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FINANCIAL TIMES 

^v^TJemmark ^11 set for small earthquake in Walla Walla 



in UK car plant 

Nissan's car plant at Sunderland, north-east 
England, has become the first Japanese manufac- 
turing venture in Europe where investment has 
topped £lbn <32.6bn). Ian Gibson, chief executive of 
Nissan Motor Manufacturing (UK), said the plant 
was likely to create a further 25,000 new direct and 
indirect jobs over the next 10-15 years. Most of these 
will be in the north-east, which has been hard-hit 
by unemployment. Page 18 

Deutsche Bank will challenge any German 
government move to force it to reduce its equity 
holdings in companies without tax relief, HUrnar 
Kopper. chairman of Deutsche's managing board, 
said. Page 19; Hopeful signs. Page 17 

Lloyd's of London will see its underwriting 
capacity shrink next year despite fresh capita) from 
corporate investors, the insurance market’s chief 
executive Peter Middleton said. Page 19 

HU1 win sets scene for a tense showdown: 

England's Damon Hill 
(left) withstood the pres- 
sure from German rival 
Michael Schumacher to 
win motor racing’s Japa- 
nese Grand Prix and set 
the stage for a tense 
world championship 
showdown. The result 
left Schumacher just one 
point ahead in the title 
contest, with one race to 
go in Adelaide, Australia, 
next week. Mystery of Formula One, Page IS 

Boss! Issues challenge: Northern League 
leader Umberto Bossi indicated he is prepared to 
bring down the Italian government unless it backs 
federalism and economic reform. Page 2 

liberal churchman murdered: South African 
liberal theologian Johan Heyns was shot dead at his 
Pretoria home in what police think may be a white 
right-wing assassination. Heyns opposed apartheid 
while leading the Dutch Reformed Church, the 
country’s main Afrikaans church. Page 2 

Hamas offers dive branch: Militant 
Palestinian group Hamas offered to stop attacking 
Israeli civilians If Israel stops killing Palestinians. 
Ibrahim Ghosheh. Jordan-based Hamas spokesman, 
said his group would not talk directly to Israel but 
was prepared to negotiate through a third party. 
Trade deal near, Page 8 

Hew pIpeBne leak lir Russia: A corroded ’ - 
pipeline running through the Russian Arctic has 
spiffed a further 13.000 tonnes of oil into toe tundra 
in toe wake of a spillage last month, according to 
environmental group Greenpeace. Moscow’s emer- 
gencies ministry said it knew nothing of any new 
disaster in the area. 

Angolan troops near Huambo: Angolan 
government forces fought their way to within six 
miles of toe Unita rebel stronghold of Huambo in 
the country's central highlands. The ruling MPLA 
party denied violating a recently-initialled peace 
accord designed to end nearly two decades of civil 
war in toe former Portuguese colony. 

Iran-lraq hostility flares: Iraq threatened to 
retaliate “at the appropriate time” after Iran 
launched a missile attack, cm an exile guerrilla base 
north-east of Baghdad. 

Franca deports religious leaders Imam Zahar 
Eddine was deported from Fiance to Algeria, 
accused of spreading fundamentalist propaganda. A 
Turkish' and a Moroccan imam were sent home last 
month. 

European monetary system: In a week when 
the US Federal Reserve intervened to support the 
dollar, toe main move in the EMS grid came from 
the Irish punt which climbed above the Belgian 
franc and the D-Mark. The punt is benefiting from 
sterling’s strength- This week the Bundesbank 
council could shift interest rates and affect the grid. 
Currencies, Page 27 


■4 


EMS: Grid 


November 4, 1994 



?% 4% 5% 6% 


The chart shows the member currencies of the . 
exchange rate mechanism measured against t he 
weakest currency in the system. Most of the cur ren- 
c ies can fluctuate within 15 per cent of agreed central 
rates against the other mehibers of the mechanism. 
The exceptions are the D-Mark and the guilder which 

move in a namtp 225 per cent bamL 

Kurds kill teachers: Kurdish guerrillas killed 
four more village school teachers in south-east Tur- 
key, where Kurdish-language teaching is forbidden 
and some lessons are based on Turkish n at ionalis t 
thanes. Fourteen teachers have now been killed in 
the region. 

China frees dissidents: China said it had 
released four people jailed in 1989 Cot inciting anti- 
government activity.and four people imprisoned for 
demanding Tibetan independence. . 

New York marathon: Mexican German Silva 
beat compatriot Beniamin Paredes, fin is hing in 2 
hours,:ll minutes, 21 seconds^ ■ 


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Walla Walla in south-eastern 
Washington, close to toe Oregon 
border, seems an unlikely place 
for an electoral earthquake. But 
it could play a small role in the 
defeat of a sitting Speaker of the 
US House of Representatives, a 
feat last accomplished in 1860. 

An early missionary outpost 
that never matched the growth of 
coastal cities such as Seattle, the 
town sits in the shadow of the 
Blue Mountains, surrounded by 
onion fields and vineyards. It is 
the sort of place where a visiting 


George Graham assesses a Republican threat to Speaker Tom Foley 


reporter asking directions at Bill 
McClure’s farm -machinery store, 
will prompt customer Bob Tinker 
to jump into his truck - with a 
deer rifle hanging behind the 
driver's seat - to show the way. 

These are the folk on whom 
Republicans are counting in 
tomorrow's US congressional 
elections, predicting that they 
will make sweeping gains and 
perhaps even take control of both 


houses of Congress from the 
Democrats. And nothing would 
seal their victory more sweetly 
than the defeat of Mr Tom Foiey 
in eastern Washington state. As 
Speaker of the House of Repre- 
sentatives, Mr Foley is third in 
line to the US president 
After Mr Foley's surprisingly 
weak showing in September’s pri- 
mary ballot, opinion polls showed 
him trailing far behind Mr 


George Nethercutt, a lawyer who 
is the most moderate candidate 
the Republicans have sent 
against him for years. The gap 
has narrowed, but Mr Foley him- 
self says it is still “very much of 
a nip and tuck race”. 

In Walla Walla there is grow- 
ing irritation with politicians and 
government, and more locals 
seem ready to throw out Mr 
Foley, whose intellectual and 


sometimes aloof manner symbol- 
ises for some toe alienation of 
that other Washington. 

Perhaps the most incendiary 
issue has been Mr Foley’s deci- 
sion to join a lawsuit questioning 
the limits an toe terms a politi- 
cian can serve in Congress - a 
decision which prompted his 
opponents to accuse him of suing 
his own voters. 

“He has been ineffective here 


in our own district because his 
lack of support for issues such as 
term limits, the balanced budget 
amendment . . . and immigration 
reform have assured their defeat 
despite overwhelming support in 
eastern Washington," said Ms 
Ruth Fleenor. Walla Walla voter. 

The anti-Foley tide has left 
business leaders in the state, who 
have a healthy respect for the 
clout of the Speaker’s office. 

Continued on Page 18 
On the charge, Page 4 


UN warns 
of threat 
to civilians 
in Sarajevo 

Upsurge in fighting places 
strain on peace efforts 


By Laura Silber in Belgrade and 
Bruce Clark In London 

Hie UN warned yesterday of a 
serious threat to the welfare of 
the 300.000 civilians oi Sarajevo 
from an upsurge in fighting and 
implored both the Bosnian gov- 
ernment and its Serb enemies to 
respect toe city's tattered cease- 
fire- ‘ . . 

“We are calling an the parties 
not make toe position of toe UN 
untenable or deploy heavy weap- 
ons." a UN official said. “Sara- 
jevo remains an exclusion zone 
in which the use of big guns 
could be subject to air strikes." 

The warning followed an over- 
night incident in which Mato air- 
craft were forced to buzz the city 
to deter Bosnia's Moslem-led 
army and the Serbs from confron- 
tation. 

Diplomats from the US. Russia, 
toe UK, France and Germany - 
the five-nation contact group 
which is supposed to be promo- 
ting peace in Bosnia - met senior 
UN and Croatian officials in 
Zagreb yesterday. 

The contact group's unity has 
been strained by the renewed 
fighting, with the US (Mending 
toe Bosnian army’s offensi ve and 
Russia condemning it Diplomats 
fear that strains will grow as the 
conflict escalates. 

Up to 10,000 residents of Sara- 
jevo were killed - mainly by Serb 
artillery shells - before the estab- 
lishment nine months ago Of an 


exclusion zone in which heavy 
weapons were either withdrawn 
or placed under supervision of 
the UN’s 25,000-strong force in 
Bosnia. 

However, the situation in toe 
capital, which relies on UN relief 
flights for food and other essen- 
tials, has deteriorated since last 
August when the Serbs partly 
. reimposed their blockade. 

The w eekend fi ghtin g was the 
latest sign that toe ability of the 
UN’s lightly armed troops to pro- 
tect the civilian population from 
the consequences of war, and 

Ecfitorial Comment Page 17 

guarantee their own safety, is 
diminishing steadily. 

The stand-off began when the 
Bosnian army opened fire with 
mortars on Serb-held territory 
near Sarajevo, provoking Serb 
artillery fire on the Moslem sub- 
urb of Hrasnica. Bosnian govern- 
ment infantry began advancing, 
firing small arms, and were 
warned - at first without success 
- by the UN to desist 

In northern Bosnia, the Bos- 
nian Serb forces said they had 
fought off a threat from the gov- 
ernment army to the town of Bos- 
anska Krupa and regained some 
of the ground they had lost over 
the past week. General Ratko 

Continued on Page 18 
Editorial Comment, Page 17 



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A man gestures to watchers on a bridge in 
Nice as his car becomes submerged by flood 
waters. Torrential storms battered southern 
France and northern. Italy over the weekend, 
bringing death and devastation to toe region. 
In Italy yesterday the death toll was 27. with 


nine people missing . More than 1,500 fire- 
fighters were working in the regions of Pied- 
mont and Liguria where rivers had burst 
their, banks and cut transport and power 
links . In France five people were missing. 
Many roads were blocked by mudslides in 


toe Riviera hinterland and Corsica, while the 
airport at Nice was dosed, with its runways 
and terminals flooded. Several homes were 
destroyed in the southern French Alps and 
dozens of villagers were evacuated, some of 
them by helicopter. now* amhv 


Airbus acts to boost ties with China 


By Tony Walker in Beijing 

Airbus Industrie, the European 
aircraft manufacturing consor- 
tium. will invest S25m in a new 
flight crew training centre in Bei- 
jing to strengthen its presence in 
the fast-growing Chinese market. 

Mr Jean Pierson, managing 
director of Airbus Industrie, said 
the agreement signed at the 
weekend with the China Aviation 
Supplies Corporation (CASC-) was 
"only the first step" in a series of 
such measures planned for the 
next few years. 

Airbus Industrie's push follows 
similar moves by its main com- 
petitors. Boeing and McDonnell 
Douglas, both of which have 
announced steps recently to bol- 
ster their position in China. 

McDonnell Douglas signed an 


agreement last Friday for the 
sale of 40 MD-80s and MD-90s to 
Chinese airlines. Half of those 
aircraft will be manufactured in 
China, with US-supplied parts. 

The Airbus chief executive said 
the company would also establish 
a maintenance centre in Beijing 
to help the Chinese acquire 
advanced engineering and air- 
craft servicing skills. 

Work on the flight training 


centre is expected to be com- 
pleted by early 1996. It will be 
run as a joint venture between 
CASC and Airbus and will offer 
similar facilities to those estab- 
lished by the Euro-consortium in 
Toulouse and Miami 
Mr Pierson, who met China’s 
president Jiang Zemin at the 
weekend, said the consortium 
would use its “muscle" with 
European governments to argue 


Beijing’s case for entry to the 
General Agreement on Tariffs 
and Trade. He said Europe 
should “spearhead” China’s 
accession to the Gatt 
The McDonnell Douglas deal 
puts even greater pressure on 
both Boeing and Airbus to 

Continued on Page 18 
Editorial Comment, Page 17 
China survey, Section m 


Stasi amnesty call hits raw 
nerve in unified Germany 


By Judy Dempsey In Berlin 

A caff at the weekend by German 
opposition leader, Mr Rudolf 
Scharping. for partial amnesty 
for those who cooperated with 
east Germany’s secret police has 
rubbed against a still-raw wound 
in unified Germany. 

Mr Scharping, leader of the 
Social Democrats, said it was 
time to grant some partial 
amnesty for former Stasi employ- 
ees on the grounds that it was 
preventing “inner unifica tion" 
However, Chancellor Helmut 
Kohl’s Christian Democrats party 
Immediately dismissed the call 
The party's general secretary. 
Peter Hintze, fold the newspaper 
WelLam Sanntag: “We owe it to 
the victims of the wall, barbed 
wire and Stasi terror that those 
responsible are not let oft” 

. More than 109,000 people are 
estimated to have collaborated 
with tiie Stasi, one of the most 
hafod and Insidious Institutions 
of the communist period. 

A law was passed in December 


2992 enabling east Germans 
access to their files. It also allows 
public and private institutions 
access to screen employees. 

Mr Scharping’s plea was sup- 
ported by Mr Stefan Heym, the 
east German writer and member 
of the PDS. the successor to the 
former east German Communist 
party. Mr Heym was recently 
elected to the Bundestag, or 
lower house. 

The CDU’s Mr Hintze accused 
the SPD of trying to rehabilitate 
the shunned reformed commu- 
nist Party of Democratic Social- 
ism (PDS), successor to East Ber- 
lin's communist party. 

“The SPD seems to be helping 
to make the PDS respectable." he 
said. 

Senior members of the Gauck 
commission, the institution 
responsible for supervising the 
Stasi files, have opposed any 
amnesty. 

“The time has not yet come, 
either for an amnesty or to close 
the flies," said Mr Hansjbrg Gei- 
ger, deputy to Mr Joachim 


Gauck. the former east German 
Lutheran pastor who heads the 
commission. 

The material remains politi- 
cally explosive. Prominent east 
German politicians, including Mr 
Gregor Gysi, the parliamentary 
head of the PDS, is alleged Co 
have collaborated with the Stasi 
but he has vehemently denied 
any of these allegations. 

Opinion among east Germans 
remains divided about keeping 
the Files open. 

Mr Jens Reich, a physicist and 
member of the former east Ger- 
man opposition, believes the files 
should be kept open to show the 
psychological and political 
nature of totalitarianism as well 
as the nature of collaboration or 
resistance under such a system. 

But other prominent east Ger- 
mans. including Mr Friedrich 
Schorlemmer. a Lutheran theolo- 
gian who opposed the former 
communist government, wants 
the files closed because they 
impose a permanent burden of 
guilt on east Germans. 


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© THE FINANCIAL TIMES UMiTKO 1 99A No 32,517 Week No 45 


LONDON ■ PARIS - FRANKFURT - NEW YORK ■ TOKYO 


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FINANCIAL TIMES MONDAY NOVEMBER 7 .994 


NEWS: INTERNATIONAL 



Shokhin duties handed to fellow reformer 


By John Lloyd bt Moscow 

President Boris Yeltsin of 
Russia yesterday accepted the 
resignation of Mr Alexander 
Shokhin, the deputy prime 
minister and economics minis- 
ter, as the shake-up in the gov- 
ernment continued over the 
weekend. 

Most of the departing minis- 
ter's responsibilities were 
given to another reformer. Mr 1 
Anatoly Chubais, who was pro- 
moted to first deputy prime 
minister from his present post 
of deputy premier in charge of 
privatisation. At the same time 
Mr Victor Chernomyrdin, the 
prime minister, named as chief 
negotiator on debt reschedul- 
ing Mr Oleg Davydov, the trade 
minister, who caused concern 
earlier this year by suggesting 
that Russia should not pay 
back its debt 

Mr Chernomyrdin acknowl- 
edged that Mr Davydov would 
take some time to familiarise 
himself with the debt talks, 
which depend heavily on 
whether Russia succeeds in 
making an agreement with the 
International Monetary Fund. 
However, he said "Oleg Davy- 
dov is a properly qualified" 
person. 

Mr Shokhin had offered his 
resignation on Friday, after 
unsuccessfully demanding that 
he be consulted on naming a 


new finance minister, and 
warning that “the economy is 
now hostage to politics". His 
comments came as a struggle 
over policy continued between 
Mr Chernomyrdin and Mr Yelt- 
sin. 

Mr Chubais, 39, has headed 
Russia's programme to privat- 
ise state-run businesses since 
1991, which is at the centre of 
the nation's transition to a 
free-market economy. As to 
being one of the last radical 
reformers left from the team 
that crafted Russia's basic 
reforms after the collapse of 
the Soviet Union, he said “Rus- 
sia has an all-reformers gov- 
ernment". 

The new finance minister, 
Mr Vladimir Panskov, a former 
official in the president’s 
department of budget policy, 
was quoted as saying that 
"there is still a lot of work to 
be done" on the 1995 budget. 
His words left open the possi- 
bility of changes In the budget, 
supposed to reduce monthly 
inflation to 1 per cent with the 
aid of substantial borrowing 
from the International Mone- 
tary Fund. 

Mr Chubais added to the con- 
fusion by saying that the cabi- 
net reshuffles "will certainly 
not lead to changes in the 
course of reform the govern- 
ment has been following". Mr 
Chubais said he would take 


charge of the economy and 
finance portfolios, making him 
Mr Panskov’s direct boss. 

Mr Yeltsin added further to 
contradictory messages when a 


close aide said the president 
was "seriously concerned over 
the work of the government", 
while saying there was no divi- 
sion between Mr Yeltsin and 


Mr Chernomyrdin, and that 
the president Intended to 
"push reforms quickly and 
effectively". 

Mr Shokhin has been work- 


ing on a concept of debt repay- 
ment which would be linked to 
the provision of external assis- 
tance and to the growth of the 
economy. 



A Greenpeace environmental campaigner looks at what the group claims is a new leak of burning oil near Usinsk in north Russia. 
The area is the site of a previous large spill resulting from a series of leaks in a pipeline over the past few months 


Cold shoulder for EU from Norway’s north 


The debate over Union membership 
has pitted the coast against Oslo 
and the south, reports Lionel Barber 


O n the outer edge of the 
Arctic Circle, an epic 
struggle is under way 
which will determine Norway's 
future in Europe. Opposition to 
membership of the European 
Union is an article of faith 
among the fanners and fisher- 
men on Norway’s northern 
coast, and nobody expects the 
mood to change ahead the 
November 2 8 referendum. 

Mr lvar Jorgensen, a 6ft 5in 
goat farmer from near Tromso. 
sums up the anti-EU atmo- 
sphere: "John Major is the only 
one telling the truth. He aid 
the European Union needs the 
Norway's oil and gas and fish, 
so get them in." 

Between beeps from his 
mobile phone. Mr Jorgensen 
ticks off more reasons for 
opposing EU membership: 
slack EU environmental stan- 
dards which allow farmers to 
use growth hormones on ani- 
mals; contaminated drinking 
water; high unemployment: 
and the Common Agricultural 


Policy, which, he says, has 
forced an Irish friend to tum 
his 40-cow farm, into a golf 
course and a motor cycle track. 

“But the main reason is the 
Viking tradition," says Mr Jor- 
gensen, who would not look 
out of place in a Norse long- 
boat. “We won’t let anyone 
rule over us." 

The referendum campaign 
has exposed latent political 
conflicts in Norway. Just as in 
1973, when Norwegians nar- 
rowly voted against member- 
ship of the (then) European 
Economic Community, the 
struggle pits the coastal 
periphery against the Oslo- 
dominated south, the cossetted 
Qsh-and-farm economy against 
free trade-minded business, 
and national collective bar- 
gaining. built around strong 
trade unions, against Brussels- 
based decision-making. 

"This is a struggle between 
traditionalists and modernisers 
which poses a challenge to the 
Norwegian model," says Mr 



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BUILDING PEOPLE - BUILDING HI SINES. S 


Opinion polls showing anti-European 
Union campaigners leading or gaining 
ground ahead of next Sunday's referen- 
dum on EU membership have alarmed 
Swedish leaders, prompting Mr Ingvar 
Carlsson, the prime minister, to warn yes- 
terday of threats to the country's cher- 
ished welfare system if there is a No vote, 
Hugh Caraegy writes from Stockholm. 

The Social Democratic prime minister 
said rejection of EU membership would 
lead to a jamp in interest rates. This 
would require tougher government mea- 
sures to control the public finances. 

The future of the welfare state has 
become a central issue in the referendum 
campaign. The No side, driven mainly by 
dissident Social Democrats, left-wingers 


and the Environment party, argues that 
Joining the EU will narrow Sweden's free- 
dom to pursue its famously generous sys- 
tem of universal cradle-to-grave welfare 
benefits, based on high taxes. 

Along with claims that EU membership 
will undermine Sweden’s independence 
and compromise its military neutrality, 
the No campaign appears to be holding its 
own against the combined forces of the 
Serial Democratic leadership, the main 
opposition parties, industry, the trade 
anions and the main farmers organisa- 
tion, which all call for a Yes vote. 

Although one poll last Friday showed 
the Yes side increasing in strength to lead 
by 48 to 42 per cent, three other polls 
showed the No campaign gaining sharply. 


The Swedish vote follows the 56.9-43. L 
per cent victory for the Yes side in neigh- 
bouring Finland's EU referendum on 
October 16. In Norway, which will vote on 
November 28, polls continue to show a 
solid lead for the No camp. But they show 
that if Sweden votes Yes, the gap will 
narrow sharply. The latest poll at the 
weekend stowed the No lead in such cir- 
cumstances falling to 41-38. 

Meanwhile in Finland yesterday, an 
unprecedented parliamentary filibuster 
mounted by EU opponents appeared likely 
to succeed in its aim of postponing ratifi- 
cation of Finnish membership until after 
the Swedish referendum. The parliamen- 
tary vote was originally scheduled for 
Wednesday. 


Jon Erik Dolvik, head of the 
Oslo-based Norwegian Institute 
for Social Science and 
Research. 

The intensity of the No cam- 
paign has knocked the Labour 
coalition government led by 
Mrs Gro Harlem Brundtland 
off balance. Mrs Brundtland 
has fought her way out of tight 
spots before, but her own party 
is split on membership. 

Polls show the Yes campaign 
trailing by a solid eight to 10 
points, and the people are wary 
about joining a Union. It was 
only early this century, she 
points out during an interview 
in her office, that Norway 
escaped 600 years of domina- 
tion by either Denmark or Swe- 
den, and won independence. 

The question which the gov- 
ernment has so for foiled to 
answer persuasively is what 
Norway stands to gain from 
the Union. EU newcomers such 
as Austria and Finland argued 
successfully in their referen- 
dums that the Union offered 
security against creeping insta- 
bility in eastern Europe and 
Russia 

Sweden, which votes in its 
own referendum on November 


13, can plead a strong case for 
membership because its busi- 
ness and industry are 
entrenched in the EU market. 
By contrast the Norwegians, 
rich in oil gas. and fish, sus- 
pect that membership may 
prove an unequal bargain. 

In Tromso Mr John Arst a 
grizzled former torpedo boat 
captain who once headed the 
Norwegian coast guard, is ada- 
mant that Norway risks having 
its fisheries plundered by the 
Europeans, despite govern- 
ment claims that it negotiated 
a watertight agreement on fish- 
ing quotas in its accession 
agreement 

A lthough Mr Arst voted 
Yes in 1973 l"l wanted 
cheaper food and 
liquor”), he is voting No in 
1994. “If the fish stocks disap- 
pear, the coastal communities 
will disappear.” he says. 

Mr Helge Gorrissen, who 
runs two prawn processing 
plants in the Tromso region, 
disagrees. A No vote would 
destroy jobs, forcing companies 
to move factories to neighbour- 
ing Sweden or Finland to take 
advantage of their favourable 


EU tariff status. By contrast, a 
Yes vote would encourage Nor- 
wegian business to create hun- 
dreds of jobs through the cre- 
ation of an indigenous 
fish-processing industry able to 
export direct to supermarkets 
in Europe. 

Mr Terje Osmudsen. a direc- 
tor of the Kvaemer shipbuild- 
ing and engineering group, 
says a No vote would lead to a 
steady shift of “knowledge- 
based" industries to Europe. 
Like Mrs Brundtland. he 
rejects the idea that Norway 
can afford to stick with mem- 
bership of the European Eco- 
nomic Area - the half-way 
house which offers the benefits 
of the single market without 
the political obligations of full 
EU membership. 

"We need to he involved 
when common rules are agreed 
in Brussels on investment and 
standards, and on areas such 
as the CO, energy tax or the 
selection of EU-funded 
research programmes," Mr 
Osmudsen says. 

Against this hard-nosed busi- 
ness calculation must be set 
the sense of superiority which 
comes naturally to a nation 


whose high-wage, low-inflation 
economy is the envy of its Nor- 
dic neighbours. 

The Norwegian model, with 
Its commitment to open gov- 
ernment. equality among 
women and high employment, 
is viewed as Infinitely purer 
than the behind-closed-door 
compromises in Brussels. "The 
European Union is a men’s 
playground," says Mrs Grethe 
Fossum, a Social Democrat MP 
who opposes EU entry. 

It will require a formidable 
effort to pull public opinion 
round to supporting EU mem- 
bership. The best hope lies in a 
Swedish Yes on November 13, 
because it would farce Norweg- 
ians to confront the prospect of 
relative isolation among their 
Nordic neighbours. 

A Norwegian No would leave 
the country country stranded 
but defiant alongside Iceland 
(and Liechtenstein i inside the 
EEA. 

Even the independent- 
minded Mr Arst admits he is 
uneasy about the future. "If we 
just had a little more time [to 
consider EU membership}," he 
sighs. “It’s all being done In 
such a rush." 


GM opens car plant in Warsaw 


By Kevin Done hi London 
and Christopher Bobinski 
In Warsaw 

General Motors, the US 
carmaker, has begun to assem- 
ble cars in Poland in a joint 
venture with Fabryka Samo- 
chodow Osobowych (FSO), the 

Polish state-owned carmaker. 

GM Poland, which is 70 per 
cent owned by GM and 30 per 
cent by FSO, is aiming ini- 
tially to assemble 10.000 cars a 
year at the Warsaw plant with 
a workforce of 125 following 
an investment of around 
DM30 m (S20m) 

The FSO plant is also one of 


several locations in Europe 
under investigation by GBf for 
a much more ambitious invest- 
ment in the production of a 
new range of small cars. 

GM Poland will produce ini- 
tially the Opel/Vauxhall Astra 
smal l family saloon car in an 
SKD (semi-knocked-down) kit 
assembly operation. Painted 
bodies will be delivered to 
Warsaw by train from the 
Opel plant at Antwerp- Bel- 
gium. along with engines, 
transmissions and other com- 
ponents from the group's plant 
at Bochum, Germany. 

The Astra, GIVTs best-selling 
car worldwide, with sales of 


700,000 forecast for 1994. is 
currently assembled at plants 
in the UK, Belgium and Ger- 
many and at smaller facilities 
in Hungary, Turkey and 
Taiwan. 

Mr Jack Smith, GM chief 
executive, said at the weekend 
at the opening of the Warsaw 
plant that GM was also plan- 
ning to begin Astra production 
in Brazil. Indonesia, India and 
Thailand. 

The assembly operation in 
Warsaw is GM’s third invest- 
ment in vehicle production in 
east Europe following the 
building of a car plant at 
Eisenach in eastern Germany, 


and an engine and small vol- 
ume car plant at Szent- 
gotthard in Hungary. 

Mr Smith said that “Poland 
is and will remain a potential 
for future Opel car and compo- 
nent production." 

GM Is also committed to 
examining the prospects for 
producing a replacement 
vehicle for FSO’s outdated 
Polonez saloon car in Warsaw. 

The Warsaw workforce can 
be increased to 250 for two- 
shift working and GM said 
that the operation had tbe 
flexibility to raise output to 
33.000 a year with additional 
investment and employ men L 


Clashes likely as German 
coalition partners haggle 


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By Michael Undent ann hi Bonn 

The three parties in Germany’s 
new coalition government 
entered their most difficult ses- 
sion of talks last night to dis- 
cuss interior and legal issues 
and a controversial income tax. 

In the talks due to continue 
into the week, the liberal Free 
Democratic part)' (FDP) was 
expected to clash with tiie 
Christian Social Union (CSU). 
the more conservative Bavar- 
ian sister party of Chancellor 
Helmut Kohl’s Christian Demo- 
cratic Union (CDU). over mea- 
sures to combat crime and on 
tbe status of foreigners in Ger- 
many. 

The FDP, which badly needs 
to show that it has secured 


concessions from its coalition 
partners after its poor result 
during the recent elections, 
was also insisting on a list of 
criteria which could be used to 
decide when the socalled soli- 
darity surcharge, a 7.5 per cent 
income tax to raise funds for 
eastern Germany, could be 
scrapped. The CDU and CSU 
have refused to give way to 
FDP demands for a deadline 
for removing the tax. 

It also remained unclear how 
the FDP would push through 
its other demands, including 
new laws to make it easier for 
foreigners to receive German 
nationality'- an issue the CSU 
has said it will not give In on. 

However, despite differences 
among the parties it seems 


increasingly likely that the 
talks will avoid decisions on 
controversial items. 

Observers said a brood brush 
agreement, short on commit- 
ments, would help ensure that 
the coalition could count on all 
of its 341 deputies in the parlia- 
mentary to re-elect Mr Kohl, 
which is likely to take place on 
November 15. The coalition has 
a majority of just 10 seats over 
the combined opposition. 

Some FDP members fear, 
however, that if the party does 
not use the present talks to 
secure its demands It will have 
even less leverage once Mr 
Kohl is safely re-elected. The 
final composition of the cabi- 
net will also only be agreed 
after the “chancellor vote”. 


IMTFRNATIONAL NEWS DIGEST 


Chirac promises 

Emu referendum 

KShmembereSp of any European nwnet^urutmto a 
referendum. Speaking on television three days after he became 
[he&st mainsSam^French politician to ded^f ormagr his 
candidacy in next spring’s election to the ElysSe, Mr Chirac 
said: “I only want France to enjoy the same rights as Britain 
and Germany, which have already announced their intention 
to consult their parliaments" on whether to move to a single 

^FranS’ had adopted the Maastricht treaty by referendum 
and should decide on the final stage of economic and mone- 
tary union (Emu) in the same way. Mr Chirac said. However, 
he suggested that the issue might not arise because be did not 
believe tip* there would be sufficient countries ec o nom i cally 
ready for Emu by the Maastricht treaty’s 1997-99 timetable. 

Last night Mr Chirac staked out a slightly more sceptical 
approach about the pace of European integration as well as 
fester action to bring down France's record 12.7 per cent 
unemployment rate, as the main elements distinguishing his 
policies from those of his fellow Gaullist, Prime Minister 
Edouard Balladur. The latter is expected to declare his rival 
candidacy, but not until the new year. 

Mr Chirac said he had formalised his candidacy an Friday in 
order to get the electorate to take more notice of his views. He 
also confirmed last night that at a special RPR congress on 
Saturday he would step down from the post of president that 
he had held since 1976 in order to focus on his presidential 
campaign. 

An Ifop poll on presidential preferences, conducted later on 
Friday and published in yesterday's Journal du Di m a ncha. 
gave him 15 per cent support compared with 10 per ceq^a 
month ago. 

The same survey showed his gain came mainly at .the 
expense of Mr Balladur, whose rating fell from 19 to 16 per 
cent over the same period, while support for Mr Jacques 
Delors, the outgoing European Commission president, declined 
only marginally from 20 to 19 per cent. David Buchan, Paris 

S Africa killing raises fears 

The murder at the weekend of South African religious leader 
Professor Johan Heyns has raised fears that radical elements 
in South Africa's white right wing may still be active and are 
now targeting people they regard as traitors to tbe Afrikaner 
people. Prof Heyns, a former moderator of the Dutch Reformed 
Chinch to which the great majority of the country’s 3m 
Afrikaners belong, was shot dead In his Pretoria home on 
Saturday night while playing cards with his family. He was 
regarded as the driving force behind the church's decision in 
1989 to reverse its long-standing support for apartheid and 
brand it a sin. 

Political and religious leaders yesterday paid tribute to Prof 
Heyns’s contribution to effecting South Africa's political trans- 
formation. “He had a mqjor part in preparing the church and 
the Afrikaner community for change,” said Anglican Arch- 
bishop Desmond Tutu. Mark Suzman, Johannesburg 

Bossi calls for change 

Mr Umberto Bossi. leader of Italy’s federalist Northern 
League, yesterday warned that the party was prepared to use 
its power in the ruling coalition to press for political change, 
once the 1995 budget was approved. “Without courage, the 
League risks being ground down," he told a League congress. 
“The moment has come for courageous decisions. Once a 
regime is installed, its difficult to obtain change." 

In a crowd-pleasing speech, aimed as much at reasserting 
his power within the party as within the government, Mr 
Bossi sought a mandate from delegates to put the govern- 
ment's record on liberalism and federalism under scrutiny. He 
also called for the area turn of a new liberal-democratic, federal- 
ist alliance, centred on the League and excluding the far-right 
National Alliance, currently part of the coalition, and the far 
left Andrew Hill, Milan 

Abiola’s detention continues 

Nigeria's opposition leader, Mr Moshood Abiola, remained in 
detention over the weekend despite winning an appeal for bafl 
at court on Friday. The military regime gave no explanation 
for not releasing him in Abuja. Mr AMola was arrested and 
charged with treason in June for proclaiming himself presi- 
dent on the anniversary of his victory in a presidential elec- 
tion which was annulled by the army regime. Mrs Kudirat 
Abiola. Ms wife, said yesterday she was still confident that be 
would be released today. According to his doctors, Mr Abiola 
needs medical treatment only available abroad. “The head of 
state, Gen Abacha, has said several times, that the issue will 
be decided by the courts and I am sure he will respect the 
decision,” Mrs Abiola said. Pout Adams, Lagos 

Albania votes on constitution 

Albanians voted yesterday on their first post-Communlst con- 
stitution after decades of Stalinist rule, but opponents of the 
proposed charter said power would again be too heavily con- 
centrated in one person. President Sah Berisha, casting his 
ballot, proclaimed the vote “the greatest day in Albania's 
history". He has argued the new constitution will help ease 
the entry of the country Into the continent's mainstream. 

The Referendum Central Commission said results would not 
be released until tomorrow night, 48 hours after the polls 
closed. Opponents contend Mr Berisha would have too much 
power under the new constitution, which would give him the 
right to appoint judges and control the government agenda. 
They argue that approving the constitution is parliament's 
job, but that Mr Berisha opted for a nationwide referendum 
because he could not get tile two-thirds majority needed for 
passage. Observers from the European Union and the US were 
in Albania to monitor the vote. AP, Tirana 

Venezuelan soldiers on patrol 

Thousands of Venezuelan National Guard soldiers today begin 
24-hour patrols in the country's big cities to check a wave of 
violent crime that cannot be controlled by regular police 
forces alone. The guard, a branch of Venezuela's armed forces, 
normally does not appear in such force except under special 
circumstances, such as natural disasters, civilian or military 
disorders or national elections. 

