
promise later this year around 
a so-called single purchaser 

system, through which one 
body independent of the host 
generator would be responsible 
for selling electricity. 

TPA opponents say this 
would maintain the integrity of 
the system. TPA supporters, 
however, say that it would 
have little impact since it 
would not enable consumers to 
deal directly with companies 
other than the hast supplier. 

The original draft directive 
has already been considerbly 
diluted after intervention from 
the European Parliament. The 
Commission had originally pro- 
posed that companies should 
have an automatic right to a 
network, rather than a negoti- 
ated right 

Some feel it would be better 
to wait for reform to gather 
pace. At the last meeting of EU 
ene r gy ministers In Ma y, the 
Italians. Spanish and Irish rep- 
resentatives hinted they were 
considering ways to liberalise 
their markets, although they 
did not say how. 

A nother change is the 
growing number of 
countries setting up 
independent grid networks. An 
essential pre-requisite of a 
competitive system Is to run 
the grid system separately 
from the power producers, 
either through separate 
accounting or through splitting 
up the electricity companies. 

Whereas five years ago there 
were no separate grid compa- 
nies there are now five. 

The pressure for change will 
be boosted by the expected 
integration of the iminn of the 
Nordic countries with the con- 
tinental network. Norway, 
Sweden and Finland either 
have liberal regimes for elec- 
tricity or plan to introduce 


Further ahead, some central 
European states might prove to 
be allies for the liberalisers. 
Poland, for example, has 
already separated the three 
arms of its electricity system. 

hi the near future, however, 
much will depend on the Ger- 
man government which 
assumes presidency of the 
European Union next month. 
In recent months, parts of the 
Bonn administration have been 
pushing for third party access 
in Germany as a means of 


Baxter describes the uproar 
following the EU's Directive 
requiring utilities to use open 
competitive tendering for 
their purchases of electricity 
generating and distribution 

national grid networks are 
steadily being woven into a 
tapestry stretching from 
Madrid to Cairo and from 
Moscow to Morocco, wntes 

Lucy Plaskett Page II 

market structures erected 
nearly 60 years ago to pro- 
tect the coal industry are 
being laboriously dismantled 
under EC pressure, wntes 
Judy Dempsey 

Wise reports from a country 
trying to meet electricity con- 
sumption which is growing 
twice as fast as In the rest of 
the European Union.. Page IV 

Maddox says pollution 
reduction by power genera- 
tors is still a political must, 
but that economic industrial 
factors affect its pace 

the citizens of Cracow know 
when their power plant is 
working even when they 
can’t see it Page V 

ulator Prof Stephen LittJe- 
child has his work cut out, 
writes Michael Smith 

King Coal was brought taw 
by a combination of gas and 
nudear power Page VI 

□ /frustration; 

David Bromley 

bringing down power prices. 

That, however, would cause 
significant political problems 
with France which has much 
cheaper electricity prices for 
industrial consumers. One Ger- 
man electricity executive says: 
“We are fighting with all our 
might a gains t liberalisation of 
the European power industry. 
But at the same time we have 
no choice but to prepare for 

* T_ * 

-V#J i f; j 

if* C~rr> (j/iyV-V 


: W \ f ri 

in Europe'94 

A n in-depth analysis of the organiza- 
tion, history and Issues facing 
European electricity companies in the 
new political environment- - - 

Electricity in Europe'94 is the English 
edition of a collective study under the 
direction of Lionel B. Taccoen, head of 
Mission Europe for Eiectricrte de France, 
and features a Foreword by Jean 
Bergougnoux, Managing Director of EDF. 

Mr. Taccoen and his team provide an 
expert overview of the political and eco- 
nomic issues affecting electric generation, 
transmission and distribution in each 
European Country, including the unified 
Germany, the European Union and 
Eastern Europe. Accompanying the dis- 
cussions for each country are statistical, 
financial and operating data on the major 
utilities, and color maps of major supply 
or distribution areas. 

Countries . 

Austria ■ Belgium ■ Denmark ■ Eastern Countries ■ France 
Germany ■ Greece ■ Ireland ■ Italy ■ Luxembourg ■ Netherlands 
Nordic Countries ■ Portugal ■ Spain ■ Switzerland ■ United Kingdom 

ORDER BY PHONE 202-942-8788 OR BY FAX 202-942-8789 

MAIL ORDER AND PAYMENT TO : Utility Data Institute, 1 200 G St. NW. Suite 250, Washington. DC 20005 











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O ne of the biggest coatrowersies In 
the electrical industry over recent 
years has been generated by the 
European Union’s Utilities Directive, 
which came Into force at the beg inning of 
last year and requires utilities to use open, 
competitive, purchasing procedures for 
their equipment and services. 

The directive sparked a big row between 
the EU and the US, because of its Article 
29 which said a purchaser may reject any 
bid that contains less than 50 per cent of 
the total value sourced from within the 
EU. and that, where there is no more than 
a 3 per cent difference between the price or 
an EU and a non-EU bid. the non-EU bid 
most be rejected. 

Amid allegations that the EU was trying 
to bu ild a “Fortress Europe." the contro- 
versy was finally defused in April last year 
when it was agreed that, for the electrical 
sector at least. Article 29 would not be 

Nationalism in procurement may 
really be a pragmatic way of 
ensuring that suppliers are close 
at hand for back up 

ap plied far works and services contracts. 
In return. EU companies would be exempt 
from the Buy American Act when tender- 
ing for works and supply contracts from 
US public utilities. 

But the controversy does not end there. 
The broader question is whether the direc- 
tive will even achieve its aim of ensuring 
that consumers will benefit from lower 
costs, through the application of competi- 
tive contracting under which the lowest 
cost supplier wins. 

The Commission has long believed that 
the tendency of public agencies in the EU 
to buy equipment and services from 
domestic suppliers meant that costs were 
higher than if contracts had been allocated 
on the basis of full and fair international 

Andrew Baxter examines the international battle to equip Europe’s power stations 

Sparks fly in a high voltage business 

competition. Hence the Utilities Directive, 
which covers equipment supply and works 
contracts far electricity - although not the 
supply of energy or fuels for energy - and 
requires any contract over Ecu400.00Q for 
equipment and Ecu5m for works to com- 
ply with a series of conditions that allow 
for the maxim um degree of competition. 

Broadly, there are three types of proce- 
dure permitted: open, restricted and nego- 
tiated. The directive also covers water, 
gas, heat and transportation services in 
the EU and is aimed at both public and 
private companies which meet the crite- 
rion of public supply. 

However, a report earlier this year by 
researchers at Sussex University's Science 
Policy Research Unit suggests that, at 
feast for electrical transmission and distri- 
bution equipment, the directive could be 
counter-productive and may even lead to 
higher equipment prices. 

According to the authors, Mr Steve 
Thomas and Mr Francis McGowan, the 
directive appears to be designed to over- 
come two particular pressures, for utilities 
to favour national suppliers - whether in 
response to their government's industrial 
policy or their own national chauvinism 
-and for utilities to enter long-term 
arrangements with suppliers to minimise 
their administrative burden even when 
such arrangements are not in the interests 
of consumers. 

But, they say, “while there probably still 
remain vestiges of the practices, which 
when viewed through today's perceptions 
of the need for free trade and competitive 
bidding appear unacceptable, the line 
between non-competitive procedures and 


Cutting edge of competition: Inspecting a generator at Parsons 

sensible long-term strategies is often a fine 

For example, what might be seen as 
national chauvinism in procurement 
might actually be a sensible policy of 
ensuring that the equipment supplier is 
close at hand to provide back-up in the 
event of technical problems. And what 
might be seen as wasteful procurement by 
not placing orders exclusively with the 
most economically attractive supplier 
could be a far-sighted policy which 

ensures a competitive industry is main- 
tained for the long-term. 

So measures that ensure that unaccept- 
able practices cannot be continued ran a 
risk of proscribing policies which are in 
the long-term interest of utility customers. 

Most of the leading equipment suppliers, 
after all, are multinational in character 
and are therefore much less likely to 
receive support from national govern- 

Also, the electric utility sector is in the 

middle of important restructuring with the 
emphasis on allowing the forces of compe- 
tition to be brought to bear on it, so that it 
functions efficiently. In addition, there ha s 
been considerable progress in adopting 
common standards in Europe which will 
allow suppliers more easily to compete in - 
all markets. 

The authors paint out that by making it 
more difficult for utilities to enter into 
long-term agreements with suppliers to 
develop and purchase new designs of 
equipment it may be harder for them to 
stimulate the market to produce the equip- 
ment with the necessary performance 

It also runs counter to the modern trend 
in supplier-customer relationships in 
industry, where old-style adversarial rela- 
tionships are giving way to partnering and 
long-term co-operative ag r ee m e nt s. 

In the equipment supply industry, mean- 
while, the process of rationalisation over 
the past two decades has been promoted 
strongly by the European Com mission, but 
does bring dangers with it, according to 
the authors. 

The presence of three large European 
companies in the electrical equipment sec- 
tor - Asea Brown B overt, GEC Als thorn 
and Siemens - ought to ensure a competi- 
tive market, they say. But if-ihe market 
size is such that all three can be comfort 
ably supported, the pressure on suppliers 
to beat their competitors might not be 
very strong. 

In addition, they say, it is not hard to 
imagine circumstances in which the field 
amid shrink to two with the second tier of 
suppliers offering little extra competition. 

“While the old narionany-basedstru^ 

tore tended to produce 0V *" spa< St!S 
removal of national protection. 
with the high banters to entry and the 
cyclical nature of demand mean vE 
new multinational structure wm tend ^ 
produce too small a supply network. Toils- 
any assumption that the market win 
behave competitively without strong 
prompting most be questi o ned." they say. 

in transmission ^ distribution equip- 
ment, they contend, there are few suppu - 
era outside Europe which could be used to 
. maintain competitive pressure. GE and 
Westfsghouse are big players in power 
generating equipment — turbines and gen- 
erators- but no longer supply the biggest 
ttamg of transmission and distribution 
equipment. The Japanese companies - Mit- 
subishi, Toshiba and Hitachi — appear not 
to have made any “concerted effort so far 
to-penetrate European markets.” 

The rundown in the number of 
suppliers, encouraged by the 
Commission, has reduced 
competitive pressures on them 

Overall, say the authors, the Commis- 
sion’s initiative on procurement may not 
have paid sufficient attention to the actual 
structure of the market and the nature of 
the relationship between the supplier and 
purchaser of equipment. 

"Given the dangerously concentrated 
nature of the equipment supply industry, 
a muc h greater threat to the economic 
welfare of consumers may be posed by the 
rum-competitive forces in the equipment 
supply industry than is posed by the poli- 
cies of the electricity supply industry." 

The European Market for Transmission 
and Distribution Equipment Publications 
Offne. Science Policy Research Unit, Uni- 
versity of Sussex, Brighton, BN1 9RP, UK 
£ 20 . 

W ithin a decade. Spain 
could be exchanging 
electricity with Egypt 
to the south and Russia to the 
east, both members of a vast 
intercontinental power grid. 

The increasing desire of util- 
ities to trade with each other, 
coupled with recent political 
and economic changes, is pro- 
moting the rapid growth of 
interconnections between elec- 
tricity grids. 

With the exception of 
Ireland, which for the time 
being stands alone, most coun- 
tries in western Europe belong 
to one of three inte rconne cted 
grid systems: the UCPTE sys- 
tem, one of the largest in the 
world, covering 12 states in 
continental Europe; the much 
smaller system of NordeL cov- 
ering Norway, Sweden. Fin- 
land and tbe eastern half of 
Denmark; and the British sys- 
tem, linking England, Wales 
and Scotland. To the east, the 
power grids of eastern and 
central Europe and the former 
Soviet Union are linked 
together by the EPS/UPS sys- 

All four evolved as utilities 
increasingly saw the advan- 
tages of cooperating together 
to improve the efficiency of 
their individual networks. 

Within such interconnected 
grid systems, tbe transmission 
networks of member countries 
are synchronised and work 
together to keep the overall 
system at the same steady fre- 
quency. This not only helps to 
promote regular electricity 
trade between grid members 
but provides a valuable 
back-up for utilities when 
power is lost nnexpectedly. 

For example, if the Spanish 
grid suffered an unexpected 
loss of power, endangering fre- 
quency levels, electricity 
would automatically flow from 
other parts of the UCPTE grid 
to make up the gap. This 
reduces the amount of genera t- 

Lucy Plaskett describes the remorseless expansion of the international grid for electricity trading 

The whole of Europe and a slice of Africa 

ing capacity that each individ- 
ual country has to keep in 
reserve, allowing utilities to 
reduce their investment costs. 

The four separate systems 
are also linked together - 
Britain with UCPTE via a 
cable link with France, Nordel 
with UCPTE via Denmark and 
with Russia via Finland, and 
three interconnections along 
the Austrian and German bor- 
ders providing a link with 
eastern Europe. 

Long distance power 
trading reduces investment 
needs and reinforces 
security of supply 

But such links are so-called 
direct current (DC) lines: while 
the alternating current (AC) of 
the synchronised grids allows 
multidirectional power flows 
to provide a constant back-up, 
DC lines are the “railways" of 
the system, allowing power to 
flow in one direction at a time, 
and only affecting the power 
grids of tbe two countries con- 
cerned. They can also be 
switched off if disturbances 

The main growth in DC tines 
has been to the north of 
Europe. Over the past few 
years, a number of new DC 
lines have been proposed, 
between the Nordel and 
UCPTE grids. 

The most advanced is the 
6Q0MW Baltic Cable being 
built between Sweden and Ger- 
many by Swedish utility Vat- 
tenfall and Germany’s Preus- 
senElektra. due to be 
completed by tbe end of this 

.JpB® . 

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year. East German utility 
VEAG and eastern Denmark's 
Elkraft are also linking their 
two grids via tbe 600MW Kon- 
tek line, due in operation at 
the end or 1995. 

Meanwhile, PreussenElektra 
has also teamed up with Nor- 
wegian utility Statkraft to 
plan the 600MW Viking Cable 
between Norway and Germany 
for later in the 1990s. And 
Norwegian utilities are also 
considering a DC link to the 
Netherlands, as well as possi- 
ble links to the UK. 

These lines are being built 
by utilities eager to exploit the 
difference in price and avail- 

ability between Sweden and 
Norway's large amounts of 
hydropower, and the mainly 
thermal-based electricity of 
UCPTE. Different peak 
demand times also offer trad- 
ing opportunities. 

Nordic utilities plan to 
export hydro electricity to the 
UCPTE grid daring the day 
when prices are high, and then 
switch off their hydro plants 
at night and import thermal 
power when prices are low. 
The links will also allow them 
to import in the event of dry 
summers. Continental utilities 
benefit from peak power with- 
out having to invest in new 

plant. Nordel has always 
exchanged power in this way 
with thermal-fired plant in 
Denmark. But such trade has 
been boosted in recent years 
by the increasing commercial 
pressures of the EC internal 
market, tbe difficulties of sit- 
ing new plant, and weak 
domestic power demand which 
has forced utilities to look 

Utilities are also looking 
east for trading opportunities. 
Vattenfall is considering a DC 
submarine link to Poland, 
while Finnish utility IVO is 
doing feasibility studies on a 
500MW link to Estonia. Preus- 

senElektra and the Polish grid 
company are just finishing a 
study on the feasibility of a 
2x2,000MW DC overland tine 
linking Frankfort to Smolensk 
in Russia, via Poland and Bye- 
lorussia. Together, these three 
projects could form a “Baltic 
ring", offering utilities similar 
chances to exploit different 
fnel sources and demand 

Political change over the 
past few years has also raised 
the possibility of further elec- 
tricity trade with eastern 
Europe. But this is more com- 
plicated since, as part of their 
economic integration into 

western Europe, the countries 
of central and eastern Europe 
want to break away from the 
IPS/UPS sys tem an d become 
part of the UCPTE synchron- 
ised network. 

But before this can happen 
their grids need to be 
caHy upgraded to meet UCPTE 

This work is well underway. 
West German utilities hope to 
link the east German grid sys- 
tem to UCPTE by 1995. While 

The collapse of 
communism has enhanced 
the prospects for deals 
with eastern Europe 

Poland, Hungary and the 
Czech and Slovak Republics 
have formed a union, GEN- 
TEEL, to look into the techni- 
cal aspects of joining the 

According to a report by 
UN1PKDE, die International 
Union of Producers and Dis- 
tributors of Electrical Energy, 
the four have said that the 
necessary upgrading will be 
done by 1997 at the latest, and 
could be completed as early as 
next year. 

Next on the list of future 
UCPTE members are Bulgaria, 
Romania and Turkey. But this 
Is compticatett by the conflict 
in the former Yugo slavia, 
which has severed tbe UCPTE 
fink to Greece. Attaching tins 
part of southern Europe will 
either have .to watt for the end 
of the conflict or will involve 
upgrading of lines between 
Hungary and Romania. 

For tiie longer term experts 

are also doing feasibility 
studies on linking the CIS and 
Rnsswn grids to the UCPTE, 
creating one vast synchronous 
network over the entire Euro- 
pe an con tinent. Technically 
UNIPEDE believes this is pos- 
able, concluding “the size (da 
system will be governed by 
geo g raphical, economic, politi- 
cal or even organisational fac- 
tors, rather than by technical 

But some experts worry that 
tbe trading advantages such a 
huge grid would offer, in 
terms of different fuels and 
peak load times, would be 
more than offset by high 
transmission costs and a loss 
of system stability. “It’s a phil- 
osophical discussion ' about 
where are the limits, who’s 
winning and who’ s losing,” 
commented UCPTE secretary 
Marcel BiaL 

Expansion plans to the 
south are abo weU advanced. 
Spanish grid company Red 
Electrica EspaHola plans to 
have an AC line to North 
Africa by 1996, linking UCPTE 
countries with the Maghreb 
grid, of Miorocco, Algeria and 
Tunisia. . 

■ Hite is the first step in a 
wider prefect to connqpt tbe 
UCPTE grid synchronously 
with the whole of the Hedfter- 
ranean baste. And on pre s en t 
plans, this is not far off. 
According to Mr Teaman Alp- 
tank of the Turkish Electricity 
Authority, work has already 
started an a AC One finking 
Turkey, Syria, Jordan, Iraq 
and Egypt, with completion 
planned by the end of 1996. If 
Tmhey is successful in finking 
up with the UCPTE grid by the 
late 1990s, the only weak link 
in this c i r cuit will be Libya. 
Feasibility studies are already 
underway to lfnkthe Libyan 
grid to Egypt and Tunisia. 

Lucy Plaskett is the editor of 
Financial Tunes newsletter EC 
Energy Monthly. 

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Vattenfall is one of the partner companies in a 
high voltage cable connecting the Swedish and 
German transmission systems which will come 
into operation by the end of 1994. 


Vattenfall generates half of Sweden's total 
electricity requirements and is today the 
fifth largest supplier of electrical energy in 

Our electricity supply system, which is 
based on environmentally acceptable hydro 
and nuclear power, is acknowledged as one 
of the most reliable and cost efficient in the 

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Vattenfall can offer specialist consulting 
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PHONE: +46 3 7J9 50 00 


When Germany takes amt the 
presidency of the European 
Union on July 1. Ur Gfinter 
Rexrodt, the country’s econom- 
ics minister, will try to place 
the liberalisation and deregula- 
tion of Germany’s energy sec* 
tor high on the agenda. 

But the chances for pushing 
through any deregulation of 
the sector before Germany’s 
federal elections next October 
are slim. Mr Rexrodt conceded 
as much during the recent con- 
gress of the Free Democrats, 
the junior partner in Chancel- 
lor Helmut Kohl’s Christian 
Democratic Union-led coali- 
tion. *1 really do not expect to 
get these measures through 
until after the election,'' sal d 
Mr Rexrodt 

Mr Rexrodt had already set 
out his {dans for a new energy 
law in a bill issued last Octo- 
ber. It sets out to replace a law 
which has been on the statute 
books since 1935. 

Its aim is to allow Third 

Deregulation knocks at Germany’s door, writes J udy Dempsey 

Forward from 1 935 

The government is 

pushing for third party 
access to electricity and 
gas efistribution networks 

Party Access (TPAJthroughout 
the electricity - and gas - sec- 

Among other things, it states 
that operators of the electricity 
grid, upon whom third parties 
are dependent for transporta- 
tion, must not unreasonably 
hinder those seeking contracts 
for TP A. However, any refusal 
to grant TPA is permitted if 
the capacity for TPA is insuffi- 
cient, if no appropriate com- 
pensation for TAP is offered, or 
if the secure supplies to other 
customers of the operators of 
the lines is deemed impossible 
through TPA. 

Over the past few months, 
opposition to the Rexrodt 
paper has hardened. The eco- 
nomics ministry itself is split 
Mr Dieter von Wttrzen, a state 
secretary, is opposed to TPA 
an the grounds that it should 
be based on reciprocity by 
other European Union coun- 
tries, while Mr Jotmann 
Rgkhnff, a state secretary and 
Mr Martin Cronenberg, an 
energy expert at the ministry, 
are anxious to push through 

The response from the envi- 
ronment ministry has been, 
lukewarm. Officials argue that 
the draft law does not go Gar 
enough in introducing environ- 
mental improvements. 

But it is Gie reaction from 
industry which holds the key 
to the success or failure of any 
plans by the federal govem- 

Nuctoar power station at Qundranwnkige - soma of Europe's dearest eJaetrfefty Picture: UtrSca Breuss 

ment to deregulate the energy 

The umbrella body for big 
industrial energy users (Ver- 
band der Industriellen Energle 
and Kraftwirtschaft, or VIE) 
has welcomed the proposals. 
This is understandable. The 
organisation’s current presi- 
dent is the rhemirals sector, 
including BASF, one of Ger- 
many's largest chemical 
groups, which has long cam- 
paigned for cheaper electricity 
and gas prices. “The electricity 
and gas prices for industry in 
Germany are between 30 and 
40 per cent, and in some 
extreme cases, 100 per cent 
higher than in. other European 
countries,’* a VIK paper 
recently noted, adding that the 
industry requires greater com- 

Indeed, unlike some other 
European Union countries, 
Germany has no single formal 
regulatory body overseeing 
electricity pricing: Distribution 
companies - that is, the 
regional utilities - must agree 
their tariffs with local munici- 
palities, which in many cases, 
own part of the distributors. 

Tariffs are normally based on 
the operational costs of the dis- 

Despite the high cost of 
energy, analysts at the German 
association of German gas and 
water users (BGW) continue to 
oppose many aspects of the 
Rexrodt proposals.- A recent 
paper issued by BGW argued 
that the introduction of TPA 
and the abolition of the princi- 
ple of exclusive service areas 
will create “inequality of 

It added that foreign gas 
companies would be able to 
supply the German market 
while foreign markets would 
remain inaccessible to German 
gas businesses, ft added that 
TPA would lead to the expro- 
priation of private investment 
and, more importantly, the 
obligation to connect custom- 
ers and guarantee supply could 
no long er be met 

The BGW*s views have been 
rein fo rced by the association of 
municipal undertakings (Ver- 
band kommtmaler Untemeh- 
raen, or VKU). Under present 
legislation, the municipalities 
have the exclusive right to 

Portugal races to catch up, reports Peter Wise 

Speed and diversity 

Portugal Is power hungry. 
Electricity consumption has 
risen at more than twice the 
average European Union rate 
over the past decade as a 
result of strong economic 
growth. Demand is forecast to 
Increase significantly faster 
than in most western Euro- 
pean countries - at an annual 
rate of 2.5 to 3 per cent to the 
end of the century and by 1.6 
to 2 per cent a year from 2000 
to 2020. 

The electricity sector is 
being radically restructured in 
an effort to satisfy this grow- 
ing demand in the most 
cost-effective way possible for 
a country with few energy 
resources of its own. The over- 
riding aims of reform are to 
reduce Portugal’s heavy 
dependence on imported oil by 
altering the energy -m+r and to 
improve efficiency through, fib- 

eralisatian and privatisation. 

“Re st r u c turi ng is aimed at 
introducing flexibility, ratio- 
nality and competition into 
the power section to provide 
consumers with lower prices 
and better services, ” says Mr 
Joaqnim SQva Correia, chair- 
man of Bectricidade de Portu- 
gal (EDP), the state-owned 
power producer and distribu- 
tor. Electricity prices for 
industrial consumers in Portu- 
gal have been reduced by 31 
per coot In real toms since 
1987 bat remain the third 
highest in the EU. 

Portugal's energy imports, 
of winch oil accounts for more 
than 90 per cent, cost 
Es330Jbn in 1993, represent- 
ing 8J9 per cent of total 
Imports and 2.8 per cent of 
gross domestic product This 
marks an improvement from a 
decade ago when energy 
imports were the equivalent of 
l(L5 per cent of GDP. But Por- 
tugal’s reliance on Imported 
off Is still so strong that a fluc- 
tuation of one dollar in the 
price of a barred has far-reach- 
ing effects on the economy. 

Oil accounts for more than 
70 per cent of primary energy 
consumption and domestic 
resources, mainly hydroelec- 
tric power and biomass, only 
12 per cent Diversification 
away from oil is bring focused 
cm natural gas and coal. Portu- 
gal, the only EU country with- 
out a natural gas supply, is 
due to lift 2£00m cubic metres 
a year from 1996 from the 
planned Maghreb-Europe pipe- 

Officials forecast natural gas 

will account for 5-7 per cent of 
primary energy use by 2000, 
subsequently climbing 
towards the EU average Of 14 
per cent if it remains more 
competitive than coaL Goal is 
forecast to grow to 20 per emit 
of primary energy use from a 
current 16 per cent 
Portugal plans to expand its 
existing power generating 
capacity of 7.200MW to 
8.800MW by 2000. A natural 
gas-fired plant will account for 
900MW of new capacity, a 
coal-fired plant for 300 MW, 
hydroelectric plants for 
350HW and wind-powered gen- 
eration for 50MW. 

Liberalisation of the electric- 
ity sector began tentatively in 
1988 with legislation permit- 
ting small-scale private pro- 

With oil accounting for 
more than 70 per cent of 
primary energy 
consumption, there is a 
move to coal and gas 

(faction in the form of mini-hy- 
dro plants. Until then p ower 
production bad been an EDP 

The scheme proved a run- 
away success and EDP was 
flooded with applications to 
build. Officials now estimate 
the potential of mini-hydro 
production could exceed 
250MW by the year 2000- 
Portugal took its first step 
towards large scale private 
production in 1991 when a 
consortium led by Siemens of 
Germany won a contract to 
build and operate a 900MW 
natural gas-fired power plant 
near Oporto in northern Porto- 
gal. The plant is due to come 
on line in 1997. 

In December 1998, EDP sold 
two 30QMW coal-fired units at 
Pego, lSOkms northeast of Lis- 
bon, to a group led by 
National Power of the UK. The 
first unit began production in 
March 1993, the second is due 
to start in October 1905. Two 
further 300MW units may 
eventually be added. 

The sector win make a far- 
ther leap towards liberalisa- 
tion in July when EDP is to be 
unbundled into 10 separate 
companies. This will be fol- 
lowed by the partial privatisa- 
tion of power production and 
distribution. New companies 
will be created to manage 
power production and the 
high-tension transmission net- 

work. Distribution will be 
split among four regional com- 
panies. Five service co mpanies 
will also be formed. A holding 
company will coordinate 
operations and strategy. 

The new production com- 
pany, CompanUa Portugnesa 
de Prodnc&o de Electriddade 
(CPP E), will take over all 
EDP*s power plants, which are 
estimated to represent about 
half the company’s net assets 
of Es2^47bn. Betwe en 20 and 
25 per coot of CJPFE’s capital is 
to be privatised by mkt-1995. 
Further tranches may subse- 
quently be sold but the state 
will retain a majority holding. 
The regional distribution com- 
panies will also privatise a 
minority of their capital over 

ih* Iftfflills— ii win. 

But liberalisation will not go 
as far as **ip UK model. An 
independent planning body Is 
to be set up to determine pol- 
icy on the building of new 
power plants. “Portugal is too 
small and too dependent on 
hydroelectric production, 
which varies according to 
rainfall, to allow the market to 
decide what plants are built,” 
says Mr Silva Correia. One of 
the new body’s first decisions 
will be whether the first large 
power plant to be built in the 
21st century should be fired by 
coal or natural gas. 

A second independent body 
will be created to oversee 
prices and competition. One of 
its main tasks will be to 
ensure that Rede Eldctrica 
National (REN)* the new com- 
pany that Is to manage the 
national grid, buys from pro- 
ducers strictly on a bads of 
lowest price first Initially, aH 
power producers will have 
binding power purchase agree- 
ments with REN. Bid over the 
medium term other producers 
will be allowed to produce 
directly for independent cus- 
tomers, paying for use of the 
national grid if required. 
R egi o nal distributors will be 
permitted to purchase up to 15 
per cent of their supply from 
such producers, 

“Our aim is to make a grad- 
ual transition from a vertical- 
ly-integrated sector to a more 
liberalised framework and to 
transfer the efficiency gains to 
consumers in the form of 
lower tariffe," says Mr SQva 
Correia. “But the special char- 
acteristics of Portugal mean 
that we cannot go as far as 
countries a ich as Britain on 
the road to a frae-market” 

issue concession contracts. If 
TPA were introduced, revenues 
earned from these concession- 
ary payments would be 
reduced. As it stands, the 
municipalities receive about 
DM5bn each year in concession 
payments which help to 
finance public services. 