In announcing the new deployment of National Guard 
patrols. Major General Rafael Montero Reverie, minister of 
defence, said the operation would be in effect until the end of 
December, and guardsmen would work in co-operation with 
police forces. “1 want to clarify that the intention is not to 
militarise the cities, but to offer better security to the popula- 
tion. A recent increase in theft and armed robbery comes as 
Venezuela struggles with a deepening economic recession. 
Official figures put unemployment at 13.5 per cent for the 
third quarter of 1994. Joseph Alarm, Caracas 

Reagan has Alzheimer’s 

Former US President Ronald Reagan has released a hand- 
written letter informing Americans that he is suffering from 
Alzheimer s disease, a progressive neurological disorder 
involving memory loss and personality change. 

The 83-year-old Republican said he and his wile Nancy 
decided to make the news public to “promote greater aware-' 
ness of this condition’' and to "encourage dearer understand- 
ing erf the Individuals and families who are affected by it" No 
effective drug exists to arrest the mental and physical decline 
of the condition. Mr Reagan's letter - a moving farewell to 
Americans from the man know as "the great communicator" - 
said the disease imposed a heavy burden on the families of 
those afflicted. “I only wish there was some way J could spare 
Nancy from this painful experience," he said. "When the time 
comes. I am confident that with your help she will face it with 
faith and courage. . . I now begin the journey that will lead me 
to the sunset of my life. I know that for America there will 
always be a bright dawn ahead." Nancy Dunne. Washington 


A 


i 




FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


3 


t 



Tr : 1 ::* ■ ft ?-) 1 






★ 


NEWS: INTERNATIONAL 


I did it my way, says Carlos Salinas 

Law and social security problems are Mexican president’s only regrets, says Damian Fraser 



Carlos Salinas: careful watch on US elections 


Strike changes 
news habits in 
San Francisco 


W ith less than a 
month to go before 
his six-year term as 
Mexico's president finishes, 
Carlos Salinas says he only has 
two regrets: that he failed to 
reform the country's judicial 
system and to overhaul its 
near-bankrupt social security 
institute. 

“I did not have time to cany 
these reforms out." he said in 
an interview in Los Pinos, the 
presidential home. The diffi- 
cult economic situation, partly 
a result of the delay in passage 
of the North American Free 
Trade Agreement, postponed 
reform of the social security 
institute, he said. 

Hie murder last year of the 
Roman Catholic Cardinal or 
Guadalajara and the subse- 
quent presidential election 
campaign, it is understood, put 
off planned changes to 
Mexico's notoriously corrupt 
and inefficient judicial system. 

These regrets aside, Mr Sali- 
nas asserts that he would not 
have done anything differently. 
He defends his pro-market eco- 
nomic policies as having laid 
the groundwork for sustain- 
able growth, and for be ginning 
to reduce Mexico's sharp 
inequalities in income. He 
argnes that the rhythm of 
political reform was deter- 
mined by the need to achieve 
consensus across the political 
parties and avoid Instability, 
but the August presidential 
election was “a victory for 
democracy". 

One of the three declared 
candidates to head the incipi- 
ent World Trade Organisation, 
Mr RaHnng hag the backing of 


Mexico's governing 
Institutional Revolutionary 
party took an important step 
over the weekend in promised 
internal democratic reforms, 
when it elected its candidate 
for the governor’s race in the 
state of Jalisco by secret vote 
in a convention of local party 
leaders, Damian Fraser reports 
from Mexico City. 

Mr Eugenio Ruiz Orozco, the 
senator-elect for the state, won 
the convention with more than 
1,400 of the nearly 2,000 dele- 
gates present. He was backed 
by the most important factions 
within the party, and had been 
overwhelming favourite to win 
the nomination. 

However, the fact that four 
other candidates stood against 
Mr Ruiz in an internal poll of 
chosen delegates was consid- 
ered an advance. In the past, 
the PRI’s candidates for senior 
elective office have usually 
been picked in private by the 


the US, Canada, and all of 
Latin America. However, he is 
reported to have less support 
than Mr Renato Ruggiero, the 
European Union candidate, 
who has been campaigning 
more actively than the Mexi- 
can president 

Mr Salmas says that before a 
decision is taken on the lead- 
ership of the WTO post, more 
countries should approve the 
Uruguay Round deal of trade 
reforms. “The key question is 
when will the US Congress rat- 
ify the Uruguay Round,” he 
says, with the answer in his 
view depending on the out- 
come of the US mid-term elec- 


president and a few senior 
party officials. 

Mr Ernesto Zedillo, the 
incoming president who him- 
self was hand-picked by Presi- 
dent Carlos Salinas, has 
repeatedly pledged not to 
interfere in the nomination of 
the party's candidates, and to 
promote a democratic selec- 
tion process. 

While there were few 
reports of anomalies in the 
vote-counting at the conven- 
tion. supporters of the second- 
placed candidate claimed dele- 
gates from the workers' and 
peasants' sectors bad been 
under pressure to vote for Mr 
Ruiz. There had also been com- 
plaints that delegate selection 
was biased in favour of the 
winning candidate. 

The state election in Jalisco 
is due in February next year, 
and is expected to be a tight 
race between the PRI and cen- 
tre-right opposition. 


tioos tomorrow. Anything that 
puts in doubt the Uruguay 
Round would "open the door to 
commercial wars, which would 
be the worse scenario for the 
end of the 20th century." 

Mr Salmas is keeping a care- 
fill watch on the US elections 
for another reason: US-Mexican 
relations are expected to come 
under strain if the state of Cal- 
ifornia approves Proposition 
187, which would deny Illegal 
immigrants non-emergency 
public services. Mr Salinas reit- 
erated his attack on the propo- 
sition, saying it wrongly 
blamed migratory workers for 
California's own internal prob- 


lems. and was "xenophobic”. 
Mexico's Foreign Ministry is 
preparing a series of responses 
in case the referendum is 
passed, he says. 

Discussing his own legacy. 
Mr Salinas says economic 
reform was already well 
advanced when he took office, 
which enabled him to move 
rapidly in this area from the 
moment he was elected presi- 
dent. 

Thus his first years in office 
were characterised by the debt 
reduction agreement, sweeping 
privatisations, economic 
deregulation, and the decision 
to negotiate a free trade agree- 


ment with the US and Canada. 

By contrast, he implies. 
Mexico’s political system had 
been touched less by reform 
when he took over. “Generally 
in Mexico the electoral struc- 
ture was arranged, let us say. 
to guarantee a victory of the 
PRL" he says. “It would have 
been very tense” if he had 
sought to dismantle the old 
political system faster. What 
was important was that he 
“succeeded in introducing 
political reforms in favour of 
democracy and pluralism with- 
out causing a rupture". 

Mr Salinas accepts that elec- 
toral and political reform 


needs to go further. He sup- 
ports making the electoral 
institute totally independent of 
the government. It would "not 
be a bad idea” if the opposition 
was given control of congres- 
sional committees that oversee 
government spending. He 
cl aims , in an argument that 
would not convince members 
of the opposition, that there 
has not previously been a con- 
sensus on such reforms. 

Commenting on the judiciary 
and social security problems 
he failed to tackle. Mr Salinas 
says it gives him “great plea- 
sure" that Mr Ernesto Zedillo, 
his hand-picked successor, has 
pledged to address these 
issues. 

Mr Salmas says social secu- 
rity reform will need to 
address shortage of funds (the 
so-called actuary deficit) and 
separation of the accounts of 
those enrolled in the institute. 
Mr Zedillo has sketched his 
approach to judicial reform, 
which among other changes, 
would establish a civil service 
for judges to encourage profes- 
sionalism and greater integ- 
rity. 

While publicly unwilling to 
admit as much, Mr Salinas is 
also almost certain to hand 
over to Mr Zedillo the problem 
of bow to disarm and integrate 
into society the Zapatista reb- 
els in the state of Chiapas. 

Mr Salinas promises he will 
look for a negotiated settle- 
ment in Chiapas until the day 
he leaves office. But with Zapa- 
tistas showing no interest in 
talks with the S alinas govern- 
ment, the chances of success 
are negligible. 


By Louise Kehoe 
In San Rancisco 

San Franciscans are getting a 
taste of the future - at least 
the future as predicted by 
those who believe that the 
daily newspaper is dying. 

Last Tuesday night, 2,600 
workers at San Francisco’s two 
leading newspapers, the morn- 
ing Chronicle and the after- 
noon Examiner, went on 
strike. Most of their more than 
600,000 daily subscribers have 
been without their daily fill of 
a local newspaper. 

There is no shortage of news. 
Local radio and TV stations 
have taken up the cause by 
expanding their regular news 
coverage. Striking journalists 
have made guest appearances 
on the airwaves to talk about 
the subjects they normally 
write about 

Not to be outdone, the man- 
agement of the Chronicle and 
Examiner accelerated plans to 
create an on-line news service 
this week. The Gate, which 
combines stories from both 
papers, was to have been intro- 
duced on the Internet the com- 
puter network, later this 
month. Instead, it made its 
debut last week. 

The strike is a classic labour 
dispute about pay, working 
conditions and job security. It 
comes after the newspaper's 
unionised employees have 
worked for a year without con- 
tracts. 


The Chronicle and Exam- 
iner, although separately 
owned, are both printed and 
distributed by the San Fran- 
cisco Newspaper Agency. The 
bosses want to streamline dis- 
tribution, eliminating 150 driv- 
ers and hundreds of “youth 
carriers", the boys and girls 
who hurl newspapers on to 
driveways in their neighbour- 
hoods each day. 

Employees object to the cuts 
and are fighting for a pay rise 
bigger than the 3.5 per cent 
increase on offer. Privately, 
they say that the strike has 
been precipitated by fears of 
“union busting". 

Resorting to radio is one way 
around the strike but. as Mr 
Herb Caen, the renowned SF 
Chronicle columnist puts it, 
the feeling “isn't the same”. 
"You can't re-read it once, to 
try to get the meaning, or 
twice, to look for typos [and] 
mistakes. . . In short, it isn't as 
much fun.” 

Mr Caen's column appeared 
in the San Francisco Free 
Press, a newspaper cobbled 
together by striking journalists 
using borrowed computers and 
telephones. A hundred thou- 
sand copies of the Free Press 
were distributed on Friday, the 
newspaper unions claim. 

While distribution of the 
Free Press was limited, several 
thousand more readers picked 
it up via their computers on 
the Internet. 

See Media Futures 


Cautious Swiss think big when it comes to choice of gas guzzlers 


By Ian Rodger at Zurich 

The Swiss love American cars. The 
Alps are crowded with Cadillacs. 
Cherokees, Mustangs and other 
strange beasts rarely sent in other 
European countries. 


claiming: a per cent share of the 
whole market. General Motors sold 
1,774 US imports, and Ford 860. 

In each case, these results are 
fastjy better than . in other Euro- 


pean countries. GM, for example, 
sells more US cars in tiny Switzer- 
land than It does in Germany or 
France. The companies sell scarcely 
any US models in the UK because 
they do not make right hand drive 
models. 


fix “h on cherished things. A 
child's hand is a HSndli; Liechten- 
stein is a “Landli But a Chevrole- 
tii? 

Ask the Swiss or the car compa- 


nies themselves the reasons for 
their quirky taste for American 
cars, and a variety of answers 
emerge. All agree that it is a long 
tradition, dating back to before the 
second world war. "The Swiss have 
always liked the US as a country to 
visit," offers Mr Roland Hflsser, 
sales manager of Chrysler-Jeep 
Import Switzerland. 

"The ties between Switzerland 
and North America - both for fami- 
lies and for businesses - are much 
stronger than in other European 
countries," claims a General 
Motors representative, 


There are also practical reasons. 
Switzerland is mountainous. Imme- 
diately after the war, under-pow- 
ered Renanlts, Fiats and Volkswa- 
gen ‘beetles' had to struggle over 
the Alpine passes. Big Oldsmobiles 
and Bnicks with six litre V8 
engines cruised over. 

Moreover, petrol prices in Swit- 
zerland have always been relatively 
low, so the gas guzzling didn't mat- 
ter. Perhaps most important, Swit- 
zerland has never had a car indus- 
try to protect, so import barriers 
against American cars are insignif- 
icant. 


Like many US buyers, the Swiss 
went off US cars in the 1980s as 
their quality standards sagged. 
Chrysler polled out of the Swiss 
market completely, returning only 
in 1988. 

Today, even though American 
cars have become much smaller 
and more difficult to distinguish 
from European models, the Swiss 
have come back to them. Ironically, 
this is in part because of the good 
value they offer, thanks to the rise 
in the Swiss franc against the dol- 
lar in the past two years. 

Also, the US companies bad a 


lead in a couple of the most trendy 
vehicle types, such as jeeps and 
called multi-purpose vehicles 
(MPV). Chrysler's Voyager, GM*s 
Pontiac Transport and Ford's 
Explorer all do well among fashion 
conscious Swiss. 

Mr Hflsser says businessmen and 
men with large families buy the 
MPVs, and they like them loaded 
with options. Cherokee Jeeps are 
preferred by “well educated males 
between 40 and 50”. 

Like nearly everything in Swit- 
zerland, US-made vehicles are more 
expensive than at home, usually by 


about 10 to 15 per cent, according 
to Mr Hflsser. The differential is 
rather higher these days because of 
the weakness of the dollar against 
the Swiss franc. As a rule, the com- 
panies set prices on the basis of 
market considerations and do not 
adjust frequently for exchange rate 
changes. 

There are good reasons for some 
price differential - mainly having to 
do with transport costs and main- 
taining a dealer network for a rela- 
tively small market. But it is a fair 
bet that the companies do very well 
on their Swiss business. 


In the first nine months of this ' It all seems at odds with the 
year, Chrysler - the most success- charming Swiss preference for 
fill of the big three US importers - things small. They like nothing bet- 
sold 5,517 vehicles in Switzerland, ter than to put the diminutive suf- 



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4 


FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


NEWS: THE US GOES TO THE POLLS 


Despair 
or joy for 

Jurek Martin on politics under fire as campaigning comes to a bitter and negative finale hurricane 


Democrats on the very brink of survival 





US MID-TERM 
ELECTIONS 


Even if Amer- 
ica were a land 
veritably flow- 
ing with milk 
and honey. 
President Bill 
Clinton awd his 
Demoei^s ts 
would lose 
seats in tomor- 
row's congres- 
sional elec- 
tions. This is 
how it always 
is when a new 
president, regardless of party 
or personality, meets the wall 
of reaction, protest and down- 
right indifference that charac- 
terise his first midterms. 

What makes tomorrow 
important is the prospect of 
something relatively unusual 
happening - a change or power 
in one, or conceivably both, 
chambers of Congress. This 
has not happened in the House 
of Representatives since 1954, 
when the Democratic hege- 
mony was established, and in 
the Senate since 1986, when the 
Democrats ended a brief six 
year Republican interregnum. 

The significance of such a 
change to President Clinton 
and to the conduct of US poli- 
cies at home and overseas can 
be overestimated. Post-war 
Republican presidents have far 
more often than not been sad- 
dled with a Democratic Con- 
gress, yet the country has not 
always found itself in a state of 
paralysis. Many Americans 
believe there is a natural order 
to the presidency resting with 
one party and the legislature 
with the other. 

Yet the angry tenor of the 
campaigns now lurching to a 
bitter and negative conclusion 


suggest stirrings in the wood- 
work far beyond normal politi- 
cal cut-and-thrusL 

Cynicism about government 
itself and those who work in it 
has reached a pitch that 
dwarfs rational consideration 
about what it, and they, should 
be doing about national prob- 
lems. 

In a sense, it may not matter 
so much whether Republicans 
take control of one or the other 
chamber than that those who 
inhabit the next Congress, old 
and new members, Republi- 
cans and Democrats alike, may 
have been so scarred by their 
confrontation with the elector- 
ate that the term “do nothing 
Congress," so successfully 
coined by President Harry Tru- 
man in the 1948 campaign, may 
come to be seen as an under- 
statement 

Democratic command of the 
legislature does hang by a 
thread. This is most easily dis- 
cernible in the 35 more visible 
races, 22 of them defended by 
Democrats, in the 58-44 Demo- 
cratic Senate than in all 435 
House contests, where the 
majority party holds a 256-178 
edge, with a lone independent 
(Mr Bernle Sanders of Ver- 
mont). 

Needing to lose no more than 
six seats to retain control, the 
Democrats seem certain to 
drop three - Ohio, Maine and 
Arizona - and are at severe 
risk in as man; as 10 more. 

They could afford to lose 
more than six if there are off- 
setting gains from Republi- 
cans. But local polls, admit- 
tedly not always reliable, point 
to only one realis tic chance, in 
Minnesota. Once hopeful pros- 
pects in Delaware, Wyoming 


INTERNATIONAL PRESS REVIEW 






Molly a lone 
voice among 
doom-sayers 


By Jurek Martin in Washington 

The best antidote to gloom, 
doom and US media porten- 
tousness is called Molly Ivins, 
the unreconstructed liberal 
who writes a column when the 
mood takes her out of Austin, 
Texas. When California got hot 
under the collar about illegal 
immigrants from the south, 
she wrote that, in her neck of 
the woods, no one could find 
anything wrong with “Messak- 
ins", as Texans call them. 

She was again outspoken 
last week in taking the wind 
out of the sails of the ship of 
heavy analysis about Amer- 
ica’s electoral agonies. On 
learning that the prevailing 
wisdom is that it is the 
"cranky voters”, not Washing- 
ton politicians, who are to 
blame, she wrote that “you 
could have knocked me over 
with Michael Huffington’s 
brain". The reference was to 
the Republican candidate for 
Senate in California. 

However, the unsinkable 
Molly, even at her most deli- 
ciously Ironic, is a minority 
with few companions. The 
comics and cartoonists have 
had their fun with the likes of 
Huffington and Oliver North 
(Republican Senate candidate 
in Virginia), but most of the 
rest of the media have been 
wringing their bands and often 
screwing up their noses before 
making endorsements. 

Clearly partisan publications 
- the Wall Street Journal on 
the right, the New York Times 
on the centre-left - have taken 
editorial satisfaction, respec- 
tively, in likely Republican 
gains generally and the proba- 
ble re-election of Mario Cuomo 
as Democratic governor of New 
York. 

There has been some break- 
ing of type - the liberal Los 
Angeles Times, which has 
made no endorsement in a gov- 
ernor’s race stace 1970, opting 
for Republican Pete Wilson in 
California, and the Washington 
Post preferring Republican 
Carol Schwartz over the reha- 
bilitated Marion Barry tor 
mayor. 

But Boston's leading newspa- 
per, the Globe, did its duty and 
supported Edward Kennedy in 
glowing terms, finding no evi- 
dence of a liberal resting on his 
laurels. “Kennedy's pace has 
only quickened, especially in 
the last two years. . . for these 
reasons - his energy, his focus 
and his ability - the Globe 
endorses his re-election." 

Still, there is nothing like 
dislike of a candidate to 
sharpen the leader writer's 
pen. The Cincinnati, Ohio, 
Enquirer said this of the hap- 
less Joel Hyatt, running for the 
Senate as a Democrat; he “is 


only as deep as a fresh coat of 
furniture wax. He comes across 
like a college student who 
thinks he can fake it through 
finals with a charming smile." 

The other end of the age 
scale was also on the mind of 
the Wilmington, Delaware, 
News Journal, which was rela- 
tively unusual in finding good 
in both its Senate candidates 
before plumping for the return 
of William Roth, the 73-year 
old Republican. It acknowl- 
edged the senator had slowed 
down but wrote, charitably, 
that “doesn’t mean that we 
have outlived our usefulness or 
that we should be thrown on to 
the scrapheap.” 

But the Burlington, Ver- 
mont, Free Press, turned rather 
savagely on James Jeffords, 
one of the most liberal Republi- 
cans in the Senate, in endors- 
ing his opponent, Ms Jan 
Backus. “Now, ifs sad to say, 
he has come to typify what is 
wrong with Washington; lots of 
money spent and nothing get- 
ting done.” 

Some newspapers found 
merit in Washington seniority, 
however. The liberal Bergen, 
New Jersey, Record, endorsing 
Senator Frank Lautenberg, the 
Democrat, wrote “we agree 
with his philosophy of using 
the federal government to 
solve major domestic prob- 
lems”. The view of the Courier 
Post of Camden, New Jersey, 
could not have been more dif- 
ferent “(Chuck the Republi- 
can) Haytaian's thrust Is right 
for the 'Ms. A lot of us are as 
mad as helL We want the gov- 
ernment off our backs and the 
sooner the better." 

Reflections of this view have 
been the dominant strain in 
analytical reportage and pun- 
ditry. Writing an negative cam- 
paigning in the Washington 
Post David Broder, who has 
rarely seen an election he did 
not like, wrote “people are 
looking for enemies. . . it's 
that criminal out there, real or 
symbolic, that people want to 
run against rather than run 
against their opponent". 

Albert Hunt of the Wall 
Street Journal, with views 
never to be confused with 
those of his newspaper's leader 
writers, wrote sadly that “the 
one lesson that should be 
drawn from this dreary experi- 
ence - the need to make state 
and congressional campaign 
financing more like the presi- 
dential system with partial 
public funding - is a non- 
starter politically." 

But the last word on all this 
lamentation and navel-gazing 
should be left with Molly Ivins. 
“What a bunch of chumps, 
boobs, saps, dolts, clods, goofe, 
mutts, jerks, tools and ignor- 
ami we all are. 1 know you're 
feeling just as ashamed as I 
am, " 


The US government 

Seats up for election 



Seals 43& up fee election; AB 



Governors 


Seats: 5ft up for election; 36 


Democrats 

21 seats 


Democrats 
a seats 



and Montana now seem longer 
shots, though one survey last 
week in the state of Washing- 
ton found a surprising surge 
for Mr Rod Sims, previously 
running well behind Mr Slade 
Gorton, the Republican incum- 
bent. Another survey found 


that Mr James Jeffords, a lead- 
ing party moderate, was not 
quite secure in Vermont. 

The pundit consensus, for 
what ft is worth, generally hov- 
ers around Republican gains of 
5-9 seats, either not quite 
enough, or just enough. In the 


event of a 50-50 tie. the pres- 
ence of Vice-President A1 Gore 
means the Democrats retain 
command of the chamber and 
its committees, unless Senator 
Richard Shelby from Alabama, 
wbo often votes with Republi- 
cans, can be persuaded to 
switch parties. 

It is much harder to get a 
national handle on the House 
races, where the Republicans 
need a 40-seat gain to form a 
majority in their own right. 
But Congressman Newt Ging- 
rich, certain to be the next 
Republican leader in the House 
and, with party control, the 
next Speaker, is openly 
talking of forming new 
alliances. He wants to link 
with conservative Democrats 
from the south and its borders, 
giving him de facto, if not ete 
jure, command. 

The Democrats started with 
the assumption that they could 
lose 25 seats, greater than the 
average post-war loss but not 
by much. Mr Gingrich raised 
the stakes by talking about 40 
and more, before lowering 
them somewhat and focusing 
on ideological majorities. 

it does appear that some 
apparently very endangered 
Democratic incumbents, many 
of them in their first terms like 
Pete Strickland in Ohio and 
Jane Hannan in California, are 
on the brink of survival. Spe- 
cial interest money also tends 
to favour sitting members, 
with one study last week find- 
ing incumbents with a 15-1 
fundraising advantage in 
House races. Again, the pundit 
consensus foresees Republican 
gains of 25-35 seats. 

Tbe obvious Republican 
advantage is derived in part 


from the fact that the mid- 
terms always attract a low 
turn-out - nationally about 
one-third of eligible voters. 
There will be wide variations, 
depending on the beat gener- 
ated by local candidates and 
issues, but Republicans, more 
committed if smaller in num- 
bers, seem more motivated to 
vote. 

A recent Washington Post- 
ABC poll sought to identify 
likely voters and found them 
evenly split between the two 
parties. Earlier surveys had 
actually found the Republicans 
ahead, but parity is a plus 
because, in recent elections, 
the Democrats have generally 
enjoyed about an eight point 
advantage. 

The impact of the religious 
right may be more visible in 
individual contests like the 
Senate races In Virginia and 
Minnesota than nationally. But 
the Christian Coalition's get- 
out-the-vote drive, invariably 
behind conservative candidates 
and causes, cannot be over- 
looked. This weekend, for 
example, it will be distributing 
across the country no less than 
33m “election guides", the con- 
tents of which have already 
drawn fire from liberal quar- 
ters. 

Yet the sad and indelible 
memory of virtually all the 
contested campaigns is that 
money and negativism have 
been identified as the keys to 
electoral success. The Calif- 
ornia Senate race between Ms 
Dianne Feinstein, the Demo- 
cratic incumbent, and Con- 
gressman Michael Huffington 
has already set national 
records - $30m and counting - 
for a single contest, most of it 


from the Republican's own 
pockets. The Robb-North slug- 
fest in Virginia is not far 
behind. 

It has been hard to find a 
single campaig n in which COO' 
ventional policy and social 
issues have been given an air 
tog in the welter of name-call- 
ing. Discussion of crime - a 
hot button subject - invariably 
is reduced to who would exe- 
cute murderers first and fast- 
est Democrats, to particular, 
have seemed at a loss to 
respond, with, perhaps, only 
Governor Mario Cuomo of New 
York secure enough in his own 
opposition to capital punish- 
ment not to bend with the pre- 
vailing tempest 

The most important ballot 
issue to any state - tbe Califor- 
nian proposition to deny social 
services to illegal immigrants 
- is the perfect manifestation 
of this public discontent and 
the consequent search for 
scapegoats. There is no doubt 
that illegal immigration poses 
costs and problems, but the 
proposed solution, probably 
both illegal and unconstitu- 
tional, seems motivated by the 
desire to take matters out of 
the hands of government, state 
and federal 

The impact of all this, as per- 
sonal experience and acres of 
reportage and polling in the 
American media attest, is of a 
polarised electorate genuinely 
disgusted with politics to all its 
manifestations. Yet tomorrow 
the country votes and, in Janu- 
ary. a new Congress, the result 
of that exercise of the fran- 
chise, will take office. Regard- 
less of who runs the legisla- 
ture, no easy times lie ahead. 



CALIFORNIA BATTLE (L to R): Governor Wilson and Democratic challenger Brown; Republican Senate candidate Huffington and Democrat incumbent Fetostehi 


The showdown In the states 



MINNESOTA 
Reputikan Senator Dava 
Dwonberger's ruttromonl 
seemed to offer tt» 
Democrats cj good 
chance of winning a state 
tram thotr rhrafe. But most 
pods show that Am Wfynia, a left-of-centre stele 
lawmaker, trate Congressmen Rod Grams, a rtgM- 
wingor who has campaigned against 
congresskxwl privtugas. 


MICHIGAN 

£5 Democrats are on the verge 
of losing the seal to 
Spencer Abraham, a termer 
aitta to ex- Vico PraafcJonl 
Dan Quayte. Abraham 
appears Id hotel a narrow edge over Congressman 
Bab Carr, whose brand of Inrtds-WasWngton pork 
banal poWca has tatot to mete Democratic 
voters. Abraham whelped by Hepubfcan Governor 
John Enow's smooth rida fa re-election. 



■ . * *-■ • ./* •• - 

. NEW YORK 

Governor Mario Cuomo 
laces' a lough chatonpa 
kittlebidforafoisth . 
term. RapiiMtaan George. 
Patofct has the backing of 
a powerful potitJcal 

machbiebut Rttto support of fib own., Cuomo has 
struck back h recent weeks, however, vrtnnhg the 
andoraament at RspuMcao Mayor Rudolph 
Glutton] of Now York. 




WASH! 

Not since 1860 has a 
| sitting Speaker of the 
: House of Representatives 
lost an election, but Tom 
Foley, 'Whom the 
Constitution ranks thW behind the pre si dent faoes 
his toughest campaign ainoe winning In 1984. 
Lawyer George Nethereutt has benafSad from the 
national antHncvnbent tide, and me cash Don 
Republican groups outside The &tata. - 


J— II. vfr • , " 




CALIFORNIA 

Democratic Senator Dianne 
FeSntein was expected to 
cruise to tv-afedfon, but 
Ftepubttcan oi mSlonaire 
Mctenl Huffington is 
over Sr 6m on 
te tovtoton odvenfetag. FefosMn (ought back, after 
Huffington eras hurt by haws that he omptoyod an 
Segal Immigrant as a nanny. RspubBcan Governor 
Fato WBson seems set far a second term. 





NEW JERSEY 
Governor Christine Todd 
Whitman swept New 
Jersey last year with a 
promt* to cunaxae. and 
theRspriJBcans had 
. hoped to repeat her victoiy 
h the Senate election this year. But Democratic 
Senator Frank Lautenberg. seems so have retaken 
too lead ow RepuMcon C*u* Haytslan. 



PENNSYLVANIA 

Senator Hants Woflbnf B 
surprise victory In e 1SBT 
by-eiectlon launched the 1 
debate about heefthcare " 
reform, but Its defeat this 
year hist Nm. 

Congre ss man FBck Soitonsn to way to the right of 
most RapubOcans who haw won hi Pennsylvania, 
but his opposite) to gun control and calls lor 
congressional reform have gfran him a narrow lead. 



TEXAS 

Democratic Gewsmor Am 
Richards tests popular, 
JWjX&L and most voters say she Is 
doing a good Job. But she 
Ms faced a tough 

campaign against Bopubfcan Georgs Bush, 
andher son of the farmer president, and co-omer 
of the Texas Rangers besebal team. However, 
Republican Senator Kay BoSay Hutchison Is having 
no trouble warring oft Dsmocrai Hchard Hahar. 


I pT^^rrrTj tcnnessee 

H Oe mucia ls expected a 
1 - r . H battle to hokf onto the 

- ! .J . • ■ ’•H Senate seat vacated by 

'..A - • ■ „ M vice Prcsktam AJ Gore. 

Congressman Jm Coopar, 
best known lor Ns centrist heahhesm reform plan. 
15 haiSng Republican \Bvr/eri actor Fmd Thompson. 
The Democrats are more surprised by too struggle 
(or Senator Jkn Sasser, who wan with 65 per cant 
six years ago. 


FLORIDA 
Democratic Governor 
Lawton Chios was elected 
to the Florida legislature in 
1968 and has not lost on 
election since, but Job 
Bush has mourned a ferocious (Stock. Ltaie divides 
toe two In toe pofc, bu toe gJf to wide on Issues 

surto as im migr a tion, crime end education, where 
Bush stands ter to the right ot hto tether, former 
President George Bush. 



VIRGINIA 

He has been convicted ot 
lying to Congress over toe 
Iran-Contra affe* ana 
denomead by tattow 
BepuMcans including 
former President Ronald 
Reagan, but ORver North's Senate campaign rolls 
on.wflh too backing of Ilia Christian right tiring. 
Democratic Senator Chuck Robb, once the darting 
of ha party, has run a IncWustra campaign. 



Newt 



Republican governors on the charge 


By George Graham in Washington 

President Bill Clinton spent years as 
governor of Arkansas, and he often 
looks happiest when he is discussing 
policy with his former colleagues in the 
National Governors Association. 

But the club may be a little less 
friendly after the elections tomorrow, 
with Republican candidates poised to 
make a significant doit In the Demo- 
crats' long dominance of state politics. 

It is not just in the congressional elec- 
tions that Democratic incumbents are 
threatened with dismissal by a disgrun- 
tled voting public. Prominent Demo- 
crats such as Governor Lawton Chiles 
in Florida, Governor Ann Richards in 
Texas and Governor Zell Miller in Geor- 
gia are in grave danger of losing their 
bids for re-election, while Republican 
Governor Pete Wilson, once a prime 
target for Democrats, now seems much 
safer in California. 

In New York, Governor Mario Cuomo 
now seems better placed to win a fourth 
term in office as his Republican chal- 
lenger, Mr George PatakL loses steam. 
But the Democrats still face the alarm- 
ing possibility that they 
could wake up on Wednesday morning 
controlling only New York and North 


Carolina among the 10 largest states. 

In all, 22 incumbent governors are 
naming for re-election tomorrow, and 
elections are also being held in 14 more 
states, many of which allow only one or 
two terms as governor. 

With the exception of Arizona and 
Maine, all the states which seem likely 
to change hands are held by Democrats. 
Some pollsters believe the Republicans 
could end up with more governorships 
than the Democrats - which they last 
did in 1970. 

Low turnout among Democratic vot- 
ers is also expected to bring Republican 
gains in the state legislatures. In the 10 
biggest states, Republicans already con- 
trol six state senates and need to pick 
up only one more seat to win control in 
Florida. They trail by a much bigger 
margin in tbe lower state chambers, but 
seem sure to take over the Michigan 
House. 

And the vote-drawing power of Gover- 
nors John Engler of Michigan and 
George Voinovich of Ohio, both cruis- 
ing to easy re-election, is expected to 
provide a strong boost to Republican 
candidates for open Senate seats in 
both states. 

State governments are not only the 
“laboratories of democracy", as Mr Clin- 


ton and most other US politicians are 
fond of saying, in echo of Justice Louis 
Brandeis; they are also formidable polit- 
ical power bases. 

Governors can be a president's most 
potent allies in lobbying their state con- 
gressional delegations In favour of leg- 
islation. 

They could also be a crucial source of 
strength tor presidential candidates in 
1996. It is certainly possible to win In 
any state without the governor's help - 
Mr Clinton won California in 1992 
despite Governor Wilson's backing for 
former President George Bush. 

But most state governors control 
their state party machinery, and tins 
can be critical in primaries - as then 
vice-president George Bush found in 
New Hampshire in 1968, when Governor 
John Sununu rescued his candidacy 
after he had been thrashed by Senator 
Bob Dole in the Iowa caucus. 

All is not yet lost for the Democrats. 
Besides Mr Cuomo, who trailed his 
Republican opponent for months but 
recently seems to have opened a lead in 
the opinion polls of as much as 16 per- 
centage points. Governor Roy Romer of 
Colorado has also shed earlier worries 
and established a comfortable margin. 

In Florida, Mr Chiles has also fared 


better in recent weeks against a strong 
challenge from Mr Jeb Bush, a Miami 
businessman and son of former Presi- 
dent Bush, but even though some polls 
show him with a wafer-thin lead he is 
still reckoned to be in the “endangered” 
category. 