Yet the Rexrodt plan would 

give the municipalities the 
right to choose which uti lities 
supply its customers, or even 
take over the supply them- 
selves by buying the distribu- 
tion grid. However, Germany's 
large utility companies, which 
are grouped under the VDEW, 
the trade association which 
represents them, would per- 

haps lose out. Currently, they 
enjoy the principle of demarca- . 
tion. which effectively 
amounts to a monopolistic 

The trade unions, particu-: 
larly IG Bergbau and Energfe, 
which represents the mining 
and energy workers, also : 
oppose the Rexrodt paper ‘ 
because social services on th#£ 
Tn m nfcipai level would be cot^/. 
and TPA and greater compete 
tion could undermine Get- 
many's heavily subsidised hard : 
coal industry. 

German coal prices are coo- - 
slderably higher than world. , 
coal prices. The latter cost, 
about DM80 a tonne, but 
tnety companies in Germany 
pay DM280 per tonne for Ger- 
man coal in order to protect 
the industry. The electricity 
utilities are allowed to collects 
levy from the consumer, called 
the Kohlpfennig, which helps 
to compensate them for using 
the high cost of coaL 

Energy and coal mining . 

unions fear that - 
competition wUI damage 
social services 

Despite this opposition, there 
is a growing consensus that 
eventually Germany must 
open up the energy sector. For 
one thing, the Kohlpfenmg is 
supposed to be reduced or even 
phased out by 1996. In addition, 
many concession rights for 
towns and cities expire by 1996,- 
raisfag the prospect of much 
greater competition in these 

As an energy expert at BGW 
explained, “we are already 
allowing in foreigners. If we- 
could get reciprocity, we would 
move ahead. But we cannot go. 
it alone. But we know we are 
undo: pressure.” 

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European countries find 
themselves in a quandary 
about how to limit the environ- 
mental damage from electricity 

Power stations are one of the 
main causes of air pollution in 
Europe. Moreover, they cause a 
diplomatically troublesome 
kind of pollution which can 
travel thousands of miles 
across national boundaries. 
The Green Party in Germany 
grew out of public rage that 
acid rain from abroad was 
withering Germany's beloved 
forests. The surge in public 
support for environmental 
campaigns in the late 1980s 
across much of Europe was 
also stimulated by the 1386 
Chernobyl nuclear explosion in 

Public concern has prompted 
many attempts at curbing pol- 
lution bom electricity genera- 
tion. However, these initiatives 
have proved controversial; 
even those governments which 
most fervently support con- 
trols have also been reluctant 
to relinquish their right to set 
energy policy without refer- 
ence to their neighbours. 

According to the European 
Commission, around two 
thirds of emissions of sulphur 
dioxide in Western Europe 
come from power stations or 
domestic heating. Power sta- 
tions also pump out about a 
fifth of emissions of nitrogen 
oxides in these countries. 

Both “sox’* and “nos", as 
these collections of gases are 
known, can cause acid rain. 
They can retard plant growth, 
and cause skin and eye irrita- 

Pollution reduction remains a high but increasingly costly priority, reports Bronwen Maddox 

The health of all living things 

tions and breathing difficulties 
in people. 

Power stations burning coal, 
oil and gas are also responsible 
for about a third of the emis- 
sions of carbon dioxide, one of 
the main gases implicated in 
the threat of global wanning. 

Most European countries 
have signed up to two main 
rafts of regulation to tackle 
these threats. The Long Range 
Trans boundary Air Pollution 

Governments, however 
green, are jealous of 
their national policy role 

Convention, drawn up in 1983, 
is a package of protocols 
directed primarily at sox and 
nox. Countries have negotiated 
separately on each of these 

In addition, at the end of last 
year, the European Union col- 
lectively ratified the climate 
change convention agreed at 
the 1992 Rio Earth Summit. 
Under the treaty, the EU must 
bring emissions of carbon diox- 
ide back to 1990 levels in the 
year 2000. That will mean a cut 
of some 12 per cent on proj- 
ected levels, the Commission 

European countries have 

Bronwen Maddox on the bid to 

clean up Cracow’s power plant 

Poland freshens 
the tainted air 
of freedom 

From the elegant, cobbled 
streets in the heart of Cracow, 
people cannot see the power 
plant that supplies their elec- 
tricity. But on an overcast 
day, they can certainly smell 
it After the huge steel works 
located just outside the town, 
Cracow's Heat and Power 
plant is the biggest polluter of 
the district’s air. 

That Is just one of the lega- 
cies of the past which the 
plant’s managers are now try- 
ing to tackle. However prog- 
ress so far has been frustrat- 

ingly slow, 

stalled by 

repeated shifts Tn® Cracow 
in government to be impc 
policies on for- rest of the I 
eign finance e _ rtor l^. 

and privatisa- sector oe» 

thm. pioneer roll 

Mr Krzysztof foreign cap 

Ebro-Prokesz, ^ mo<J< 

the plant’s 
strategy and 
implementation manager, 
stresses that the plant’s suc- 
cess in achieving its bopes “is 
important for the whole Polish 
energy sector. This plant is the 
pilot showing the way to bring 
in capital to modernise the 

It will, though, be a long 
haul- Demand for electricity is 
currently running below 1986 
levels because of the slump in 
industrial activity as the econ- 
omy restructures, although 
the plant’s managers expect it 
now to climb steadily. 

While pollution from the 
plant 1ms improved during the 
slump, it will rise again as 
output increases. So too will 
the costs of the plant’s pollu- 
tion permits. In 1993, it paid 
44bn zlotys in fees to local 
environmental protection 
agencies for the right to 
release gases into the air. 

The plant’s main environ- 
mental concern, according to 
Mr Jannsz Danko, in charge of 
environmental protection, is 
nitrogen oxides, known collec- 
tively as “nox". 

The gases can cause breath- 
ing difficulties and contribute 
to acid rain. Poland has agreed 
with European Union coun- 

The Cracow plant claims 
to be important for the 
rest of the Polish energy 
sector because of its 
pioneer roie in securing 
foreign capital to ensure 
its modernisation 

tries that it will reduce nox 
emissions sharply by 1998. At 
Cracow, they are keen to 
install low-nox burners which 
would cut emissions by up to 

Sulphur emissions - the 
other big cause of arid rain - 
are less of a concern, as the 
plant boras Polish coal which 
is low in sulphur by European 
standards. The managers are 
consequently unwilling to 
Invest in expensive flue-gas 
desnlphurisatlon equipment, 
of the kind now being fitted to 

many power 

, . stations in 

olant claims Western 

ant for the Europe. 

)lish energy But these 
wise Of its - of output and 

in securing cleanliness - 

a! to ensure are near-impos- 

nisation sible without 

and more 
finance. The plant has already 
spawned two subsidiaries to 
look after maintenance and 
transport, as a first step in 
reducing its labour force. 

In 1992, the managers began 
to explore the possibility of 
World Bank funding, but the 
bank wanted the plant itself to 
make a financial contribution. 
The plant's original plans for a 
joint venture with a foreign 
company were shelved when 
the government indicated that 
it preferred to sell a stake in 
the company, in order to raise 
funds for the Treasury as wen 
as enabling a capital injection 
into the company. 

Instead, the managers 
turned to possible foreign 
partners, including Electricity 
de France (EDF). However, 
government officials have also 
suggested that the local gov- 
ernment could be a partner. 

Decisions on the plant's 
future ownership have now 
been snspended until after 
local government elections on 
June 19. The plant is not short 
of plans., but until the govern- 
ment’s stance on the industry 
becomes clearer, the finance 
for modernisation is tantalis- 
ingiy just out of reach. 




London, 14 & 15 September 1994 

This high-level international conference will 
debate current issues facing the nuclear industry 
and examine its prospects to the 
year 2000 and beyond. 

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Uneasy coexistence; efovefi and Grafenrtwmfeld nuclear power station at UeWenfeM in Northern Bavaria Picture; Reuter 

assembled a range of tools to energy tax of $10 a barrel of 

try and reach these targets. To 
combat sulphur emissions 
some such as Germany, and to 
a lesser extent the UK. have 
Qtted power stations with Oue 
gas desulphurisation. 

oil-equivalent. weighted 
towards those fuels with high- 
est carbon content However, 
the proposals have stalled 
because of worries about the 
impact on international com- 

Before the Rio summit Euro- petitiveness, and about politi- 
pean Union countries also cal controversy. The UK gov- 
drew up proposals for an eminent, which last year 

walked into one of its stormi- 
est political rows when it 
imposed value added tax on 
domestic heating fuel, has been 
particularly unwilling to con- 
template a further, Brussels- 
imposed hike in the price of 

France, which generates 
more than two thirds of its 

electricity from nuclear power, 
has also protested that the 
nuclear power should be 
exempt from the tax as it does 
not emit carbon dioxide, sox or 

European Union countries 
have also drawn up an energy 
conservation programme called 
SAVE - specific actions for 

vigorous energy efficiency. The 
programme wants to urge 
higher energy efficiency stan- 
dards on the building and car 
industries. However, momen- 
tum behind these has also 
slowed, partly because reces- 
sion reduced the rate of con- 
struction and new design. 
Commission nfficigis suggest. 

Despite those obstacles, 
there has been Improvement 
on some of the fronts. How- 

The decline fn carbon 
emissions is due 
primarily to recession 

ever, there are many signs that 
this is due to wider industrial 
chang es, rather than tbp suc- 
cess of the anti-pollution mea- 

While EU data is incomplete, 
Commission figures show a 
steady decline in sulphur emis- 
sions during the 1970s and 
1980s, by roughly 20 per cent 
overall. In Its 1992 overview of 
the state of the environment in 
the Eli, the Commission com- 
ments that this toll is “due 
mainly to the energy-saving 
measures taken in response to 
the 1973 and 1978 oil shocks 
and industrial restructuring" 
as well as to adoption of new 

anti-pollution reguIation^U 
notes that "since the mid-1980s 
p n-iigginna have been falling at 
a slower rate". 

Nox has proved a tougher 
battle. While measures to con- 
trol pollution from power sta- 
tions and other industry °^ ve 
had some success, "the reduc- 
tions in emissions— are more 
than offset by the increases m 
the number of vehicles on the 
road. The net result is that nox 
emissions are still rising in 
many countries," the report 

While carbon emissions have 
been growing more slowly 
Hian expected, for instance in 
the UK, this is largely due to 
recession, environmentalists 

Commission officials suggest 
privately that further improve- 
ments may follow that pattern: 
due less to specific measures 
than to structural changes 
within Europe, such as east 
German modernisation, or the 
UK's switch from coal to gas in 
power generation. Equally, 
future energy policy changes - 
for example, if the UK decided 
to phase put nuggar paws* in 
the recently-launched review 
of the industry - could coun- 
teract the effect of measures to 
curb air pollution. 

The environmental impact of 
electricity generation is likely 
to continue to be politically 
contentious. But while there 
may well continue to be envi- 
ronmental improvement, the 
driving force is likely to be the 
economic and industrial 
riifl-ng wfi in Europe as much as 
purely “green" concerns. 

off electricity 

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F our years after the 
England and Wales elec- 
tricity system was priva- 
tised, the companies created 
for the state sell-off are in a 
state of flux. 

Professor Stephen Little- 
child, director general of the 
Office of Electricity Regula- 
tion. is reviewing price con- 
trols which consumers say 
have allowed the regional dis- 
tribution companies to make 
excessive profits. 

He is threatening tough 
action following charges that 
their prices and profits are too 
high, sometimes blatantly so. 

National Power and Power- 
Gen, the generating companies 
carved from the non-nuclear 
assets of the Central Electric- 
ity Generating Board, have 
also been under the regulator's 
scrutiny following claims, par- 
ticularly from huge customers, 
that they have too much influ- 
ence over the market 
In this, say critics, the gener- 
ators are assisted by a trading 
system, the wholesale electric- 
ity pool, which constitutes one 
of the most complicated and 
arcane markets in the world 
and is in need of serious 

The judge and jury on the 
charges is Professor Little- 
child, the industry regulator 
who was appointed earlier this 
year for a second five year 

term of office. 

He cleared, the generators of 
abusing their power, but never- 
theless struck a deal to temper 
their strength. 

He is also increasing pres- 
sure for reform of the trading 
pool. One possibility is that 
companies will be allowed to 
bypass the pool when they 
trade in electricity; existing 
rules mean all power most be 
traded through the pool. 

The pool Is also conducting 
experiments to allow buyers of 
electricity a greater role in 
price determination. 

With so much change In the 
air other countries must be 
wondering whether the UK 
experiment in electricity priva- 
tisation has gone wrong. 

Not surprisingly the electric- 
ity companies deny this. They 
argue that the changes are evo- 
lutionary rather than revolu- 
tionary and are refining a sys- 
tem that has, after all, kept the 
lights on and has reduced 
prices in real terms for all but 
the very largest companies. 

Consumer groups dispute the 

claim of price reductions, 
pointing out that it depends 
which date you take as the 
start of privatisation. 

But there Is grudging recog- 
nition that the industry is 
more efficient and more ser- 
vice-oriented than it was 
before privatisation. Occa- 

British utilities face profiteering charges, writes Michael Smith 

Bonanza raises hackles 

stanal calls for zenationahsa- 
tion attract little support and 
the Labour Party would be 
unlikely to make it a priority if 
it won the next general elec- 

However, few people would 
deny that the government 
committed errors when it laid 
the groundwork for 
privatisation at breakneck 
speed in the late 1380s. 

Most industry analysts 
believe that the CEGB’s 


non-nuclear assets qfoinM have 
been broken up into a greater 
number of smalle r bundles 
than the two nhimlew all ocated 
to National Power and 

Even ministers acknowledge 
thin as a mistake, pointing out 
it was influenced by the 
original plan to include the 
commercially unattractive 
nuclear stations in the sale. 

The reasoning was that the 
stock market would not buy 

small power companies that 
included nuclear stations. In 
(he end, the government was 
persuaded that investors would 
not buy any nuclear stations, 
whatever the size of the parent 
company, and they were kept 
in the state sector. 

By then, however, it was too 
late to split up National Power 
and PowerGen without 
abandoning the timetable for 
privatisation. It was left to Prof 
Littlechild to sort out the 
subsequent problems, and this 
was what he attempted to do in 
his settlement with them 
parHur this year. 

T he deal Is that the 
generators will 
endeavour to sell off 
5,000 to 6.000MW of generating 
plant by the end of next year; 
until then they have agreed to 
adopt policies which will lead 
to reducing prices in the 

electricity pooL 
In ggr-hange, Prof Littlechild 
agreed he would not refer the 
generators to the Monopolies 
and Mergers Commission for at 
least two years. By then, 

prof Utflschfld: arbiter between 
suppliers and customers 

competition will have grown as 
independently-owned power 
plants come on stream. 

The deal satisfied lew, other 
than the large users of 
electricity including Imperial 
Chemical Industries, who buy 
their power supplies at prices 
directly related to the pool 

However, the vast majority 
of consumers are unaffected by 
short term pool price changes 
since their supplies are 

covered by long term hedging 
contracts. They were, 
therefore, indifferent to Prof 
Litttechild’s settlement with 
the generators. 