So too is Ms Richards in Texas. Her 
folksy one-liners and general popularity 
In the state have done nothing to shake 
off the challenge of Mr George Bush, 
coowner of the Texas Rangers baseball 
team and another son of the former 
president. 

Although national trends still seem to 
f&vour the Republicans, at the local 
level the individual candidate can still 
be more important 

In Maine, for example, the Senate 
seat left open by the retirement of Dem- 
ocratic majority leader George Mitchell 
appears to be swinging to Republican 
Congresswoman Olympia Snowe. But in 
the election for the governorship 
vacated by retiring Governor Jock 
McKernan. Ms Snowe's husband, the 
Republican candidate is running a dis- 
tant third; if Democrat Joe Brennan 
loses, it will be to independent busi- 
nessman and television presenter 
Angus King. 


By Jurek Martin to Washington 

Tomorrow could be the 
greatest day in, the political life 
of Newton Leroy Gingrich, 
known as Newt'ft could also 
be the night of Ms greatest dis- 
appointment. 

In the rosy scenario, he 
could 1 end it Sfpeakerpresump- 
ttve of the House of- the Repre- 
sentatives' and conceivably 
with Republican . majorities in 
both chambers/ In "the night- 
mare, he oo uld wind up sad- 
dled with tbe Hame for raising' 
Republican expectations too 
high and for the commission of 
grievous tactical errors that 
excited the Democrats suffi- 
ciently for them to hold on, 

. Rarely has a party's national 
campaign been so. shaped by a 
single person as has this year's 
midterm effort by the 51-year- 
old, Pehnsylvania-bom radical 
conservative congresmnaxfewho 
has represented Georgia’s jifetii 
district; how encompassing the 
spreading northern suburbs of 
Atlanta, since 1979. • 

Other prominent Republi- Jp 
cans have done their bit, but 
many, like Senators Bob Dole 
of Kansas and . even Phil 
Gramm of -Texas, -have seemed 
to have at least half an eye. cm 
a stiff bigger election in 1996 
or. schooled in political prag- 
matism. rather than confronta- 
tion, wondered if tbe party was 
not going too. far to the right 
Such ambitions and reserva- 
tions have never clouded Newt 
Gingrich’s nrind. An articulate 
ideologue by conviction and a 
guerrilla fighter by nature.-he 
has always seen the Reagan 
era as one with much unfin- 
ished business and the Bush 
and Clinton presidencies as 
Inconvenient interruptions. A 
political product of a Congress 
he profiesses to despise, be is 
intent on changing not only its 
feces but also its collective 

mtori- 

It was Mr Gingrich who first 
demanded that the midterm 
elections be turned sot into a 
series of local battles but first 
and foremost into a national 
referendum on the Clinton 
presidency. Republican candi- 
dates beyond number have 
sought to identify their Demo- 
cratic opponents with Mr Clin- 
ton, often using commercials — 
where a candidate’s face meta- Pv 
morphoses into one of the pres- 
ident 

It was Gingrich, too, who in 
September trotted out more 
than 300 Republican candidates 
for the House onto the steps of 
the Capitol to sign the 10-point 
“contract with America" - 
instantly assailed by the wit- 
tier Democrats as a mob-style 
''contract on America". 

This committed them to 
introduce, within 100 days of 
the convening of the new Con- 
gress, legislation to balance the 
budget by constitutional 
amendment, to establish the 
budget line item veto (empow- 
ering a president to eliminate 
any specific item of spending), 
to limit the terms served in 
Congress, to cut taxes, and 
other items long on the conser- 
vative wish-list 
He has never been shy about 
his purpose or his methods, 
rarely less so than in an inter- 
view with the Washington Post 
last month encapsulating the 
logic behind the twin strate- K . 
gies. * v 

“We reached two conclusions 
about May. One was that we _. 
might win a majority. . . the 
other that the country was 
going to be so negative about 
Clinton that if we went as neg- 
ative as the country was, we 
would drive down participation 
because people would be sick 
of the process. And so we con- 
sciously designed the contract 
around these two observa- 
tions." 

Dissuading people from vot- 
ing might seem an odd way to 
win elections, but not for a 
party which normally benefits 
when the turnout is low. 

Reasonably secure of his 
own re-election, he has person- 
ally visited about one third of 
the House's 435 districts in the 
last two months, energising 
Republicans with his own fiery 
brand of take-no-prisoners ora- 
tory. 

Not for nothing is he known 
as Hurricane Newt or his polit- 
ical potion as containing Eye 
of Newt 

Yet, until the strategic deci- 
sions were taken on this cam- 
paign and until he led the suc- 
cessful Republican attempt to 
block virtually all that 
remained of the Clinton legisla- 
tive programme, he had some- 
times co-operated with the™ 

White House. 

Steeped in opposition and 
obstruction, he will find tomor- 
row if he also gets a slice of 
real power. If he does, his exer- 
cise of that authority will 
make him either Bill Clinton's 
worst bate notr or his political 
saviour or both. Newt Gingrich 
would ask for nothing less. 






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V'NUS' 


FINANCIAL TIMES MONDAY NOVEMBER 7 199A 


NEWS: INTERNATIONAL 


Denying access to trade body could turn Beijing into wild gorilla, official warns I Free trade deal 


China turns up pressure in Gatt talks near between 


By Tony Walker in BeQlng 


Denying China access to the 
General Agreement on Tariffs 
and Trade could turn the coun- 
try into a “9001b gorilla" at 
large In the world trading sys- 
tem, a senior Chinese official 
warned at the weekend. 

Professor Chu Xiangyin, 
dean of the School of Interna- 
tional Trade and Economics, 
told the official Business 
Weekly newspaper that it 
would “do no good for anyone" 
for China to be excluded from 


Gatt and its successor World 
Trade Organisation (WTO). 

He said large US companies 
would be hurt by China's 
exclusion since their invest- 
ments would be afforded better 
protection under Gatt rules. 
China regards the US as the 
main stumbling block to its 
Gatt ambitions. 

Statements at the weekend 
by the professor and by a 
senior Chinese trade official 
indicate a tougher Chinese 
stance on Gatt accession, coin- 
ciding with the last phase of 


difficult negotiations. 

China has been negotiating 
Gatt issues bilaterally. The 
Gatt working party on China is 
expected to resume discussions 
in Geneva later this month for 
a final push on Bering's appli- 
cation to rejoin. 

Both US and European 
Union officials say China has 
“some way to go" before satis- 
fying Gatt market liberalisa- 
tion requirements. Ms Char- 
lene Barshefcky, an assistant 
US Trade Representative, said 
last month that Beijing needed 


to "step on the gas pedal" to 
become Gatt-consistent in time 
for the planned birth of the 
WTO on January 1. 

US officials want firmer com- 
mitments from China on tariff 
cuts, pbasing out of non-tariff 
barriers and access for service 
organisations. The US is also 
demanding concrete action 
against widespread abuses of 
intellectual property rights, 
including counterfeiting of 
compact discs and computer 
software. 

One of China’s top Gatt 


negotiators, called, in a news- 
paper interview. for 
“high-level, strategic support 
and foresight" from the US 
over the issue. 

“The US should Lake stock of 
its medium and long-term com- 
mercial benefits in China, not 
just the short-term ones.” he 
said. 

He urged US officials to give 
what he described as “earnest 
consideration to three key 
questions.'' These were: Is Chi- 
na's Gatt accession good for 
riade liberalisation advocated 


by the the Asia-Pacific Eco- 
nomic Co-operation forum 
(APEC)? fs Gatt membership 
good for promoting China's 
reforms? and should China be 
brought within the new multi- 
lateral trading system from the 
beginning?" 

Ms Wu Yi. China's trade 
minister, and Mr Mickey Kan- 
tor. the US trade representa- 
tive. are scheduled to meet in 
Jakarta on November 12 dur- 
ing the Apec forum for what is 
expected to be crucial discus- 
sions on Gatt issues. 


Turkey, Israel 


By Julian Ozanne in Jerusalem 


World Bank urges urban clean-up 


By Tony Walker 


The World Bank has urged 
C hina to impose user fees to 
improve urban environmental 
services and to bit industrial 
polluters with much tougher 
penalties or risk a crisis in 
towns and cities. 

A bank study also reported 
alarming negligence in the 
handling of hazardous waste, 
saying there was no adequate 
monitoring of the storage of 
50m tonnes of waste a year. In 
Urban Environmental Pollu- 
tion*. the bank said that China 


“has an urgent need to reorient 
the provision of urban environ- 
mental services toward the 
market economy”. 

The release of the study coin- 
cides with growing alarm inter- 
nationally over the environ- 
mental costs of China's 
explosive economic growth. 
Real gross domestic product 
growth for the past two years 
exceeded 13 per cent. The bank 
identified pollution caused by 
emerging rural manufacturers 
- the fastest growing sector of 
the economy - as a significant 
threat to China’s already over- 


burdened environment 
It noted that in 1980. when 
the environmental regulatory 
system was imposed, these 
rural enterprises accounted for 
less than 10 per cent of Indus- 
trial ouput, but that had 
jumped by 1992 to 36.8 per cent 
and was still growing. The 
study said it was especially 
worrying these often small- to- 
rn edium sized enterprises had 
avoided many of the regulatory 
restraints that applied to state- 
owned-enterprises, and the 
“regulation problem can no 
longer be ignored". 


Among other recommenda- 
tions were that China: 

• Increase the financial and 
social cost of violating environ- 
mental standards. 

• Enact and enforce hazard- 
ous waste legislation. 

• Charge tariffs for water sup- 
ply, waste water treatment and 
solid waste disposal that 
encourage careful use. 

The World Bank, in its plea 
for stiffer penalties to deter 
widespread flouting of environ- 
mental standards, said Chinese 
companies would have “no eco- 
nomic incentive to improve 


CONTRACTS & TENDERS 


REPUBLIC OF LEBANON 

MINISTRY OF MUNICIPALE AND RURAL AFFAIRS 
COUNCIL FOR DEVELOPMENT AND RECONSTRUCTION 
Solid Waste Management Sector 

Pre-Qualification of contractors for the supply of Compactor Trucks 


The Republic of Lebanon has applied for financing from the International Bank for Reconstruction and 
Development (IBRD), for the rehabilitation and development of the solid waste management sector. It is 
intended that part of the proceeds of the above financing will hr applied to payments for the contract to be 
awarded for the supply of 180 compactor trucks for countrywide distribution. 


The contract will be managed hy the Council for Development and Reconstruction (CDR) under IBRD 
guidelines. 


Contractors who have already implemented similar projects in short periods and under tight control, are 
invited to apply for pre-qualification. 


Prequalification must be in accordance with the prequalification documents available at C.D.R. against the 
sum of U.&.S 500 in the form of a banker's certified check in the name of the Council for Development and 
Reconstruction . 


Reasons for .not pre-quafifying any firm or consortium will not be given and no cost incurred in pre-qualifying 
will be reimbursed. Invitations for bidding will only he sent to firms or consortia which are p re-qualified. 


The prequalification documents will be available at CDR offices starting Tuesday, November 8, 1994 and are to 
be returned with all supporting documents before twelve o'clock noon , Beirut local time on Thursday, 
December 22, 1994 at the following address : 

Council for Development and Reconstruction 
Tallet Al-Saray - Beirut - Lebanon 


REPUBLIC OF LEBANON 

MINISTRY OF MUNICIPALE AND RURAL AFFAIRS 
COUNCIL FOR DEVELOPMENT AND RECONSTRUCTION 
Solid Waste Management Sector 

Pre-Qualification of contractors for the supply of Garbage Containers 


The Republic of Lebanon has applied for financing from the International Bank for Reconstruction and 
Development (IBRD), for the rehabilitation and development of the solid waste management sector. It is 
intended that part of the proceeds of the above financing will be applied to payments for the contract to be 
awarded for the supply of 5200 garbage containers for countrywide distribution. 


The contract will be managed by the Council for Development and Reconstruction (CDR) under IBRD 
guidelines. 


Contractors who have already implemented similar projects in short periods and under tight control, are 
invited to apply for pre-qualification. 


Prequalification must be in accordance with the prequalification documents available at C.D.R. against the 
sum of V.S.S 2 50 in the form of a banker's certified check in the name of the Council for Development and 
Reconstruction. 


Reasons for not pre-qualifying any firm or consortium will not be given and no cost incurred in pre-qualifying 
will be reimbursed. Invitations for bidding will only be sent to firms or consortia which are pre-qualified. 


The prequalification documents will be available at CDR offices starting Tuesday, November 8, 1994 and are to 
be returned with all supporting documents before twelve o'clock noon , Beirut local time on Thursday, 
December 22, 1994 at the following address : 

Council for Development and Reconstruction 
Tallet Al-Saray - Beirut - Lebanon 


REPUBLIC OF LEBANON 

MINISTRY OF HYDRAULIC AND ELECTRIC RESOURCES 
COUNCIL FOR DEVELOPMENT AND RECONSTRUCTION 
ELECTRICITE DU LI BAN 
PRE-QUALIFICATION FOR 

EXPANSION OF THE TRANSMISSION SYSTEM (PHASE 1} 


The Government of Lebanon, represented by the Ministry of Hydraulic and Electric Resources (MHER), the 
Councillor Development and Reconstruction (CDR), and Electricite du Liban (EDL), wishes to engage firms 
through international competitive bidding, for supply of materials and construction for the following projects 
which constitute the first phase in the expansion of the transmission system: 


l- 220/1 50/66/20kV Substations 


2- 220kV Underground Cables 
(approx. 50 km) 


3- 220kV Overhead Line 
(approx. 300 km) 


The works shall be financed by the contractors. The terms and conditions of the inanis) shall be proposed by 
tbc pre-qualified bidders in their bid submission. 

Firms wishing to participate io the bidding process for one or more of these projects, must be prequalified. 

The expected date for starting the works is foreseen mid I99S. 

The works will be executed under supervision of consultants appointed by CDR/MHER/EDL. 

Prequalification documents for each of the projects will be as’ailable for collection, starting Monday November 
7, 1994, on presentation of a Bankers draft, in the name of the Council for Development and Reconstruction, 
for 51,000 (One thousand US Dollars) per document, from CDR’s offices at the address given below, during 
normal working hours: 

Council for Development and Reconstruction 
Tallet El Seray- P.O.Box 116:5351 
Beirut - Lebanon 

In order to be considered for inclusion in the lists of preqnalified bidders, firms should return the documents 
to CDR's offices at the above mentioned address not later titan 12:00 hours noon (Beirut local time) on Monday 
December 12, 1994, at the latest, duly completed and accompanied by the required supporting material 


pollution control efficiency 
unless the expected cost of vio- 
lations is raised through sub- 
stantially higher fines and 
more frequent monitoring". 

The bank urged that draft 
legislation which gives envi- 
ronmental protection bureaux 
regulatory authority over haz- 
ardous wastes should be imple- 
mented immediately. 

“No agency is responsible for 
hazardous waste monitoring 
and. as a result, violations 
become known only after an 
accident results in injury or 
immediate economic loss." the 
study said. 

'“hi 1991. 2,800 recorded pollu- 
tion accidents resulted in 
nearly 1.900 iujuries. But these 
numbers pale in comparison to 
the potential damage that 
could be done to the ambient 
environment and human 
health by hazardous waste pol- 
lution." 

The study identified sewer- 
age and waste water treatment 
as another hug£ burden on the 
state, resulting in contami- 
nated groundwater and pol- 
luted urban surface water 
across the country. 

"Nearly 40 per cent of urban 
China is unserved by sewers, 
with waste water going 


Township & vtUaga enterprises 
contributions to national poBudon 
toads (percent) 

■W Bn inns i- 



Water Air 


Soute: NEPA 


directly into lakes and riv- 
ers. . . only 4.5 per cent of 
municipal waste water flows 
receive treatment of any kind.” 

The study, in its conclusion, 
argued strongly that increas- 
ingly affluent urban consum- 
ers were “well positioned to 
absorb both the indirect and 
direct costs of an unproved 
environment". “While the 
imposition of user fees may be 
politically difficult, city leaders 
must recognise that 
the. . . current choice to rely 
on iudirect payments leads to 
excess demand, on the one 
hand, and an Inability to meet 
needs, on the other." 

•Urban EnrnrontnenUiL Pollu- 
tion: World Bank, August. 1994. 


Ms Tansu piUer, the prime 
minister of Turkey, said in 
Jerusalem at the weekend that 
a free trade agreement between 
Israel and Turkey, held up by 
opposition from the Israeli tex- 
tile industry, would be signed 
before the end of the year. 

She said It would comple- 
ment other bilateral agree- 
ments to prevent double taxa- 
tion, guarantee and protect 
investments and to open up 
the capital markets of the two 
countries. During her two-day 
visit to Israel Me Ciller dis- 
cussed a range of multi-million 
projects in telecommunica- 
tions, energy, water and mili- 
tary co-operation in construc- 
tion of the F-16 Phantom 
fighter jet 

In Gaza Ms Ciller promised 
to help finance Palestinian pro- 
jects including the construc- 
tion of housing, a port and 
international airport. Turkey 
has promised the Palestinian 
self-rule authority a $50m 
(£30- 4m) package of project 
credits and a 52m grant 

Ms Ciller's visit was marred, 
however, by political contro- 
versy after she visited Orient 
House, the Palestinian head- 
quarters in Israeli-occupied 
< Arab East Jerusalem. The 
Esraeii cabinet yesterday critic- 
ised the visit and the barring 
by Palestinian security men of 
Israeli bodyguards accompany- 
ing Ms Ciller. Palestinians 
claimed the visit had bolstered 
their claims to Jerusalem as 
the future capital of a Palestin- 
I ian state. 

| Ms Ciller's visit, the first to 
I Israel by a prime minister of 
predominantly Moslem Tur- 
key, is expected to strengthen 
growing economic ties between 
, the two states and boost moves 
towards regional integration. 

Israeli tourism to Turkey has 


more than doubled this year. 
In the first nine months about 
250,000 Israelis visited Turkey 
compared with 110,000 for the 
whole of 1993. Turkey, Israel 
and Egypt have joined together 
to promote tourism in the East- 
ern Mediterranean Tourist 
Association. 

The volume of trade has also 
increased from 893m in 1992 to 
$226m last year. Officials said 
ferael-Turkey trade had consid- 
erably expanded In the first 
nine months of 1994 although 
no figures were available. 

Ms CiUer signed agreements 
pledging Israel and Turkey to 
integration in a regional com- 
munications system based on 
fibre optics and to linking elec- 
tricity grids. Ms Ciller also dis- 
cussed a deal between the 
Turkish and Israeli defence 
industries worth several hun- 
dred million dollars for Israel 
to supply avionics for Turkey's 
F-16 production line. 

The two countries discussed 
a long-term project for Turkey 
to export its surplus water to 
the region which drains into 
the Mediterranean. 

Ms Ciller also said bar gov- 
ernment was firmly committed 
to the “new Middle East” and a 
future Middle East common 
market and pledged to partici- 
pate in and finance the Middle 
East development bank agreed 
In Casablanca last week. Mr 
Yitzhak Rabin, Israeli prime 
minister, said Turkey could 
serve as a bridge between 
Israel and the Arab and Mos- 
lem world. 

In Cairo yesterday, where Ms 
Ciller continued her tour, 
Egyptian prime Minister Atef 
Sedki said Egypt hoped to 
strengthen existing co-opera- 
tion with Turkey and extend 
trade worth about $350m annu- 
ally. He said oil and gas were 
the two main areas for 
increased co-operation. 


Oman 


Domestic savings 
tntto (GDP 

45 




Government balance 

aa Hot OOP 
Reform case ^ 


Reform case 


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Bass oaao cB Oman gowmmwn does not cftmgo pdttm 


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Oman warned: cut spending 
or face economic upheaval 


World Bank spells out harsh realities, writes Robin Allen 


T he financial policies 
being pursued by Oman, 
whose political and eco- 
nomic stability is vital for the 
west's oil supplies coming from 
the Gulf through the Strait of 
Hormuz, are unsustainable, the 
World Bank warns in a recent 
study. 

Many of Oman’s underlying 
structural economic weak- 
nesses are shared by its neigh- 
bours and partners in the Gulf 
Co-operation Council (GCC): 
Bahrain. Qatar, Saudi Arabia, 
Kuwait and the UAE. While 
the last three, which hold 40 
per cent of the world's known 
oil reserves, are not faced with 
the same immediate and criti- 
cal choices as Oman, thanks to 
their larger “cushion" of capi- 
tal derived from their far 
greater oil reserves, ail six 
share the same type of heredi- 
tary and autocratic monarchi- 
cal government systems. Insta- 
bility in one could quickly 
spread to one or more of the 
others. 

The bank is particularly 
severe on the scale of Oman's 
repeated budget deficits, cur- 
rent expenditure trends and 
the decline in investment, all 
of which feature - sometimes 
to a chronic extent - in the 
other five GCC countries. If 
these and other problems are 
not corrected, and tbe reforms 
proposed ignored, Oman is 
heading for a "a major eco- 
nomic and social upheaval" as 
the oil and gas era comes to an 
end and Omanis are “forced to 
give up accustomed standards 
of consumption". 

Researched by a team of five 
in January and February 1993. 
the 224-page report was com- 
pleted at the end of last May 
and subsequently made public 
“in accordance with the World 
Bank’s policy on disclosure”. 

The report amounts to a 
swingeing indictment of the 
Omani government's manage- 
ment of the economy, particu- 
larly over the last to years, 
when many key ministers have 
held the same jobs. The bank’s 
analysis also represents a com- 


prehensive rebuke to officials 
at all levels who have devel- 
oped the “plausible and posi- 
tive platitude" almost to a fine 
art form, even when con- 
fronted with unpleasant reali- 
ties, 

"Oman's oil and gas wealth, 
being depletable, is analogous 
to a large inheri- 
tance . . . Oman, like most 
neighbouring oil and gas pro- 
ducers, is currently spending 
an excessive proportion of the 
proceeds of extraction on cur- 
rent consumption. In other 
words it is consuming its capi- 
tal at a rapid rate," the bank 


• Lack of appropriate tax 
structure and rates and realis- 
tic charges for public services: 

• fll-conceived notions about 
the role and cost of expatriate 
labour, and the consequent 
market distortions caused by 
government efforts to force pri- 
vate sector companies to 
employ nationals at uneco- 
nomic rates; 

• Failure to alert Omanis to 
the reality of the country’s fis- 
cal position, to the inadequate 
rate of saving, and to their own 
unrealistic consumption and 
employment expectations; 

• Bureaucratic inertia and 


Even now the government has 
made only a partial adjustment 
to stagnation in its oil revenues 


says. 

The main problems Identi- 
fied by the bank include: 

• A persistent top-heavy gov- 
ernment role In the economy; 

• State budgets over-stretched 
by bloated recurrent expendi- 
tures, notably on defence and 
internal security (among the 
highest in the world with an 
average 33 per cent of budget 
expenditure for the last 14 
years and now 23 per cent of 
GDP), and civil service sala- 
ries: 

• Persistent and rising gov- 
ernment-encouraged public 
consumption trends and a lack 
of domestic public savings; 

• The lack of a consistent for- 
eign and domestic investment 
strategy for when oil reserves 
taper off; 

• An overvalued real 
exchange rate in relation to 
what would be consistent with 
higher (and more desirable) 
national savings rates; 

• Failure of efforts to diver- 
sify into manufacturing and 
other non-oil industries 
because of current public 
expenditure/savings policies; 

• Misuse of the state's reserve 

and contingency funds; 


lack of financial discipline by 
ministers over their own bud- 
get allocations; 

• The absence of healthy com- 
petition in the private sector 
caused by entrenched monopo- 
listic habits in the public and 
private sectors; 

• Out-of-date and cumber- 
some legal frameworks; 

• Lack of a self-sustaining pri- 
vate sector and an investment 
framework to attract foreign 
capital; 

• Lack of a role for private 
banks in medium- and 
long-term financing; 

• Too great an emphasis on 
higher education at the 
expense of primary and second- 
ary schooling; 

• Need for more entrepre- 
neurial, competitive and less 
“rent-seeking" (cash income 
for no effort and minim.-ii risk) 
attitudes among nationals. 

For each of the main prob- 
lem areas, the bank sets out 
two sets of scenarios: a “base 
case", assuming neither big 
changes in government poli- 
cies nor unforeseen external 
shocks; and a “reform case“, 
where the bank's detailed pro- 
posals to reverse the deficit 


trend are acted on. Some of the 
assumptions under the reform 
scenario could be faulted for 
being too optimistic, but even 
the most optimistic “base case" 
models give cause for gloom. 

Observers say the growing 
incidence of some of these 
structural economic weak- 
nesses. and the concomitant 
political risks which the gov- 
ernments of Oman and Saudi 
Arabia were courting by ignor-,. 
ing them, had a lot to do with’- 
protests which led to arrests of 
extremists last summer. 

Although oil prices have- 
recovered from the lorn of 1986 
and 1988, they have remained, 
apart from a brief period dur- 
ing the latest Gulf war, below 
$18 a barrel, the bank points 
out “Even now. the (Omani) 
government has made only a 
partial expenditure adjustment 
to the stagnation in its oil reve- 
nues. In consequence, its finan- 
cial position has deteriorated 
and continues to do so." 

This, the report says, “is 
apparent In an almost unbro- 
ken string of deficits since 1981 
(an annual average deficit of 
S871rn or 23.4 per cent annually 
over budget revenue during 
the 11-year period); declining 
contributions to the State Gen- 
eral Reserve Fund (SGRF); a 
substantial rise in external 
debt; increased recourse to bor- 
rowing from the domestic pri- 
vate sector a massive, recent 
accumulation of negative 
changes in the government's 
accounts; and the virtual dis- 
appearance of net government 
financial reserves. 

The deficits have been the 
result of an exceptionally high 
level of defence and national 
security expenditures, coupled 
with continued strong growtf, 
in civil recurrent expenditures. 
The use of the SGRF as an oil 
revenue stabilisation fund has 
pre-empted its potential as a 
vehicle for long-term public 
savings and investment 
World Bank Report iVo 
12199-OM. "Sultanate of Oman : 
Sustainable Growth and Eco- 
nomic Diversification ~ 


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UK 


Chancellor plans deep cuts in public spending 


By Kevin Brown, 

PoOttea! Correspondent 

Hie British cabinet will seek to head 
off right-wing anger about the Post 
Office debacle by endorsing deep cuts 
in public spending at a special meet- 
ing tomorrow. 

Mr Kenneth Clarke, the chancellor, 
is expected to put forward plans for a 
reduction of between £4bn and £5bn 
in the government’s control total for 
1995/96. 

A second cabinet meeting has been 
scheduled for Thursday in case agree- 
ment proves difficult. 

Senior ministers believe that the 


cuts will go some way towards molli- 
fying right-wing backbenchers 
angered by the cabinet’s decision to 
postpone Post Office privatisation 
because of opposition from a group of 
mainly left-wing rebels. 

Right-wing backbenchers have 
demanded cuts of up to £7bn to pave 
the way for tax cuts next year, which 
many believe are essential if the Con- 
servatives are to win the next general 
election. 

The case for deep cuts in nominal 
spending has also been strengthened 
by an unexpectedly rapid fall in 
underlying inflation, excluding mort- 
gage interest payments, since Mr 


Clarke's last budget in November 
1993. 

The budget forecast underlying 
inflation of 3.25 per cent in the cur- 
rent quarter. Instead, it fell to a 27 
yoar low of 2 per cent in September, 
and lias been below 3 per cent for 12 
months. As a result, Mr Clarke will be 
able to teli the cabinet that deep cuts 
in nominal spending are essential to 
maintain the confidence of the finan- 
cial markets in the government's con- 
tinuing commitment to sound public 
finances. 

Goldman Sachs, the US-owned mer- 
chant bank, has calculated that the 
chancellor must cut the 1995/96 con- 


trol total, which excludes some reces- 
sion-related social security spending, 
by £5bn merely to prevent spending 
rising in real terms. 

General government expenditure, 
which includes unemployment and 
other social security benefits, will 
also fall sharply because of the- 
decline in unemployment caused by 
the stronger than expected economic 
recovery. 

Mr Jonathan Aitken, the Treasury 
chief secretary, is believed to have 
encountered fewer difficulties than 
usual in the annual round of public 
spending negotiations with ministers. 

However. Mr Peter Lillcy, social 


security secretary, has resisted pres- 
sure for big cuts in the £&8bn bousing 
benefit budget, which he believes 
would have to be restructured to yield 
major savings. 

Some senior Tories are pressing the 
chancellor to cut taxes on the poor, 
especially pensioners, to offset the 
Impact of £5bn in fresh taxes on fUel 
and services announced last year to 
take effect in April 

Others are pressing the chancellor 
to announce tax cuts in a special 
mini-budget next spring, rather than 
waiting until November. Mr Clarke 
has said he will not cut taxes until it 
is prudent to do so. 


UK NEWS DIGEST 

Arms-to-Iraq 
inquiry probes 
Saudi contracts 

Sir Ri char d Scott is investigating defence contracts linked to 
the controversial AI-Yamamah defence package with Saudi 
Arabia as part of his arms-to-lraq inquiry. 

Among the contacts with Saudi Arabia being wnmingd is 
one involving a British defence company. Whitehall docu- 
ments made available to the inquiry show that a contract with 
the company for the supply of sheils may have been rerouted 
to Iraq in breach of official government guidelines. 

However the judge’s efforts to establish whether Saudi 
Arabia was being used as a diversionary route is believed to 
have been hampered by the lack of conclusive evidence among 
thousands of Whitehall documents which have been made 
available to him. 

Earlier this year it emerged that Saudi Arabia was under no 
obligation to give details of the end-users of defence equip- 
ment supplied by the UK under the Al-Yamamah deal 
Mr Jonathan Aitken, then defence procurement minis ter, 
said in reply to a written parliamentary question that defence 
exports under the deal had “Grown status”, in common with 
all government defence exports and were “therefore not sub- 
ject to export licensing requirements.” 

The first and only part so far of the judge’s final report to be 
completed is one covering the UK’s Export Control System 
which the judge considers questionable both in terms of gov- 
ernment efficiency and democratic acdounta bility. 

Small travel agents combine 

More than 600 independent travel agents are today adopting a 
common brand, making them the UK's second largest group- 
ing of travel retailers after Lunn Poly. 

The retailers, all members of the National Association of 
Independent Travel Agents, will display Ore brand Advantage 
Travel Centres alongside their mrfsHng names. A tele phone 
line has been set up to direct consumers to their nearest 
Advantage Travel Centre. 

The move follows concern among smaller companies over 
the growth of large travel retailers and their links with lead- 
ing tour operators. 

The two largest travel retailers, Lunn Poly and Going 
Places, are respectively owned by the two leading tour opera- 
tors, Thomson and Airtouis. Lunn Poly has 742 shops and 
Going places has 562. Thomas Cook, the third largest travel 
chain with 3® shops, has financial links with First Choice, the 
third biggest tour operator. 

The Office of Fair Trading said last August that the links 
between large tour operators and travel agents did not restrict 
consumer choice or prevent smaller companies from selling 
holidays. Small travel agents argue, however, that it is diffi- 
cult for them to match the advertising budgets of large compa- 
nies. 

Plan for airport links 

BAA, operator of Heathrow airport, hopes to encourage the 
creation of additional railway links with Britain’s busiest 
airport . - 

It will announce tomorrow that it is to spend £500.000 on a 
feasibility study to look at ways at linking the airport with the 
UK regions. 

BAA has no plans to finance the construction, of further rail 
Hnks or to own and operate them itself but it wants to 
encourage Railtracfc and the train operating companies to do 
so. 

BAA has already made a large contribution to the £300m 
cost of building the Heathrow express link with London’s 
Paddington station. . 

South West Trains, the train operating company which 
provides services f rom London Waterloo to Southampton and 
Portsmouth, has said it is keen to open a direct link from 
Waterloo to Heathrow. This would require only a short link 
between existing lines and the airport 

Trade mission targets India 

The biggest trade mission ever held by British b u s in e ss lead- 
ers will visit ftvHfl next weekend in a bid to boost links 
between the two countries. 

More than .150 businessmen and women will fly to India next 
Sunday for a five-day four led by Mr Richard Needham, the 
Trade minister. 

“The UK has close ties with India so it is Important that we 
take advantage of this huge emerging market," said a Depart- 
ment of Trade and Industry spokesman. 


Industry 
‘on verge 
of healthy 
growth’ 

By Philip Coggan, 

Rod Oram and Alan Pike, 


UK manufacturing industry, 
battered by contraction and 
plant closures during the 
1980s, may be on the verge of 
its strongest period of growth 
for 30 years. 

Forecasts by the London 
Business School predict that 
manufacturing output will rise 
by 4.5 per cent this year and 
5.6 per cent in 1995. 

Manufacturing production 
over the five-year period from 
1994 to 1998 will, according to 
the school, show an average 
annual increase of 4.3 per 
cent If achieved, this would 
make it the best five-year 
period of industrial growth 
since 1964-68. 

London Business School says 
changes on the supply side of 
the economy meant that prob- 
lems once dubbed the “British 
disease" - low productivity 
growth, poor industrial rela- 
tions and a declining share of 
world trade - were “a thing of 
the past." Improvements in 
these areas, combined with 
shifts towards investment and 
export-led growth and a lower 
exchange rate, were reasons 
for expecting that manufactur- 
ing industry would perform 
well in the years ahead. 

The view that the overall 
recovery in the UK economy 
remains strong is supported by 
Mr ATan Davies, chief econo- 
mist of Bard ays Bank, in the 
bank’s quarterly economic 
review today. 

London Business School pre- 
dicts that a slowdown in 
domestic consumption growth, 
in the face of higher taxes and 
interest rates, will slow over- 
all UK economic growth to 2.5 
per cent next year, from 3.5 
per cent in 1994. Gross domes- 
tic product will grow at rates 
between 2.4 per cent and 2.8 
per cent during the 1996-98 
period. 

• Weaker levels of new car 
sales slowed down UK con- 
sumer credit growth in Sep- 
tember, a report by the 
Finance & Leasing Association 
shows today. 

Finance for new cars fell by 
2 pm emit in September on a 
year on year basis to £333 m. 
and by 56 per cent on a month 
on mouth basis. The same fac- 
tor is likely to affect next 
month’s consumer credit fig- 
ures - tiie Society or Motor 
Manufacturers and Traders 
said mi Friday that new car 
registrations fell by 3 per cent 
last month compared with 
October, 1993, with a reduc- 
tion in sales to private buyers 
the main factor behind the 
drop. 

Total consumer credit in 
September nonetheless 
increased by 24 per cent year 
on year to £1.55bn, although 
rises of more than 30 per cent 
were experienced is the first 
half of this year. 


Computer tax returns 
signal end of bad form 




4 •" ’ 


3 1‘i” 

v V*'- 

7? 