Independent generation 
companies, however, 
complained that the price cap 
would deter them from setting 
up new plants. Given that the 
deal was supposed to foster 
competition, this is a serious 

Another problem is that the 
settlement may turn out to be 
merely a temporary fix. It Is 
far from certain that the 
generators wQl be able to find 
buyers for their plant at the 
kind of prices that they 
consider acceptable. 

And even if they do, the 
plant they keep will probably 
continue to set the price in the 
electricity pool It is this power 
to set prices that most offends 
free market champions like 
Prof Littlechild. 

Little wonder then that he is 
pushing for the pool to accept 
bypass arrangements. The 
more trade occurs outside the 
pool - that is between a 
generator and a customer - the 
less important its prices 
become. However, securing the 
industry’s agreement for 
bypass arrangements will not 
be easy. Some companies 
including regional electricity 
companies argue that the pooL 

is effectively bypassed anyway 
because of the hedging 
arrangenaettts. They are 
concerned that formal bypass 
arrangements would make the 
pool even less transparent and 
would produce little savings 
for consumers. 

Concerned though the 
regional electricity companies 
are about pool reform, their 
over-riding consideration this 
summer is the distribution 
review which Prof Littlechild 
is conducting- Leaks of a letter 
from his office to the 
companies earlier this summer 
suggested that the companies, 
may have to reduce 
distribution prices by up to 20 
per cent next April. Future 
increases would be limited to 
inflation minus 4 per cent. 

S everal of the companies 
are warning privately 
that unless Prof 
Littlechild softens his line then 
they will take their case to the 
Monopolies and Mergers 
Commiss ion. 

Most analysts think the 
regulator will compromise and 
allow the companies a return 
on their assets which they can 
present to shareholders as at 
least reasonable. 

Undoubtedly the excessively 
good times are over for the 
distribution companies. But 
the party is not about to end. 

Britain is a battleground between rival fuels for power generation, reports Michael Smith 

Coal squeezed between gas and nuclear 

C entral European countries can only 
dream of the range of fuels avail- 
able to the UK for electricity gener- 

But they are less envious of the political 
problems which result for a government 
determined to let the market decide on 
which fuels should be used. 

There were times in 1992 and 1993 when 
the very survival of the government 
seemed threatened by the furious reaction 
to its decision to close three fifths of the 
nation's 50 remaining coal mines because 
of a lack of markets for their products. 

With that crisis apparently overc o me, 
the government’s difficulties in power 
generation this year centre on a nuclear 
review which it promised five years ago 
but has bed reluctant to start 
It will have to deal with the demands of 
Nuclear Electric, which with Scottish 
Nuclear provides virtually aO of the UK's 
nuclear power, that it be privatised and 
be allowed to build new power stations. 

Meanwhile, the growth of the use of gas 
in power production is continuing. 
Although changes in prices in the 
England and Wales power trading pool 
have delayed the building of some sta- 
tions, gas could take more than 30 per 
cent of the market by the end of the 
century, compared with almost nothing in 

Some forecasts see gas taking almost all 
of the market by the year 2001. Many 

European countries would rule that out 
because of its implications for security of 
supplies. The government shows no sig ns 
of doubt, saying that if corrections are 
needed in the fuel supply balance then the 
market will have plenty of time to make 


Its confidence in its abilities to sort out 
any problems will have been immeasur- 
ably boosted by its resolution of tbe coal 
closures crisis which was politically 

With the closures programme now 
largely completed - at least while the 
industry remains in state hands - Britain 
now has only 16 deep mines (three fewer 
than were envisaged in its mishandled 
plan two years ago) aemploying fewer 
tium 10,000 men. That compares with 50 
pits and 50,000 men two year ago. 

Ministers got away with it because their 
white paper of March 1993 appeared to 
offer so much. They indicated that several 
hundred million pounds were available to 
keep the mines open, but in the event 
almost nothing has been paid out 

What tiie white paper did was to buy 

time. Since then a succession of pit clo- 
sures have been announced, but because 
they have closed in ones and twos rather 
than in one large operation there has 
been far less pnblictty. 

were simply not there. The mam reason 
was that the two largest generators in 
Kn gfand and Wales cut purchases from 
65m tonnes in 1992-3 to 40m tonnes in 
1993-4 and 30m tonnes for the following 
four years. However, the government’s 
ar gum ent that the tonnag e decline was 
dictated by the free market is not wholly 
convincing. Tbe coal is being displaced 
mainly by new gas plants which wfll pro- 

duce electricity at higher prices than 
existing coal stations. 

The coal lobby argues that the "dash for 
gas" is due to the way the electricity 
industry was privatised, with the creation 
of just two large power generators in 

were desperate to lessen their dependmce 
on what they consider to be a duopoly of 
the two generating companies. 

Their participation in the dash for gas, 
in which they helped to build new star 
tions, was prompted by a desire for after- 
native supplies. 

National Power and PowerGen were 
forced to join the gas stampede or see 
their markets severely squeezed, the argu- 
ment goes. In energy markets nothing is 

ever ample. The coal lobbyists tend to 
forget that the switch to gas is partly 
prompted by environmental consider- 
ations; gas emits much less sulphur diox- 
ide than coal and without it the UK would 
struggle to meet internationally agreed 
pollution targets. 

Nevertheless the government did no 
favours to the coal industry when it 
decided to privatise it after completing a 
sale of the power industry with a less 
titan fully competitive structure. 

But perhaps the biggest test of the gov- 
ernment's free market principles will 
come in its attitude to the nuclear indus- 
try both in this year’s review and over the 
next few years. If the electricity market 
was truly free then Nuclear Electric and 
Scottish Nuclear would be told that that 
they could never build another nuclear 
station unless they could produce power 
from it at fully competitive prices. 

But that would probably mean the 
beginning of the end for the nation's 
nuclear power industry, with two compa- 
nies retaining an ever dwindling share of 
the market as they decommission ageing 

stations. Nuclear Electric acknowledged 
recently that it could only build Slzewell 
C, its second 2.600MW pressurised water 
reactor station in Suffolk, if the state pro* 
vided it with "material support". 

That does not necessarily mean direct 
aid. It could, for example, be achieved by 
tbe government agreeing to meet unfore- 
seen decommissioning costs. Or tbe gov- 
ernment could decide to set aside a spe- 
cific proportion of the power generation 
market for the nuclear industry. Any 
form of support, however, would require 
the government or consumers to give 
assistance that they will not be providing 
to other fuels after 1993. 

In the review and beyond, the govern- 
ment will face arguments from powerful 
lobbies, including some of the country's 
largest companies who want a share of 
power station contracts, that nuclear 
power generation should be supported, 
and soon. 

If Nuclear Electric is unable to start 
work on SizeweU C soon, the expertise 
gained In building Slzewell B, Us forerun- 
ner, would dissipate, they say. They also 
argue that Britain would be unable to 
meet future environmental targets on sul- 
phur and carbon emissions. 

If the government accepts these argu- 
ments it will be accused of abandoning 
tiie free market principles it dung to in 
the coal debate. An inconclusive result to 
the uudear review seems likely. 

The government’s defiance of public 
feelings about pit closures s tems m part 
from its determination to privatise an 

industry that it 

believes would be 
much better nm in 
the private sector. 

Privatisation is 
expected to be com- 
pleted later this 
year. At its previous size the industry 
would have been unsellable,' toe markets 

Gas could take almost a third of 
the market by the end of the century 
compared with zero in 1990 

England and Wales. 

This would have been less harmful if 

the gove rnm ent had 

created vertically 
integrated generat- 
ing and distribution 
companies as it did 
in Scotland. But in 
England and Wales, 
the 12 regional electricity distributors 




This announcement appears as a matter of record only. 

The Treuhandanstalt 

has sold, in separate transactions, the 
majority of the shares in 

the 14 eastern German regional 
electricity distribution companies 


PreussenElektra AG 
RWE Energie AG 
Bayernwerk AG 

Vereinigte Elektrizitatswerke Westfalen AG 
Hamburgische Electricitats-Werke AG 
Energie- Versorgung Schwaben AG 
Isar-Amperwerke AG 
Badenwerk AG 

Vendor advised by 

Price Jfhterhouse 

Corporate Finance 

March 1994 

For further information please contact; 

Mark Hughes, Price Waterhouse. No. I Loudon Bridge, London SE1 9QL. Tel; +44 71 939 3000 
Authorised by the Institute of Chartered Accountants in England and Wales to carry on investment business. 


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banking, finance and 

Monday June 20 1994 


uncertainty a 
threat to recovery 

Recent corruption scandals and the risk of political 
instability are unsettling investors and could 
undermine economic confidence, says David White 

I f there is ever a good time 
for a political crisis, it is not 
at the beginning of a tenta- 
tive economic recovery. But. as 
Felipe Gonz&lez's Spanish gov- 
ernment has found out. argu- 
ing the need Tor stability in 
order to rebuild economic con- 
fidence does not necessarily 
wort on voters. 

After almost 12 years of 
Socialist administration, politi- 
cal uncertainty now has to be 
factored into the Spanish equa- 

The risks of Instability are of 
a different order from those 
experienced in the early 1980s 
when the Soc ialis ts came to 
power, not long after an 
attempted military coup and at 
a time when Spain was not yet 
anchored in the European 
Community. However, events 
that have taken place over the 
past two months have left the 

outlook unclear. 

After a series of resignations 
from the government and par- 
liament over corruption affairs 
involving former top officials, 
the discredit to the govern- 
ment was reflected in a 
resounding defeat in this 
month's European elections. 

Mr Gonzalez, who since last 
year no longer has an outright 
majority in parliament, has 
been left to depend on a precar- 
ious arrangement with Catalan 
nationalists, who are willing to 
support him subject to certain 
conditions. When it comes to 
drawing up the 1995 budget, 
these conditions may prove dif- 
ficult to meet 

Spain could, therefore, face a 
new election period at any 
time from now. Tbe prospect 
has unsettled investors. The 
probable outcome - the advent 
of a conservative Popular 
Party government determined 
to take a tougher line on curb- 

ing the public sector deficit 
and to move faster on privati- 
sation - is one they would wel- 

However, the Popular Party 
has yet to clarify its economic 
programme. There is also a 
danger that it could tall short 
of a governing majority and 
have to rely - as do the Social- 
ists but possibly with even 
more difficulty - on alliances 
made with regumalist parties. 

These jitters have magnified 
the impact in Spain of recent 
international turbulence in the 
bond markets. The govern- 
ment's worry is that political 
nervousness will interfere with 
the restoration of business con- 
fidence in the aftermath of last 
year's recession, the worst 
Spain has experienced for more 
than SO years. 

Expectations of a recovery 
led by exports and tourism - 
both benefiting from a three- 
fold devaluation of the peseta 
in 1992-93 - have been con- 
firmed by figures so far this 

Holidaymakers are flocking 
back to Spain. The country is 
heavily booked for what is 
expected to be a record year 
bringing foreign exchange rev- 
enues of about ywhn. 

Exports rose by a third in 
real terms in the first four 
months of the year compared 
with the same period of 1993. 
However, imports have also 
started rising more strongly 
than expected. 

The most recent figures, for 
April, brought a setback to tbe 
improvement in the country's 
balance of payments current 
account However, some ana- 
lysts still expect the current 
account to come out of deficit 
this year for the first time 
since 1986. 

According to Bank of Spain 

estimates, gross domestic prod- 
uct rose 0.5 per cent in the first 
quarter compared with a year 
previously, following negative 
figures for the five previous 

The OECD recently revised 
its annual growth forecast for 
Spain upwards from 0.9 to L2 
per cent Government planners 
expect that the rate will be 
closer to 1-5 per cent, following 
negative growth of 1 per cent 
last year. 

However, even the more opti- 
mistic forecasts are below the 
average growth predicted for 
tim rest of Europe. It is not 
clear how soon Spain can 
revase the rise in its jobless 
rate, which reached 24.6 per 
c eat in the first quarter, more 
than in any other European 

The government believes 
that measures which came into 
force this month introducing 
more flexibility in tbe labour 
market - although not as 
much flexibility as industrial- 
ists would like - will help 
bring about an early recovery 
in employment Industrial pro- 
duction figures have been 
improving since last Novem- 
ber. However, in spite of lower 
borrowing costs, investment Is 

Still slack. 

T he picture for foreign 
industrial investment, 
which accounts for 
about half of Spanish manufac- 
turing. has been overshadowed 
by recent problems at compa- 
nies such as Volkswagen’s Seat 
subsidiary - which is due to 
receive government aid - and 
Suzuki’ s offshoot Santana 

Wage costs, which in the last 
few years have risen by about 
two points above the annual 
rate of inflation, have eroded 

The modem banking dfetrict of Madrid: nothing has c h anged more in Spain since tho mkM980a than the banking and fi na ncial system AshuvAntma 

Top bank groups 



Customer funds 










Banco Central Htepano 





Banco BHbao Vizcaya 










Banco Popidar Espaftol 





Souxx twfe* OMR 1993 ■ 

Spain's competitiveness as a 
mannfartiiTiTig base. 

Fay increases this year, how- 
ever, have been more modest, 
with settlements averaging 
less than the government's 3.5 
per cent inflati on target 

Although this target looks 
unlikely to be met - given that 
consumer prices have so far 
stubbornly refused to fall 
below a 12-month rate of 49 
per rmt - inflation is expected 
to ease off later in the year. 

One of the more dramatic 
and potentially damaging side- 
products of recession - the cri- 
sis at Banesto, one of the coun- 
try's leading hanks - has been 

successfully and swiftly dealt 

From the Bank of Spain’s 
summary intervention in late 
December to the sale of a 
restructured Banesto took less 
than four months, with mini- 
mal consequences for confi- 
dence in the banking system as 
a whole. 

Banesto was the biggest 
h?nk to have run aground in a 
long series of Spanish hanking 
crises. Its rescue, a $4bn repair 
job to its balance sheet, was 
one of the biggest operations of 
its kind mounted anywhere. 
And its eventual sale by auc- 
tion to Banco Santander for 

more than $2bn was Spain's 
biggest takeover. 

Tbe result is that Banco San- 
tander - formerly a middle- 
ranter among the main Span- 
ish hanka - ha* fatten over 33 
the country's top banking 

Nothing has changed more 
in Spain since the mid-1980s 
than the banking and financial 
system, instead of seven “big 
banks " there are now four. 

Two big private-sector bank 
mergers have taken place. 
State banking interests have 
been brought together into the 
partially-privatised Argentaria. 
And savings banks have under- 

taken a series of mergers, 
expanded outside their 
regional fiefdoms, and taken 
over commercial banks. 

A generational change has 
taken place among the leading 
hank chairmen. Financial mar- 
kets have been reformed, 
exchange controls lifted, 
restrictions eased, the last 
fixed interest rates abandoned, 
barriers to foreign banks 
removed, competition opened 

Banks no longer have to 
keep a large proportion of their 
deposits in compulsory 
reserves and low-yield state-di- 
rected investments. 