ByJtmKefly, 

Accountancy Correspondent . 

For almost as long as tax has 
been paid it has been accompa- 
nied by the dreaded tax form. 
Today, that link could be bro- 
ken. forever with the introduc- 
tion by the Inland Revenue of 
Its Electronic Lodgement Sys^ 
tern (ELS)/-. 

A sample group of up to 1000 
UK companies will have their 
. . , corporation tax returns- filed 
: ;;; directly to the Inland Revenue 
'■ r by computer Hnk.The scheme 
; ? aims to replace costly, letters 
- and telephone, calls and to 
; ' ' »bring closer the goal of direct 

-f.V - ' ,J filing from accountants, cam- 
panics and home-based per- 
' 1’.,.-; sonal computers. ' . . \ • - ' 

■ ; ' --.I'' : s i * if the pilot exercise succeeds, 

r ^.-.r > a national system of electronic 
■; filing may he available for aH 

the lm corooratidn tax returns 
•\ made in a. year. ' .' . 

: ln 1996 the Revenue plans Jo 
try the system on its new self- 
assessment personal tax forms. 


• Up to Bm tax payers may be 
using ELS through accoun- 
tants by 2001- 

ELS will link the computer 
systems of taxpayers’ agents, 
normally accountants, with 
those of tax collectors at the 
revenue. 

The savings to the long-term 
should be huge. Ian Barlow, 
tax partner at KPMG Peat Mar- 
wick, estimates that it costs 
EL5 a year to just store an aver- 
age tax file in a filing cabinet 
for a year. The likely savings 
potential at the revenue, which 
; dealt last year with 30hr 
returns from individuals and 

• companies, could be huge. 

Until later this month, when 
changes are expected to be 
announced in the Budget, a 
duplicate paper tax process 
must run in tandem with ELS. 
Later that may go - but the 
- need for a signed authorisation 
from the taxpayer may persist 
. Joining, the system is also 
. proving expensive. While the 
revenue is paying for most of 


Jthe transmission costs the Big 
Six accountancy firms are 
aware that while the capital 
costs of starting up may be 
slim, the investment in time is 
considerable. 

In New Zealand, where elec- 
tronic lodgement has been 
launched, 80 per cent of tax- 
payers get refunds within 14 
days when using an ELS sys- 
tem. Paper returns earn 
refunds in two to three 
months. The UK system will 
not contain the same rewards. 

The revenue envisages that 
some tax payers may one day 
file their returns from home 
but others will transfer the 
information to a disk and take 
it to an agent - or even to a 
central “tax shop" or service 
point in a Post Office. 

But for the revenue - and 
the taxpayer - the prize is 
likely to be increased accuracy 
in tax returns and a radical 
reduction in the time spent on 
putting right errors in hand- 
written forms. 


Business leaders back 
stronger single market 


By Paul Cheeseright 

Senior British business leaders 
yesterday came out strongly in 
favour of a European Union 
built on the disciplines of the 
single market. 

They dismissed out of hand 
the suggestion floated by Mr 
Norman Lamont, the former 
Chancellor of the Exchequer, 
at the Conservative party con- 
ference, that the UK could 
withdraw from the EU. 

Results of a survey of more 
than 200 chief executives and 
company chairmen, published 
at the annual conference of the 
Confederation of British Indus- 
try in Birmingham, constituted 
a sharp rebuff 1 to the Euro- 
sceptic elements of the Conser- 
vative party. 

The survey showed that 58 
per cent of the business leaders 
supported an EU based on the 
single market, with freedom 
for members states to adopt 
other common policies accord- 
ing to their circumstances. 

A fortber 29 per cent went 


British companies are not 
investing enough and many 
need to “raise their stan- 
dards”, according to a report 
by the CBI’s National Manu- 
facturing Council. 

Productivity has risen 3.6 
per cent over the past year and 
manufacturing is up by 3 per 
cent - but the improvements 
are not good enough, the CBI 
warned, saying it was “cru- 


cial” that firms continued the 
drive to match foreign compet- 
itors. 

Problems included lower 
workplace skills than overseas 
and “sluggish" investment. 
“We need more investment in 
our plants and in oar people. 
We have to teach people how 
fast the world is moving on," 
said Mr Tony Hales, chairman 
of the conncil 


further than that, wanting 
member states to set common 
policy objectives but to retain 
their flexibility about the tim- 
ing of adoption. 

On monetary union, anath- 
ema to Conservative opponents 
of the EU. Mr Davies said the 
poll showed that business “is 
comfortable about economic 
and monetary union as long as 
it is properly planned.” 

For 56 per cent of the busi- 
ness leaders a single currency 
is a long term help, but not a 
necessity, while for 28 per cent 
a single currency is a neces- 


sary condition for the success- 
ful working of the Single Mar- 
ket in the long term. While the 
CBI has been seeking to stiffen 
the European sinews of the UK 
government, the business lead- 
ers made clear that they are 
not obtaining the full benefits 
of the single market. 

They want more deregu- 
lation and less interference in 
competition from state subsi- 
dies. They want the single mar- 
ket extended to energy and 
telecommunications sectors 
and urge reform of the com- 
mon agricultural policy. 



A vintage Tnrner-Meisse, driven by John Moeller, passes Big 
Ben daring yesterday's annual London to Brighton car rally. 
Over 400 cars took put in the run. which is held to celebrate the 
abolition of the 2 miles per hour speed limit in 1896 r«u» 


We have 30 seconde to demonstrate 
the benefits of E P&F Man’s 
Mint Plus Bond. 



It’s targeted at institutional investors and they’re always 
pressed for time. 

‘Can Lve do it?” 

Yes, if vve stick lo essentials like “Tills is a uniquely struc- 
tured bond offering a combination of medium-term cap- 
ital appreciation and annual income”. And the important 
bit about “the income stream is not fixed but variable, 
with an intended minimum of5%”. 

“ That’s fifteen seconds... " 

And how all investors have the potential for attractive 
medium-terra capital growth through a truly diversified 
asset mix supported by a Stand-by Letter of Credit 
“assured principal face value on maturity in 2002”. 

“7 \ventyjive... ” 

Then we finish by mentioning that Mint Plus Bonds will 
be cleared through Eurodcar and Cedel and a listing is 
intended on the Dublin Stock Exchange. 

" Thirty one . thirty two- it's too long. They'll need to read faster. ” 

And we should also tell them about all the other in- 
vestment products ED&P Man has including those 
specifically aimed at the institutional investor. 

“No time ... but maybe they'll take another 30 seconds 
and fill in the coupon below?” 


KJ| ill file oMipuii w-cmrlact wmr ncsin'sl office for lilt* Ml story on Hl> &F Man's Mini Plus Guaranteed Honil and other investment products. 

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K I) & F MAN INTERNATIONAL LTD 

l M* Milt HIII lilt *114* UlMiHilir KSr\HI IMII.D l\ I 781 


it' 


X.V- 







FINANCIAL TIMES MONDAY NOVEMBER 7 1W 


MANAGEMENT 


U 


The telecoms company’s transformation has taken its toll on employee morale, says David Goodhart 

Bad connections at BT 


B ritish Telecom's staff mag- 
azine - BT Today - Is 
known inside the organisa- 
tion as BT Toady. It there- 
fore came as a surprise to many 
employees when the latest issue 
carried a devastating account of 
how attempts to improve customer 
service in one corner of the organi- 
sation were failing badly. 

The letter, from a senior techni- 
cian in Worldwide Networks, was 
unsigned, but its basic message was 
simple. Despite the organisational 
upheavals of the past few years cus- 
tomers were still Seeing to the com- 
petition because of poor quality. 

They were doing this because 
basically sound ideas, such as mul- 
ti-skilling and performance targets, 
were being implemented In a short- 
termlst and counter-productive way 
by managers either too remote or 
too frightened to tell the truth. 

Sir Iain Vallance, the BT chair- 
man, to whom the letter was sent, 
praised it as “intelligent, articulate, 
to the point and just what we 
wanted from Total Quality Manage- 
ment". He regretted, however, that 
the engineer had remained anony- 
mous, while the staff magazine 
asked “how can we overcome the 
culture of fear?”. 

The letter - which was only pub- 
lished after considerable internal 
debate - Is a sign that some of BTs 
senior managers are becoming con- 
cerned about employee morale 
inside Europe's most profitable 
company. 

There is much in the 10 years 
since privatisation for those manag- 
ers to feel satisfied about, particu- 
larly bearing in mind the intro- 
verted, civil service mentality 
which still prevailed at the start of 
the period. The customer now 
receives an incomparably better ser- 
vice at a lower price. The returns to 
shareholders have been impressive. 

Some of those gains have been 
bought at the expense of employees. 
The company has shed one- third of 
its UK employees - from 232,000 to 
148,000 - since 1990. Those that 
remain work harder in a less secure 
organisation and their unions no 
longer have quasi-veto power over 
management decisions. 

But even for employees things 
could be a lot worse. Pay and condi- 
tions, especially for middle manag- 
ers, are still well above average for 
equivalent skills and experience. 
And thanks to the generous redun- 
dancy terms accompanying the job 
cuts not a day has been lost in 
Industrial action, a remarkable 
record for a highly-unionised com- 
pany. 

The way that bluechip BT has 
handled its employee relations in 
recent years is often regarded as a 
modal by its peers. Mike Bett, the 
former head of personnel and dep- 
uty chairman of the company, has 
just been elected president of the 
Institute of Personnel and Develop- 
ment, Britain’s main personnel 
body. 

But as BT braces itself for the 
next 10 years of life in the private 
sector - a period which will be 
Incomparably tougher than the first 
10 thanks to competition and the 



new regulatory framework - cracks 
are beginning to appear in the 
shiny self-image of employee rela- 
tions successfully reformed. 

At the normally placid employee 
annual meeting earlier this year 
Michael Hepher, BTs managing 
director, was almost assaulted as 
tempers boiled over. Hepher says 
that much of the anger was due to 
ths uncertainty surrounding a dis- 
posal of part of the business which 
was resolved soon alter. 

That is only part of the story. 
Almost all speakers complained 
about job insecurity but they also 
complained about lack of trust, 
excessive use erf outside contractors, 
“flavour of the month” organisa- 
tional reforms, the disappearance of 
pride in working for BT. A young 
graduate entrant said that most of 
her peers were already looking for 
new jobs and the company was find- 
ing it hard to fiQ graduate vacan- 
cies in some parts of the country. 

Internal BT surveys suggest that 
only around one fifth of employees 
believe that senior managers can be 
relied upon to do what they say 
they will do. A similarly low propor- 
tion believe that the changes going 
on inside the company are good for 
them and even fewer believe that 
they have job security. 


A survey by the.National Commu- 
nications Union, the main BT 
union, found employees in customer 
service centres strongly commited 
to delivering a service to the cus- 
tomer. but a large majority no lon- 
ger felt any commitment to working 
for BT. 

Such attitudes are also common 
among the 70,000 engineers, who 
were hit by the first big wave of 
redundancies. A recent dispute over 
more customer-friendly working 
hours for engineers seemed to illus- 
trate not opposition to the changes 
but mistrust of how local managers 
would implement tiwm. 

Many of these attitude problems 
are unavoidable when a once pater- 
nalistic company such as BT has to 
cut both its numbers and its cost 
base so rapidly. But BT managers 
are now beginning to wonder how 
to prevent poor morale affecting 
business in an organisation where a 
large proportion of employees have 
daily contact with customers. 

The job reduction programme is 
at the root of many morale prob- 
lems. BT is stm committed to vol- 
untary redundancy, and has paid a 
high price for that commitment 
Redundancy pay - which averages 
about £35,000 - has cost £2bn over 
the past two years, but there are 


other costs associated with the com- 
mitment including restraining the 
□early 3,500 people currently being 
redeployed and even paying a few 
dozen people to sit at home on full 
pay. “We can afford to be generous 
as long as we remain successful." 
says Hepher. 

Nonetheless many people - espe- 
cially, at present those in middle 
management - apparently feel that 
voluntary redundancy exists only in 
name, and that the insecurity will 
never end. Once the current target 
of a 100, 000-employee company is 
reached, people fear that the next 
target will be 50.000, and with the 
introduction of intelligent networks 
they may be right. 

Hepher can offer little comfort 
“Our biggest problem is those who 
have not volunteered and who [ear 
that one day we will have to move 
to compulsory redundancies. . .that 
fear is entirely logical," he says. 

Some believe the commitment to 
voluntary redundancy has sent a 
confusing signal to employees. On 
the one hand, they point out, BT 
seems to be saying it is still the 
paternalistic employer which can 
guarantee a job, on the other hand 
people such as Hepher spend much 
of their time saying that era has 
gone forever. 


Hepher says that voluntarism is 
not set in stone but is still compati- 
ble with what the company needs to 
achieve. Many people believe that 
Hepher, who came from outside BT 
three years ago, would like to scrap 
it but finds Sir lain standing in his 
way. 

Outside consultants suggest that 
voluntarism bas made it more diffi- 
cult to weed out poor performers. 
“BT has lost some of its best people 
because of the way the system 
works, and it is left with an unusu- 
ally wide range of people from 
extremely good to surprisingly 
dim.” said one. 

Outsiders also complain about 
how much management time the 
redundancy system consumes and 
how politicised it is. A few people 
have been targeted for redundancy 
on the basis of their appearance or 
how they write reports. One mar- 
keting manager achieved sales 50 
per cent higher than target last 
year and received a large pay 
bonus, but then found heiself on a 
list of people to go. 

But the cause of dissatisfaction is 
not only job cuts. According to 
Jeannie Drake, deputy general-sec- 
retary of the NCU, it is also the 
insensitive way the company is 
being restructured for those left 


Sleazy relationships in the office 


D oes the appointment, 
from outside and at the 
same time, of a husband 
and wife to an organisa- 
tion constitute sleaze at work, or 
simply a fairly negotiated package 
deal? In the university world it fa 
very widespread, but because 
females keep their maiden name it 
is difficult to detect. Some organisa- 
tions frown upon the process, 
believing that nearly always one of 
the pair is a freeloader often 
appointed to a position or role less 
for ability, effort or motivation, 
more because of a relationship by 
blood or marriage. A sort of “job for 
the relatives" idea we used to dis- 
miss as unacceptable nepotism. 

Others have come up with a 
rather grandiose theory based on 
the biological idea of assorting mat- 
ing. This argues that in general tall 
people marry tall people; the bright 
seek out the bright; the sociable 
each other - so that couples are 
frequently similar one-to-another. 

A wonderful study done years ago 
showed people with the name of 


Schneider (or Taylor), that is people 
who took their name from their job 
and were required to be nimble of 
finger but not large of stature, were 
in fact shorter than those called 
Schmidt (Smith) who being black- 
smiths needed to be big and strong. 
Hence, appointing two spouses of 
near equal merit is hardly corrupt 
but a double bonus for the organisa- 
tion. 

If this theory were true, though, 
wouldn’t one find lonely-hearts col- 
umns involved in mate selection 
mentioning such things as con- 
sciousness, computer-literacy and 
managerial competence? Ever seen; 
"Male with strategic perspective, 
decisional -flair and org anisational 
ability seeks prioritising female to 
implement proactive visioning”? 


ADRIAN FURNHAM 



people often want to be witty, phys- 
ically strong people, caring. 

A favourite compliment reveals 
what one values and also what one 
is not quite certain about To learn 
that from one question can't be bad. 


Most interviewers have favourite 
questions which they believe reveal 
the most about their interviewees. 
They acquire these from a range of 
different sources. Same may have 


been asked a question themselves 
in the past and. having then strug- 
gled with the answer, now think 
others might do likewise. Some peo- 
ple may have heard other Interview- 
ers pose a question, been suitably 
impressed and so plagiarised it. 
Others have purchased those "self 
help” type paperbacks, titled items 
such as One Hundred Tough Inter- 
view Questions- 

A high-yield question is one that, 
quite literally, provides maximal 
amounts of salient information. 
There is one question which 1 find 
most effective and 1 have a pet the- 
ory about its high yield. The ques- 
tion is pretty simple. "What is your 


favourite compliment?” 

I believe this question taps into 
two things simultaneously: values 
and insecurities. Almost by defini- 
tion a good compliment is one 
which appeals to one's values and 
priorities, and that makes it inter- 
esting in its own right. Second, 
compliments often pick up insecuri- 
ties. Beautiful women aren't inter- 
ested in compliments about their 
appearance, rich men are bored by 
comments on their wealth. They 
both seek other accolades. Many 
beautiful women attempt to write 
and would like to be thought of as 
intelligent, sensitive and articulate 
(as well as beautiful). Intelligent 


One of our technicians died very 
suddenly just under 10 years ago. 
He was a computer enthusiast and a 
hungry consumer of catalogues, 
brochures and magazines dedicated 
to the field. Of course his post kept 
coming from eager manufacturers 
and publishing houses. And it still 
does. 

In the past month he has received 
well over a dozen letters. Were 
these being simply thrown away or 
were they being happily consumed 
by someone else? Was it In fact con- 
venient not to stop them or Is it 
simply a nuisance that nobody has 
taken the responsibility for? I 
decided to investigate. 

1 found that because identical cat- 
alogues and magazines went to 


other technicians, the late, departed 
colleague’s mail was 6imply 
dumped. Same publishers were told 
there was no point continuing, but 
they did. 

How long, I wonder, will this per- 
sist and what does it tell us about 
the business? What determines 
when a name is taken off the file? I 
presume, perhaps naively, that 
someone, somewhere, updates, 
checks, verifies and even monitors 
a m a i l i n g list But perhaps mailing 
lists are sold an without ever being 
"cleaned-up", as the computer jar- 
gon might have it It may be that 
because the hit rate for this sort erf 
selling is so poor (maybe 2 per cent 
of readers respond) it does not 
really pay to spend time and effort 
checking out the corporeal status of 
those on the list It may not be a 
way to eternity, but getting on 
these junkmail lists may certainly 
keep one’s memory alive. 

The author is head of the business 
psychology unit at University Col- 
lege London. 




behind. 

The lTnirais accept that job cuts 
through technology and competi- 
tion are unavoidable and believe 
that they have played an important 
role in delivering orderly shrinkage, 
despite their reduced influence at 
local Level. 

A degree of corporatism still lives 
on at wafinnal level — the recent 
dispute over flexible working was, 
for example, finally resolved m a 
private chat between Heph er an d 
Tony Young, leader of the NCU 
atiri Hepher, who had never before 
worked with unions, is full of praise 
for their trustworthiness and ratio- 
nality. 

But the unions complain angrily 
about some of the new managers 
who they claim cannot consult at 
all or whose idea of communication 
is to inform engineers repeatedly 
tfrot they are very expensive com- 
pared with contractors (which fa 
true). 

Drake points to the way seem- 
ingly conflicting targets create 
despondency. She cites the cus- 
tomer service centre staff - the 
company's front-line staff - who 
were subject to a 25 per cent cut in 
numbers, while at the same time 
being required to answer all calls in 
15 speni yfo and provide better-qual- 
ity information. 

The unions also fear a creeping 
decentralisation as local managers 
are given more autonomy in the 
implementation of national rules. 
Hepher, however, stresses th e limits 
of decentralisation: "I have regretta- 
bly co nclud ed that you need central 
direction on a lot of key things in 
an organisation fike this,” he says. 

Some of these tensions are as 
unavoidable as those arising from 
job cute, and whatever its shortcom- 
ings BT bas been improving produc- 
tivity at about 10 per cent per year 
in recent years. It fa regarded as a 
model by most large European tele- 
phone manpaniff s and fa rinsing the 
gap with the Americans. 

"What strikes me is the way the 
company has struggled to preserve 
the best of the old public service 
ethos while malting itself fit for a 
brutal world market, ” says one con- 
sultant who has worked with BT 
since just after privatisation. 

There are even signs that the cor- 
ner may have been turned on 
morale, at least for the 70,000 engi- 
neers who are no longer the main 
focus for redundancy. A popular 
p ypprimpnf in Nottingham - even- 
tually to be spread to the whole 
country - will allow engineers to 
earn commission for passing on 
new business from a customer. 

Although 25,000 wiiddio managers 
are now in the Bring line on redun- 
dancies, Hepher says he fa consider- 
ing a gentler way of approaching 
redundancy by allowing people “to 
signup today to leave in 18 months’ 
or two years’ time". 

Nevertheless, to many people - 
especially those aged between 35 
and 50 who have been in the organi- 
sation 10 or 15 years - the modem 
BT remains in bewildering perma- 
nent revolution. They keep taking 
the medicine but they never seem 
to get better. 






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While Ford will never be. ■ a ■ -■ 
celebrated for ids people . Y> 
management sldBs,behadaa y.\ 
International perspe^vewfrich • ; 

-was ahead of his time. Be 3*8$ ; : 
also acutely aware fluff time .V;'~ 
was an important competitive ; > 
weapon. “Time wastediffers ■> '[«< 
from material waste In that. .!• ■ k 
there can be no salvage.” . i- 
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remains a good role model;”;' 
says Ray Wild, principal of *"*■# 
Henley Management College,;.' - ft* 

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innovator, he borrowed idwsr . 
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synthesised them- He developed ” 

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level of wealth for workers and - • 
products for consumers whieh - 
wereu’t previously available/* -■ ." 

Stuart Crainer . 


•*k 

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FINANCIAL TIMES MONDAY NOVEMBER 7 1994 ★ 



Special offers 

Big savings on 
classy 
European 
hotel rooms 
are possible 
this winter for 
customers who investigate the 
special offers, writes Michael 
Thtxpp son-Atoe/. For example. 
Mfiridien is offering winter 
promotional rates at its f i 
European hotels from 
December 1 to March 31: up 
to 50 per cent off published 
tariffs. Promotional rates for a 
nl^tfs stay in a single or twin/ 
double room, including taxes 

and services, range from S266 

in the private Club President 
section of the M6ridien Bote 
in Paris to SI 02 in Porto and 


$73 in UmassoL In London: 
$260. 

Wise traveters know that 
hotels often offer a Smiled 
number of rooms at 
promotional rates (as In this 
easel so advance bookings 
are essential. But try to 
haggle, . The London MAndlen 
in Pfecacffiy is offering 15 
rooms at the special rate, with 
free access to Champney's 
Health Ctyb but breakfast 
excluded. You could ask, in a 
penetrating voice, why the 
deal at Club President in Pans 
includes a free continental 
breakfast for virtually the same 
price as London’s 
breakfasttess promo. See 
where it gets you. 



Do 

not 

<fiswb 


Give and take 
Even the bedside CUdeon 
Bible is not safe from the 
dutches of business 
executives sta yi ng In hotels, 
says a survey by Britain's 
Reed Travel Group. 
Coat-hangers, cutlery and 
TV remote-controls are 
other Items they take, while 
ni ght c l ot hes, underwear 
and ties top the Bstof 
things they leave. Younger 
business travellers are the 
most Ught-flngered. British 
executives visit the US on 
business more than their 
European counterparts. One 
in Are bu sine ss travellers 
takas exercise while away. 
The survey covered 1,270 
business haveners. 


London City 

London City 
Airport has 
launched new 
routes to 
Geneva and 
Hamburg, and 
says it is celebrating another 
“tremendous increase" in 
passenger numbers. Crossair, 
the Swiss airline, which has 
sendees to Zurich and Lugano, 
has added a twice-daily flight to 
Geneva And Lufthansa has 
added five flights a week to 
Hamburg, as well as improving 
its flight schedule to Frankfurt 
London City Airport says 49,680 
passengers used its flights last 
month, a 76 per cent gain on 
October last year. It now serves 
11 destinations, but plans to 
add to them at year’s turn. 


KLM deal 

KLM Royal Dutch AJrfinee 
says it Is off e r in g 
reductions of up to 35 per 
cent on business-ciass 
fares to destinations 
outside Europe from now to 
April 1. A spokeswoman 
sad most reductions would 
be about 20 per cent, 
though 36 per cent was 
possible in some casco. 
KLM Is aiming its 
reductions at 
business-class travellers 
whose companies have no 
formal ticket-purchasing 
contract with It - an area, 
said the s pok es woman, in 
which KLM faces heavy 

competition from other 
European carriers. 


HyatMntemet 

Hyatt Hotels is to offer guests 
the chance to book rooms in its 
North American properties 
through the Internet, the 
worldwide computer network, 
writes Michael SkapFiker. 
Personal computer users can 
already request details of Hyatt 
rooms, restaurants and leisure 
facilities over the Internet and 
view colour photographs of the 
hotels. By the end of next 
month they will be able to book 
rooms at 103 Hyatt hotels and 
resorts in the US and Canada. 
Hyatt plans to extend the faculty 
to travel agents. Thisco, the 
company which is setting up 
Internet booking for Hyatt, said 
it plans to add other hotel 
companies to the network 
eventually. 



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081-750 ?.030 for more informs con 



The hard trail to 
post- sanctions Iraq 

Mark Nicholson with tips for the business optimist 



Baghdad: food and drinks would be gratefully accepted by Iraqi business partners 


V isiting Baghdad is still 
not easy. It takes an 
arduous 12- to 14-hour 
drive from Amman to 
get there. Hotels are 
stripped of the least luxury. Doing 
business in anything but food and 
medicines requires approval from 
the stem UN sanctions committee. 
How much money Iraq's govern- 
ment has to pay for things is a 
matter of doubt. And the post-sanc- 
tions atmosphere in the Middle 
East's most oppressively policed 
state is not festive. 

None of this, however, has 
deterred coachloads of French, Ital- 
ian, Russian, Turkish, Canadian 
and even a few hardy British busi- 
nessmen from making the trip - all 
preparing for the day when the 
shackle of sanctions is unlocked 
from what, before the Gulf war. was 
among the region's richest markets. 

So, some tips for dogged opti- 
mists: 

All non-Arab visitors require a 
visa to get into Baghdad, which is 
more than a formality given Iraq's 
lack of diplomatic relations with 
most western countries, whose gov- 
ernments mostly discourage all vis- 
its to Iraq. 

Iraq's embassy in Amman is well 
used to processing journalists* 
visas, and might be worth calling 
directly for Information on business 
passes. Visa approval takes time. 
Most countries also have an Iraqi 
interest section in a “neutral" local 


embassy. In Baghdad itself. US and 
British interests are represented by 
the Polish and Russian embassies, 
for instance. 

Once a visa is approved, travel- 
lers will need to start their journey 
in Jordan. There is then no alterna- 
tive but to travel the Amman-Bagh- 
dad desert highway, which takes a 
minimum of 12 hours if you are 
lucky enough to take only an hour 
crossing the border. But be warned: 
it can take several hours to cross. 

Taxis can easily be hired in 
Amman - for instance through the 
Intercontinental Hotel - and prices 
vary with demand and bargaining 
abilities. But count on paying 
around $250 par one-way trip in one 
of the numerous big GMC Suburban 
taxis which ply the route. Saloon 
cars are cheaper, but 12 cramped 
hours is a long, long drive. In Iraq 
itself, travel by day if possible, for 
diplomats warn against driving any- 
where in Iraq by night and travel- 
lers have been robbed and killed on 
the Amman-Baghdad road recently. 

Crossing the border is relatively 
straight-forward, but those taking 
personal computers should have 
them marked on the entry visa. An 
“Aids test" (ie. a means of relieving 
foreigners of $50) at the border is 
obligatory, so equip yourself with 
sterilised needles. If you are lucky, 
and you or your driver are savvy 
enough, the “Aids test" can be cir- 
cumvented by a small “gift” at the 
border. A pack of Marlboros might 


suffice, and are a good thing to have 
about you at all times. 

In Baghdad, all main hotels are 
operating, and the al-Rasheed (as 
seen on CNN), the Meridien and 
Sheraton all offer rooms at $100 a 
night plus a small Iraq dinar ebarge 
for obligatory breakfast - usually 
an anaemic omelette. Food is in 
critically short supply in Iraq, and 
hotels and restaurants offer meagre 
fare, so it is worth stocking up on 
food and drinks before leaving. 
Such goods would be gratefully 
accepted by Iraqi business partners. 

All substantial bills can be met in 
US dollars, but it is worth changing 
some into Iraqi dinars. And forget 
credit cards. Swap $100 at first, 
which will produce enough low-de- 
nomination dinars to stuff a brief- 
case. By the time you leave you will 
be able to count notes with the dex- 
terity of a bank-teller, for in hyper- 
inflationary Baghdad even paying a 
restaurant bill will remind you of 
playing Monopoly. 

Not that Baghdad’s once- buzzing 
restaurants are what they were. 
The shortage of food and a recent 
ban on public drinking has plunged 
the city's best eateries into sad. des- 
erted gloom. 

The al-Diwan “Chinese" restau- 
rant, with Tunisian cook, at the al- 
Hamra hotel still manages a cheap, 
passable but tiny-portioned meal. 
The al-Mudeef restaurant on the 
Tigris comiche is also worth trying, 
and highly picturesque, but when I 


drew the waiters' attention to a big 
rat contentedly weaving through 
the feet of customers on its way to 
the kitchen, they barely shrugged. 

Beware, too. the once cheap and 
cheerful Tigris-side fish restaurants. 
It is still possible to choose a tasty- 
looking live flsh to grill, but UN 
experts in Baghdad warn that they 
are more than usually nourished 
these days on fecal matter poured 
into the river, so chase your meal 
down with some imm odium. 

Getting around Baghdad is no 
problem. Each hotel has plenty of 
over-attentive taxi drivers who will 
charge $50 a day. Many of them live 
in the big hotels, and are keen to 


act as guides. They will not prove 
the most critical or independent 
observers of Iraq's political system, 
but this is not a topic you should 
try to discuss. It might also prove 
highly risky to take up these driv- 
ers' offers to change money at 
black-market rates. No foreign visi- 
tor will go anywhere, do anything 
or meet anyone without being 
closely watched or reported upon. 

Communications with the outside 
world are also a problem, unless 
you have access to a satellite tele- 
phone. Most business locals telex 
home base for a call-back, which 
usually comes through to the main 
hotels quickly and readily. Overseas 


calls from the big hotels can be 
booked, but take hours. 

All of which compounds the mood 
of cheerless isolation which 
descends swiftly on visitors to 
Baghdad. Day trips can alleviate 
things: Babylon is an hour away by 
taxi, for example. And there are 
shopping opportunities for those 
with a strong enough heart to buy 
fine carpets and stiver from locals 
who need money to buy food. How- 
ever, rigorous customs checks when 
you are leaving mean you might 
lose your purchases without 
recourse. 

If none of this deters you - the 
best of luck. 


Hotel 
costs fall 
in Japan 

By Michael Skapfnker 

Japanese hotel rates have plunged 
this year, but Tokyo and Osaka 
remain the most expensive cities in 
the world in which to rent a room, 
according to Hogg Robinson Busi- 
ness Travel International. 

Hogg Robinson said prices paid 
by its clients show that Tokyo’s 
rates have fallen 16 per cent to an 
average of £167.18 a night, while 
Osaka's dropped 2d per cent to 
£143.87, the biggest fall for any 
important city in the world. Even 
with the decrease, Osaka was the 
world's second most expensive city. 

Hong Kong was third, with rates 
up 12 per cent to £13L24. and New 
York fourth on £126.11. 4 per cent 
higher. Fifth spot was taken by Zur- 
ich - average rates of £12337, a fall 
of 6 per cent - and then came Kow- 
loon (£117.99) and Washington 
(£110.89). 

Fr ankf urt was in eighth (£108.18), 
Paris (£107.12) ninth and Copen- 
hagen (£106.73) 10th. London,, 
regarded by many as an over-priced 
hotel city, is only the 39th most 
expensive. Hogg Robinson says. 
London's rates fell 3 per cent this 
year to £8025. 

Mike Gates, a Hogg Robinson 
director, says that travellers should 
not be repulsed by London's high 
advertised room rates. Far lower 
prices are available to those who 
shop around. 

• Further infopmtion: Michelle 
Waldron or Tania Uttlehales. tele: 
071-497 3001. 


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Iir-f y. 






HILTON INTERNATIONAL OPERATES JOVER 160 HOTELS AROUND THE WORLD. 


FOR RESERVATIONS CON TACT YOUR TRAVEL AGENT, ANY HILTON HOTEL OR HILTON 


Anyone who fell that it was better 
to travel hopefully than to arrive, 

I thought, obviously stayed at the 
wrong hotels. 

“Take me to the Hiltori? 

The ferryman smiled: we both knew 
1 still had a long way to go. But 
they'd be holding my room, even 
though I’d booked weeks before. 

With the help of their 
business centre. I'd soon have 
my notes sorted out. And a large 
measure of my favourite 
single malt would do the same 
for me. Hilton. It was great to be 
heading back. 



HILTON 

Where you can be 
your^^again. 


INTERNATIONAL WORLDWIDE. 











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and especially not here 


The use of chlorine is being drastically reduced 
almost everywhere. Be it in the home or in indus- 
try. /Hie reason, of course, is the problems it may 

cause for the environment 

The pulp and paper industry has, by many, 
beda regarded as one of the biggest villains, 
because of the large quantities of chlorine it uses 
in its manufacturing processes, and in many 

places, still does. 


But a major change has also occurred. 

It has been led from the front by Sodra Cell - 
Europe’s largest manufacturer of woodpulp, and a 
world leader when it comes to producing pulp 
without the use of any chlorine in the manufac- 
turing process. 

You may already have heard of our “Z" pulp. 
(“Z" as in Zero or 0% chlorine.) These pulps are 
just as stipng and have the same high bright- 


ness as conventional chlorine-bleached pulps. 

So paper manufacturers no longer have any 
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the user, have the power to influence the situ- 
ation. If your supplier won’t think chlorine-free, 
change to one that does. 


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12 


FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


P E O P E E 


The Dalgety director 

who took an early bath 

Jack Rowell stepped down from the board in order to transfer his 
winning streak to England's rugby team. Roderick Oram reports 


K arine - Is that how 
yon pronounce it? 
Lovely name." Jack 
Rowell said to the 
waitress. He is a man who 
knows a bit about motivation. 
Needless to say. service at 
lunch was excellent 
Last night. Rowell got 
together with a more robust 
cast of characters: the 2 1 mem- 
bers of the England rugby 
union squad. Their first inter- 
national game with Rowell as 
manager and coach is against 
Romania on Saturday. Only 15 
will take to the Twickenham 
pitch, selected and motivated 
in Rowell's inimitable style. 

Charm, inspiration, pugnac- 
ity and fear are a few of the 
words that pepper comments 
about this very tall and impos- 
ing man from colleagues both 
on the rugby pitch and around 
the boardroom table. 