What has not changed is the 
unmissable physical presence 
of banks on Spanish streets. 
Spain still has more bank 
branches than France or 
Britain, and more per head of 
population than anywhere else 
in Europe except Denmark and 

The tradition whereby there 
is a church, a bar and a bank 
on every block seems to die 

hard. On the other hand, more 
than a third or the bank 
branches carry names that are 
different from those of five or 
six years ago, such has been 
the reorganisation ol the sec- 

It is a bitter irony that one of 
the main figures who oversaw 
the modernisation of the sec- 
tor, and one of the main stan- 
dard-bearers of economic 
orthodoxy during the Socialist 
party’s period in government - 
Maria nn Rubio, for eight years 
governor of tbe Bank of Spain 
- should also be one of the 
chief protagonists of the cor- 
ruption scandals that have 
brought the government and 
some of the country's leading 
institutions into disrepute. 

It may well be, as some 
bankers argue, that Mr Rubio’s 
alleged misdemeanours, such 
as insider dealing, were "no 
more than everybody else was 
doing” in the 1980s. IBs dis- 
grace, then, is a sign of 
another important change, to 
stricter rales and standards. 

This announcement appears as a matter of record only 

Santander Investment, 

linking investors around the world with high-quality corporate and 
goverment issuers throughout Latin America and Southern Europe. 

Grupo Televisa, SLA. 

Global Equity Offering 

Santander tertstatal Bank Looted 

Joint Book Humor 
Joint LMd MaitB0or 


Santander Investment 





ffciux orn«roui m oc coaamotSu. **. 

Public Equity Offering 

Rights base 

Banco Santander dr Negndo* PMagel 

Santander Invest 



* l III/ Smhtntk* fmtxh 

Boko Santtmtkrde Ncgocios -VeabertftheSFA 

Headquarters: Madrid (Spam), Piaza del Marques de Salamanca, 3_v 4 • 23006 Madrid • Tel. (34 V 435 77 66- 435 7788 


John Gapper finds competition is growing in the commercial sector 

The boat starts to rock 

For the private hanks which st31 dominate 
reta il hank-trip qi Spain despite growing 
competition from savings banks, this ts 
already an unsettling year. It started 
Tmmmffir tahty with the dismissal of Banco 
TRgpwftni de Crfidito's (Banesto’s) manage- 
ment ami shows few signs of short-term 

The removal of Mario Conde as presi- 
dent of Banesto by the Bank of Spain and 
Che subsequent restructuring in which 
Ba nco Santenitar took a controlling stake 
nwaptficd investors in the private banks. 
Shares in banks with industrial holdings 
such as Banco Central Hispano suffered a 
fees of confidence. 

Six Tnonthn on from the drama, which 
embroiled the US bank J.P. Morgan 
because of its dual role as Banesto’s 
adviser and an investor In Banesto 
through its Corsair fond, stability has 
been restored. The central bank Is gener- 
ally held to have wielded supervisory pow- 
ers effectively if drastically. 

Yet Banesto is likely to remain a weight 
on Santander, and therefore <nfhi«v»A the 
dynamics of retail hanking, for at least 
two years. Santander most prove that it is 
able to gal" value from its bid of Pta762 
($5.52) per share for Banesto, a bid which 
was greeted with, scepticism by the stock 

The acquisition of Banesto is a signifi- 
cant step in the process of the cansdhda- 
tfon of Spanish banking tram the old “big 
seven" banks to four big banks - San- 
tander/Banesto, Central Hispano, Banco 
Bilbao Vizcaya and Argentaria, fixe collec- 
tion of former state-run banks that were 
partly privatised a year ago. 

One effect of the purchase is to move 
Santander Closer to its amb ition to be a 
rival to banks such as Barclays and Deut- 
sche Rank That means a hank with strong 
roots in retail htmkrng in its home coun- 
try, but with a strong global and invest- 
ment awd commercial fcmiring ' presence. 

But in its home market, some rivals 
hope that it has at teaat bitten off winn gh 
In Banesto to afbetthe effects of its sus- 
tained effort to raise market share over 
file past five years. Its launch of high 
interest savings accounts in 1989 was one 
of the f nr m a ri vp in increasing 


Santander ha* chosen to keep Banesto 
as a separate group under the manage- 
ment of Alfredo Saenz. In spite of the 
idearing of ft* immediate asset problems 
c au se d by Mr Cande’s expansion, o ther 
hanks say that Mr Saenr has a tough task 
to instill going vigour in the managers of 
Banesto’s rural branches. 

They hope that the *aqfc will itampm the 
competition for assets — particularly mort- 
gages - and deposits, which intensified 
list year and early this year. 

Jorge Bay, Central Hispano’s research 
director, says that net interest margins 
narrowed “quite sharply" at some banks 

in the first quarter. 

This is a continuation of a long trend of 
narrowing margins following the emer- 
gence of true competition among hanks. 
But last year’s fall was dramatic - private 
banks' average net interest margins fell by 
(L5 percentage points from 8-24 per emit to 
2.74 per cent between 1992 and 1993. 

That kind of fall is unsustainable- In 
1993, it could be absorbed because banks 
mad« up all the loss of profit an lending 
business through bond and foreign 

Last year's aqueoza on lendhg has rafcad 
quesUona about Uia mefca’a d awlcp m an t 

exchang e trading, iwdmUng bond sale and 
repurchase. Prefits were virtually guaran- 
teed by falling shortterm interest rates. 

The expectation of a far ther foil in inter- 
est rates caught banks out in the first 
quarter. Some tried to gain mortgages by 
pricing them virtually at the cost of fund- 
ing, expecting margins to widen as inter- 
est rates fefl- They no longer had windfall 
trading profits to cover this squeeze. 

Yet not all is gloom for the banks. There 
are hopes that the first half of the year 
win mark the bottom of their fortunes for 
a number of reasons: 

• The shock of first and second quarter 

figures is likely to persuade banks of the 
folly of competing too strongly in. a static 
market for loans. 

The second quarter fall from last year 
may be pronounced because the 1993 fig- 
ure reflected windfall gains from the 
devaluation of the peseta. 

• Spain’s recovery now appears 
ent renched flt»nfral nfgpnnn is predicting 
a growth in demand for bank credit of 7 
per cent this year, compared with a fall of 
1 per cent last year. 

This should both improve volume, and 
ease p r** *™ on iwargina f wm hankn com- 
peting for Brnired demand. 

• The Ml in interest rates squeezed mar- 
gins last year, but win gradually ease the 
burden of non-performing loans. Banks 
ahnq i d be ahh» to release provisions if the 
economy recovers sharply. 

They will also have to pay less to 
ftimiw loans an which borrowers have 
suspended paying Interest 

These factors should ease same af the 
short-term pressures an hanim But the 
Banesto crisis and last year's squeeze on 
tondte C have raised longterm questions 
about the development of the sector. These 
concern growing competition from capital 
markets, and the fixture of banks' equity 

One reason for the Spanish banks' tradi- 
tional x n t rftte bfHiy ts that there ha« been 
relatively little “disintermediation” - a 
bankers’ term for the elimination of banks 
as intermediaries between investors, and 
issuers of financial instruments. This has 
been true of both wholesale and retail 

Few large Spanish companies have easy 
acflayf to Hwnnmf Hai paper and medtum- 
teim note markets to raise finance, but are 
instead heavily dependent on bank 
finanro Similarly, retail customers have 
relied on Hawk and savings hank d qifl ftjte 
as short-term investments rather than 
equities and bonds. 

However, there has been strong growth 
in bond-based mutual funds in the past 
year, encouraged both by faftng inflation 
and tax breaks to finance the public sector 

A switch from bank deposits in the 
long-term would put pressure on banks’ to 
rationalise their large branch networks. 

Companies are also likely to rely mare 
on m pHai markets. They may have to do 
so, as hanks such as Banesto and Central 
Hispano reduce equity holdings to free 
capital. But Spain could face structural 
problems if banks switch away from 
equity holdings before capital markets 

Rod Frew, Lloyds Bank’s chief manager 
for Spain, says that the sector hag “seen, 
the gnd of growth in industrial holdings". 

But be argues that banks could face 
equivalent problems if they simply replace 
equity stakes in raropanipft with lower-re- 
turn debt fin a nce. 





Sarvsfai MdTOuDca 1 
Itactamant de Restdus 
(Barcelona HatropoltMi Ana) 



PTAS 18^00,000,000 

■ w 

Fomento de CoRstfucdones 
y Commas, sjl 

SfiOOflQQ Shares o! Capital Stock 

ChMCteH H W 

ILS. $350,000^000 


%% Grope INI 
IM Finance ELV. 

institute Nadonal de Industita 
Sfc percent Notes di»i998 

Jot* Laadlfanagf 
US. $850^00,000 


Pedro Domecq, SJL 
— dfcyeo fcwn p a at aa 
haa baan acqritad ay 
AlOed Lyons PLC 

trough to aUMfctay 
Hiram WMwriEurapa. SA. 
wtich wS be re-named 

Allied Domecq PLC 

Empress Nadonal de 
Bectfiddad.SJL (ENDESA) 

Hough fts W0% owned aubeiSary 

Endesa DesarroBo, SJL 

haaacqriredtrom bedMaSA. 
fl.78%af the stare capital of 

Socledad General de Aguas de 
Barcelona, SA. (SCAB) 



Santander Finance Limited 

kyWMMO Shares 
Wor»<3inMitotiv» G uaran teed 
P ra to* m ice Shares, Series A 


Banco Santander, SJL 
L ea d Ma nn er 
ILS. $250,000,000 

O aiW BB 

In the last twelve months Goldman Sachs acted as joint-lead arranger 
and underwriter to Entitat Metropolitana de Serveis Hkfrfiulics i 
Tractament de Residus: financial adviser to Pedro Domecq, SA, 
Empresa Nadonal de Electriddad, SA (ENDESA), EmRsint, SA 
and Socfedad de O6dito Hipotecario Bansander, s A; global 
coordinator to Fomento de Construcdones y Contraias, SA: joint- 
lead manager to Institute) Nadonal de Industria and lead manager 
to Banco Santander, SA 

London Newttxk Tokyo Baipng Frankfurt HongKOng Madrid* Milan Mows* 
Moscow* Paris Seoul* Singapore Sydney TalpeP Toronro Vancouver Zurich 
isared by Gotdman Sachs iraemaUonaL a member of Tha Securities and Rjaues Autarity. 
l up re ae i aj dvp rffof 


hat aoqL*r*d from GrupoB»tJroto2CTfcol 


feardrotrthyrtm»l»,mi minninl 
aiectric^ymaritaCri ARAGON, ol 


aaaw— tareaareatreregkiia— WH— a 
Brough B4ECO. ER2: D4ISSA and BMER 

Enrflsfc i L SJL 

has sou id 




Socledad do Crttlto 
Hlpotocario Bansander, SA. 

*100% aubakSary al 
Banco Santander 
taiMU reddtnBal mortgage partfebabn 
HEporeeariaHpoteban aa nhWiliaQ 

of Bonos dsTUacttnKpaiscsita which 
amrend'AA* widb% undamnwiby 

Banco Santander 




David White follows a drama few believed could ever hit the top bank 

Banesto joins the crisis list 

It was the longest 
shareholders' meeting any- 
body in Spanish banking could 
r ememb er and at moments 
ram« dose to anarchy. A suc- 
cession of small shareholders 
stood up to protest about 

being swindled. 

About 6,006 people turned 
up to ft p exhibition ten out- 
side Madrid for the meeting, 
on March 28, although most 
hmf gone by the Hitia it ended 

ntnn hours later. 

Tim outcome had been deter- 
mined by proxy votes support- 
ing the restructuring plan for 
Banco Espafiol de Crddtto 
(Banesto), opening the way for 
its gate and the CODdUBOIl of 
the most spectacular crisis 
ever to hit a top Spanish bank. 

In tiie midst of flits, protest- 
ors carried a banner through 
the Htn»« of chairs with a sin- 
gle word, on it “Bumasa” - a 
reminder that, while the 
authorities and the banking 
community were making a 
concerted effort to treat the 
upset at Banesto as a unique 
case and prevent panic spread- 
ing to other institutions, the 
s y m p tom s of the case were not 
without precedent in Spain. 

In February 1983 the Social- 
ist government, then newly 
arrived in power, had also 
taken a deep breath and seized 
Rmnasa, the country’s largest 
privately-owned holding 
gro up , to preve n t a collapse 
that rtir fwtetmri to whakw the 
country's whole finBT>ria1 sys- 

There were dear differences 
between the two cases. 
Rmnasa was e xpro pri a ted out- 
right and sold off bit by bit 
while the Bank of Spain inter- 
vened in Banesto with a view 
to re-launching the bank as 
quickly as possible under new 

There were also co n trasts 
between the men at the centre 
of the two affa i rs. Jost Marla 
Ruiz-Hateos is a self-made 
man, devout member of the 
lay organisation Opus Dei, 
who built a small family 
sherry business into an empire 
including hotels, stores, bund- 
ing, agrobusiness, insurance 
and 18 banks. The glamorous 

Mark) Conde is a derrer lawyer 
who sold his stake in a phar- 
maceuticals comp any for a 

large sum and parachuted into 
the chairmanship of Bane s to 
at the age (rf 39 as It was fight- 
ing off a hostile takeover bid. 

They do, however, have 
mnw thing s in common. Bath 
are outsiders who have tried 
to tako on banking estab- 
fr j i m gy i t and the government; 

they are inge- 

itinam financial 
who face alle- 
gations of 
and both 
headed groups 
in which hawks and industrial 
co m p ani es coexisted in com- 
plex relationships that went 
seriously awry when business 
conditions ba^ama tmrg h. 

In Rumasa’s case, it was tire 
banks * hn * belonged to the 
industrial group and were 
used to finance it In Banesto’s 
case, in dus t r ia l participations 
belonging to the bank com- 
pounded the problems in its 
lending business. 

Spain sometimes has a short 
memory, but it should know a 
bit about bank crises. In the 15 
years from 1978 there were 30 
bank collapses, not counting 
-that of Bumasa. The series cul- 
minated in 1982/3 with several 

Between 1978 and 1983 
Spain has witnessed 30 
bank coffapses, not 
counting that of Rumasa 

hip names. Apart from Ban co 
AfUntico - Rmnasa's Barcelo- 
na-based flagship, now con- 
trolled by tire Arab Banking 
C or por a tion — Banco Catalans 
and Banco Drqnffo were also 
brought down fay industrial 

In Spain, the German model 

of leading banks at fl y centre 
of a web of industrial interests 
has frequently been found not 

to work well. 

At the time 
of the Bumasa 
it was unimag- 
inable that 
Banesto should 
meet a similar 
fate, Banesto was still the top 
^parish hawk by the size of its 
customer deposits. 