In business, his reward for 
saving Golden Wonder Crisps 
carried him to the board of 
Dalgety. The snack foods man- 
ufacturer, bought from Hanson 
in 1986, was “run down", 
according to Dalgety, which 
put in Rowell as chief execu- 
tive. In sport, success in mak- 
ing Bath the best British - per- 
haps European - club team 
has landed him die England 
job. 

“Business and sport have 
been mutually dependent for 
me," Rowell says. “Winning at 
sport gives you a lot of confi- 
dence that rubs off in business, 
but sprat also washes the mind 
of pressures so you come back 
to business refreshed." 

Business had come first and 
rugby was a hobby. But Rowell 
has reversed his priorities for 
En gland, He has stepped down 
at Dalgety to work on projects 
he can fit around rugby, and 
pcked up a couple of non-exec- 
utive directorships to keep his 
hand in. 

“My wife Susan said to me: 
'After the Alpine peaks of 
[dub] rugby, you have to try 
the Himalayas’.” Fifty-eight 



last Tuesday, he looks to this 
as “the pinnacle of my rugby 
career". 

Rowell’s arrival as manager 
was less dramatic than his 
arrival at Golden Wonder. Dal- 
gety was struggling to make 
good its acquisition and worse, 
the factory burnt down shortly 
after he Joined. The company 
literally rose from the ashes,” 
says one analyst 

Taking on England presents 
different challenges as the 
team prepares for next year's 
World Cup in South Africa. 
“We have to develop a more 
flexible way of scoring tries," 
says Rowell 

His appointment as manager 
last spring was greeted warmly 
because of his team-building 
skills and deep knowledge and 
love of the game. Some former 
players, though, have won- 
dered out loud whether his use 
of fear and love of making 
players compete for places on 


the pitch would work among 
the egos at international level 
Two small squalls have 
blown up already: one was 
with the coach Dick Best who, 
after this summer’s tour of 
South Africa, was relieved of 
his job which Rowell took on 
additionally*, he also tried to 
insist that his squad members 
be excused their club games 
last Saturday to leave them 
fresher for the international. 
He backed down but nobody 
believes he will drop it 
“He’s won most times," says 
Maurice Warren, Dalgety’s 
chairman and a veteran of 
such encounters after 15 years 
as Rowell's boss. Rowell is one 
of the most inspirational and 
effective managers he has met 
and a delight to work with. But 
he is very obstinate and often 
unforthcoming, says Warren. 

“If s very difficult to get to 
the bottom of what he’s think- 
ing, what he’s planning. It is 


also bard to get him to under- 
stand when changes are 
required," says Warren. 

“I bad to pick my moments 
to have my rows with him. The 
best way was to sit him down 
at a hotel or other public 
place." Having lots of pass- 
ers-by helped restrain Rowell. 

A rumbustious personality 
was evident from the outset of 
his career when he arrived as a 
trainee accountant at a 
Middlesbrough practice in the 
1960s. “His riotous sense of 
humour and keen intellect 
enlivened the place.” says John 
Precious, then a fellow trainee, 
now chairman of Cels is Inter- 
national. the biotech company 
Rowell recently joined as a 
non-executive. 

Working later for Procter & 
Gamble in the north-east, Row- 
ell resumed a rugby career cut 
short at Oxford University by a 
serious injury. He played for 
Gosforth. then took over as 



coach. “I le amt more about 
managing than ever before. I 
had to be a credible leader of 
England players on the team " 

A job change took him to 
Bristol - and Bath’s rugby club 
was conveniently close by. 
Both endeavours draw on com- 
mon ingredients for success, be 
says: physical and me ntal fit- 
ness, skills and team building. 
He looks for people who are 
“competitive, sparky, self-moti- 
vated individuals". He believes 
in giving the individual the 
confidence and tools “to exer- 
cise their skills and judgment 
in the heat of battle". 

The personal touch is key to 
Rowell’s technique. In the 
changing room before a match 
he is known for going to each 
player in turn - praising, 
brow-beating, encouraging or 
cajoling as he sees fit. Perfor- 
mance is everything, but if a 
player is dropped from the 
team. Rowell will work with 
him to rebuild his confidence. 

He sets “stretch targets", 
believing that people can con- 
stantly give 15 per cent more 
effort than they think possible. 
“For human nature reasons, 
you also need internal competi- 
tion. I'm a great believer in 
peer pressure and approval, 
but in an open environment 
where people can say you're 
letting the team down.” Above 
all, there is the will to win. 
“Business generally neglects 
the psychology of winning." 

A flash of temper is among 
his tricks, too. “Sometimes you 
have to be bloody-minded to 
sort things out. It releases your 
own tension and helps you 
make your point." 

Once his team takes to the 
field, he lets them get on with 
the job. During matches at 
Bath he was known for pacing 
around the ground, always 
watching, always analysing. 
Twickenham’s soaring stands 
may constrain ids style. But 
every England player on the 
pitch will live in hope or fear 
of Rowell's praise or criticism. 


IK THE NEW S 


Sons bring Ziff 
back to zero 

On his retirement earlier this 
year. Wired, the trendy San 
Francisco ma gamnp , described 
Bill Ziff as “the most powerful 
unknown publisher in 
America, but arguably the 
most powerful man in 
computing", writes Louise 
Kehoe. 

Just a few weeks later, Ziff’s 
high tech publishing empire 
was put an the block by his 
three sous, who announced 
that they had no interest in 
following in their father’s 
footsteps but would instead 
form an investment firm. 

Over the past few days the 
wishes of the junior have 
been fulfilled. Most of the 
assets of Ziff n omnumimtiortc 
have been sold off in three 
parcels for about S2bn. 

The sales mark the end of a 
decade in which the name Ziff 
has become synonymous with 
influence in the personal 
computer industry. When Ziff 
publications praised a new 
product, it was a sure fire 
success. Wien they panned It, 
it was all but dead. 

The success of Ziff’s 
publishing business is all the 
more remarkable because it 
was built from the scraps of a 
much broader publishing 
group that included magagfnos 
about cars, hi-fi and many 
other special interests. 

In 1982, Bill Ziff was 
diagnosed as having terminal 
cancer. He sold off most of the 
assets of the business, founded 
by his father, that he bad built 
up over the previous 29 years 
for $712 -5m. But buyers showed 
little interest in the company's 
fledgling computer ma garinps. 

Despite his doctors' negative 
prognoses. Bill Ziff recovered 
his health and built the 
remnants of bis family 
business into a new publishing 
empire focused on the 
computer Industry. 

The Ziff family is “delighted” 
by the terms of the sale of its 


businesses, Dirk Ziff, the oldest 
of the sons said last week. It is 
hard to imagine, however, that 
Bill Off does not regret his 
sons' decision not to cany on 
the publishing dynasty. 

Dejouany lines 
up successor 

When French companies skip 
a generation, they often do it 
in style, writes Andrew Jack. 
Jean-Marie Messier, the heir 
apparent at Gdndrale des 
£aux, is almost exactly half 
the age of the incumbent. 

Gay Dejouany. chairman of 
the enormous French utilities 
and communications group 
which reported first half 

profits last month of FFr 
1.26bn, is now 73 and has 
finally decided It is time to 
rnafre plans for succession. 

Messier, a partner at hazard 
Frferes, the merchant bank, at 
37 has considerable experience 
in his portfolio already. 

It seems that Dejouany has 
Tuadp the selection personally, 
although it has yet to be 
ratified. If all goes to plan, 
Messier will join the board 
soon after, probably in a role 
such as director general. 


that Dejouany is not expected 
to retire for some time - 
perhaps not until 1996 - and 
will retain considerable power 
as “president". Dejouaay's 
reputation is of an 
extraordinarily hard worker. 
He recently said to a friend: “I 
must be getting old. I 
some times find that after 11 
pm I get tired reading 
documents." 

Born in Grenoble, Messier 
graduated from two of the 
most important schools - the 
Ecole Polytecfaniqe and the 
Ecole Nationale 
d’ Administration - before 
becoming a member of the 
highly respected -Inspecteurs 
des Finances. 

He was an adviser on prime 
minister Edouard BaQadnr’s 
privatisation programme, 
became a partner atLazard 
Frferes aged 32, and in the past 
few months has built up a 
strong link with Gdn&ale des 
Eanx as its investment banker. 

Ohga collects 
another award 

Norio Ohga. 63, the colourful 
president and chief executive 
of Sony, is about to collect 
another award - and this time 
not [or bis piano playing, 
writes William Dawfons- 


George Washington 
University has named him as 
Its first international chief .. 
executive or the year. The feet 
that Obga's talents are not Just 
limited to business is an 
“Inspiration to business 
leaders around the world", 
says David Fowler, the dean. 

Ohga learned to play the - 
pfonn at the age of seven, 
studied music in Munich and 
Berlin, and had started a . 
career as an opera singer when 
he was spotted by Altio Marita, 
Sony’s founder. Since then, the 
baritone has provided the 
cultural and design input 

Ohga is well known in US' 
business circles, having taken 
a big part in Sony's, 
negotiations to buy CBS 
Records for $2bn in 1987 and 
Columbia Pictures for $3.4bn in 
1989 - the biggest foreign 
acquisition by a Japanese 
company. 

This realised the dream of 
Ohga and Morita to add 
software - films and music - 
to a consumer electronics 
hardware malting business. 

That dream has become 
something of a headache 
during the recession, but Sony, 
under Ohga, is sticking to the 
strategy. The recession . 
certainly has not dented his 
taste for the grand gesture, as 
shown when be appeared in 
New York last year to conduct 
the Metropolitan Opera 
Orchestra before a capacity 
audience; He win content 
tifmgeitf in Washington next 
Friday with giving a speech at 
the award ceremony. 

Harry Schwartz 
goes home 

Harry Schwartz, South Africa’s 
ambassador to the US and a 
longtime friend of President 
Mandela, is going back into 
legal practice and will devote 
himself to getting foreign 
investment for “the new South 
Africa”, writes Nancy Dunne. 

He is setting up shop in 
Johannesburg representing the 
prestigious Washington law 
firm of Akin, Gump. Strauss, 
Hauer & Feld, which is headed 
by two Democratic party 
stalwarts. He also will join the 
Johannesburg-based law firm 
of Hofmeyr van der Merwe, 
which he is merging with his 
own former firm - 
Schwartz-North. “I would like 
to devote my efforts to 
sustaining democracy by 
assisting in the development of 
economic growth and job 
creation," be said in his 
farewell statement. 



Steel 

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it is resident in, India. While we were building a professionally-led, 
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enticing 200 million. 

We achieved business leadership In steel, shipping, oS & gas, power, 
finance and are looking to expand our scope, internationally. India's 
corporate performance, exhibiting a similar trend, is expected to spurt by 
30%. Parallel to our reckoning among the world’s largest enterprises, was 
India's recognition among its 5 premier investment markets. As we achieved 
strategic integration, die nation reposed faith in a market-driven economy. 

It is only logical today for the world to focus on the new India. Once 
there, converging on Essar similarly adds up. 

STEEL ■ SHIPPING ■OEL ft GAS* POWER* FINANCE 'TURNKEY PROJECTS -TRADING 


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FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


13 


M r E D fA F>0^ UliE^S 


Japanese take a walk on the wide side 


O ne of the hottest items on 
the shopping list of any 
self-respecting Tokyo 
techno-buff is a televi- 
sion set which would seem more at 
home in the spacious lounges of 
1950s Las Vegas than the ascetic 
apartments of 1990s Omote-Sando - 
a wide-screen. 

Wide- screens are conventional TV 
sets with unusually wide screens: 
designed in the same proportions as 
those in cinemas. They might look 
like throwbacks to the 1950s. but 
they have taken the Japanese mar- 
ket by storm since their launch two 
years ago. 

pne in five TVs bought in Japan 
this year will be wide-screens. 
according to the Electrical Industry 
Association. By the end of the cen- 
tury they will be in nearly every 
Japanese home. The wide-screen is 
now making its debut in Europe to 
coincide with the Introduction of 


Alice Rawsthom on the new TV format that has taken the industry by surprise 


□ew-generation TVs made to the 
Pal-Plus standard that significantly 
improves picture quality. 

Nokia has already launched the 
first wide-screen Pal-Plus set, and 
Sony. Philips and Grundig are 
about to follow, in the hope that 
Europeans will embrace wide- 
screen as their format for the late 
1990s. 

The speed with which wide-screen 
has taken off in Japan came as a 
surprise, not least to the consumer 
electronics industry. The first wide- 
screen sets were introduced three 
years ago, but were seen by Sony, 
Sanyo, Matsushita, Sharp and other 
leading manufacturers as little 
more than an interesting alterna- 
tive to the popular big-screen sets 
that might attract a cult market of 
film buffs. 


After all, there is nothing special 
about the technology behind the 
wide-screens now on sale in Japan- 
They function like ordinary TVs but 
will, eventually, be able to relay 
higher-quality images for broadcast 
programmes when Japan's new 
Extended Definition Television 
(EDTV) service starts next year. In 
the meantime, the only real advan- 
tage for viewers is that, thanks to 
the wide-screen's special 16:9 dimen- 
sions. they can watch movies on 
video in their origioal cinematic 
scale, rather than the cramped ver- 
sion usually used on TV. 

To the innovation-obsessed Japa- 
nese electronics industry, wide- 
screen seemed far less Interesting 
than a more elaborate and expen- 
sive development that came to the 
market at about the same time; 


high-definition TV, or HDTV. The 
industry confidently expected that 
HDTV would create a lucrative new 
market by becoming the TV format 
for the 21st century. 

In technology terms, HDTV' is far 
superior to wide-screen. However, 
its development has been dogged by 
regulatory rows, pricing problems 
and software shortages. The regula- 
tors have yet to decide when it will 
be launched in the US or Europe. At 
present it is available only in Japan. 

The industry, anxious to exploit 
its exciting new technology, rushed 
HDTV on to the Japanese market in 
the early 1990s. Sales have been dis- 
appointing. Only 10.000 systems 
were sold in 1992 and the same 
□umber in 1993, according to the 
ELA. Things have picked up this 
year, but sales are only expected to 


total 30.000. This reflects efforts to 
reduce prices. Matsushita's Pana- 
sonic subsidiary has slashed the 
cost of its HDTV systems from 
Y2.5m (S25.500) to Y550.000 - Still 
more expensive than conventional 
TV's, given that a standard Pana- 
sonic 21-inch set costs Y 130,000. 

B ut the main problem for 
HDTV is dearth of pro- 
gramming. At present it is 
restricted to 10 hours of 
test broadcasts a day. Tois is not 
expected to improve significantly 
until Japan's new HDTV service is 
introduced in 1997. Most manufac- 
turers are resigned to waiting until 
then to try to recoup their invest- 
ment. Some, such as Sanyo, are 
redirecting their efforts away from 
the consumer market to selling 


HDTV as an educational and pro- 
motional medium to museums and 
companies. 

Meanwhile, wide-screen, origi- 
nally treated as HDTV’s poor rela- 
tion. has prospered. And there is no 
shortage of software. For years 
there has been a cult market among 
Japanese film-buffs for 16:9 video 
versions of particular movies, nota- 
bly Ridley Scott's Bladerunner : 
Most video stores now stock films 
in standard and wide-screen format, 
enabling consumers to get the full 
benefit of wide-screen when watch- 
ing movies on video. The market 
should receive another boost with 
the launch of EDTV next year, 
enabling broadcasters to be more 
inventive with progr amm es, partic- 
ularly when filming sport. 

The number of wide-screens sold 


in Japan has risen rapidly from 
60,000 sets in 1992 to 300,000 last 
year and to an estimated 1.5m this 
year. The EIA forecasts continued 
growth for the rest of the 1990s, 
with wide-screen becoming Japan's 
dominant format by 2000. 

The Industry is now waiting to 
see whether wide-screen catches on 
in Europe, where HDTV’s prospects 
are still clouded. Earlier this year 
Sony introduced two wide-screen 
sets to the European market Both 
use the old Pal format, rather than 
Pal-Plus, yet Sony says sales are 
well ahead of initial targets, augur- 
ing well for the launch of its first 
Pal-Plus sets in January. 

“We see wide-screen as the next 
big step forward for the European 
television market,” says Sony 
Europe. “But we’re also realistic. 
It's very unusual for a new product 
to sell as quickly anywhere else as 
it does in Japan.” 


Newspapers: the eyes have it 

Winston Fletcher makes a case for traditional reading matter 


I t is a truth universally 
acknowledged that news- 
papers will soon be pop- 
ping their clogs - that 
the newspaper is to television 
what the pony and trap was to 
the motor car. 

I beg to differ. Unarguably, 
newspaper circulations have 
fallen daring the 40 or so years 
since television got going. But 
they have not plummeted. In 
the mid-1950s, when post-war 
newsprint rationing ended and 
papers were artificially cheap, 
the total circulation of 
Britain's national dailies 
peaked at 16.7m. After 35 years 
of television, that figure had 
dropped to 15.6m. During the 
late 1980s, total circulations 
grew. 

The Sundays, admittedly, 
fared worse in the 1950s and 
1960s, but likewise later stabi- 
lised. So the walk to the virtual 
scaffold, if such it be, has been 
long and sedate. 

The soothsayers believe the 
walk is about to turn into a 
trot. Their on-line tea leaves 
predict that as televisual com- 
munications become faster, 
cheaper, more sophisticated, 
more flexible - and interactive 
- people will get more and 
more of their news, data, enter- 
tainment and know-how off the 
screen. 

Before - too long, everything 


f 


newspapers now offer will be 
provided televisually, and 
everyone knows that a pixel is 
worth 1,000 words, don’t they? 
Again. I beg to differ. 

Forget, for the moment, 
superhighways, CD-Roms, surf- 
ing on the Internet and the 
plethora of iess-tban-user- 
friendly hyper-jargon. Think, 
instead, about the h uman eye 

- upon which, in the end, all 
the cybernetic doodahs depend. 

From the eye's point of view 
there are several key differ- 
ences between printed commu- 
nications and televisual com- 
munications. First, televisual 
communications must be 
sequential. In future it may be 
possible to alter the sequences 

- to get your sport at the 
beginning of the TV news 
instead of at the end. Even that 
will be hideously difficult 1 and 
costly. But you will never be 
able to start at the end and 
work backward. Or, if you do, 
you won't be able to make 
sense of it. 

You can't make much sense 
of watching film backwards. 
Human eyes (and ears and 
brains) don't work that way. 
But human eyes can, and do, 
start anywhere on a page, and 
skip around. This will prove to 
be much more significant than 
it may seem, for it leads to 
another - perhaps still more 


significant - difference 
between printed and televisual 
media. The eye can scan this 
entire edition of the FT in min- 
utes. selecting the items you 
want to explore further. Imag- 
ine doing that by pressing but- 
tons to bring articles on to 
your screen. You might hardly 
get beyond sorting out the 
leader page. 

And this is anything but 
unimportant. To read your FT 
from beginning to end (exclu- 
ding the market prices) would 
take six or seven hours. (Even 
reading The Sun would take a 
couple of hours). So it would 
be Impossible to include the 
full contents of the FT - or 
even of The Sun - in a televi- 
sion news programme. 

W ith a newspaper 
your eyes can 
sort out what 
interests you 
most and e limina te what does 
not. You can start to read an 
article, then stop, or hop from 
paragraph to paragraph, or go 
back and re-read if you haven't 
understood something. Try 
doing that on a screen, with or 
without a remote control. 

Not that there is much bene- 
fit in getting data from a 
screen ff you have to read it. 
The benefit of a screen is 
either that an announcer can 


read it to you (but how slow), 
or that the data can be inter- 
woven with relevant film mate- 
rial (making it sequentially 
time-consuming). True, screens 
con constantly update data, as 
can radio. But how many areas 
of Information require continu- 
ous updating? Even watching 
the news non-stop is dullsville. 
Sky News and CNN are great 
to dip into - dreary’ as hell to 
sit glued to. 

And I have not even .men- 
tioned the more mundane ben- 
efits of newspapers. They are 
portable, light, silent, very 
cheap and can be disposed of 
easily. They can be studied, 
scribbled on and passed 
around. They don't crash or 
catch viruses. They can be 
stuck on notice-boards and 
photo-copied. Above all, they 
can be handled by non -comput- 
er-literate, non-dextrous, non- 
interactive dumb human 
beinp like me. 

With all these advantages, 
one cannot help but wonder 
whether - had TV been 
invented by Caxtan and print- 
ing by John Logie Baird - 
seers would not now be pre- 
dicting the demise or TV and 
an explosion of printed com- 
munications. 

Advertisers are in no doubt 
about the efficacy of printed 
messages. Although their mar- 






schedules 


. • r_. 

By Raymond Snoddy 

The ITV Neitwprk has . . - 

developed 1 # computer system 
designate predict the most 
effective programming ■ . 
schedule In terms bothofsizg, - 
of audience and attractiveness 
to advertisers. ITV executives 
believe that the Evaluator, as 
the system is being called, is 
the world's most sophisticated * 

computerised aid for ‘ 
programme scheduling. 

For example, if ITV was 
considering moving The Russ 
Abbott Show to Tuesday at 
9.00pm, the Evaluator would be 
able to predict bow many 
people were likely .to watch 
and the demographic profile 
and viewir^rChajacterlstics of 




'the audience. 

• “The ITV network has a tool 
to take ite understanding and 
evaluation of programme 
performance and audience 
delivery to a higher level than 
- previously, ■* David Brennan, 
controller of audience planning 
for the ITV Network Centre, 
told a Media Week conference 
at the weekend. 

The Evaluator is going to be 
launched formally within the 
next few weeks. After 
extensive testing to make sure 
is does not recommend playing 
top ITV programmes such as 
Coronation Street at midnight, 
it will be let loose on real 
schedules from the beginning 
of next year. . 

An essential ingredient in 


creating Evaluator has been 
the use of confidential 
information from advertising 
agencies on their overall TV 
spending, broken down into 
sub-demographic groups, the 
proportion of the UK 
population they want to reach 
with advertisements and at 
what frequency. 

This financial information 
was used to place a relative 
value on each member of the 
panel of viewers that provides 
the official BARB TV ratings. 
After analysing the audience to 
every networked programme 
transmitted so far this year, it 
has been possible to place 
monetary values against each 
programme. To try to predict 
accurately both the audience 


and advertising effects of 
changes to the schedule. 
Evaluator has gone one step 
further. It has applied cluster 
analysis to the viewing habits 
of every member of the BARB 
panel over 12 weeks. They 
were divided up, not only into 
heavy, medium and light 
viewers but into a total of 23 
different categories according 
to their viewing tastes and 
preferences. 

Brennan said he had no 
doubt that Evaluator would be 
an important decision-making 
tool both for the Network 
Centre and the individual ITV 
companies, even though 
sometimes decisions would be 
taken despite computerised 
recommendations. 


ARCHITECTURE 



-a 


mountain 

Colin Amery discusses whether the Getty Center makes sense 


"ORLD 


ur. ■■ 
a--*’'-' 

' j-ii' 




jcd;5?> v - 


I t looks; like the ruins of 
the Potala Palace in 
Tibet The huge bulk of 
Its soaring solid walls ris- 
ing out of the rocky hill-top 
dominates the view from the 
San Diego freeway. This is Los 
Angeles, and what looks like a 
giant film -set for a major his- 
torical movie turns out to be 
the s till - unfinis hed Getty Cen- 
ter. 

What is slowly growing 
beneath the cranes is a college 
of culture - a series of build- 
ings around courtyards where 
the most arcane" aspects of the 
visual and decorative arts will 
be studied. 

When, he won the competi- 
tion to design the centre in 
1984, Richard Meier, a New. 
York architect, described it as 
“the architectural commission 
of the century”. Many people.' 
in the .art. world and in Los 
Angeles are now -wondering 
whether it wtu ever be com- 
pleted. . 

Today, the estimated final 
.construction cost is not for 
$hort of*75Qm.,The plans show 
?ame L6m sq ft of buildings, a 
figure which was quadrupled 
during the - long’ planning 
period. 

Why has it taken so long, 
and why did the- -Getty Trust 
decide to buOd what is a new 
uni versity with a museum in 
«? ’ •••.- ' 

It loaks.as though 10 years of 
wearying debate- between the 


academic factions at the Getty 
have been the major reason for 
the slow progress of the proj- 
ect The choice of site - 600 
acres of hilly terrain in Brent- 
wood, in. West Los Angeles - 
has necessitated massive exca- 
vation and also complex nego- 
tiations with the neighbours, 
who are concerned about the 
arrival of a cultural Disney- 
land on their doorstep. 

. The choice of a famous archi- 
tect with a defined philosophy 
has inevitably prolonged the 
exercise. Richard Meier was a 
predictable choice- when you 
look at the composition of the 
competition jury. He was 
famous in the 1980s for his 
museums in Germany, and for 
the High museum in Atlanta, 
Georgia. 

His white metal-clad cubist 
houses brought a disciplined 
and CTuel symmetry to the 
minimal homes of the super- 
rich. IDs work is abstract, and 
he uses only the history of a 
brief period of. modernism as 
his palette.. There was such a 
predictability about his white 
buildings in the. 1970s and '80s 
that he became known as the 
“Frigidaire architect?, and 
many doubts have been 
expressed about his suitability 
for the Getty. The magnificent 
site demands the opposite of a 
' fhnicai approach, so the ques- . 
tion has to be asked: does a 
random scattering of cubist 
elements, some dad in stone. 


some in white metal, signifi- 
cantly enrich the Los Angeles 
landscape? 

The symbolism of these her- 
metic blocks on top of a moun- 
tain does not suggest that the 
Getty is particularly concerned 
about making fine art an acces- 
sible part of life. Conservation- 
ists, acquisitive curators and 
academics are a bad combina- 
tion when it comes to muse- 
ums. Inevitably, they feel pro- 
prietorial about their 
collections, and are often 
unable to make their 
researches more relevant than 
a secret shared among a few 
competitive colleagues. 

T he Idea for a campus 
Of Six main buildings, 
each one dedicated to 
different aspects of art 
preservation and education, 
was to bring together a college 
of experts on one site to ensure 
harmonious dialogue and a 
stimulating atmosphere for 
research. The Getty is being 
built at a time when the great 
information explosion and 
advances in computer technol- 
ogy have made it completely 
unnecessary to have all your 
scholars and books and collec- 
tions in one place. 

■ .B uilding a home for some of 
the most important and most 
expensive works of art in the 
world on top of a mountain In 
a city regularly threatened by 
earthquakes Is risky. Great 


sums of money have been 
spent to try and ensure that 
the centre can withstand major 
shocks. 

There has also been vast 
expenditure on landscaping 
and tree-planting to satisfy the 
neighbours' demands Tor an 
almost invisible building. 
Three years into the construc- 
tion programme the only com- 
pleted buildings are the vast 
underground garage and a 
tram station for the funicular 
tbat will give visitors a rule 
around the site. 

It is important to remember 
that the Getty has huge grant- 
making and educational pro- 
grammes which have a more 
useful and less visible impact 
on the world than this monu- 
mental project. But it is the 
work of Richard Meier that 
will leave the greatest impres- 
sion. 

There is considerable unhap- 
piness about the removal of so 
many great works of art from 
around the world to this moun- 
tain-top mausoleum. The scale 
of the museum's wealth means 
that however carefully it buys, 
it will be seen as predatory and 
reactionary in its desire to own 
so much for itself. The fact 
that the British government 
decided not to let the sculpture 
of the Three Graces go to the 
Getty is a small signal that the 
days of its domination in the 
art market may be over, at 
least for now. 



Jurassic paper shop?: circulations have fallen since the advent of television but don't write off newspapers yet 


ket share has dipped, total 
print media in Britain still 
account for 55 per cent of all 
advertising expenditure com- 
pared with 28 per cent for tele- 
vision. (In fact, the fastest- 
growing UK advertising 
medium at the moment is 
homely, old-fashioned steam 
radio). 


BUSINESS TRAVEL 


None of which is intended to 
imply that televisual communi- 
cations are not about to grow 
rapidly. Patently they are. But 
they are less competitive with 
newspapers than they seem. 
The two forms of media com- 
plement each other, and will 
co-exist for as far ahead as the 
human eye can see. And it will 


be the human eye - not futur- 
istic technology - which evalu- 
ates their relative strengths 
and weaknesses. 

If Britain's national dallies 
continue to lose circulation, as 
they have in the past, by l.lm 
copies every 35 years - we are 
talking trends, aren't we? - 
they will still be selling 2m or 


so copies daily in 2,500. That is 
not a problem I can get worked 
up about right now. 

(i Winston Fletcher is chair- 
man of the UK Advertising 
Association, and chairman of 
the advertising agency DFSD 
BozeU, whose clients include the 
Financial Times. 


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Tho Financial Tim®® plans to publish this Survey on 

France Finance & 
Investment 

on Monday, November 14. 


This annual analysis of Frants as m Investment centre will be 
published In the financial Times on November 14th. K will be seen by 
our worldwide readership of a vet one millon readers. 


For an editorial synopsis and advertising material please call 


Dominic Good in Paris 
on (33 1) 42 97 60 30 


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FT Surveys 


FUJITA CORPORATION USA 
US $ 25,000,000 

GUARANTEED FLOATING RATE NOTES DUE 1998 
In accordance with the provisions of the above mentioned Notes, notice Is 
hereby given as follows: 

* Interest period: November 4, 1994 to May 4, 1995 (161 days} 

* Interest payment dale: May 4, 1995 

* Interest rate: 6.275% per annum 

* Coupon amount payable per Bond of US $ 100,000: US S 3,154.93 

AGENT BANK 

BANQUE INTERNATIONALE 
A LUXEMBOURG 


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Commercial Property Advertising 
A dvertise your property to approximately 
1 million FT readers in 160 countries. 

For details: Cali Emma Mullaly on +44 71 873574 
or Fax: +44 71 873 3098 









THE WEEK AHEAP 


DIVIDEND & INTEREST PAYMENTS 


■ TODAY 

BBA 10% Db. 1989/94 £5.0 

Bristol & West Bldg. Scty. 
13%% Perm Int Brg. £66.875 
Conversion 9%% 2003 £4.875 
Brft Petroleum 2.5p 
Brit Vita 3.75p 

Clarke Ntakote & Coombs 0.1 p 
Courtauids 6% Cm 2nd PT. 

2.1 p 

Eksportfinans 7%% Nts. 1997 
C$77.50 

European Smaller Co's Q.56p 
Golden Vale IR0.6p 
GT Japan Inv. Tst l.lp 
Irish Conti. lBl.17Bp 
! & S Optimum Inc. TsL l.95p 
Logica 3.6p 
Macro 4 11.98p 
Manders 2.9p 

Mazda Motor FRN Aug. 1996 
Y6540S.0 

Do. FRN Nov. 1996 Y65406.0 
Morrison (Wm) Supermarkets 
024p 

NM Smaller Australian Co’s 
0_25p 

Osaka Gas 4.95% Nts. 1999 
Y495000.0 
Rentokll I.OIp 
Scholl 2.6p 

Sterling Publishing 2.9p 

UK COMPANIES 


■ TODAY 

COMPANY MEETINGS: 

Hays, Hogs Back Hotel, Seale, 
Famham, Surrey, 12.00 

BOARD MEETINGS: 

Finals: 

Assoc British Foods 
Automagic HIdgs. 

Rve Oaks tnvs. 

Stratagem 

Interims: 

BAA 

Investment Co. 

Merchant Retail Grp. 


■ TOMORROW 
COMPANY MEETINGS: 
Community Hospitals, The 
Brewery, Ghiswell Street E.C., 
12.00 

Kleinwort High Inc. TsL, 10, 
Fenchurch Street E.C., 10.00 
River & Mercantile Smaller - 
Co’s TsL, New Connaught 
Rooms, Great Queen Street 
W.C., 12.00 


Sweden (Kingdom of) 8% Bd. 
1997 DM800.0 

Wyevale Garden Centres 2.93p 
Zeneca 10.75p 

■ TOMORROW 
Black (A&C) 4.25p 
Goodwin 0.655p 
MacaUan-G ten/lvet 0.41 p 
Minorco $0.38 

Nottingham Gass Anns. £1.625 
Royal Doutton 1.75p 
Sumitomo Fin. FRBN 1994 
124687.5 

Waterman Partnership 0.5p 

■ WEDNESDAY 
NOVEMBER 9 

Abtrust Prf. Inc. inv. Tst 3p 
Bowater 5.8p 
Collateralised Mortgage 
(No.12) Class B Mtg. FRN 
2028 £196.64 
Dixon Motors 1-25p 
Hall Eng. 5p 
Halos 8%% Db. 2018 
£4.1875 

lnt Bank for Reconstruction 
& Dev. 11%% Ln. 2003 £5.75 
Jerome (S) 0.5p 
New Throgmorton TsL 
(1983) Ip 


BOARD MEETINGS: 

Finals: 

AG HIdgs. 

Gartmore Shared Equity Tst 
UPF Grp. 

Interims: 

Anglian Water 
British Airways 
Greenway 
Ingham 

Maries & Spencer 
li gland 

Wyndeham Press 


■ WEDNESDAY 
NOVEMBER 9 
COMPANY MEETINGS: 
Adwest, Dorchester Hotel, W M 
12.00 

DCS Grp., Painters Half, 9, 
Little Trinity Lane, E.C., 12.00 
Rl Grp., Westbury Hotel. 
Conduit Street W.. 12.00 
Isotron, Howard Hotel, Temple 
Place, Strand, W.C.. 12.00 
Thorpe (FW), Mere® Road, 
North Moons Moat, Reddrtch, 


Nova Scotia (Province 01) FRN 
1999 $126.18 
NTT Data Com ms. 

Systems4.1 % Bd. 1999 

Y1 13888.0 

Polypi pe l.S9p 

River & Mercantile Smaller 

Co's 2-8875p 

■ THURSDAY 
NOVEMBER 10 

Am. Express S0.225 
Barclays Jnr Gtd. Und. FRN 
$132.57 
Cantors 3p 
Chelsflekj Ip 

Christiania Bank Prim Cap. 
Und. FRN $261.94 
Courtauids Textiles 4.9p 
Fletcher Challenge NZ$0.0625 
Forth Ports 2.7p 
Guinnness 3.9p 
Henderson Highland TsL 1.4p 
Inchcape 8V>% Cv. 5b. Bd. 
2008 £31.25 
Inspec 1.33p 

Int Business Comms. 1.5p 
Johnston Press 2.75p 
Liberty 1.85p 
Merivala Moore 2p 
MTL Instruments 1.9p 
PCT 2.7p 


Worcs., 3.15 

BOARD MEETINGS: 

Finals: 

Fenner 
Villiers Grp. 

Interims: 

Amersham 
Cable & Wireless 
Chamberlin & HID 
Electrocomponents 
Hambro Insurance Services 
Yates Bros Urine Lodges 

■ THURSDAY 
NOVEMBER 10 

COMPANY MEETINGS: 
Mucklow (A & J), Chamber of 
Commerce, Edgbaston, 
Birmingham, 11.00 
Sinclair (Wm), White Hart 
Hotel, Bailgate, Lincoln, 11.00 
Thorntons, Assembly Rooms, 
Derby, 10.30 

BOARD MEETINGS: 

Finals: 

Burton Grp. 


P&0 6% Cv. Bd. 1st 
Ser.1989 S150.0 
Redrew Grp. l.8p 
Wolstenholme Rink 7.8p 

■ FRIDAY 
NOVEMBER 11 

Alliance Tst. 4Vi% Db. £2.25 

Angtovaal R0.88 

Do. N R0.88 

Boosey & Hawkes 1.32p 

Dewhirst 0.65p 

Finelist 1 .5p 

First National Bldg. Scty. 
11%% Perm. Int Brg. 
IRE568.75 

Do. 11%% Penn Int. Brg. 
IRE587.50 

F & C Pacific Inv. TsL 1-2p 
Gates (UK) 4%% Rd. Db. 
£2.125 

Glasgow 3 %% trrd. £1.75 

Do. Gas 6%% £3.375 

Do. Gas 9% £4.50 

Do. Water 50p 

Do. Waterworks Debt 3%% 

£1.75 

Do. Waterworks Debt 4% £2.0 
Headlam Ip 
HTV 0.75p 

Investors Capital 4% Db. 

Rd. £2.0 


Honeysuckle 
Orb Estates 

Interims: 

Appleby Westward 
Bank of Ireland 
British Telecom 
Cranswick 

Drayton English & InL TsL 
Kleinwort Emerging Markets 
TsL 

London Insurance Market 
Inv. Tst 

Northumbrian Water 
Oxford Instruments 
Paridand 
Porter Chadbum 
Royal Insurance 
Scottish Power 
Somic 

Staveley Inds. 

Umeco 

Warner Howard 


■ FRIDAY 
NOVEMBER 11 

COMPANY MEETINGS: 
Dalgety, CentrepoinL 103, 


Isotron 3.1 Ip 

Mazda Motor FRN 2000 

Y69000.0 

Mirror Grp. Ip 

More O'Ferrall 3.2 p 

NB Smaller Co's Tst. 0.94p 

North Housing Assoc. 8%% 

Gtd. Ln. 2037 £4.375 

Page (Michael) 0.8p 

Provident Financial 6.5p 

Rossmont 0.2p 

Scottish Eastern Inv. Tst. 4% 

Db. £2.0 

Do. 4% Peep- Db. £2.0 
Scottish (Mortgage & Tst. 4%% 
Db. Irrd. £2.25 

Second Alliance Tst. 4%% Db. 
£2.25 

Secure Tst. 5p 
Sinclair (William) 5.45p 
Tibbett & Britten 5p 
Tilbury Douglas 10.5p 
Wassail 1.1 5p 
Weir Grp. 2.06p 

■ SATURDAY 
NOVEMBER 12 

Tottenham Hotspur ip 


New Oxford Street W.C., 
11.30 

Pizza Ex press, 9, Bow Street, 
Covent Garden, W.C., 9.30 
Tor Inv. Tst, 107. Cheapside, 
E.C., 12.00 

BOARD MEETINGS: 

Finals: 

Mercury Keystone 
Ramus HIdgs. 

Interims: 

Prowting 


Company meetings are annual 
general meetings unless 
otherwise stated. 


Please note: Reports and 
accounts are not normally 
available until approximately 
six weeks after the board 
meeting to approve the 
preliminary results. 


M MONDAY NOVEMBER 7 1994. 

FINANCIAL TIMES MONDA 


THE 

DAVID. 

T HOMA S 

PRIZE 

David Thomas was a Financial Times journalist killed on assignment in 
Kuwait in April 1991. Before joining the FT he had worked for, among 

others, the Trades Union Congress. 

His life was characterised by original and radical thinking coupled 
with a search for new subjects and orthodoxies to challenge. 

In his memory a prize has been established to provide an annual study/ 
travel grant to enable the recipient to take a career break to explore a 
theme in the fields of industrial policy, third world development or the 
environment. 

The theme for the 1995 prize, worth not less than £3,000, is: 
DOES FREE TRADE THREATEN THE ENVIRONMENT? 

Applicants, aged under 35, of any nationality, should submit . up to 1000 
words in English on this subject, together with a brief c.v. and a proposal 
outlining how the award would be used to explore this theme further. 

The award winner will be required to write a 1500 to 2000 word 
essay at the end of the study period. The essay will be considered for 
publication in the FT. 

CLOSING DATE JANUARY 6 1995 

Applications to: 

Robin Pauley, Managing Editor 
The Financial Times (L) 

Number One Southwark Bridge 
London SE1 9HL 


CONFERENCES & EXHIBITIONS 


NOVEMBER 9 
Polish Business Day 
CBI Conference, supported by the DTI, 
dengned t» provide convuics wb practical 
fafurmatwo od specific trading or inveamoK 
opportunities. Program m e indudes keynote 
address by Prime Minister Pawl a k. 
presentations by senior Government 
representatives, together with sectoral 
tMxkahofB and netwoddngopporraaibes. 

Coancc Sandra A! died, CBI Conferences 

Tel: Cm 3797400 

24h fax-on-demaad: 071 240 124* 

LONDON 

NOVEMBERS 

Equity Finance for European 
High Growth Companies: 

The Case For EASDAO 
A one day conference. Speakers from 
throughout Europe and US including 
European Commission, European Venture 
Capital Association and NASDAQ. 

Contact dry A Financial Conferences 
Tel: 0276 85696(5 Fwc 0276 856566 

LONDON 

NOVEMBER 15/16 
Practical Dealing course - 
Money market 

Training in traditional Cub markets and 
short term derivatives dealing - risk 
Identification and evaluation, product 
pricing, position management - 
opportunities to test theories learnt in 
dealing simulation and practical exercises. 
For Corporate treasury personnel and bank 
dealers. 1480 tVAT. 

Lymwd David International Ltd. 

Tet 0959 565820 Fan; 0959 565821 

LONDON 

NOVEMBER 15-16 

Business Performance 
Measurement: 

Transforming corporate performance by 
measuring and managing the drivers of 
[uluie profitability. This two-day 
conference explores the relevance and 
praetjobfliry of developing new ’corporate 
dashboards'*, which include non-funnrial 
indicators, such as customer satisfaction, 
quality and benchmarking. 

Coo&ct Bosinfejs Intelligence 
Tet 08! -543 6565 Fas 081 -544 M20 

LONDON 

NOVEMBER 16 

Essential Computer Contracts 

Onc-day conference that will update you 
cm the fundamental issues of computer 
contracts. Topics include software 
licences, escrow, intellectual properly 
issues, "ge> -out" clauses and maintenance 
contract hazards. Pan of a three -day series 
oo computer contracts. , 

Comae*: European Study Conferences 
Tel: 44 71 586 9322 

LONDON 

NOVEMBER 16(17 
The Digital In fo rmation Revolution 
Market Opportunities Tor Multimedia 
created by the S u perhigh w ay 
A major high-level, interactive 
indwry/Govcrmpent Conference, providing 
the first opportunity for senior 
representatives from commerce and 
industry to address the key Issues with 
Government participation in an open forum. 
Contact: lulu Moulton, Slants Meetings 
Td; 01730 266544 

LONDON 

NOVEMBER 17 

Advanced Computer Contracts 
and Drafting Workshop 

This une-day intensive programme 
combines detailed information on 
advanced computer contract topics with a 
practical approach to drafting. Samples of 
software licences and hardware purchase 
agreements provided. Part of a throe-day 
series 1 cut Computer Coo tracts. 

Contact: European Study Con fere nc e s 
Tel: 44 71 3S6«322 

LONDON 


NOVEMBER 17 
Kenya 

CBI conference plus workshops, in 
association with Standard Chartered Bank, 
considers current development!, 
opportunities and future prospects for 
investors and export ers . Keynote address by 
President Daniel T arap Med and speakers 
(tom the high powered delegation of 
Mimfflcn and senior o (Serais. 

Comet: Nicola Martin. CBI Conferences 
Tel: 071 379 7400 
24 hr fax-an-denand: 071 240 1248 
LONDON 

NOVEMBEH17 

EMU In a Multi-Tier Europe 

EMU is back on the agenda for the 1996 

1GG Can Britain opt oui? This conference. 

hosted by Salomon Brothers InL. considers 

these issues and the considerable problems 

of conversion to a single currency. 

Speakers include: Karl Camera MdB. 

Giovanni Ravaskr, Director General, EC 

Giles Hadlee MP 

Contact: Federal That 

Tel: 071 259 9990 Fax: 071 2599505 

LONDON 

NOVEMBER 19-20 

The National Classic Motor Show 

The Triwxfi/ Classic Car Show, where the 
car dabs take centra stage. Massive Indoor 
Aulojumble, Car Club Displays, Rally 
Mini Cooper S rebuild and o Special Stage 
of the Millers Oils RAC International 
Historic Rally (20th only). Roger Clark. 
Britain's most famous rally driver, will 

officially open the ahow. 

Enquiries: Roger West * Cfcntre Exhibitions 
Tel: 0121 767 2683 

NEC, BIRMINGHAM 

NOVEMBER 21 
A Guide to Swaps (n Practice 
Swaps are a powerful financial loot with 
large potential gains or losses. Many 
companies have quietly profited (root their 
use. Course explains What Swaps are. bow 
they work when they should be used and 
bow controlled. 

Details: Investment Education pic 
Tel: 061-228 2400 Abe 061-228 2440 

LONDON 

NOVEMBER 21 & 22 

THrd Central Banking Conference 

Features leading speakers from the central 
banks or China. India. France. Hungary. 
Finland. Austria. Poland, Venezuela and The 
Bank of England. EMI and IMF. Sponsors 
The Wwtd Gold Ownril. Barclays Precious 
Mrtab and Oiffonl Chance. 

Details: CityfonimUd 

Tet 0225 466744 Fax: 0225 442903 

LONDON 

NOVEMBER 21-22 
Business Process 
Ra-engineering (BPR) 

f*nm i^ ||i ii g aeries of seminm* for amg^n 
charged with designing and Implementing 
BPR initiative s. Pre sented hy leading US 
practitioner and BPR author. Proven 'how-to- 
do-it' implementation guide iflustrafed with 
case sufees aod workshops. Comae book abo 
available. Over 50 orgamsstkan in the private 
£ public sectors have already amended. 
Contact: Richard Parris. Vertical Systems 
Intercede Ltd 

Tel: +44-455-250266 (24 bom) 

UNIVERSITY OF WARWICK 

NOVEMBER 21 & 22 
FT-The Petrochemicals Industry 
-Prospects tor the 
Mid-1990s and Beyond 
Arranged in association with Chemical 
Monets, this major Financial Tunes forum 
will discus prospects for ibis key 
industrial sector. 

Enquiries: Financial Times 

Teh 081-673 9000 Fas: 081-673 1335 

LONDON 


NOVEMBER 21-25 
Applied Creativity In 
Management (AC1M) 

Rapid change makes much of today's 
'received wisdom' a recipe for t o morrow's 
disaster*. ACTM Seminar members learn to 
recognise A eradicate obsolete ways to 
thinking <£ acting. Tbcy /earn to identify 
current/ future critical issues and to 
generate A Implement effective solutions 
to their real-life problems A opportunities. 
The impact is life-long. 

Contact: Dr Hurry Sheamnft 1MOD1 Ltd 
Fax: 0734 509262; Tel: 0734 471263. 

LONDON 

NOVEMBER 22 

PoHcal Risk OuttookforlhBOa 

Industry In 1995 

The oil industry has become well 
experienced in evaluating the risks it few 
in its business, particularly when planning 
major new investment. Yet the greatest 
uncertainties which affect the security of 
supply and price and which may 
fundamentally change the economics of 
new projects arc political risks. 

Contact: The Institute of Petroleum. 
Conference Department 
Tet 07! 4677100 

LONDON 

NOVEMBER 22/23 
Introduction to Derivatives In 
Treasury risk management 

Training course covering treasury 
derivative markets. Currency Options. 
SAFE*. FRAs. Futures, lore rest rate swaps 
and related products. For Corporate 
Treasurers, bank dealers and marketing 
executives, financial controllers, systems 
and support personnel. £480 + V.A.T. 
Lywood David Inwomttaoal LUL 
Tbfc 0959 565820 Fax: 0959 54JK2I 

LONDON 

NOVEMBER 23 ”” 

Hong Kong: 2001 

Half-day seminar demonstrating Hong 
Kong's key role as an economic force next 
century and an increasingly important 
gateway to China and the region. Speakers 
include The Rt Ihm Michael Hcsritine MP 
and Mrs Anson Chan. Chief Secretary. 
Hong Kong, 

Contact: Mark Keenan, DTI 

Tet 071 215 4829 Fax: 071 215 8797 

LONDON 

NOVEMBER 23 

New Regulations on Transport 
of Dangerous Goods 

CBI Conference includes presentations rod 
case studies on how companies are 
preparing to meet the le qulre mcms of new 
UK JegisLiriaD in response to the European 
Directive and the ways that the regulations 

wtil be controlled and enforced. 

Cbmaci Sandra Aldred. CBI Conferences 
Tel 07] 379 7400 

24 hr Fax -on -demand 071 24Q 1 24S 
LONDON 

NOVEMBER 23-24 
Commercial Parallel Processing 
Experiences and Practice 
Speakers from Churchill Insurance. WH 
Smith. Mercnry Communicant! os. and 
Humberside County Council amongst 
others will discuss the benefits and their 
experiences of this signMicant technology, 
which allows scalable low cost comp u ter* 
to be expandable to very high performance 
In on office environment. 

Codcm: I tree Part IBCTcdarical Services Lid 
Tel: 071 637 4383 Fax: 071 631 3214 

LONDON 

NOVEMBER 24 

A User's Guide to the Yellow 

Book 

The London Slock Exchange UsUm; Rules 
f, Yellow Book] is essential for anyone 
involved with listed company transa c tions. 
c.g. Corporate Financiers. Financial 
Directors. Brokers. Lawyers and 
Aorotuuants. Course provides a complete 
practical review of the key areas. 

Details: Investment Education pic 
Tel: 061-228 2400 Fax: 061-228 24411 

LONDON 


NOVEMBER 24 
Computer Contracts: 

The New EC Rules 
An important one-day w n fc icact for both 
the public and private sector that will 
update you cm the new EC rules on public 
procurement of computer technology. Part 
of a three-day series on Computer 
Con tracts 

Contact: European Study Conferences 
Tel: 44 71 386 9322 

LONDON 

NOVEMBER 24 

Israel Ttade & Investment In an 

Emerging Market 

International conference in association 
with Israeli Embassy. KEYNOTE SPEAKER 
YOSSI BOLIN. Topics cover the Economy, 
Investment. Privatisation Opportunities, 
Major Capital Projects and Cam Studies. 
INTERFORUM 
Tel: *441111 71 386 9322 
Fax: +44 (0171 381 8914 

LONDON 

NOVEMBER 24/25 

FT M a i t choate r Postgraduate Fair 

This is the first postgraduate fob to be held 
!n Manchester. This fair will provide 
exhibitors with a unique opportunity to 
attract the highest calibre of stndents for 
postgraduate courses. Booking deadline for 
exhibitors - October 21. 

Contact: Kay Day at Manchester 
Tel: mil 275 3952 

MANCHESTER 

NOVEMBER 25 

The 1994 CBI Lead Body 

Conference 

This years conference addresses the key 
challenges now facing the NVQ network. 
Representatives of NCVO and 
Government win identify wens of current 
policy development and the issue of the 
new Occupational Standards Councils will 
be examined. 

Contact Sandra Aldred. CBI Conferences 

Tel: 07 1 TTO 7400 

24 hr Fax-on-demand 071 240 1248 

LONDON 

NOVEMBER 28 
TTw IMRO Rules: 

A Guide For Compliance 
For Directors and Compliance Officers 
who want to review lbe IMRO Rales and 
their application. Conduct of Business, 
Client Agree meat. Dealing Obligations, 
die nr Money. Money Laundering, etc. 
included. 

Details: Investment Education pic 
Tel: 061-228 2400 Fax: 06J-2M 2440 

LONDON 

NOVEMBER 28-29 — 

Global Emerging Markets 
Investment Management 

Major International conference on global 
emerging detn and ajatty tmrica leaking at 
CIS, Eastern Europe, Africa, the 
Mediterranean Rim; Asian and Indian 
Subcontinent. Latin America aod the 
Carribean. Programme designed for 
international portfolio investors and asset 
ntln rjMnwi imdrciin g bi p maria-w « qi «ni l 4q* . 
r-«rifc»T- AtisQn Elgar. Dow Janes Tcktme Ltd 
TcL - 071 832 9S32 Fax: 071 353 279] 

LONDON 

NOVEMBER 28 & 29 
City Intensive Seminar 
Sponsored by THE CORPORATION OF 
LONDON and KPMG. this briefing eaves 

the sirnciure. markets, flow of funds, 
regulation and world position of the City. 
Designed for reccni entrants, corporate 
finance and treasury staff and overseas 
financial executives. 

Contact: Cityfomm Lid 

Teh iC2S 466744 Fax: 0Z2S 442903 

LONDON 


The UK's premier event on planning, 
h npfenieatmg and susta i ning orga nisational 
and cultural change. This two-day 
conference includes frank discussion of 
why so many initiative* fail and explores 
proven ntcrhotfc for achieving critical buy- 
in and support for new organisation 
structures and working practices. 

Contact: Business intelligence 
Tel: 081-543 6565 Fax: 081-544 9020 

LONDON 

NOVEMBER 28-30 

Fund Management Overview 

Provides a complete overview of what 
Fund Management involves including 
types of investment, their applications and 
returns, portfolio construction, etc. Aimed 
at non-specialists working with Fund 
Managers. No prior knowledge needed. 
Derails: Investment Education pic 
Tel: 061-228 2400 Fax: Oo 1-228 2440 

LONDON 

NOVEMBER 30 

A User's Guide to the Cfty Code 
The C5ty Code on Takeovers and Mergers 
defines the roles for offerer and offeree 
companies in both takeover and substantial 
acquisition situations- Course details the 
rules and their applications for Corporate 
Financiers, Broken. Bankers. Financial 
Directors, etc. 

DemOK Investment Education pic 
Tel: 061-228 2400 Fax:061-228 2440 

LONDON 

NOVEMBER 30 
Pakistan Today - 
Prospects Tor British Business 
CBI conference includes keynote addresses 
by Prime Minister Benazir Bfautio and 
Michael HeseWne. presentations by senior 
Pakistan Government officials and UK 
investors and exporiers, together with 
sectorial workshops and networking 

mffiing t 

Contact Nicola Mania. CBJ Conferences 
Td 071 379 7400 

24 hr Fax-on-dcmand 071 240 1248 

LONDON 

DECEMBER 1 — ~ 

Futures & Options Overview 

A comprehensive overview or traded 
Futures A Option assuming no prior 
knowledge. What are they? How do they 
work? When should they be used etc. Ideal 
for Mo-specialists managers rod siafr. 
Details: Investment Education pk: 

Tel: 061-228 2400 Fax: 061-22X2440 

LONDON 

DECEMBERS! 

Currency Risk Management 
Workshop 

Understand and identify eiposures. and 
learn the techniqnci of currency risk 
management. Spot and Forward FX, 
Standard and 'Exotic' Currency Options. 
Zero Premium Strategics- Currency Swop* 
£275 I DAY 

Contact: Fnirplace Banking A Financial 
Training This 071 329 0595 

LONDON 

DECEMBERS 

DHomma of Choice - A Working 
Conference with Charles Handy 
For senior manager* concerned about how 
they manage personally the difficult 
balances herwceti value and results 
involved in today's organisations. Also 
with Andrew Foster, Martin Mats-5miltr. 
Greg Parti on. Charles Pollard and 
Barabara Young. 

Office for Public Management 
Tel: 07 1 833 1 973 Fax: H7| 837 fi5KI 

QEU CENTER. LONDON 


DECEMBER 5 
The SEA Rides: 

A Guide For Compliance 

For Directors and Compliance Officers 
who want to review the SFA Rales and 
their application. Emphasis given to the 
Investment Services Directive as well as 
Conduct of Business. Monitoring and 
Enforcement Procedures, etc. 

Details: Investment Education pic 
Tel: 061-228 2400 Fax: 061-228 2440 
LONDON 

DECEMBER 6 

Competition in the Gas Market 

A one day conference. Speakers indude 
Tim Eggar MP, Minister for Industry and 
Energy: Clare Spottiswoode. Director 
Genera/ of OFOAS and leading industry 
figures from amongst others British Gas 
andTransoo. 

Conner City & Financial Conferences 
Tel: 0276 856966 Fare 0276 856566 

LONDON 

DECEMBER 6& 7 
Lobbying The European Union 

This conference is addressed in those who 
know something of Brussels and need to 
stay np to-date with the changes that are 
currently raking place. 

Farther details from International 
Professional Conferences Lid 
Tel: 061 445 86Z3 

LONDON 

DECEMBER 7 

Advanced Software Solutions 
in Manufacturing and 
Engineering 

Seminar for business and rechnical 
managers showing use Df practical 
applications of logic programming 
software in manufacturing and 
engineering, including prob Tents of 
intelligent scheduling. Leading 
internal tonal companies present state-of- 
the-art systems. Includes panel discussion 
and vendor displays. 

Contact: AJ Ruth. teU 0253 338081 

LONDON 

DECEMBER 7-8 
Corporate Finance Overview 

A review of the hramrocna and tec hn iq ue s 
of Corporate Finance for those with no 
knowledge- Designed for Bookers Finance 
Directors, Brokers, Lawyers. Accountants. 
FT specialists working with Corporate 
Financiers. 

Details: Investment Education pk 
Tel: UGI-Z28 2400 Fax: 061-228 2440 

LONDON 

DECEMBER 7-8 
Succeeding with Teams: 


and driving the team-based organbatiaa. An 
inrenotional twivday con fe rence specifically 
designed to help senior executives understand 
lbe forkbraerol ishjcs invnb«rimtfrirff m ggnd 
Bnpfanajang .i ccara-ferrxi Ofgafc'Wiart 
Contact: Business intelligence 
Tel: IISl-543 6505 Fax: 081-544 9020 

LONDON 

DECEMBERS 

The UK Economy 

Prut pects up to and beyond the next 

General Election. 

This Henley Centre Conference is our 
annual look at the UK Economy and Us 
prospects for the nvxfiwn term. 

Cost: £350 * VAT 

Contact: Anna Harman at 

The Henley Centre Tel: 071 353 9961 

LONDON 


DECEMBER 8 
Dispute Resolution in the 
MemoMonar 01 and Gob industries 

This conference will consider recent 
nucrcsr within the imenruioaal oO and gas 
industries in dispute resolution and 
arbitration in respect both of disputes 
within the industry and of external disputes 
which affect the industry, such as those 
regarding territorial jtirisdilaion. 

Contact: The Institute of Petroleum, 
Conference Departm en t 
TfeL-071 4677100 

LONDON 

DECEMBER 12-14 
Smart Card Europe 94 
2 day conference pins ‘h day introductory 
tutorial 

The peominem speaker panel will discow 
the use of Smart Cards in application areas 
snch as electronic purse schemes, 
motorway tolling and transport ticketing. 
GSM mobile phones. Mondex, 
subscription TV and mobile banking. Ph« 
essential Information about current and 
future standards and security Issues. 
Contact Hattie Park, 

1BC Technical Services Limited 
Tet 071 637 4383 Fax: 071 631 3214 

LONDON 

DECEMBER 13 
Advanced Corporate Finance 
A course on the applications and more 
advanced teciuuqoes of Co r pora te Finance 
for those wife a basic knowledge, (deal for 
Bankers. Corporate Financiers, Treas urer s. 
Lawyers and Accou n tants who arc working 
or will work in Corporate Finance. 

Details: Investment Education pic 
Tel: 061-228 2400 Fax: 061-228 2440 

LONDON 

DECEMBER 13 

Advanced Documentary Credits 
and Trade Finance 

An intensive one -day conference tbit looks 
at fen key issues around UCT 500, focuses 
on Letters of Credit. EDI Bilb of Lading 
and forfeiting, and reviews the treatment of 
bund in documentary credit transactions. 
Contact: iMcrforum Services Ltd 
Tel: 44 71 386 9322 

LOND ON 

DECEMBER 13 

Energy Seminar - Transition or 
Maturity? A Review of Current 
Policy and Development 

This CRI rominar examines recent 
icgulmory reviews. competition 
development, consumer interests and 
European energy policy. Speokcre from 
OF GAS. SWEB. NERA. British Gj«. 
Electricity Fool, Gas Consumers Council. 
IEA. 

Cost £299 *■ VAT 

Contact: Leigh Sykes, CRI 

Tet d7l WS St 23 Fax: U71 395 SMS 

LONDON 

DECEMBER 20-21 
increasing Business by 
Telephone 

December 31 - Incoming Call 
December 21 - Ourgomg Call 
Whether dealing with incoming enquiries 
or proactive sales calls In existing or 
potential curfiimcrv. delegates learn how ro 
maximise ihc puicmUl of every call. 

£105 + VAT per day inclusive nf materials 
and refreshment*. Bank both days together 
for same delegate fur I5t) icducuon - £3411 
+ VAT. 

Contact: STRUCTURED TRAINING 
0926337621 

LONDON 

JANUARY 26 1995 
Strategy Update 

in today's increasingly complex, rod hostile 
markers it is no longer sufficient lo rely on 
post experience. Manager, musi think 
strategically when developing and 
implementing plans which will impact 
their company's competitive pnsiuun. Yet 
most managers devote lira than 3*? of ifieir 
time u> strategy develnpmcm. This seminar 
aims in redress Ihc balance. 

Contact: Elaine Purockt af Cran field 

School of Mroaecmcni 

Tel: 0234 751122 Fxx:n2.M 751M7H 

CRANF1EIJ1 


JANUARY 31 
Strategic Reward Policies 
A critical factor lor business 
success 

This practical programme for senior 
exec u tiv es will show how baking reward 
policies to stnuegic objectives can hmrex 
measurable impact on the successful 
impfemenmiJaa of corporate strategy. Run 
by Cranfkid School of Manage meat and 
The Wyatt Oropany. 

Cbnacc Jane Reed TeL- 0234 751 122 
The Institute of Director*. 

LONDON 


EXHIBITION 


DECEMBER 1-4 
EXPORaktetan: Trade Fair 

A raaqne oppo rtun ity for business contacts 
and ID see fee extensive stray of ftdostanh 
products: textile*, jewellery, ceramics, 
sanitaryware, onyx, giftware. carpets, 
sports goods, hand-crafted form tme eat. 
Contact: MrMAfearTUnr, 

Patton High Cta i n tih aiu u 
Fax: 071 23S 8731 
UUk) AM. to &00 PJM. daily 
Admission free. 

BARBICAN, LONDON 


INTERNATIONAL 


NOVEMBER 14 & 15 
FT-Dotng Business with 
Hungary - Investment 
Prospects RfeAppratead 
Following the election of a new 
Government, this major Financial Times 
forum will provide a timely opportunity to 
appraise Hungary's attractiveness as 
location for foreign direct and portfolio 
investment. 

Enquiries: Financial Times 

Tet 081-673 9000 Fax: 081-673 1335 

WARSAW 

■ t J-r i -' a— 

NOVEMBER 24 & 25 
Offshore Trust Administration/ 
Offshore Trusts & Trustees 
IPC have arranged two one-day 
conferences on related aspects of the 
offshore world, which compliment each 
other perfectly, bin which can be attended 
separately if desired. 

Farther details from international 
Professional Conferences Lid 
Tel: 061 445 8t>23 

JERSEY 

NOVEMBER 29 - DECEMBER 1 
10th World Airports Conference 
This conference will consider the two big 
issues currently facing airport planners: 
Airport Capacity and Development FtaxEng, 
Papers prcsenieJ on new airports: effidess 
use of existing airports oompctilhm » keep 
facilities in balance with demand and 
advantages/drsadvaruages or privatisation. 
Abo Latest airport developments n i Pacific 
Rim. South Africa and Europe. 

Contact: Carol Chin, tn p km inn of Qv3 
Tel: *44 (0j?| 8399913/2 
Fm: *44 (0|71 233 1743 

HONGKONG 

DECEMBER 5-6 
Competitive Intelligence 

Seminar for managers who want to learn 
how Competitive Intelligence supports 
both operational rffccDvenev. and strategic 
portioning. Topics indude aims nod role 
of intelligence in firms, collection 
methods. analytical technique?, 
organisation, and counter-intelligence. 
Principal lecturers are forme: professional 
intelligence officers. 

Contact: Business Research Group 
Tel. 022 929 1900 Fax: 022 788 0824 

GENEVA 

JANUARY 19-20 1995 
Security Export Control in the 
Russian Federation and 
Worldwide 

High-level expens in capon control from 
the Russian Federation. U.S.A.. France. 
Great Britain, European Union, from 
industry and international export 
organisations will present their view of the 
importance of export control in today's 
world. 

Moscow Olympic Perns Hotel. Moscow. ' 
Russian Federation. 

Ciwitaa: ISSC +-Wn 0)228-6483- 126 

MOSCOW 


w 


Anw n - 






fe 


TO ADVERTISE IN THIS SECTION PLEASE CALL NADINE HOWARTH ON 071-873 3503 





FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


-- — • - 




rf ‘ COl0r ^mon, 


link*"* .. , 

Ju plcd 


LONDON 

In a hectic week of London 
theatrical openings, 
Stephanie Cole (leti) conies 
to the Comedy Theatre 
tonight in “A Passionate 
Woman”; Brian Cox comes to 
Riverside Studios on 
Thursday in his own 
production of Ibsen's 
The Master Builder 4 '; 
and on the same night 
Mark Rylance and 
Michael Rudko 
(Swapping the rales ; 
of brothers at 
alternate 
performances) 
come to the 
Donmar 
Warehouse In 
Sam Shepard's 
True West". 


4: 


NATIONAL THEATRE, LONDON 

At the Cottesloe, Christopher Hampton's 
version of "Alice’s Adventures Under 
Ground” opens on Thursday, devised in 
collaboration with the 
choreographer/director 
Martha Clarke. 


/ 


NEW YORK 

The first night of the new staging of 
the Metropolitan Opera's 1994-5 
season is Shostakovich’s "Lady 
Macbeth of Mtsensk”, is on 
Thursday, it marks the Met debut of 
British producer Graham Vick and 
Ms designers Paul Brown and Nick 
Chelton. Maria Ewing sings the role 
of Katerina, and the conductor is 
James Con Ion. Other Shostakovich 
events at the Lincoln Center this 
month include a complete cycle of 
the quartets played by the Borodin 
Quartet 

COVENT GARDEN, LONDON 

On Thursday, the Royal Ballet 
shows the first of two programmes 
celebrating the work of Sir Frederick 
Ashton, including a revival of his 
ravishing "Daphnfs and CWoe", at 
the Royal Opera House. 


THE HAGUE 

•r A major retrospective of i7ttioerjfcKy. 
Dutch painter Patfue Potter opens ;• 
tomorrow at the Mauntshufe Wbfle, . 'jt- 
Potter*s reputation rests bo MS 

paintings of animate, this. v 

exhibftton aims to demonstrate; 

.'the versatility and tegfthutyV.rV 
, with which M depicted 
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The siege of the Barbican 

Antony Thomcroft examines the plight of Detta O’Cathain as she retreats into her bunker 



I f you arrive late, or leave 
early, from a concert or a 
play at the Barbican Centre 
in the City of London, you 
may well see a lone female 
figure surveying the empty foyers, 
checking out the bars, the cafes and 
the toilets, like a cross between a 
ghost and a night manager. It is 
Baroness Detta O'Cathain. the 
director of the centre, whose future, 
4| under intense speculation for two 
w years now. seems increasingly par- 
lous. 

Last week the centre started a 
search for a deputy director, but not 
just any old deputy. This new 
appointee will also be responsible 
for artistic programming and even- 
tually will replace the lady herself. 
It puts the Baroness in a virtually 
impossible position and she is 
resigned to not seeing out the 
remaining three years of her con- 
tract Tm not going to walk out 
Whether I will be here in a year's 
time I do not know. If the ideal 
person came in and bedded down 
rapidly it could be a matter of 
months”. 

O’Cathain’s plight is the inevita- 
ble consequence of a culture clash. 
She arrived, in 1990 to lick the Bar- 
bican into financial shape. Under 


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her predecessor, Henry Wrong, it 
had been a happy, easy going place, 
where the bottom line lost out in 
the battle for artistic excellence. A 
committed Thatcherlte, O'Cathaln 
had the backing of the City Fathers, 
who bail out the Barbican with 
£13 .5m a year in subsidy, to knock 
heads together. 

She has succeeded only too well. 
“I have always stayed within bud- 
get" she boasts. But there has been 
more blood around the place that at 
the end oT Hamlet Around 50 of the 
220 staff have left, and relations 
with those remaining, worried 
about their jobs and the centre's 
future, are not good. The situation 
has deteriorated rapidly since the 
s umme r when O'Cathain sacked her 
artistic director. Kenneth Richard- 
son, a few months after appointing 
him. 

This has forced her to take a 
more active role in programming at 
the Barbican Hgll, with some 
unhappy consequences. A series of 
three concerts designed to intro- 
duce a new audience to classical 
music attracted attendances of less 
than 30 per cent and lost money. 
Instead of the centre promoting just 
over 20 performances a year at the 
hall, with outside producers like 


Raymond Gubbay filling the gaps 
and taking the risk, it has had to 
find shows for almost 100 nights, a 
daunting task at a time when con- 
cert attendances around the coun- 
try have fallen sharply. 

So strong had the murmurings 
become in recent weeks that Geoff- 
rey Lawson, chairman of the Barbi- 
can Centre committee, and a firm 
champion of Detta O'Cathain, was 
forced to investigate. He asked the 
heads of the main users of the Bar- 
bican - Adrian Noble of the RSC, 
Clive Gillinson of the LSO, Ray- 
mond Gubbay, and the Guildhall 
School of Music - for their views. 

T hey were not encourag- 
ing about O'Cathain's 
prospects. They spoke of 
a lack of direction in the 
Barbican, shortcomings 
in artistic vision and a lack of moti- 
vation and support among staff. 
There was also concern about the 
Baroness's part-time directorships 
and her involvement in the House 
of Lords. Lawson had no alternative 
but to launch the sudden hunt for a 
deputy-corae-replacement. He has 
also reassured the staff by saying 
there will be no more job losses - a 
public indication that, for the first 


time, O'Cathain has lost the back- 
ing or the City. 