Founded in 1902, it was for 
the e pit o me of bank- 
ing in Spain, stodgy, conserva- 
tive, bat solid and ultra-re- 

Its pride in its retail net- 
work, reaching into the far- 
thest comers of the country, is 
recorded in bronze in the lists 
of branch names adorning the 
mrtmte walls of its old b e ad 
office in central Madrid. 

Ironically, Mr Ruiz-Mateos 
bad tried, unsuccessfully, to 
get into Banesto as a l ead i n g 
minority shareholder in 1982. 
"I am convinced,” be wrote 

The rescue 

Dec 28: Banesto shares are 
suspended. Bank of Spain 
sTteivenes, sacks chairman 
Mario Conde and rest of 
Banesto board. Appoints 
Albedo Saenz as chairman. 

Jan 28: Rescue plan 
approved to repair Pte605bn 
hole in Banesto balance 
sheet. Former board 
launches ^successful 

Feb 1: Trading in Banesto 
shares resumes. 

Feb 2& General 
shareholders’ meeting ca&ed. 
Mar 16: J.P.Morgan, whose 
Corsair fond has largest 

sngle shareholding, agrees 
to plan. 

Mar 2ft Shareholders vote 
in favour of plan and legal 
action against the former 

Mar 29: Terms for sale of 
majority hohfing released. 
Apr 1ft Banco Popular and 
Banco Central Hispano 
withdraw from contest, 
leaving Banco BBbao - 
Vizcaya, Banco Santander 
and Argentaria in the race. 
Apr 25: Co mp eting banks 
submit seated bids. 8anco 
Santander announced as 

recently, “that col 
between Rumasa an d Bxnefea 
would have been womo&y 
beneficial for the national 
economy, and would hart 
avoided the great drama . 
Spanish capitalism, 
destruction of o«r 
and *™***tel fabric.” 

From the end of 1967, 
Conde took Banesto on a 1 
path of aggressive lend ! 

The bank’s loan volume roa^ 
rose 109 pm cent in the 
years from 1988 to 1991, t 
the rate of growth In tbs ; 
of the banking sector. ■ 

It had to pay a Ugh priori , 
finance this expansion, cum. 
pettag with Banco Santander 

- its eventual new owner 

offering interwt-beartn* 
accounts. • -!fl 

The concentration of 
was accentuated by hnf 

recession-hit comjwniea 

industrial holding gnwp.'' ^'- 

Efforts to canM&dte&r 
through provisions uni 
Pta95bn capital increase 
year proved insufficient-;; 
Bank of Spain moved- ' 
December 28, overrhtts 
plans which JJP-Morgan i. u 
US had laid for brilingj, 
bank out. Auditors 
quently raised their . _____ 
of the hidden losses strffc- 
bank by 20 per 

The rescue, including 1 
to cover non-performtag'j 
and an intexestfree 
offset current losses, 
cost the Bank of Sptin 
private banking 
Pta96bn each, 
account the profit . 
selling newly-created „ 
a premium to Banco 

The latter, whiefth 
declared its intention 
ing on to at least a 40 _ 
share, is setting about 
Banesto’s industrial 
a«A — through 

- the stakes which Mr 
built up in newspapers 

To stop Banesto hmfaqfl 
negative impact on its ccttsolf*: 
dated results, it says 8^-vfflf 
need to recover some PtaSOOfaig 
of dubious Banesto loans. :-■% 


jos :- 

** ‘fUf W > 


- ^ 

Tom Bums looks at the degree of autonomy the Bank of Spain enjoys 

Maintaining independence 

its counterparts around the 
world, would prefer to ovoid. 

Arguably, tiie best option; 
open to the treasury, parties^ 
Uaiy : because there are stiftT 
expectations of farther interest: 
rate cuts, is debt strippin g, 
strategy that originated in the'. 
US and which consists of the T 
division and separate maike& 
ing of a debt asset into its poring 
opal and its interest. 

Debt stripping, which', 
prompts a wider and more Bqg" 
uid secondary market, ha& • 
bean developed elsewhere htr 
the EtT bid has still to mukn as*^ . 
impact in Spain in par£?' 
because of the lack of speci- 
alised knowledge and fn parti; - 
because of double taxation- 
finpedimmits that Imve Stiff to*- 
be ironed out . 

A main attraction for nonr'l 
residents holding the interest' 
part of a stripped debt is that 
they are exempt from with- v. 
holding tax. • ?,- 

Mr Rojo is thmefiae in the.?’ 
enviable position of working.-, 
with “hands-off** politicians 
and with a resourceful trea- 
sury that has already come to 
terms with rum-monetary fin- 


He can therefore co n ce ntra te 
on his pet project of raising 
domestic awareness of infla- \ 

The governor plans to have - 
the bank issue monthly reports 
on inflation and he himself . . 
wants to address parliament's 
fiflfai c e committee frequently » 
on price stability. 

He also wants to follow the 
sample of Bank of Rn giand 
governor Eddie George and - 
have regular meetings over 
policy with the earn- . 
omy minister, the minutes of 
which are subsequently made' 

Looking ahead, however, Mir . 
Rojo’s independence could be 
tested to the fufl. Shook! the 
domestic economy begin the 
recover quickly - which it . 
could do - will Mr Rojo be 
tempted to push up interest 
rates in tiie manner of the 
Fed’s Alan Greenspan? And 
should Mr Rojo want to do so, 
what will be the reaction of 


Luis Angel Rojo, the Bank of 
Spain’s governor for the past 
two years, is cautious when he 
talks about the autonomy stat- 
ute that was legislated for the 

ins IHi itina by parirawwait last 
month. *2 'n theory we are now 
as independent as the Bundes- 
bank," be says. 

Mi>jtefffld m similar legisla- 
tive initiatives in France, 
Ireland and other European 
Union member states, Spain’s 
autonomy law gives Mr Rojo 
and the bank the responsibility 
for setting a monetary policy 
that is compatible with reduc- 
ing inflation . 

In line with the Maastricht 
Treaty’s provisions an central 
bank independence, the new 
law also prohibits the institu- 
tion from financing the Trea- 
sury or any other public entity. 
However, the Spanish govern- 
ment, as elsewhere in the EU, 
has reserved for itself the 
responsibility for exchange 
rate policy. 

Theoretically, as Mr Rojo 
would have it, the goal posts 
have now been changed on 
Spam’s economic playing field. 
What remains to be seen is 
how tiie game alters. 

The consensus view is that is 
will not change a great dead, at 
least not in the mid term. 

The Bank of Spain’s gover- 
nor knows that a set of legal 
provisions does not automati- 
cally create a code of public 
conduct Whether the bank 
becomes a recognisable Baba 
clone will depend on the firm- 
ness displayed fay Mr Rojo and 
the bank over ttmp and qq the 
backing that such mdependeixt- 
ly-nrinded decisiveness might 
receive from parliament and 
the public. 

Mr Rojo argues that a certain 
amount of education is in 
order "The Germans under- 
stand that price stability is 
important, the Spaniards 
under stand fate less.” He also 
belives that at some future 
date there could be disagree- 
ments with his ministerial 
masters because price stability 
“is an objective that hardly 
anyone in politics is Interested 

So far the governor has been 
fortunate with his political 
overlords. Former economy 
minister Caries Solchaga. who 
appointed Mr Rojo governor, 
echoed Mr Rojo’s sentiments 
when he confessed in a bitter- 
sweet valedictory speech to 
parliament that a real domestic 
problem was the fact that 
Spaniards had news' ham suffi- 
ciently worried about high 

l T if b tirm. 

Pedro Solbes, who replaced 
Mr Solchaga a year ago as 
economy and ftnunap minister, 
has put budgetary restraint at 

Luis Anpal Bute Barrie of Spain governor 

the top of his agenda. 

Such political support has 
made Mr Rojo's Job a lot easier. 
Having steered the peseta 
through three devaluations in 
less than a year, following 
Europe's monetary turmoil in 
the autumn, of 1992, Mr Rojo 

asserts that he has already 
been acting with the sort of 
independence which the auton- 
omy statute has now formally 
granted the bank. 

Over the past few months Mr 
Rojo has almost halved the 
Bank of Spain’s benchmark 
intervention rate and brought 
it down to 7 A per rent and he 
claims that over the period he 
has not received a single 
instruction from the economy 
and finance ministry on inter- 
est rates cuts. 

hi the same von, the govern- 
ment has anticipated the new 
restrictions on monetary finan- 
cing by unilaterally relinquish- 
ing this instr ument at the 
begining of 2993. It did so 
shortly after the cabinet 
approved the draft Bank of 
Spain autonomy law in Decem- 
ber 1992, although legally it 
could have continued to bor- 
row from the institution right 
up until last month when the 
law was finally enacted by par- 

Treasury officials say they 
wanted to “get into training" 
ahead of the ban on monetary 

In the event the g over n m e nt 
went to the markets last year 
and obtained more debt than St 
required; Spain’s PSBR of some 

Ptal5,0G0bn was overfunded by 
Pta3,Q00bn and not a peseta of 

this total came from the Bank 
of Spain. 

In addition, the Madrid Trea- 
sury negotiated last year a syn- 
dicated loan facility with the 
UK’s National Westminster 
bank, which led the syndicate, 
th at provides a multi-currency 
Pta750bn standby credit line 
over a three-year period at 
libar plus 0fr75BP. 

A year later tiie government 
has stfll not made use of this 
fatality, one of the largest 
available to an EU member, 
although there are suggestions 
that sane of the foreign banks 
in the syndicate are urging it 
to do so. 

Should the going get tough 
the_ government has several 
options with which to over- 
came the ban cm monetary Un- 

it can start to take up the 
Nat West's facility and it caw 
in addition, negotiate a ahnffo r 
credit line with the domestic 
banks. It can also return to 
short-term three- and six- 
month debt issues, a strategy 
which Madrid's treasury, like 





Takeovers are changing direction, says Tom Bums 

Foreign funds 

Two disposals in the past 
year - the sale of a 15 per 
cent stake held by the March 
family In the construction 
and chemical company Ural- 
ita and the sale by Banesto of 
its 34 per cent stake in the 
Acerinox steel producer - 
suggest a new trend in 
inward investment 

In the past a Spanish com- 
pany was simply the object of 
an outright foreign takeover. 
In 1991, Ear example, Petro- 
med, a Banesto-controlled oil 
company, was sold to British 
Petroleum, and In 1992 JBib- 
by&Sons, the UK subsidiary 
of South Africa's Barlow 
B and , bought Finanzanto, a 
construction services group 
In which the March family 
had formerly been a major 
equity holder. 

Large takeovers are far 
from over. Hus April, follow- 
ing the lead of Gahmess* 1990 
takeover of Crnzcampo, 
Spain's leading brewery. 
Allied Lyons acquired the 
Pedro Domecq wine firm, the 
last big domestically-owned 
sherry producer. 

But file Uralita and Aceri- 
nox disposals represented a 
new development. In both 
cases fresh capital flowed 
into the Spanish companies 
in the shape of foreign Insti- 
tutions. Mostly UK-based 
institutions replaced the 
March family's holding - Cor- 
poracidn Financiers Alba - in 
Uralita and mostly largely US 
Institutions bought the Ban- 
esto equity in Acerinox. The 
existing management 
remained in place at Uralita 
and at Acerinox. 

During recessionary cycles, 
this type of inward invest- 
ment is common in HwHrrfg 
that have achieved a high 
level of maturity. As rates 
come down and the markets 
become bullish, institutional 
investors are willing to pay a 
market-driven value for 
equity that is above the con- 
ventional acquisition price in 
an industrial takeover. 

In Spain this is new 
because it was only at the end 
of the 1980s that the Madrid 
market began to take on the 
sort at strength and liquidity 
that attracts long-term 
investment from foreign 

institutions. In the early 
1980s, when the economy also 
dipped into recession, the for- 
eign funds option was pre- 
cluded by the narrowness of 
the domestic stock exchange. 

“For the first time we were 
able to employ Anglo-Saxon 
practices and seek out insti- 
tutions, " says Mr Santiago 
Egnidazu, bead of corporate 
finance at AB Asesores, the 
Madrid firm which advised 
and lead managed the Uralita 

Cyclically -exposed Spanish 
companies in need of fresh 
capital, such as Uralita and 
Acerinox, are for the first 
time able to tap foreign insti- 
tutions that can be counted 
upon to anticipate the end of 
a recessionary cycle. 

Companies in need of 
fresh capital can now 
tap foreign institutions 

Uralita. with its odd mix of 
construction and PVC- 
weighted chemicals, is in 
addition a difficult takeover 
target. It would have to be 
broken up in order to attract 
separate industrial buyers 
and even then it would have 
to await a sustained economic 
upturn that would permit the 
appearance of potential cash- 
flow rich acquirers. 

Phillips & Drew Fund Man- 
agement owns 10 per cent of 
Uralita's equity, haring 
recently increased Its position 
in the company, and the 
Royal Bank of Scotland con- 
trols almost 9 per cent of the 
stock including a S per emit 
stake owned by Scottish Wid- 

Foreign funds now control 
the 34 per cent of Acerinox 
equity formerly owned by 
Banesto. The US Investment 
bank JP Morgan, advised 
Banesto bank on the sale of a 
25 per cent of its equity, plac- 
ing it In the US and AB Ase- 
sores subsequently placed a 
farther 9 per cent 

The Uralita Investment Is 
instructive because the com- 
pany smoothed the path 
towards the final deal and, by 
doing so, pointed the way for 
companies seeking similar 

flow in 

re lation ships with foreign 

What Phillips & Drew and 
Scottish Widows wanted and 
obtained from Uralita was the 
right to name independent 
directors with a brief to exer- 
cise a broad supervision of 
the company’s management 
as well as a close control over 
certain areas, such as the 
controversial issue of the 
board's remuneration. 

These directors - there are 
three, all senior officers of 
Mg Spain-based firms - main- 
tain a fluid relationship 
between the Uralita’s execu- 
tive management and the 
shareholder in stitut ions that 
they represent. Such a role is 
new to Spain. 

"The funds can have a shot 
at influencing management 
decisions,” said a banker 
close to tiie company. “They 
Ct ffi wmka t e l ephone ipik fim t 
carry clout and they almost 
certainly wont have to make 
angry scenes at the AGM.” 

In fact the institutions 
should have little cause for 
worry about their invest- 
ments in Uralita and In Aceri- 
nox. Bath are 00 course to 
become the sort of turn- 
around stories that gladden a 
ftmd manager's heart. 

At Uralita, the effect of an 
intensive re s tr u c turin g pro- 
gramme which was started in 
1991 is beghrtng to be felt 
Sales volumes In the group’s 
main division, refurbishing 
and housing, are up and PVC 
prices, the mainstay of its 
chemical unit, are recovering 

The group could break even 
this year - following losses of 
Pta7-5im ($55m) in 1993 - pay 
a dividend next year and post 
profits of some Pta9bn in 

Acerinox reports similar 
progress for its stainless steel 
business. The company’s net 
profits of Pta7.5bn last year 
are estimated to rise to 
PtalO-Tbn this year and are 
forecast to dhnh to PtaUL2bn 
in 1996. Acerinox's board has 
approved a Pta6bn invest- 
ment to raise its production 
capacity and earnings per 
store are forecast to stand at 
Ptal,676 in 1996 against last 
year's Pta785. 