It is not surprising that she feels 
hard done by and has retreated into 
her bunker. She has discovered the 
tough way that practitioners in the 
arts are sensitive and self-regarding 
and have an exaggerated opinion of 
their creative contribution. In her 
world, the balance sheet rules; in 
theirs, it Is the emotional experi- 
ence. 

She was brought in to administer 
the centre - to improve the catering 
facilities, to make the place more 
agreeable to visitors, to raise its 
reputation and bring in sponsors - 
but she just could not keep her 
hands off the artistic planning 
when she discovered that at certain 
concerts each of the few attenders 
was being subsidised at the rate of 
£54 a bead. 

Such interference has contributed 
to her current plight. In many ways 
the Barbican is a more attractive 
venue. Little can be done about its 
brutalist exterior and depressing 
approaches, but inside the ambi- 
ance. the catering and the free foyer 
entertainment make it quite jolly. 

O'Cathaln laboured hard to 
improve the acoustic in the Barbi- 
can Hail. She has helped to attract 



Under fire: the beleaguered director Baroness Detta O’Cathain 


millions in sponsorship - at last 
week's opening of the ambitious 
Everybody's Shakespeare Festival 
she could claim some credit for the 
£700,000 raised - and then? are few 
corporate receptions at the centre 
where she is not on hand, pressing 
the flesh. 

But she bad not been prepared to 
soften her abrasive style, to answer 
the criticisms that she came to the 
Barbican from the Milk Marketing 
Board knowing little about the arts 
and convinced that they could be 
managed and marketed like any 
other product. Her attempts to 
influence the artistic programming 
have not been successful, and, with- 
out an artistic director, the Barbi- 
can faces many dark nights and few 
major eye catching festivals. 

Ironically, it has worked against 
her that her two main tenants, the 
RSC and the LSO, are currently 
enjoying artistic an4 financial 
highs. Both had their problems set- 
tling in to the Barbican, but now 
they are happy and successful they 
expect the same from their land- 
lady. It matters to them that their 
mutual home is populated by 
relaxed staff and contented visitors. 
An ill attended concert at the Barbi- 
can Hall rubs off on the theatre. In 
the old days the different audiences 
mingled together, sniffing out 
future treats in other parts of the 
centre. The tenants now t hink they 
are carrying the Barbican and want 
a better service. 

The Barbican Centre was a child 
of post-war planning. It took 
decades to complete and by the time 
it opened in 1982 the worldhad 
moved on. It was anticipated that 
commercial rentals from the adja- 
cent exhibition centre andfrom the 
hall would pay for the arts pro- 
gramme. It was a pious hope. Little 
has worked out as projected and 
Mammon and culture have been 
forced into a difficult marriage. 

When the arts flourished, and 
there were plenty of successful 
bookings for the hall, all the parties 
could live in reasonable harmony. 
The anomalous position of the cen- 
tre's director, who was mainly 
responsible for run-of-the-mill sup- 
port services but who also had to 
master mind an artistic programme 
alongside the work of the RSC- and 
the LSO, was skated over. When 
times were harder, and money 
talked more loudly, there were 
bound to be rows. 

O’Cathain will not be the first 
business person to come unstuck 
when mixmg it with the arts. Hav- 
ing badly wounded their prey they 
now hope for a quick kill. The feel- 
ing is that the Barbican will not 
attract the first class artistic (and 
tyro business) manager it needs if 
there is uncertainty about the 
future of the boss. Detta O'Ca- 
thain's fate seems to mirror uncan- 
nily that of the former prime minis- 
ter whose views she so admired. 


Theatre 


Dillane gets to 
the heartbeat of 
Hall's Hamlet 


N ot only is Stephen Dil- 
Lane’s Hamlet the fre- 
shest, most interesting, 
and most peculiar ingre- 
dient of Peter Hall’s new staging of 
Hamlet, be is also the most modern. 
The production is curious in con- 
taining several dissimilar acting 
styles, and Dillane's performance 
makes most of the other key charac- 
ters - Claudius, Gertrude, Ophelia, 
Polonius - seem somewhat artifi- 
cial. We. watching, may not feel 
that we are in their world, yet we 
never doubt we are in his. His per- 
formance is close to the one he gave 
as Prior, the Aids patient in Angels 
in America, and yet here it is far 
from unstylish. He is alienated from 
the court about him, but with no 
Romantic beauty about his alien- 
ation. He is ironic, self-critical, 
witty, passive, but incisive. 

I have never heard a Hamlet less 
concerned with vocal beauty or 
technique. Fascinating to be hear- 
ing him alongside Michael Penning- 
ton. who here plays both Claudius 
and Ghost, and who. 14 years ago. 
was an exceptionally intelligent 
Hamlet whose gorgeous vocal virtu- 
osity was geared to showing the 
vast range of Hamlet's thought. Dll- 
lane is altogether smaller-stale, less 
energetic, Less varied, but 
immensely more spontaneous. Very 
simply, he uses the rhythm of the 
verse to reveal its heartbeat The 
most important thing about him is 
that we hang easily on his every 
word. And yet the most striking 
oddity about him is his voice - dry, 
unlovely. The dryness is itself 
expressive; it tells us of Hamlet's 
detached, sardonic, attitude. 

And the voice is the man. This is 
a hand-on-hip Hamlet, who shrugs, 
and rolls his eyes in disbelief. (The 
latter is overdone.) We see the delib- 
erate lack of manly assertiveness, 
and we see how absurd he often 
finds his society. Though it helps 
Hamlet if Hamlet is more visibly a 
prince, and more evidently capable 
of virile ardour, these limitations 
scarcely troubled me while I was in 
the theatre. 

1 did miss the bounding scale of 
Hamlet's thought; Dillane's Hamlet 
is scarcely a philosopher at alL As 
for his wit, 1 wanted yet more; the 
energy of Hamlet’s mind should cor- 
uscate. But everything Dillane does 
is spontaneous. When it comes to 
self, and family, and court, he 
reveals, wonderfully, many things 
in Hamlet - not least his self-loath- 
ing. Then, towards the end, he finds 
the right inner calm. 

This Hamlet is not, however, the 
best vehicle for this Hamlet. Lucy 
Hall has designed an attractive 
cyclorama of sea and clouds (and 
we hear the thumping waves and 
whistling wind), while the centre of 


the stage is a forward- tilted grey 
circle. All that, obviously, is Nature, 
and is meant to clash with the court 
- for which long-stranded red cur- 
tains descend, and red furniture is 
brought on. But the court is dis- 
tractingly vulgar. And there is 
pointless, dull muzak. 

In theory, 1 like the way that the 
presence of Pennington and Donald 
Sinden (Polonius) supplied the pro- 
duction with an immense wealth of 
Shakespearian experience. Some of 
their lines have marvellous force, 
such as Claudius's first fierce stab 
of guilt, “How smart a lash that 
speech doth give my conscience!," 
and Polonius's "I do know. When 
the blood bums, how prodigal the 
soul Lends the tongue vows...” 

Everything Pennington does is 
intelligent; and Sinden gives an 
interestingly punitive edge to Ids 
scenes with Ophelia. But there is 
too much contrivance about most of 
Pe nnin gton's utterance; and Sin- 
den's standard vocal tricks - espe- 
cially the prolonged vowels and 
final consonants - remind us of his 
canny old actorliness, at the 
expense of Polonius to us. 

Ophelia is probably the most 
impossible role in Shakespeare, and 
Gina Bellman is not the first to 
have been tripped over by LL 

Y es, she is pretty; yes, she 
has presence. But. in her 
effort to show us the per- 
plexed suffering and repres- 
sion of Ophelia's early scenes, she 
already seems precious and insin- 
cere. That her mad scenes (men- 
strual blood staining her dress, 
spastic gestures, pigeon-toed mock- 
ballet steps) are all artifice is 
scarcely surprising. Gwen Taylor's 
Gertrude, brightly superficial at 
first, gets better, as events force her 
to grow more honest; but with no 
especial depth. 

Although this production has 
been touring Britain for months, it 
feels under-prepared. I never 
believed that Polonius, Laertes 
(Tom Beard), and Ophelia were one 
family; or that Gertrude and Clau- 
dius could have slept together; or 
that Hamlet and Ophelia had been 
in love; or that this Gertrude and 
Hamlet were mother and son. 

A further problem is that the 
Gielgud Theatre (formerly the 
Globe) does not have the kind of 
comfortable seating to help us 
through a play as long as Hamlet 
(How ironic; the names Gielgud and 
Hamlet should go together like 
bread and butter.) The production 
lasts considerably longer than four 
hours. A second Interval would 
help, but n more integrated produc- 
tion would help much better. 

Alastair Macaulay 


[| Interna tional]\ 

:.A 

R 

F§ v 

CtI 

7T 

DR 






■ BERLIN 

OPERA/DANCE 

Deutsche Oper The main event this 
week is the first night oh Sat of a 

new production of Poulenc's 

Dialogues des Carm6Gtes, 

conducted by Jin Kout steged by 

GOnter Kramer and deigned by 
Gottfried Pilz, with a cast headed by 
Rita Goh, Karan Armstrong, 
Alexandra vph der Weth and Lucy 
Peacock {repeated Nov. 17, 23, 25, 
29; Dec 1). Repertory, also includes 
Alda (imth -Juila Varady) and a 
.Balanchine programme. Wagner’s • 
FBng wfl! be- performed on Nov .16, 
20. 27 and Dec 4, and again on Dec 
11„14 Wk 118(341 0249) 
Staatsoper itnter den Linden A 
" new stetfng of-ttoee Balanchine 
ballete.'foc^ng'Symphdny in C, 
opens dnButvTfce pew 
Bajwbp&n^Gjpfer production of 
Siegfried can fce seen on Nov 9, 16 
and 20* with a cast headed by 
Siegfried Jerusatem/Relner 
Goldberg,- Falk Kruckmann, Graham 
Oarit arid Deborah' PolaskL 
'Repertory aJar -includes Telemann s 
Oiptwuff arid’Toaca stsvrtng 


Suzanne Murphy and Sergei Larin 
(200 4762/2035 4494) 

CONCERTS 

PfiDharaionle Tonight Daniel 
Barenboim conducts Scharoun 
Ensemble in Schoenberg's chamber 
version of Mahler’s Das Lied von der 
Erde, with soloists Marjana Lipovsek 
and Peter Schreter. Tomorrow: Frans 
BrOggen conducts Orchestra of the 
18th Century in works by Rossini, 

' Schubert and Mendelssohn. Wed, 
Thurs and Fit Simon Rattle 
conducts Berlin Philharmonic 
Orchestra In works by Hindemith, 
Berg, Debussy and Ravel. Claudia 
Abbado conducts Brahms and 
Beethoven on Nov 17 and 18, and 
concert performances of Bektra on 
Nov 30 and Dec 4 (2543 3132) 

JAZZ 

The Berlin Jazz Festive nine from 
Nov 16 to 20 at Haus der Kutturen 
der Welt. Guest artists Include Bvin 
Jones Jazz Machine* Randy Weston 
African Rhythms Quintet, Count 
Basle Orchestra, Phil Woods and 
j J. Johnson Quintet (2548 9254) 

■ NEW YORK 

THEATRE 

• Sunset Boulevard: the show has 
finally reached Broadway, with 
Glenn Close as Norma Desmond. 
Nowin previews, opens Nov 17 
[Mlnskoff Theatre, 200 West 45th St, 
869 0550) 

• Show Boat: Harold Prince's new 
production of the 1927 Jerome 
Kem/Oscar Hammerstein musical is 
the first show on Broadway to cost 
$75 a ticket ft to a huge hit which 

. will run and run - but in her FT 
review, Karen Pricker said that 
despite its musical excellence; the 


production was emotionally empty 
(Gershwin, 51st St west of 
Broadway, 307 4100) 

• Love! Valour! Compassion!: 
sight men gather at an Idyllic 
country home over the course of 
three holiday weekends, in the latest 
play by Terrence McNally - author of 
numerous well-regarded plays 
(Manhattan Theatre Club, 131 West 
55th St, 581 1212) 

• Angels In America: Tony 
Kushnerie epic play conjures a 
vision of America at the edge of 
disaster. Part one is Millenium 
Approaches, part two Perestroika, 
played on separate evenings. Catch 
it now before the show closes at 
year-end (Walter Kerr, 219 West 
43th St 239 6200) 

• Three Tall Women: a poetic play 
by Edward Albee, dominated by the 
heroic performance of Myra Carter. 
She, Jordan Baker and the droll 
Marian Seldes represent three 
generations of women trying to sort 
out their pasts (Promenade, 2162 
Broadway at 76th St, 239 6200) 

• A Cheever Evening; A.R 
Gurney’s play Intertwines elements 
from 18 stories by John Cheever to 
create a new work, paying homage 
to one of his Influences while 
showing Cheever’s work in a new 
light (Playwrights Horizons, 416 
West 42nd St, 279 4200) 

• An Inspector Calls: J.8. 
Priestley's 1945 mystery thriller in a 
stunning re-interpretation by 
Stephen Daldry, first seen at 
Britain's National Theatre (Royale, 
242 West 45th St, 239 6200) 

O Uncommon Women And Others: 
a revival of Wendy Wasserstdn's 
play about friends at a small New 
England women’s college, who meet 
for tea and then for a reunion six 


years later (Lucille Lortel, 121 
Christopher St. 239 6200) 

• Jelly Roll!: Vemel Bagneris stars 
in a musical show about jazz legend 
Jelly Roll Morton (47th Street 
theatre, 304 West 47th St. 265 1086) 

• Carousel: Nicholas Hytner's 
bold, beautiful production launches 
the 1945 Rodgers and Hammerstein 
musical towards the 21st century 
(Vivian Beaumont. 150 West B5th St, 
239 6200) 

• Kiss of the Spider Woman: pop 
star and ex-Miss America Vanessa 
Williams has taken over the title role 
in the long-running Kander and Ebb 
musical (Broadhurst, 235 West 44th 
St. 239 6200) 

OPERA 

Metropolitan Opera Shostakovich's 
Lady Macbeth of Mtsensk. opening 
on Thurs, is the first new production 
of the season. James Conlon 
conducts a staging by Graham Vick, 
with designs by Paul Brown. The 
cast is headed by Maria Ewing, 

Mark Baker and Sergei Koptchak 
(further performances Nov 14. 18, 

22, 26, 30, Dec 3. 7, 10). This 
week's repertory also features 
Rigoletto tomorrow and Sat with 
Alfredo Kraus and Sumi Jo. and Gav 
and Pag on Wed with Vladimir 
Atlantov as Canio (362 6000) 

DANCE 

New York City Ballet's winter season 
runs from Nov 22 to Feb 26 at New 
York State Theater. The opening 
night gala features a new pas de 
deux by Peter Martins. 

(307 4100/870 5570) 

CONCERTS 

Carnegie Hall Nancy Wilson gives 
tonight’s concert. Philippe 
Herreweghe conducts Orchestra of 


St Luke's and La Chapelle Royale 
on Thurs in Stravinsky's Mass and 
Faure's Requiem (247 7800) 

Avery Fisher Hall Charles Dutoit 
conducts New York Philharmonic 
Orchestra tomorrow In works by 
Prokofiev, Ravel and Respighi, with 
violin soloist Glenn Dictorow. On 
Thurs, Fri and Sat. Hugh Wolff 
conducts Albert, Prokofiev and 
Dvorak, with piano soloist Leon 
Fleischer (875 5030) 

Alice Tully Hail The Borodin 
Quartet's cycle of Shostakovich 
string quartets continues on Nov 13, 
16 and 20 (875 5050) 

JAZZ/CABARET 

Blue Note Sheila Jordan Trio can be 
heard tonight. Stanley Jordan is in 
residence for the rest of the week 
(131 West 3rd St. 475 8592) 
Algonquin Hotel Weslia Whitfield 
brings her droll wit and agile voice 
to bear on two shows, Including 
songs by Rodgers and Berlin. 

Nightly from 9pm (59 West 44th St. 
840 6800) 

Cafe Carlyle Bobby Short continues 
to hone respectful but incisive takes 
on every standard under the sun. 
Nightly from 8.45pm (35 East 76th 
St. 570 7189) 

■ PARIS 

DANCE 

• The Kirov Ballet gives a final 
performance of La Fontaine de 
Bakchisara! tonight at Theatre des 
Champs-Elysees, with guest soloist 
Sylvie Guillem. The Kirov Opera 
arrives on Nov 23 for a Three-week 
residency (4952 5050) 

• The opening production of the 
Paris Opera Ballet’s 1994-5 season 
can be seen tomorrow. Thurs and 


Sat at the Bastille (with two final 
performances next week). It consists 
of a Baianchine-Robbins programme 
preceded by a grand spectacle with 
the entire company. There is also a 
young dancers' programme on Nov 
13 and 19, consisting of extracts 
from classical ballets (4742 5371) 

• Trisha Brown Dance Company 
is in residence from tomorrow till Sat 
at Theatre de la Ville (4271 2277) 

MUSIC 

• Le nozze dr Figaro runs till Dec 
4 at the Bastille; this week’s 
performances are tonight. Wed and 
Fri. Ivan Fischer conducts a cast 
including Hakan Hagegard. Leila 
Cuberii, Andrea Rost, Ferruccio 
Furianetto, Brian James, Anne 
Howells and Federico Davia (4473 
1300) 

• A second and final cycle of The 
Ring can be seen at the Chatelet 
this week, beginning tomorrow with 
Das Rhelngold. The conductor is 
Jeffrey Tate and the producer Pierre 
Strosser. The cast is headed by 
Robert Hale, Gabriele Schnaut, 

Heinz Kruse and Kurt Rydl (4028 
2840) 

• This week's concerts at Theatre 
des Champs-Elysees feature Teresa 
Berganza on Wed and Wynton 
Marsalis Septet on Thurs. Nov 22: 
Glulini conducts the Vienna 
Philharmonic (4952 5050) 

JAZZ/GABARET 

American soul singer Mighty Sam 
McClain is in residence this week at 
Lionel Hampton Jazz Club. Nov 
14-26: J.J. Johnson Quintet Music 
daily from 10.30pm to 02.00am 
(Hotel Merldlen Paris Eloile, 81 
Boulevard Gouvion St Cyr, tel 4068 
3042) 


ARTS GUIDE 

Monday: Berlin, New York and 
Pans. 

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) 

MONDAY TO FRIDAY 
NBC/Super Channel: FT Busi- 
ness Today 1330; FT Business 
Tonight 1730, 2230 


MONDAY 

NBC/Super Channel: 
Reports 1230. 


FT 


TUESDAY 

Euro news: FT Reports 0745, 
1315, 1545, 1815, 2345 

WEDNESDAY 

NBC/Super Channel: FT 
Reports 1230 

FRIDAY 

NBC/Super Channel: FT 
Reports '1230 

Sky News: FT Reports 0230, 
2030 

SUNDAY 

NBC/Super Channel: FT 
Reports 2230 

Sky News: FT Reports 0430, 
1730; 







16 


★ 


Compelling case 
for monetary union 



Persona l 
view 


Economic and 
monetary 
union is the 
central part of 
the project for 
European unifi- 
cation. For a 
country to 
transfer power 


over its currency to an inde- 
pendent European central 
bank represents a most 
Ear-reaching form of European 
integration, not least because 
the central bank's decisions 
would affect governmental 
decisions in many other fields 
of economic and social policy. 

The European states linked 
by monetary union will need to 
show solidarity in many other 
spheres. If they were to drift 
apart on fundamental ques- 
tions of foreign and security 
policy, for example, it would 
jeopardise the consensus 
needed in the economic field. 

Once the fundamental link 
between monetary and politi- 
cal union is recognised, three 
important assertions can be 
made. First, European Union 
members that form the “core" 
of monetary union will also be. 
for the foreseeable future, at 
the core of political union. 

Second, any country that 
opposes monetary union can 
also be held to oppose political 
union, and vice versa. Third, 
any country that comes out 
against either of these goals 
clearly has no interest in the 
success of the 1996 intergovern- 
mental conference to review 
progress since the Maastricht 
treaty. This conference will be 
important for trying to bring 
about Anther improvements in 
plans for political union, 
matching the agreements on 
monetary union made at Maas- 
tricht in 1991. 


No one can be in any doubt 
that monetary union is neces- 
sary. The D-Mark occupies 
what some feel to be a domi- 
nant position in Europe. As a 
result, the existing European 
Monetary System, which is In 
essence a German one, cannot 
be a permanent solution for 
Europe’s monetary arrange- 
ments. In the long run. it is 
unacceptable for other member 
states to have to acquiesce In 
monetary decisions made by 
the Bundesbank. 

A recent discussion paper 
from the Christian Democratic 
Union/Christian Social Union 


parliamentary group in Bonn 
attracted controversy because 
it postulated the likelihood of a 
core group emerging in the EU 
comprising those member 
states ready for monetary 
union. In reality, however, this 
statement contained nothing 
that was new. 

Not ah 12 members of the EU 
will be able to take part in 
European monetary union 
(Emu) in 1997, or even after 
1999. because they will not 
meet the convergence criteria 
for Emu set down in the Maas- 
tricht treaty. This has already 
been tacitly acknowledged in 
recent budgetary projections 
by Spain and Portugal, at least 
as far as 1997 is concerned. 

After the publication of the 
CDU/CSU paper, some observ- 
ers in Britain voiced their hope 
that France would not join an 
Emu core group that included 
Germany but not other larger 
EU member states. Some peo- 
ple in Britain even appear to 


Those who cling 
to national 
sovereignty are 
seeking solace in 
an empty shell 

think that this could cause the 
Emu project to fail - perhaps 
for good. Such an argument 
flies in the face of reality, how- 
ever. 

Even if monetary union were 
limited at first to a small core, 
each non-German member 
would be in- a better position 
than today, since decisions 
would be taken not by the 
Bundesbank but jointly by a 
European central bank. Any 
country that meets the conver- 
gence criteria, therefore, has 
an interest in taking part in 
Emu as soon as practicable. 

Countries that deliberately 
chose not to take part in such 
a union would be in a difficult 
position. If the D-Mark is held 
to be dominant today, how 
much more would this apply to 
a future European currency in 
a monetary union comprising 
perhaps eight or 10 present and 
future member states? 

Countries outside Emu 
would have no say in the deci- 
sions of the European central 
bank. This would be a serious 
handicap to a country such as 


Britain which has Europe's 
largest financial market 

There are other reasons, too, 
why Germany Is interested in 
monetary union. Germany is 
no longer capable of. or inter- 
ested in, exercising some form 
of European hegemony. Its 
strength vis-a-vis its European 
partners - in economic, politi- 
cal or military terms - is not 
comparable with that of the US 
vis-a-vis its partners in the 
Brett on Woods system or Nato 
after the second world war. 

The overwhelming desire of 
the German political establish- 
ment is to invest the country's 
strength in the construction of 
Europe. That fact has not been 
changed by the result of the 
German general elections, even 
though Chancellor Helmut 
Kohl's majority in the Bundes- 
tag has fallen. 

If, however, efforts to estab- 
lish monetary union were to 
fail, the process of political 
integration would also come to 
a halt, at least for the time 
being. This would have disas- 
trous consequences - not sim- 
ply for Germany but also, 
directly or indirectly, for all 
other EU states. 

We Germans, facing various 
temptations and pressures to 
adopt a “go-it-alone’’ policy 
towards eastern Europe, see - 
due to the catastrophe of 1945 
perhaps a little bit clearer than 
other European states - the 
need to learn the lessons of 
history. Yet the Europe of the 
future cannot and must not be 
built simply on the lessons of 
the past. The imperatives of 
the present are equally compel- 
ling, and these call for common 
European institutions. 

The nation states of Europe 
must face the reality that they 
are no longer capable of mas- 
tering by ourselves all their 
external challenges. Those who 
cling to national sovereignty 
are seeking solace in an empty 
shell In trying to escape from 
Europe, they are seeking to 
escape reality. And this is an 
endeavour which, as everyone 
knows, is doomed to failure. 

Karl Lamers 

The author is foreign policy 
spokesman of the Christian 
Democratic Union! Christian 
Social Union parliamentary 
group in Barm. 


A s Renault. the motor 
group, enters the 
home straight on its 
Journey to the stodc 
market, the French govern- 
ment is weighing the next 
steps in its programme to dis- 
pose of much of the state's cor- 
porate assets. 

Individual investors have 
until Thursday to confirm 
orders for shares in the partial 
privatisation of Renault, but 
Mr Edmond Alphandfiry. the 
economy minis ter, is already 
plotting his next steps. He has 
lit the fuse far the privatisa- 
tion of Seita, the state tobacco 
monopoly, by launching the 
process to select adviser banks 
for the sale. 

Mr Alphanddry has also 
emphasised tha t the insurance 
companies Assurances Gener- 
ates de France and the Caisse 
Nationale de Prtvoyance are 
on the auction block, and that 
industrial partners are being 
invited to invest In Groupe 
Bull, the computer maker. 

The preparations reflect the 
government's strategy of hav- 
ing several irons in the fire. 
But they also demonstrate the 
need to maintain momentum 
in France's ambitious privati- 
sation drive. For 1995. the cen- 
tre-right administration of 
prime minister Edouard Baha- 
dur is bonking on receipts of 
FFrS5bn (£6.5bn) from the sale 
of state assets, the same target 
as for this year, and vital to Its 
goal of cutting the budget defi- 
cit from FFr301bn in 1994 to 
FFr275bn. 

Maintaining such momen- 
tum could, however, prove 
tough. As the government 
moves down the list of 21 pub- 
lic-sector groups it selected for 
sale on taking office last year, 
the going may become more 
difficult 

Part of the reason is that the 
government has set itself a 
hard act to follow. The first 
four privatisations - Banque 
N ation&le de Paris, Rhone 
Poulenc, the chemicals group. 
Elf Aquitaine, the oil company, 
and the insurer Union des 
Assurances de Paris - involved 
stars of the public sector. Prof- 
itable, and f amiliar to inves- 
tors through the existence of 
tradeable securities, they 
slipped smoothly into the 
hands of private investors. The 
combined receipts totalled 
FFr94.4bn, with Elf alone rais- 
ing FFr34- 9 bn. 

The flotation of Renault, 
another of the state's prize 
assets, is also proceeding 
smoothly. Institutional inves- 
tors have demanded 15 times 
as many shares as they had 
been allocated. Industry 
observers expect sufficient 
demand for the 60 per cent of 


MONDAY NOVEMBER 7 1994 


A hard act 
to follow 

John Ridding asks whether France’s drive 
to privatise can sustain momentum 


the shares alloted to be sold to 
individual investors. 

It is after Renault, however, 
and the FFriJbn or so its flota- 
tion will bring the state that 
the challenges become more 
complex. This is partly because 
some of the next candidates for 
sale are in blighted market sec- 
tors and partly because the 
sale of profitable public-sector 
companies leaves the govern- 
ment with fewer large, attrac- 
tive assets. Political sensitivi- 
ties in the run-up to next 
spring’s presidential elections 
and the depression looming 
over the stock market may fur- 
ther complicate the task 

Mr Alphand6ry is keen that 
Assurances Generates de 
France should be dispatched as 
soon as possible and most 
industry analysts regard the 
insurer as an attractive com- 
pany. But tike other insurers, 
AGF has been hit hard by mar- 
ket conditions. Its shares have 
fallen by more than 35 per cent 
this year, as the value of its 
bond portfolio has plunged 
with rising long-term interest 
rates. CNP, the other insur- 
ance company on the block for 
partial privatisation, has been 
similarly affected. 

“The government is ready to 
launch both operations." says 
one insurance industry ana- 
lyst, “but it cannot be seen to 
be flogging off the state silver- 
ware too cheaply.” 

Such considerations are a 
factor in the decision to start 
work on Seita. Like AGF and 
CNP. the tobacco monopoly is 
potentially attractive, achiev- 
ing net profits of FFr585m last 
year, against FFr447m in 1992. 

But privatisation may prove 
politically sensitive, since Sei- 
ta's Gitanes and Gauloises 
brands are, for many, an 
important symbol of French 
culture. There is also opposi- 
tion among trade unions at the 
company, which have started 
to mobilise against the sale. 

Seita, like several other com- 
panies near the top of the pri- 
vatisation list, Is a relatively 
small operation. Although the 
sale of AGF would bring more 
than FFrlSbn, the tobacco 
group is valued at about 
FFrTbn, more than the expec- 



ted receipts from the partial 
privatisation of CNP. Bull, still 
reporting losses, is unlikely to 
bring significant income, 
despite the FFrllbn In subsi- 
dies it has been granted over 
the past two years. 

The problem facing the gov- 
ernment is that big does not 
mean beautifuL State-owned 
giants such as Air France and 
Credit Lyonnais are incurring 
big losses and undergoing radi- 
cal recovery programmes that 
must be completed before they 
can be sold. 

There are several attractive 
large companies on the privati- 
sation list. These include 
Thomson, the electronics 
group. Usinor Sacilor, the steel 
company, and Pechiney, the 
aluminium and packaging con- 
cern. 

But each has its complica- 
tions. Thomson may merge its 
defence and consumer elec- 
tronics activities before sale. 
Usinor Sacilor. although back 
in the black after losses of 
FFr5.7bn last year, must 


for the savings of the French 
public. Last month, for exam- 
ple. the government launched 
a scheme to sell 10-year gov- 
eminent bonds direct to the 
public: with a yield of about 7.5 
per cent they are proving an 
attractive investment 
Despite the array of chal- 
lenges, the French government 
is sanguine. “Hie success so 
far augurs well for the next 
stages,” says one offi c i a l . He 
cites strong demand from insti- 
tutional investors, and says 
that industrial partners have 
gi«n shown a healthy appetite 
for privatisations. The planned 
investment In Renault by 
Lagard&re group, the defence 
ami comm unications com p any 
that helped develop the Ren-: 
ault Espace car, is one exam- 


si P le - 


reduce its debt burden of 
FFr20bn. Mr Jean-Pierre 
Rodier. who took over as chair- 
man at Pechiney in July, 
believes the need to return the 
group to profit and reduce bor- 
rowings suggests privatisation 
in 1996, rather than next year. 

If many of the privatisation 
candidates are not yet in a 
state of readiness, neither is 
the market It is not just the 
insurance sector which has 
been hit this year. The CAC-40 
index of leading shares has 
fallen by 19 per cent since its 
February peak, depressing the 
value of privatisation Issues. 
With the exception of BNP, all 
the privatisation issues are 
trading below their issue price. 

“Investors may have been 
disappointed.” says a broker at 
one French securities house. 
"Renault should see strong 
demand, but less femlhar and 
less profitable companies may 
experience a more cautious 
approach from the public.” 

Caution may be compounded 
by the increased competition 


Officials play down talk of 
disenchantment among retail 
investors. “Privatisation shares 
have fallen by less than the 
market as a whole; and inves- 
tors are aware of the potential 
upswing,” says an aide ait the 
economy ministry. 

At the Industry ministry, the 
message is that the restructur- 
ing programmes necessary to 
prepare the next batch of pri- 
vatisation candidates will bear 
fruit. “If you look at Renault, 
not so long ago it was a sick 
pian of the public sector. It is 
possible to get the loss-makers 
into shape and It will be helped 
by the strong revival in the 
domestic economy.” 

Such an assessment is sup- 
ported by industry observers. 
“They have the assets, and the 
political sensitivity of some of 
the sales will matter less after 
next spring's presidential elec-:, 
tions,” says one merchant 
banker. 

One option is to sell a second 
t ranche of shares in Renault, 
reducing the state's holding to 
below 50 per cent. Mr Alphan- 
d£ry has dismissed such a sce- 
nario. “We have no plans for a 
second' operation," he says, 
reflecting official sensitivity 
concerning the c ompany , a for- 
mer stronghold of union 
power. But Mr Louis 
Schweitzer. Renault’s chair- 
man, hinted at the possibility 
last week that the flotation 
represented a step rather than 
an end in his company's priva- 
tisation process. 

Should individual Investors 
demonstrate the same appetite 
for Renault as their institu- 
tional counterparts, Mr 
Schweitzer's state ' shareholder 
may come to agree. As one 
Paris banker puts it “If other 
issues are moving tricky, then 
a further sale of Renault 
shares could prove an enticing 
way of easing a budgetary 
bind." 


Quite simply 
the Royal Oak 


m 

4UDEMAR S Pictet 

The master watchmaker. 


l-'nr ml, ioii.iin hi .inil i-jul'SMi- «f»i- 

\inlLiir.'r> IVjm-i »\ i.k- I'wU- Mriw.ii. s-« n.vri.irkl 
TH It _'l l-l «J Ms ll JJ a«4 IJ It 



LETTERS TO THE EDITOR 


Number One Southwark Bridge, London SE1 9HL . ■#.* 

Fax 071 873 5938. Letters transmitted should be clearly typed ana not hand written. Please set fax for finest resolution 


Government must 
play part to achieve 
endogenous growth 


From Mr Robert J Shapiro. 

Sir. I follow with interest 
your discussion of the endoge- 
nous sources of national 
growth. In truth, much of the 
disagreement seems to concern 
the political preferences of 
Kenneth Clarke, chancellor of 
the exchequer, and others, to 
which the economics of the 
matter are largely indifferent 

What can be said with cer- 
tainty is that national growth 
rates are affected not only by 
the capacity of companies and 
workers to enhance their effi- 
ciency. but also by their capac- 
ities for innovation. In this 
regard, innovation refers not 
simply to the development of 
new physical technologies, but 
virtually every aspect of the 
economic process, from identi- 
fying or locating new materi- 
als, sources of labour or means 
of finan cing and marketing, to 
reorganising jobs and work 
places. Endogenous growth 
policy involves all factors 
which contribute to such varie- 
gated innovation, as well as to 
efficiency. 

This view will not reassure 
political promoters on the hard 
left or the hard right. Higher 
efficiency requires greater 
investment, which in turn 
requires capital-encouraging 
policies. That includes what 
should seem obvious - sound 
monetary policy, enhanced 
access to capital especially for 
smaller companies, and cycli- 
cal fiscal discipline - but not, 
as many might like it, lower 
marginal tax rates on the 
returns from certain capital 
(which evidence indicates has 
little affect on the aggregate 
net store of capital). 

It also involves an enhanced 


commitment to enlarging the 
supply of public capital Profes- 
sor Robert Barra says as much 
(Personal View, November 1) 
when he notes the importance 
of improving the skills and 
health of the workforce and 
the quality of the infrastruc- 
ture (which, properly chosen, 
produce returns higher than 
those from private invest- 
ment). Also, add to that the 
store of basic research. 