Having second thoughts 

Embattled: jab cuts proposed by Santana Motor, Spanish subsidiary of Suzuki, provoked angry demonstrations 

Anti-Japanese graffiti on the 
walls of the southern Spanish 
town of Linares bears witness 
to one of the bitterest stories of 
foreign investment in Spain 
over the past decade. 

“On terms like these, we 
want no Japanese,” reads one 
of the milder slogans outside 
the factory gate of Santana 
Motor, subsidiary of Suzuki 

The embattled car company 
has provided the most dra- 
matic example of a multina- 
tional venture having second 
thou gh tg about its investment 
in Spain. 

The case is all the more tell- 
ing because Suzuki’s arrival on 
the scene is relatively recent 
Like Nissan, which also has 
problems at its Motor Eoferica 
subsidiary in Barcelona, it 
began producing in Spain 
shortly before the country's 
accession to the European 
Union, with a view to creating 
a competitive export base. 

By suspending payments to 
creditors in February and pro- 
posing drastic job cuts, Santan- 
a’s Japanese management pro- 
voked an explosive reaction in 
the Linares region, which is 
heavily dependent on the fac- 
tory and its 30-odd supplier 

Demonstrators mobbed the 
Japanese embassy in Madrid 
promising "dynamite next 
time". The Spanish govern- 
ment, seriously concerned that 
other Japanese investors 
would take fright, launched a 
propaganda campaign in 

Tokyo to try to limit the dam- 

Many of the 40 or 50 Japa- 
nese executives and techni- 
cians at Santana are thought 
to have moved to the capital or 
to have left the country. Amid 
general confusion in the indus- 
try about the company’s inten- 
tions, the management has 
repeatedly declined requests 
for interviews. 

Three mnnt.ha after the sus- 

pension of payments the 
Socialist regional government 
persuaded a reluctant Suzuki 
to back a milder cutback plan, 
involving 900 Instead of the 
2,400 exmployees instead of the 
1,500 originklly proposed by 
the company, with the promise 
of a credit package. The plan is 
an effort to buy time while a 
desperate search goes on for a 
new owner. 

The regional authorites are 

understood to have trawled the 
world’s motor companies for 
interest Only two - BMW-Ro- 
ver, which has a historical link 
with Santana, and Hyundai of 
South Korea - are thought to 
have shown any willingness 
even to look into it 
In its origins, San tana la typ- 
ical of industrial ventures set 
up in the Franco period to gain 
access to a protected market 
Starting In the mid-1950s, it 

made parts for farm machin- 
ery, gearboxes for 2CV Citroen 
cars, and then Land Rovers 
under licence, selling to the 
Spanish and Latin American 
markets, with the UK company 
as a shareholder. 

But in the early 1980s Laud 
Rover excluded the Spanish 
plant from its plans for new 
models. From 1984 the factory 
began making Suzuki four- 
wheel-drive runabouts as well 
and in 1990 Land Rover sold its 
last shareholding, leaving the 
Japanese company in effective 
control. However, Suzuki's 
commitment was also luke- 
warm. Its current 84 per cent 
stake came by default, because 
other shareholders would not 
subscribe to much-needed new 

"There has been no big 
investment in technology, 
either by the British or the 
Japanese," says Antonio Fern- 
andez Sties, chairman of the 
works council, recognising the 
difficulty of competing with 
other manufacturing sites. 
Suzuki figures show labour 
costs at Linares accounting for 
almost 20 per cent of sales 
compared with 7 per cent in 

In the past three years the 
Spanish subsidiary showed 
losses of Pta21bn and during 
this year's conflict it is reck- 
oned to have been losing 
money at a rate of Pta30m a 

The irony is that Santana 
has become more of a house- 
hold name in Spain the past 
four months, because of the 
protest movement against Job 
losses, than it ever was 
because of the vehicles pro- 
duced at the factory. 

David White 


Closure costly 

technology there is obsolete, and its 

A fter 27 years making razor-blades 
in Spain, Gillette of the US 
decided to close its factory. Three 
months later, the Spanish authorities 
have yet to accept the Logic of it 
Gillette’s announcement sparked a 
controversy out of proportion to the 
size of the plant just outside Seville, 
where the workforce had already 
shrunk to less than 25ft 
There were three factors behind this. 
One was that Gillette was sacrificing 
Seville in order to concentrate produc- 
tion for the European market in the UK 
and Germany - much like Hoover’s 
fiercely-contested decision last year to 
move vacuum-cleaner production from 
Dijon in eastern France to Scotland. 

Secondly, tire closure ?»nunnii«immit 
coincided with pre-election tensions in 
the ruling Socialist party's stronghold 
of Andalucia, a region with a fragile 
and underdeveloped industrial sector 

and high unemployment The Gillette 
workers' cause was immediately linked 
with that of the “Santaneros" at Suzu- 
ki’s threatened Santana subsidiary. 
Both cases involve facilities which 
flourished at a time of hi gh import bar- 
riers but which have not been adapted 
to meet the competitive demands of an 
open European market. 

The difference between them - and 
the third factor fuelling the row - is 
that Gillette has up to now been profit- 
able. Alberto Morales, general manager 
of the Seville subsidiary, says Gillette 
simply does not need the factory. The 

production can easily be taken over by 
the other plants without expanding 
their capacity. “The manhinaH we have 
here wont go to England or Germany 
because they have enough,” he says. 

B oth the Madrid government and 
the re gional authorities say that 
even under the more flexible con- 
ditions of Spam’s newly-revised labour 
legislation Gillette lacks legal grounds 
for seeking redundancies through the 
normal procedures. Gillette's only 
option far achieving Its plan is a negoti- 

ated deal for paying off its workers. 

The Labour reforms, aimed at remov- 
ing disincentives to investment and job 
creation, will make it somewhat easier 
for companies to adjust their work- 
forces, giving them mare leeway to 
make reductions when necessary and 
speeding up the red tape involved. 

But redundancy compensation costs 
remain well above those in most other 
European countries. Companies tend to 
offer the upper level of 45 days pay per 
year of service in order to avoid costly 
court cases. 

To achieve previous reductions, Gil- 
lette has paid this amount plus a bonus 
of Ptalm for every five years of service. 
But even so. It has had difficulty find- 
ing takers because of the scarcity of 
alternative jobs in southern Spain. Its 
closure plan is likely to be costlier stiE 

David White 

No other truly global bank has the market share and long-standing 
commitment ro the Iberian Peninsula that Chemical has. 

Wc are at home in Iberia to a degree that others generally are not. 
Our bankers and specialists are deeply knowledgeable about local 
markets and client requirements. With five offices m Spain, four in 
Portugal and an offshore bark subsidiary in Madeira, we are conve- 
niently located. And we are ready to put all oar resources and sldlb to 
work for you, whether you already do business in Iberia, or are 
considering doing so. 

In both Spain and Portugal, Chemical has consisttndy been first in 
profits among international banks active in those marketplaces, a primary 
dealer in government debt and a leading bank with the region's public 
and privatt sectors. These clients value our innovative solutions to 
complex problems. 

In Spain, through Chemical Bant, Sucmsal en Espana, we work with 

eight out of ton Spanish companies with sales above Ptas. 75 bn and have a 
relationship with most of the major corporations in the country. 

The picture is eqnally bright in Portugal, where Banco Chemical 

0% Chemical 

The Global Bank 

(Portugal) SA counts among its clients virtually all die 50 largest 
companies, and a significant number of the top 500. 

Globally, oar network of offices in 35 countries can find and access 
the most cost-efficient capital sources, wherever they mighr be. And as 
always, we seek to build long-term and mutually valuable relationships 
with our clients— serving them in a broad range of capacities. 

Whatever your company's financial needs, ask Chemical 
To help you succeed, we have the right strengths in the right place at 
the right rime. 

Expect more from us.” 

O19Miai«n^e< > ^C«ip0<?fe' Chcn^Bar*-Men*otSFA 


I t was not surprising that Madrid’s 
Balsa index should have shot up to 
record highs in January for the equity 
markets were performing strongly almost 
everywhere. What was extraordinary 
about the gams in Madrid was that the 
Bolsa’s rally was driven by domestic insti- 
tutions mad not, as is usually the case, by 
foreign, investors. 

To a great extent the foreign institutions 
had turned bearish about Spain at the 
beginning of the year because they 
believed that the Banesto crisis, which 
pr ompted the intervention of the Bank of 
Spain, would send tremors through the 
financial system. 

By a happy coincidence, domestic funds 
were able to take positions normally occu- 
pied by the foreigners because they were 
growing strongly and also because they 
were in the process of switching part of 
their fast growing investment portfolio 
from fixed income investment to equities. 

A footnote to the history of the Spanish 
stock markets in the first half of 1994 
would read that non-residents, who had 
traditionally been so opportune with their 
Bolsa investments, had for once missed 
their chance. By the time the Banesto-in- 
duced panic was over, thanks to a support 
operation which reflected great credit on 
Spain's financial institutions, the markets 
were down and it was too late to reap 

The maiTi market thamp in the first half 
of this year is that the arrival, in large 
volumes, of domestic funds on to the Bolsa 
constituted a major development that both 
complemented and rivalled in importance 
the “mini-bang” that the Madrid market 
underwent in the late 1980s. 

A large stock of Spanish funds is emerging that can be tapped by outsiders, says Tom Bums 

Domestic volumes dominate 

The Bolsa reforms ushered In a stock 
exchange regulator, securities houses to 
replace individual brokers and a continu- 
ous Twarkat what the onset of funds has 
done is to broaden the market and to pro- 
vide it with an acceptable domestic sup- 
port base that had been lacking in die 

But the sudden appearance of a domes- 
tic frmds-driven Bolsa has implications 
that go beyond the Spanish market’s 
increased liquidity. The build up of funds 
through, the big branch networks owned 
by the domestic banks and savings banks 
in Spain, together with the management of 
the rrmria by these tnstitntifmg and their 
investment by the in-house brokers of the 
Mina banks and savings hanks, forms an 
arguably incestuous relationship that 
might raise eyebrows in the City of Lou- 

“Warburg’s Securities has to be more 
competitive than any one else in order to 
'get the business from Mercury Asset Man- 
agement,” says a UK-trained executive at 
a Madrid broking house. “That doesn’t 
happen here.” 

Argentaria, the State-controlled hanging 
•corporation, for example, has been captar- 
ing a big slice of the public sector’s pen- 
sion foods. Is this because Argentaria is 
particularly good at manag ing funds or is 
the business merely oiled by the mutual 

Bank of America dastog room, 

: non r—Monta for once mtoed tfaair chance 

goodwill that exists in the old state com- 
pany tie network? 

The traditionally strong bonds between 
Spain’s main fin a n cial institutions and 
domestic industry additionally begs the 
question of what sort of equity invest- 
ments the in-house brokers are likely to 


It would be surprising if funds managed 
by investment units at Banco Santander 
and at Banco Bilbao Vizcaya, the two big- 
gest players in the sector, as well as those 
managed by Banco Central Hispano, 
Argentaria and the other ip«dtng hanks, 

were not overweighted in the stocks con- 
trolled or favoured by those same institu- 

No doubt over time a sophisticated mar- 
ket wfiL emerge in which investors will 
demand, and get, greater transparency, 
will pick and choose their funds and will 
closely monitor their performance. For the 
present the big institutions have it all 
their own way as they aggressively cap- 
ture clients through their networks and 
channel the resulting funds into their 
broking units. 

What is not in doubt, however, is the 

potential impact of the domestic institu- 
tions as they flex their muscles in their 
own backyard. January and February, 
when the presence of foreign institutions 
in Spain was noticeable by its absmee, 
provided a good indicator of what can hap- 
tv>p when the home-side bulls are ru nning. 
Daring those two months the volume 
traded on Madrid market Increased by 122 
per against January and February 

Domestic funds invested an estimated 
Ptal93bn in the Bolsa during Jan uary, a 
huge sum c onsideri ng, that the average 
daily volume during the 20 trading days 
that, mopth was Pta42.2hn., 

Two trends in Spain's fund industry 
have become evident in the past montb- 
Firsfc, it has grown rapidly thanks to tax 
incentives and to strong marketing by the 
hanking networks and also because recess- 
ionary periods spur the public to save in 
instruments that will earn t h e m most 

Secondly, the accelerated drop in inter- 
est rates have under mined the traditional 
attraction in Spain exerted by fix ed-int er- 
est investment in general and government 
paper in particular. Spanish fund manag- 
ers, always extremely cautious about equi- 
ties, have begun to look at the Bolsa with 
an unprecedented enthusiasm. 

During 1993 the total volume of mutual 
funds under management in Spain grew 

from Pta6.627bn to PtalOJWbn, a rate of 
expansion that equalled the accumulated 
arJJrth of domestic funds in the previous 
two years- Just as important as the growth 
was the changing investment trend. The 
CNMV the Bolsa 's regulatory commission, 
estimates that in the course of last year 
the perc en ta g e of total funds invested ia 
equities rase from little more than 3 per 
cent to more than 5 per colt. 

This year the pattern is one of more or 
the same; larger hinds and proportionally 
increased investment on the Balsa. 



T he funds topped PtolZOCBm at the 
end of May and are forecast to total 
some Ptal<h500bn at year's end. The 
CNMV estimates that by the end of this 
year the percentage of funds under man- 
agement invested in equities could double 
last year’s figure to represent between 8 
per cent and 10 per cent Ahorro Corpora- 
cion Financiers, the broking arm of a 
group of savings banks, believes toe year- 
end percentage on the Bolsa will be closo- 
to 7 per cent 

There are two lessons that non-resident 
watchers of the Madrid market should 
learn. One is that the Bolsa, for all its 
volatility, looks to be a more mature stock 
exchange with a sounder liquidity than at 
any stage in the past The other is that for 
the first time there is the makin g s of a 
serious volume of Spanish funds that can 
be tapped by outsiders. 

The CNMV revealed m its a nnu a l report 
this year that domestic funds had 
increased the weighting of foreign equities 
and foreign fixed income in their invest- 
ment portfolios during 1993 from 22 per 
cent to 5.7 per cent 

f fro* 


Spain is attracting large amounts of capital investment from the EU 

A flush of Euro-funds 

A visitor who ventures out of 
the urban environments of a 
Madrid or a Barcelona and 
takes to the Spanish byways 
will soon come head on with 
the circular constellation on a 
blue background that denotes 
European Union-inspired 

Anybody that is considering 
financial projects in Spain 
should first take aboard the 
fact that the country is a prime 
target for massive capital 
investment funds that, rooted 
from Brussels, fall on the Span- 
ish plain like manna frnm the 


There is a growing business 
among those who matr-h avail- 
able funds with borrowers and 
there is also increasing exper- 
tise among those potential pri- 
vate sector investors who track 
the route blazed by Brussels’ 

At the begining of this 

month the European commis- 
sion approved structural funds 
worth Ecu26.3bn for Spain 
between 1995 and 1999. 

This sum represented more 
than half the total structural 
funds approved for all the 
other 11 European Union mem- 
bers and it was mare than dou- 
ble the funding that Spain’s 
regions received between 1989 
and 1993. 

Given such Brussels largesse 
it is not surprising that Spain 
should also be the largest bor- 
rower from the Luxembourg- 
based European Investment 
Bank (EIB). 

Last year Era loans to Spain 
totalled Ecuflm, a figure that 
was 44 per cent up on Spain’s 
1992 borrowing and which rep- 
resented 22.6 per cent of the 
Ecul7.7hn loans made by the 
Luxembourg institution to all 
of the EU members. 

Sir Brian Unwin, EIB's cfaair- 




Headquarters; 34- Velazquez St 
28001 MADRID - Spain 
Telephone: (341) 520 70 00 
Telex: 44351 BPEM 
Telefax: (341) 577 92 08 

as of March 31, 1994 

(Amounts in millions) 

Shareholders' Equity 
and Minority Interests . 

Ptas. 265,179 


Customer Funds. 

Ptas. 2,196.154 
(US $ 15,969) 

Total Assets. 

Ptas. 2.857.321 


Loans and Discounts. 

Ptas. 1,729,322 

Net Income for the 1st quarter.. 

Ptas. 14,972 

Net Return on Average 
Equity (ROE) 


Net Return on Average 
Total Assets (ROA) 

2 . 10 %* 

Number of employees 11,961 

Number of branches. 

* Annualized. 

Exchange rate at March 31, 1934: US $ 1 a 137.525 ptas. 

man, claimed that the financ- 
ing facilities routed by the 
bank to Spain in 1993 repre- 
sented the biggest ever loan 
total marig available to an indi- 
vidual EU member in a single 

The flush of Euro-fiinds into 
Spain is held up with pride by 
the Madrid government as a 
prize won by the negotiating 
sViTIa of prime minister Felipe 
Gonz&lez in successive Euro- 
pean summits and as a tribute 
to the Spanish, contingent’s 
ability to drive a hard bargain 
in Brussels. 

There are some intelligent 
complaints being made about 
the Ecu flow, notably those 
that are voiced by economics 
Professor Pedro Schwartz of 
Madrid University, an acerbic 
deregulation lobbyist and 
member of that rare breed, the 
Spanish Eurosceptic. 

Mr Schwartz lflrpng the onset 
of funds to Faust’s pact with 
Mephistopheles and argues 
that the sudden arrival of a lot 
of structural funds to improve 
Spain’s infrastructure will not 
necessarily make Spain less 

A visitor to Spain cannot 
help noticing that while the 
Euro-financed highway 
schemes might have ensured 
quick journeys between the 
provincial capitals, fluey have 
also succeeded in by-passing 
largish towns between the 
departure and destination 

Service industries in such 
towns used to earn a great deal 
of income from their proximity 
to the former national roads 
that the new beltways have 

The less acceptable face of 
the BlTs lavish funding to 
Spain is that it engenders a 
passive society. Because 
Europe is picking up the tabs 
for much of Spain’s infrastruc- 
ture, the Madrid government is 
able to “afford” an unemploy- 
ment level of 34 per cent of the 
working population in Andalu- 

The southern swathe of the 
country. Andalucia is the 
equivalent of Italy's Mezzio- 
giorao and it is also the chief 
political base of the r uling 
socialist party. 

Some 80 per cent of Andalu- 
cia’s jobless population is now 

covered by unemployment ben- 

Thirty years ago when there 
were no such unemployment 
benefits in General Franco’s 
Spain, and long before struc- 
tural hinds bad been th oug ht 
of and the Era created, Andalu- 
da’s jobless emigrated to work 
In the Common Market from 
where they sent home remit- 
tances. saved and eventually 
returned home to set up busi- 

Whatever the political, eco- 
nomic and even moral argu- 
ments that might surround the 
sort of aid that the Madrid gov- 
ernment receives, the fact is 
that Spain is an ideal recipient 
for such funds. 

It is a big country by Euro- 
pean standards and it a poor 
one by that same yardstick. 
Spain has r eadied an interme- 
diate level of development that 
requires the sort of specialised 
capital investment that the 
EIB provides and it has the 
political clout that carries 
weight when the share-out of 
the EXTs structural funds is 

Spanish officials have learnt 
the tricks of the borrowing 
trade and they have become 
adept at exploiting what in the 
EIB’s case is a demand-driven 

“The Spaniards are really 
looking for finance," an EIB 
official conceded. 

There is also a great deal 
that requires financing in 
Spain. The Spanish recipients 
of the EIB range from 
small and medium-sized com- 
panies across the economic 
spectrum, to environmental 
initiatives, particularly in the 
water treatment sector which 
has major domestic deficien- 
cies, and to the big infrastruc- 
ture projects that deal with 
road and railroad transporta- 
tion and electric cabling. 

It is no less true that the EIB 
is well below the it has 
set itself for loans and has con- 
siderable room for providing 
greater fi nancial assistance in 
the years ahead. 

Loans this year to Spain, 
judging from those already 
signed and from those that are 
in the pipeline, are likely to be 
similar to 1993’s record total. 

A s European economies 
begin to recover and as 
governments across the 
continent launch privatisation 
programmes, US investment 
h anks are ready to make 

strong Enro-related profits. In 
Spain, 1994 already appears to 
belong to Goldman Sachs for it 
has pitied up most of the big 
domestic business that was 
available in the first quarter 
of this year. 

“It has the best people work- 
ing the Spanish patch,” says a 
senior executive of a European 
merchant bank. “They are 
clever and they eat, sleep and 
dream Goldman.” A review of 
the New York bank’s progres s 
suggests that its Spanish team 
will not have space on its 
shelves to accommodate the 
tombstones it is accumulating. 

Success has inevitably bred 
criticism and envy. Goldman’s 
Spanish team is accused of 
being, on occasions, too 
aggressive in its pricing. Euro- 
pean rivals also say Goldman 
is benefitting from an 

Tom Bums 


In the limelight 

In the game of Spanish hanking , the players are 
waiting for the new arrival to malm the next 
move. Argentaria - the group which came an to 
the scene three years ago, co mbining state 
banking operations and competing on an equal 
footing with the main private-sector banks - 
was bitterly disappointed by its defeat in April 
In the bidding to take over Banesto and equip 
itself with a comprehensive branch network. 

It had done more than its rivals to try to 

justify its participation 

in the Banesto auction Mr Luzon’s vis k 

- controversial because - Ko „. „ 

of the government’s ■nnovative bank s 

role as Argentaria’s among the top 
majority shareholder. 

But it last in the contest, outbid by Banco 
Santander by a margin of almost 35 per cent 

The finance ministry was anxious that the 
bank should not do a bad deal For Francisco 
Luzdn. Argentaria’s chairman, the big con- 
straint was the risk of losing credibility, less 
than a year after launching Argentaria on the 
stock markets. His team has since been review- 
ing the group's “strategic focus”, keen to 
strengthen Its international side hot also to 
reinforce its retail network of 1,500 Spanish 
brandies, adding perhaps a farther 500. 

Argentaria is the prominently displayed 
brand-name of the more prosaically entitled Cor 
po radon Bancaria de Espafia. Set up in 1991 it 
has majority control of Banco Exterior de 
Espafia, the large quoted bank which has tradi- 
tionally been the channel for Spanish export 

Mr Luzon’s vision is of a modem, 
innovative bank able to hold its own 
among the top Spanish groups 

credit but lost its monopoly in 1985. 

Under the reorganisation. Banco Exterior 
absorbed the state's Banco de Credito Industrial. 
Other state interests brought into Argentaria 
were leading mortgage specialist Banco EBpo- 
tecaria; the post office savings bank, Caja 
Postal; and two institutions dedicated respec- 
tively to the food sector and local authorities. 
Banco de Credito Agricola and Banco de Credito 

Because of the dea- 
l's of a modem, ciencies of each inher- 

je to hold its own fS^SSK 

ipanisn groups them as “four cripples 

and a one-eyed man”. 

Hie group has since established itself among 

the country's top banks with more than 500,000 
sha r eh o lders and pre-tax profits rising 40 per 
cent over the past two years. Last year it made 
two share flotations in six months, both heavily 
oversubscribed, reducing the state’s holding to 
just over 50 per oent and bringing in Pta296bn to 
the treasury. 

A third stage of privatisation is planned later 
this year or early in 1995. Mr Luzdn's vision is of 
a modem, innovative hank able to hold its own 
among the top Spanish groups, with a state 
holding of 20-25 per cent, with 30 per cent of its 
business abroad and a strong presence in 
nearby markets of Portugal, southern France 
and North Africa. 

David White 


Goldman gets 
ready to harvest 
Spanish profits 

for the offering’s disappoint- 
ing results outside Spate. 

There were similar fears 
over pricing when Goldman 
worked its way on to an April 
$280m equity offering by Con- 
tinent^ a hypermarket chain 
controlled by France’s Pro- 
mod £s group. 

The offering was co-ordi- 
nated by Sodttfi Gdndrale and 
Continente brought Goldman 
on to the team as co-lead man- 
ager in order to consolidate 

youth orientated high street 
rham called Zara. 

Goldman meanwhile 
remains strong in its more 
familiar territory of large 
offerings by public groups. 
Last month the New York 
bank co-ordinated a global 
offering worth J1.3bn by End- 
esa, the large stafocontrolled 
electrical utility. 

Goldman had already guided 
Endesa on to the markets in 
its 1989 partial privatisation 

unhealthy fascination for all 
things American in invest- 
ment hankftig - 

There have been deals initi- 
ated by others that Goldman 
joined once they were under 
way. “They have a technique 
of wriggling their way into a 
business,” says a domestic 

The weight attached to US 
banks may he unwarranted on 
a domestic level - Spanish 
banks, with their huge retail 
networks, are capable of deliv- 
ering an impressive book - 
hut it is justified by the grow- 
ing trend in Spain towards 
international offerings domi- 
nated by a US tranche. 

In Spain Goldman has a 
track record with govenunent- 
controlled companies thanks 
to a trail-blazing 1987 listing 
in New York that it coordi- 
nated for Telefonica, the tele- 
comm uni cations monopoly , 
and now it is making its mark 
on the private sector. 

In February Goldman Sachs 
acted as global coordinator to 
Fomento de Contrucciones y 
Contratas (FCC), a leading and 
highly diversified construction 
company that made a f35Qm 
equity offering, one of the 
largest to date by a private 
domestic group. 

The initial groundwork for 
the FCC offering had been con- 
ducted by Schroders and when 
Goldman took on g fln fral 
coordinator mandate the New 
York bank was accused of 
aggressively pricing the con- 
struction group and blamed 

Goldman rejects c r it icis m of aggressive pricing 
and points to the fast-growing Cortefiel retail 
clothing group as an example of its growing ability 
to manage smaller offerings for the private sector 

the US book. 

Goldman rejects the aggres- 
sive pricing criticism (FCC’s 
share price has since recov- 
ered to the levels that Gold- 
man had set) and points to the 
test-growing Cortefiel retail 
rirrfWtig group as an example 
of its increasing ability to 
manage smaller offerings for 
the private sector. Cortefiel, in 
which Goldman Sachs has a 
■email uTiarriioMing , hug hired 
the US bank to co-ordinate its 
long-awaited equity offering 
within the next six months. 

The Cortefiel placement 
could net a comparatively 
modest $88m but it should 
lead to business with similar 
family-controlled domestic 
groups In the retail fashion 

Like other investment 
banks, Goldman has its eyes 
on Inditex, a group which 
owns a highly successful 

and prior to May’s equity 
offering, it had advised the 
utility on- dose to $lbn worth 
of asset purchases from 
regional and small Spanish 
generators. Goldman is now 
hoping to take on the year’s 
other big public equity deal, 
the !L4bn to ffibn offering 
by the Kepsol oil and chemical 

Repsd, like Endesa, is a 
longstanding client of the New 
York bank. Goldman helped to 
take the oil group to the mar- 
kets in 1988 in its firet encoun- 
ter with foreign institutions 
and it was its global coordina- 
tor is a second major Bepsol 
international offering last 

Goldman was also on famil- 
iar territory when in late April 
it advised Pedro Domecq, the 
Spanish-Mexican drinks 
group, on its Sl.lbn sdl out to 
the UK's Allied Lyons. The 

previous big drinks sector dis- 
posal in Spain, the 1999 take- 
over by Guinness of the 
domestic Cruzcampo beer 
group, also had Goldman ' 
advising the Spanish seller. 

Together with the tradi- 
tional business, at tout one 
interesting innovation has. 
token place. Earlier tide yen 
Goldman arranged ItSfen 
worth of financing for a BtftF 
Iona city council hydranlte ser- 
vices company that is branch- 
ing into water treatment : 

Finessing a loan str uctur e 
that has been practised hi fits 
US and was being introduced 
for the first time in Europe, 
the New York bank guaran- 
teed the financing with the 
future water cannon that the 
company will impose on Bar- 
celona consumers. 

Why is Goldman so far 
ahead in Spain? One reason Is 
that it entered forcibly in the 
late 19806 when govemmeut- 
cantr oHcd groups started tap- 
ping the markets. Its Wall 
Street listing for Telefonica 
att rac t e d solid clients such as 
Repsdand Endesa. 

These relationships, with its 
analysis and di stri b u ti on mus- 
cle and follow-up expertise 
have served Goldman 
extremely well. “Very few big 
deals are decided on fees,” 
says a senior member of the 
US bank’s Spanish team. 

The existence of wefl estab- 
lished clients in what is essen- 
tially a recurring business is, 
however, only part of the 
answer. Goldman, at least In 
Spate, has provided continuity 
by keeping tire same dose-knit 
team working together for 
more than five years. 

It has also invested strongly 
in a “door-opener” in the 
shape of former junior econ- 
omy minister Mr Guillermo de 
la Dehesa, the chief executive 
of Banco Pastor, who also 
serves on Goldman’s advisory 
board. A rival US bank, wor- 
ried that it was slipping in 
Spain, recently sent one of its 
most experienced officers to 
Madrid with the mission of 
“fin d in g a de la Dehesa”. 

«*3 *■’ : “ r "’ 

jgzn sf-a 

rrv*r:r /.t; 



Tom Bums 


Maxwell y Espinosa AV SA, Madrid, is pleased 
to announce the opening of its U.S. subsidiary. 
Maxwell Espinosa Inc. is a broker-dealer 
registered with the SEC, 
and is a member of the NASD and SIPC. 


- -’■’’Mr* 


One Post Office Square (40th Floor) 
Boston. MA 02109 
Tel: 617-42 6-8866 
Fax: 617-426-8844 

t t,? 
*• 'A. 

1 800 SPAIN-4-U 

•3 1 


20th Jane. 1994