These functions cannot be 
"privatised” without sacrific- 
ing an increment of growth. 
Put another way, government's 
role in national growth is sub- 
stantial - an investor, not 
director - for an advanced 
economy cannot for long raise 
its underlying growth rate 
without vigorous public (and 
private) investment 

Your correspondents are not 
wrong in suggesting that com- 
petition also matters to 
national growth rates, because 
(like political parties) compa- 
nies and workers innovate only 
when competition forces them 
to. Regulation which impedes 
competition - for example, 
laws and rules insulating 
banks or telecommunications 
companies from certain 
sources of competition - 
makes no sense in a growth 
programme. This should not be 
confused with ideological 
demands to roll back other 
forms of regulation, such as 
health or safety protections, 
which serve social policy ends 
and pose no threat to the com- 
petition that drives innovation. 
Robert J Shapiro, 
vice-president. 

Progressive Policy Institute. 

518 C Street, NE, 

Washington, DC 20002. US 


Palestinian enterprise 
fund would aid stability 


From Mr Adrian MKhashoggi 

Sir, I read with interest your 
editorial, "White House and 
Casablanca" (October 31). 
regarding the Middle East/ 
North Africa economic sum- 
mit. I was present at the sum- 
mit In Casablanca and agree 
whole-heartedly with the 
thrust of your comments on 
the difficulty of creating a 
large regional structure when 
there is not a consensus of 
opinion among the key partici- 
pants. 

Political solutions are insuf- 
ficient. Grandiose development 
plans will take too Long. In a 
just and perpetual peace, the 
powere have to ensure there is 
individual economic opportuni- 
ties at the grassroots level of 
society. This need is most 


acute in the West Bank and 
Gaza. 

Palestinians need capital to 
develop their own small busi- 
nesses and create jobs. The 
most effective vehicle I have 
seen in this regard has been 
the Enterprise Fund the US 
government set up to help east- 
ern Europe's transformation. 

That is why I presented a pro- 
posal for a Palestinian Enter- 
prise Fund to the leaders 
attending the economic sum- 
mit 

This concept can be put in 
place quickly and contribute to 
the stability essential for the 
region to attract the larger 
Investments that win cement 
regional relations. 

Adrian M Khashoggi, .. . 

Paris tr’ 


Airport tax rates 

From Mr D J McKay. 

Sir, May I draw your atten- 
tion to another problem with 
the newly-introduced airport 
tax (“Airlines hit at levy on 
departures". October 31). 

In addition to the confusion 
over European rates there is 
the problem of double levying 
where passengers wish to 
make use of the fact that Lon- 


are illogical # 

don has five airports. Rates for 
London -Gene va-Lon don are £5 
when travelling in and out of 
the same airport, but £10 when 
flying from Heathrow and 
returning to Gatwick. or any 
other combination. 

Where is the logic in this? 
Duncan J McKay. 

82 Sedgwick Street, 

Cambridge CBl 3AL 


Public funding unavoidable 


From Mr Martin C Richards. 

Sir, Whether or not it is 
desirable to reduce capital 
expenditure on roads, I think 
that very few would argue for 
a reduction in capital expendi- 
ture on transport, as suggested 
in your report, “Roads budget 
faces cut of £400m" (October 3). 
Any reduction in the roads 
budget should be comple- 
mented by an increase in 
expenditure on public trans- 


port. While the government 
would like much of that invest- 
ment to come from the private 
sector, it is quite clear from 
the limited progress of the pri- 
vate finance initiative that the 
use of public funds is unavoid- 
able. 

Martin G Richards. 
chairman. MVA Group. 

MV A House, 

Victoria Way, 

Woking. Surrey GU21 1DD 


Pension failing was inability to show what member would receive 


From Mr J P Batting. 

Sir, Mr M A Bentley (Letters. 
November 2) seems to have an 
interestingly topsy-turvy view 
about company pension 
schemes. It is true that one of 
the merits of a money-pur- 
chase scheme is that it clearly 
shows each member's 
“savings". Equally, its greatest 
failing is its inability to show 
what a member can expect to 
receive at retirement. It was 


this shortcoming which was 
put to such good use by some 
personal pensions salesmen 
who were able to hoodwink 
huge numbers of employees 
with wildly unreasonable pre- 
fictions. If personal pensions 
bad been required to show a 
proper estimate of what a 
member was likely to receive 
at retirement then I would 
agree that. In Mr Bentley’s 
own words, "most employees 


would never have spared a 
moment to consider personal 
pension plans”. 

To try to drag employers and 
occupational pension schemes 
into this depressing, but pre- 
dictable, saga with mis-sold 
personal pensions is quite 
unfair. Many employers, and 
their associations, made strong 
criticisms about personal pen- 
sions at the time they were 
Introduced. These criticisms 


were cheerfully dismissed as , 
being nothing more than /' 
vested interest. Had the propo- 
nents of personal pensions 
been recognised at the time for 
the vested interests that they 
really were, the position of 
many disappointed personal 
pension policy holders would 
now be quite different. 

J P Batting, 

BCJ & Co. Hatch Lane. 

Windsor, Berkshire SLA 3QP. 




FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


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FINANCIAL TIMES 

Number One Southwark Bridge, London SE1 9HL 
Tel: 071-873 3000 Telex: 922IS6 Fax: 071-407 5700 

Monday November 7 1994 


Era’s end 
in Beijing 


How Messers Boris Yeltsin and 
Victor Chernomyrdin must envy 
the Chinese their annual rate of 
inflation of 27 per cent. Neverthe- 
less, this rise in Chinese prices is 
important, not just for its direct 
effects, but also for what it reveals 
about the fissures within C hinese 
politics. With people positioning 
themselves for life after Deng 
Xiaoping, these are unlikely to be 
closed. This is the disturbing mes- 
sage from this year's FT survey of 
China, published today. 

Mr Deng's stroke of genius was 
to approach the collapsing state- 
socialist economy just as invaders 
used to treat China's Great Wall. 
He went round it. The results may 
not be quite as stellar as official 
figures suggest, but the country 
has made more economic progress 
in a decade and a half than in 
centuries. The government, albeit 
corrupt and dictatorial, has pro- 
vided reasonable political stabil- 
ity, while encouraging economic 
initiative. The consequences have 
been astounding. 

Big problems remain, however, 
partly because reform has been so 
carefully circumscribed. As com- 
petition has become stronger, 
swathes of the old economy are 
failing to compete. More than 40 
per cent of the older state enter- 
prises, which still generate close 
to half of industrial output, are 
making losses this year. Yet 1994 
is far from a year of recession, 
notwithstanding hitherto unsuc- 
cessful efforts to curb inflation. 
On the contrary, the economy is 
expected to grow by ll per cent 

Relations between Beijing and 
local g o vernment Is the other big 
challenge to reformers. As the 
economy has expanded, particu- 


larly along the coast Beijing has 
found it increasingly difficult 
either to obtain the revenue it 
needs or to control spending, par- 
ticularly on investment Its solu 
tion has been the printing press. 
Direct and indirect borrowing 
from the central bank has been 
equal to about a third of total bud- 
getary revenues in recent years. 

In consequence, the ratio of 
broad money to national income 
has climbed to over 100 per cent 
This monetary time-bomb threat- 
ens grave economic and political 
damage. China cannot afford a 
flight from money. What is needed 
is a push for effective reform of 
the fiscal system, social welfare 
(still largely provided by state 
enterprises), finance and the cen- 
tral bank itself. Reformers know 
very well what is needed. But 
recently progress has become 
decidedly slow. 

So great is the release of energy 
in China that continued rapid eco- 
nomic progress remains the most 
likely outcome. In the absence of 
Deng's authority, however, bitter 
struggles for power are likely to 
emerge within Beijing, between it 
and the provinces, and between 
competitive and less competitive 
parts of the economy-. 

Outsiders are largely spectators. 
But they can encourage China to 
play a responsible part in Interna- 
tional arrangements. The country 
should, for example, be helped 
into the new World Trade Organi- 
sation, in return for a commit- 
ment to further liberalisation. In 
the longer term, only the emer- 
gence of a prosperous middle-class 
in an open economy Is likely to 
produce a China with which the 
world can be comfortable. 


War and peace 


During the past 10 days, the world 
has glimpsed the possibility that 
the Bosnian army will retake by 
force some of the territory which 
it has failed to gain by diplomacy. 

If the Bosnian gov e rnment gains 
are sustained - and this is stni in 
the balance - that may possibly 
be one of the le ast b ad develop- 
mpnt<;"Tn fHaTfai-Hihip gfiTalp n 

Western leaders wifi no doubt 
deplore further death and destruc- 
tion and rightly condemn the Bos- 
nian army if it violates UN safe 
havens. But having recognised the 
Sarajevo authorities as the legiti- 
mate rulers of an independent 
state, the world cannot, with any 
consistency, condemn the Bosnian 
army for winning back some of 
the land taken from it. 

The west may also hope that the 
latest battles will create a better 
chance of a viable settlement than 
has existed since the Serbs seized 
control of about 70 per cent of 
Bosnia. - 

Until recently, the Serbs had lit- 
tle incentive to. negotiate a peace 
on terms which others might con- 
sider . reasonable; the Bosnian 
army’s successes this some- 
what more, likely. 

If peace negotiations should 
indeed result, the cautious strat- 
egy of the five-nation contact 
group for bringing the parties 
together will prove to have been 
partially vindicated. 

If the west had intervened 
directly, either with its own air 
power or conspicuous deliveries of 
big guns. Mr Slobodan Milosevic, 
the Serbian president, would have 


come under stronger pressure to 
rescue the Bosnian Serbs. 

Although Mr Milosevic is widely 
blamed for starting the war, his 
decision to isolate the Bosnian 
Serbs has contributed to the 
recent successes of their wictiwi 

Even if a more even balance of 
jbrees can eventually bring, the 
conflict "to an end, there is no 
ground for complacency. Worse 
-horrors may be in store. 

The United Nations forces in the 
region are trying to mitigate the 
effects of the fi ghting on civilians 
by distributing aid and maintain- 
ing safe havens. 

The new fighting redoubles the 
moral imperative to demilitarise 
and protect the six UN-designated 
safe areas, a task which should 
not be confused with any ambition 
to influence the course of the war. 

These efforts by the UN have 
been undermined by all the par- 
ties, including the Bosnian gov- 
ernment The UN deserves sup- 
port in facing down, by all means 
at its disposal, any challenges to 
agreed peacekeeping arrange- 
ments 

The outside world’s moral influ- 
ence over Bosnia’s leaders is 
weak, given that it failed to stop 
the atrocities by the Serbs. 

However, if the Sarajevo author- 
ities wish to retain the sympathy 
they have gained among western 
nations, they must address two 
questions: wifi they help their own 
civilians by co-operating more 
with the UN? And will they show 
mercy to Serb civilians in their 
army's path? 


rc iiiogi cal 


]A job for the CBI 


. :*;• y 




- 0 idab> e 


" ■- - ;■* 


■ ' .id ^ 


" s . 


The chancellor’s ‘'Wise Men” and 
the Confederation of British Indus- 
try have recently drawn attention 
to the plight of the unemployed. 
At a time when many are pointing 
to other - more promising - fea- 
tures of the UK's economic perfor- 
mance, they are right to remind 
the chancellor that a colossal 
labour market failure remains. 

The Treasury panel of Indepen- 
dent economic forecasters ' is 
well-known for its inability to 
reach a consensus about what Mr 
Kenneth Clarke should do next 
And yet — as a special section of 
its latest repeat points out - only 
-one of the Wise Men, Professor 
Patrick MUrford, expects unem- 
ployment to fall much below 2m 
daring the next three years if the 
government does not make 
greater efforts to reduce it 

Politically, nothing would do 
more to tarnish three further 
years of recovery than a failure to 
get the unemployed back to work. 
Biit any policy to reduce unem- 
ployment confronts a danger. 
Wage growth - one of the tradi- 
tional causes of Inflation in the 
UK - has. been unusually subdued 
, in the recovery to date. But this 
jtafll.nrt last tang if many people 
^stay out- of -work so long that 
employers think they are no lon- 
ger suitable fra* the jots available. 
Finns will then fill vacancies by 
.offering higher wages, rather than 
giving the jobs to the unemployed. 

Re-connecting the long-term 
unemployed to the labour force is 
thus in employers’ own interests, 
and it was encouraging to see the 


CBI take up the issue in a report 
published last week. Its study goes 
beyond the standard prescriptions 
of more training and education, to 
suggest reforms which could have 
a more Immediate impact. 

. Predictably, the authors are bet- 
ter at identifying the govern- 
ment’s failing s than in proposing 
ways of improving the contribu- 
tion of employers. It suggests 
reforms to the tax and benefit sys- 
tem to improve incentives to offer, 
and accept, low-paid employment 
Similarly, the CBI believes the 
employment service could do more 
to bring companies and the unem- 
ployed together. 

There is much the government 
could do in these areas. But the 
report implicitly recognises that 
sustainable economic growth, 
which will produce jobs, will 
require changes in attitude as well 
as changes in policy. 

The' UK economy seems unable 
to employ a large proportion of its 
workforce without stimulating 
inflation. This will change only if 
more employers decide to fill 
vacancies with relatively low-paid 
workers, who must be trained, 
rather than te mp ting their com- 
petitors' employees with higher 
wage offers. On past experience, 
state subsidies can take compa- 
nies only so far down this route. 
Persuading the government to act 
in the long-term interest of UK 
business is one thing. The CBI 
would do even more for the unem- 
ployed, and the economy at large, 
if it convinced its members to do 
the same. 


a t-'a * 

( •*»!£. V''* 


★ 


T he old Banco de Madrid 
signs have been taken 
down from 300 branches 
across Spain, and those 
of Banca d'Amerlca e 
d’ltaiia are disappearing in Italy. In 
their place sits the familiar lino- 
and-box symbol of their owner, 
Deutsche Bank. After a year of tra- 
vails and controversy in Germany, 
Mr Hilmar Kopper, Deutsche's 
chairman, does not disguise his 
delight that his bank's namn re tains 
Us prestige elsewhere in Europe. 

Sitting in his wood-panelled office 
in Frankfort, Mr Kopper recounts 
how the two banks asked to be re- 
branded. Their customers liked the 
idea of banking with Deutsche 
despite finding the name difficult to 
pronounce. “Clients seem to like it, 
and they will practise very hard to 
be able to tell their relatives what 
their bank is called,” he says, his 
shoulders shaking with amusement 
Mr Kopper has had few chances 
to laugh this year. Many Germans 
enjoyed the sight of their biggest 
bank being toppled from its pedes- 
tal by the Schneider and Metall- 
gesellschaft affairs. This not only 
revived traditional German antipa- 
thy to the Macht der Banken (power 
of the banks), but raised doubts 
about Deutsche's reputation for 
strong management Its shares slid 
against the market as it lost its pre- 
mium rating. On the eve of Deut- 
sche’s 125th anniversary next year, 
he and his fellow managing board 
members found themselves in the 
unfamiliar position of struggling to 
restore the bank's reputation. 

They have not found it easy. Mr 
Kopper’s remark that the DM50m 
(£21m) trade debts left by Mr Jiirgen 
Schneider when his property group 
collapsed earlier this year with total 
debts of DM5bn were “peanuts", 
reinforced Deutsche's image of arro- 
gance. And the incidents have re- 
kindled debate over whether banks’ 
equity stakes in large companies - 
such as Deutsche’s 24.4 per cent 
stake in Daimler-Benz - lead to con- 
flicts of interest 

Deutsche was dragged into the 
Metallgesellschaft affair because it 
not only lent money to the mining , 
metals and industrial group, but 
held a 10.6 per cent stake. Mr Ron- 
aldo Srhmitv, a Deutsche managing 
board member, chaired Metallgesell- 
sc haft's supervisory board as a 
result. 

All this has happened as Deut- 
sche wrestles with restructuring its 
1,506-branch domestic bank, trying 
to devolve more power to local man- 
agers (see below). “It has obviously 
been a tough year for them,” says 
Mr John Leonard, European bank- 
ing analyst at Salomon Brothers, 
the investment bank, “They have 
been in the news more than they 
would have liked, in circumstances 
they would not have chosen." 

Yet in the last months of the 
year, Deutsche shows signs not only 
of regaining stability, but striking 
back. The bank announced 10 days 
ago that it will base investment 
banking operations in London, and 
integrate more closely with Morgan 
Grenfell, the merchant bank it 
acquired five years ago. This is a 
sign of new aggression in the com- 


D entsche Bank’s huge 
branch network in Ger- 
many is undergoing one 
of the most fundamental 
transformations since the bank was 
broken into regions after the sec- 
ond world war. The slowly-growing 
competition for customers among 
German banks has forced it to re- 
think how services are delivered. 

Deutsche recognised the need to 
give customers at its 1,500 
branches a more personal and effec- 
tive service - and tons have a bet- 
ter chance of keeping them - in 
1990. It started poshing authority 
down to local branch managers, 
and away from Its head and 
regional offices four years ago. 

Not satisfied with the results, it 
is now trying to inject urgency into 
the process and involve staff more 
closely, with the introduction of 
Projekt Kundenn&he (getting close 
to the customers). It involves visits 
to branches by board members, and 
training for staff. 

Mr Michael Entires, a member of 
the managing board, says ft will 


Sweetness 
and light 

■ Some sweet news for Paddy 
Ashdown, the UK’s Liberal 
Democrat party leader. 

Sugar producer Tate & Lyle, a 
consistent financial supporter of the 
Tory party, has decided this year it 
will give a donation to Ashdown’s 
lot, as well as spooning out its usual 
£25,000 to the Tories. 

The company is not commenting 
on the move but it is thought to be 
the idea of Neil Shaw, Tate & Lyle’s 
iconoclastic chairman, in recent 
months a less than vigorous 
advocate of Prime Minister John 
Major’s leadership qualities. 

It is particularly unusual for 
Ashdown’s party to get cash from 
companies outside a general 
election year. Not that the Lib 
Dems will be able to go on a spree; 
Tate & Lyle is donating less than 
£5,000. 

Enough to sugar a few pills, 
nonetheless. 


Bottoms up 

■ Having done its best to absorb 
the finan cial and image-tarnishing 
consequences of the Schneider 
property collapse. Deutsche Bank is 
meeting as many of the claims of 
contractors on the properly 
magnate’s uncompleted buildings as 
it Teels are justified. 

One demand will probably prove 


John Gapper and Andrew Fisher on Hilmar Kopper’s 
plans to rebuild Deutsche Bank’s reputation 

Hopeful signs of a 
reversal of fortune 


Deutsche Bank: getting bigger and broader 



Assets (DM bn) 
600 “ 


Pretax profit (DM bn) 

5 • - “ 



Share price 
Rebttve to the DAX Index 



1894 


Source Oataareom 


petition for investment banking 
business path other large European 
banks. 

Mr Kopper, who took over as 
chairman of the managing board 
five years ago when Alfred 
Herrhausen was assassinated, 
accepts that it may never regain all 
its mystique, but insists that 
respect remains. “That has not been 
shaken at alL There is the same 
amount of trust, confidence and sta- 
bility. What has changed is that it 
has become more popular to talk 
about banks. There is much less of 
a taboo,” he says. 

He dismisses the idea that Metall- 
gesellschaft or Schneider will have 
a lasting impact, describing the for- 
mer's losses in futures trading as “a 
wonderful story for textbooks of 
what a management board can do 
wrong". The latter, he insists, was a 
one-off 

Yet Mr Kopper admits that Deut- 
sche has been afflicted by the same 
reputation for being uniquely pow- 
erful that it used to enjoy. “I some- 
times wonder why we are looked at 
that way. We try to explain what 
we can - and cannot - do." he says. 
“Of course, there is some mystique, 
which one enjoys as long as it is 
positive. It is less enjoyable when 
negative connotations are attached. 


which seems to be the case now." 

Ridicule matters less than the 
possibility that hostility to h anks 
will encourage legislation forcing 
them to reduce stakes in companies 
to 5 or 10 per cent of those com- 
panies' equity. Although Deutsche 
has a policy of reducing stakes - 
and withdrawing from supervisory 
boards - forced disposals would 
cost it dearly in tax as it realised 
large capital gains from stakes held 


The bank may never 
regain all its 
mystique, but Kopper 
insists that respect 
remains 


at the original value. 

Mr Kopper says that such legisla- 
tion would be against the German 
constitution, and would be chal- 
lenged by Deutsche in court. Fur- 
ther. he insists that banks are good 
shareholders. “A bank is a share- 
holder that reacts in a responsible 
way in line with the interests of the 
company it has invested in, not its 
own." he says. 

Deutsche wants to maintain its 
portfolio because tbe yield from div- 


idends helps to smooth cyclical 
earnings from lending and volatile 
trading income. The latter was 
more than halved in the first half of 
this year because of bond market 
turmoil. Mr Kopper says he wants 
to reduce volatility In earnings, and 
also to diversify its sources of 
income geographically, one of the 
motives behind tbe investment 
banking move. 

By comparison with most other 
European banks, Deutsche has 
expanded boldly in European retail 
hanking, with acquisitions in Italy 
and Spain, where margins are high. 
But it has been more cautious than 
Swiss and US banks in investment 
banking. It has not expanded fast in 
equity underwriting and broking, or 
financial derivatives, both unfamil- 
iar for a bank from a country that 
lacks sophisticated capital markets. 

It has also been slower than com- 
petitors to absorb London firms, 
rea ching a 40-page agreement with 
Morgan Grenfell in 1989 that pre- 
vented integration. Mr Kopper says 
its ambitions have now grown. 
“This is really the starting point. 
We are making a major effort in 
these markets, a very daring move," 
he says. He talks of “a lot of invest- 
ment from every angle", to expand 
international investment banking. 


Closer to the customers 


boost the confidence of the 55,000 
domestic employees. “This has to 
reinvigorate our activities in Ger- 
many. There Is also the question of 
motivation. The blows we have 
received this year have had some 
repercussions on our people." 

Deutsche is keen to enhance links 
with the customer and strengthen a 
service mentality for which Ger- 
many is not exactly famed. 

Tbe bank also plans to develop 
advisory skills. It wants staff to 
give financial advice to customers, 
and persuade them to buy a wider 
range of products. “You have to 
find a way of opening up the bank 
more folly for the client," says Mr 
Hilmar Kopper, the chairman. 

This is in line with efforts by 
banks in other European countries 
to sell more products such as resi- 
dential mortgage loans and life 
insurance to customers. German 


customers have traditionally been 
as conservative as banks, but they 
are beginning to shop around for 
better deals. 

“Three or four years ago, banks 
found It bard to compete with one 
another because customers were 
not price-sensitive, bnt there has 
been an attitudinal change." says 
Mr Chris Williams, analyst at the 
broker Fox- Pitt Kelton. Banks now 
offer more products such as money 
market investment funds. 

They are also starting to charge 
companies for products and ser- 
vices that used to be included in 
lending margins before they were 
eroded. “Banks are beginning to re- 
think, and they will attach price 
tags to individual sendees," says 
Mr Hans-Peter Ferslev, head of 
Deutsche’s strategy unit 

Deutsche has tried to remove 
administrative responsibilities 


from middle managers, to give 
them more time to focus on lending 
and giving advice. Paper processing 
is bring taken out of branches and 
done in regional centres, while per- 
sonnel issues are being handled 
from bead office. 

The aim is not simply to increase 
income, but to reduce the number 
of poor lending decisions. Mr 
Entires says the sharp rise in bad 
debt provisions on lending to 
small* and medium-sized companies 
last year was partly because man- 
agers had not devoted enough time 
to their customers. 

“We saw in recent years, espe- 
cially in our business with smaller 
and medium-sized companies, that 
we didn't take enough care of oar 
clients." says Mr Entires. He esti- 
mates that productivity (measured 
in profit per employee) has risen by 
about 30 per cent since reforms 


too much, however, even for a bank 
doing all it can to repair the 
damage caused by JUrgen 
Schneider's wayward business 
decisions and subsequent 
disappearance. 

For the company which supplied 
champagne to Schneider - in rather 
large quantities - has now 
presented its bill. Observer suspects 
it bas about as much chance of 
collecting its money from Deutsche 
as of squeezing a popped cork back 
into a bottle of bubbly. 


Ploughshares 

■ While hapless broadcasters at the 
BBC’s central and east European 
language services (mostly 
anti-communist emigres) in 
London's Bush House are 
wondering how much longer they 
might have jobs - the end of the 
cold war substantially eroding their 
raison d'etre - the corporation is 
gladly reaping peace dividends 
where it can. 

Bonuses are springing up in the 
oddest places. Audio tapes of a 
World Service Radio history of the 
cold war - The World That Came in 
from the Cold - and 50.000 copies of 
an accompanying book have now- 
been adopted as teaching materials 
in 2.400 Slovak secondary schools. 

Now that the Tory government 
seems to be running out of steam 
with the mammoth privatisations of 
yesteryear, surely this creative 
approach from the BBC might 
fruitfully be explored in other fields 


Observer 



abuse and I don't like your face’ 

of government activity? 

A further sword-into-ploughshare 
idea might be to send out to former 
communist states the 500 GCHQ 
intelligence-gatherers the UK 
government now plans to sack; they 
could surely find work as itinerant 
professors, from Tirana to 
Bialystock? 

Hmm. Probably unsound, on 
reflection - they might start 
spreading ugly notions about 
industrial action. 


Headline views 

■ Literate readers of yesterday's 
Sunday Telegraph must have been 


a little puzzled at a headline 
reading “Mellors to divorce over 
new Lady in his life". 

Those expecting a spicy piece 
about D H Lawrence's novel Lady 
Cfiatterley’s Lover - featuring the 
athletic gamekeeper Oliver Mellors 
- were in for a disappointment. The 
story turned out to be about David 
Mellor, an obscure Tory ex-cabinet 
minister and his new lover. Not a 
pheasant in sight. 


Peripatetic 

■ Not high on everyone's list of 
emerging market possibilities, 
Uzbekistan is among the former 
Russian republics or satellites being 
closely studied by the First Russian 
Frontiers Trust, just set up by 
Pictet Asset Management. 

It helps if you have an 
experienced pioneer, and Pictet's 
Douglas Polunin - whose family 
originates from Russia - seems just 
the chap. His grandfather, a 
renowned artist and stage designer, 
left St Petersburg in 1902 to settle in 
Russian emigr§ circles in Paris. His 
father, Nicholas Polunin, an 
eminent explorer, botanist and 
environmentalist, discovered Prince 
Charles Island in the Arctic in the 
mid-1940s. Polunin himself was 
raised in Nigeria: he has also lived 
in Baghdad and has a sister who 
runs a Buddhist centre In South 
Korea. 

If Tashkent gets him down, 
Polunin could always try writing a 
travel guide to doing business in 


Yet Deutsche remains cautious in 
two ways. First, while an invest- 
ment hanking board will now be in 
charge of both Morgan Grenfell and 
Deutsche's activities, further inte- 
gration will occur only “in tbe most 
careful way". Mr Kopper argues 
that the bank has already gained 
from “bundling the Morgan abilities 
with the Deutsche abilities" but 
“there is even more there than we 
have been able to realise". 

Second, he emphasises that the 
bank wants to build investment 
banking organically rather than 
through acquisition. Although it 
aims to build equity broking 
strength in London, he says that 
“we are quite able to build this up 
ourselves from the grassroots to 
save the time- and money-consum- 
ing process of integration". This 
also goes for derivatives, a field in 
which others have expanded by 
buying Chicago firms. 

M r Kopper admits 
that Deutsche 
“may look weak" 
in terms of the 
notional value of 
derivatives it trades compared with 
US and Swiss banks. However, it 
believes “a prudent approach is 
right” in a field that bas been con- 
troversial because of losses by com- 
panies such as Procter & Gamble. 

This raises the broader question 
of whether the cautious and consen- 
sual approach to management typi- 
fied by the Deutsche managing 
board - 12 directors who meet each 
Tuesday and have collective respon- 
sibility - suits the fast-moving 
world of investment banking. “You 
have got 12 bosses, none of whom 
strikes me as a weak individual, 
and that means they can be a little 
slow," says Mr Leonard. 

Mr Kopper points out that the 
managing board approach has been 
varied by having a single chief exec- 
utive for investment h anking . But 
he robustly defends the underlying 
principle. 

“This is one of the most success- 
ful banks in the world. I always 
hear that this is not the best struc- 
ture, and I don’t know what is. But 
experience suggests the Vorstand 
(managing board) structure is obvi- 
ously desirable," he says. 

It will therefore be a chastened, 
but unbowed Deutsche that faces 
next year's anniversary. The bank’s 
confidence last year was such that 
it commissioned an official history 
to be published in 1995. Tt will 
include chapters on the late 1930s 
and 1940s when it helped the Nazi 
government to seize Jewish prop- 
erty and assets. Further disclosures 
could spoil the celebrations, but Mr 
Kopper is unabashed 
“Maybe there is something new 
that we did not know about. I hope 
so, I hope it will make interesting 
reading. I say we must be able to 
face up to whatever it is.” he says. 

It is an appropriate sentiment for 
a year in which Germany's most 
powerful bank has seemed curi- 
ously vulnerable. But it may take 
more than the admiration of Italian 
and Spanish customers to restore 
folly Deutsche's old sense of superi- 
ority. 


started in 1990. 

To reinforce the idea of personal 
responsibility, Deutsche has intro- 
duced performance-related pay at 
the level of branch director, and 
wants to extend it throughout the 
hank. "Everybody can be drawn at 
his nose if something goes wrong. 
He cannot say that it is someone 
rise’s fault," says Mr Entires. 

Deutsche has become a harsher 
place to work in other ways. Staff 
numbers fell by 2,800 in the domes- 
tic bank last year, with many mid- 
dle managers taking early retire- 
ment. The impact of the changes in 
west Germany was partly cush- 
ioned by Dentsche'5 expansion into 
branch banking in the east. 

Mr Entires says that a change in 
attitudes is the most vital aspect of 
reforms. “It is not just a matter of 
drawing lines and boxes on a chart, 
it is important that everyone 
knows that his role has changed," 
he says. 

As competition grows in German 
banking, this will become increas- 
ingly apparent. 


tbe world's difficult spots. Like 
London. 


Cha-cha- cha 

■ Dirty deeds in the office of 
Ramon Escovar Salom. Venezuela’s 
minister of the interior. He recently 
discovered bugging devices, planted 
there by bands unknown. Suspicion 
lies against anonymous disgruntled 
former security officers. 

Not too surprising; in his role as 
prosecutor general. Escovar last 
year laid corruption charges against 
president Carlos Andr6s Pferez, • 
ultimately dislodging him from 
office. 

Around that time Escovar started 
playing loud classical music in his 
office, raising the volume when 
engaged in sensitive conversations. 
He says the music “helps to 
maintain my spiritual peace’’. 

Plenty of Wagner - that should 
scare them off 


Do the ballot rap 

■ Husamettin Cindoruk. chairman 
of the Turkish parliament and 
clearly a stem guardian of morals, 
has ruled that women cannot come 
to work in mini skirts, reminding 
everyone that the attire of 
parliamentary employees is 
regulated by a 1982 civil service 
law. “Parliament is not a disco,” he 
said. He should pay a visit to the 
mother of all parliaments - he 
might have to eat his words. 





18 


. .. - -.v , -£-,sop 


SHEERFRAME 

Specified 

Worldwide 


ULPfaBBiics LMAed 

Tal: 0773 89231 1 


FINANCIAL TIMES 

Monday November 7 1994 


PLUMB 

CENTER 


0% 



Company predicts 25,000 new jobs in region 

Nissan investment in 
UK plant tops £lbn 


By John Griffiths in London 


Nissan's car plant at Sunderland, 
in north-east England, has 
become the first Japanese manu- 
facturing venture in Europe to 
invest more than £lbn ($l. 61 bn). 

The plant is entering a new 
phase likely to create a further 
25,000 direct and indirect jobs - 
mostly in the hard hit north-east 
- over the next 10-15 years, 
according to Mr Ian Gibson, chief 
executive of Nissan Motor Manu- 
facturing (UK). 

Nissan's UK manufacturing 
operations, which today mark 
their 10th anniversary since the 
foundation stone was laid on the 
800-acre Sunderland site, have 
taken spending past £lbn by 
starting construction of a £3 3m 
gTla - mannfa nhirin g plant and a 
further upgrading of vehicle 
painting and other facilities. 

The axle factory is due to start 
production in 1996. when a 
replacement for the current Pri- 
mers range of medium-sized cars 
Is introduced. 

When operational it will mean 
that Nissan UK will have virtu- 
ally a fully integrated production 
facility, including foundry and 
pressings facilities. The only sig- 


nificant components still expec- 
ted to be imported from Japan 
will be engine blocks and gear- 
boxes, about 8 per cent of each 
car's value. 

Mr Gibson made his jobs pre- 
diction 24 hours after the frigate 
HMS Richmond slipped down the 
nearby River Tyne. After IS 
months in receivership. Swan 
Hunter itself now appears 
unlikely to escape closure, and 
the shipbuilding that was the 
region's economic mainstay for 
many years will end. 

The additional 25,000 Nissan-re- 
lated jobs will not come, in the 
main, from the Sunderland plant, 
although it is expected to 
increase capacity from 300,000 
cars a year to 400,000 by the end 
of the decade. Instead they will 
come from additional industrial 
and commercial activities for 
which Nissan UK is already act- 
ing as the catalyst, Mr Gibson 
said. 

“If you go to Stuttgart, for 
example, you see a great heap of 
companies that no longer look 
like automotive businesses but 
which needed the presence of 
Mercedes and Porsche to get 
them going: metal fabricators, 
toolmaking, design sendees, all 


providing an industrial infra- 
structure for a range of activities 
which would not otherwise have 
existed. 

“We're only now starting that 
infrastructure stage in the 
north-east. It will be another 10 
years in growing, but there is an 
enormous growth in economic 
activity to come." 

Nissan companies on the site 
employ almost 5.000 people, with 
□early another 10.000 jobs esti- 
mated to have been created 
among Nissan's 200 component 
suppliers, 130 of which are UK- 
based. 

At the weekend Nissan 
defended its UK components sup- 
pliers from heavy criticism in a 
report published by Cardiff Busi- 
ness School. Cambridge Univer- 
sity and Andersen Consulting, 
which compares worldwide com- 
petitiveness. 

Cardiff Business School's Pro- 
fessor Dan Jones said most UK 
component-makers' performance 
was so poor that Japanese car 
companies with UK plants might 
have to bring supplies in from 
Japan to replace them. 

Mr Gibson said Nissan had no 
intention of doing that. 


Rightwing 
UK Tories 
threaten 
to block 
EU bill 


By Kevin Brown, 
Political Correspondent, 
in London 


UN warning 
of threat 
to civilians 


Earthquake in Walla Walla 


Continued from Page 1 


Continued from Page 2 


Mladic, the Bosnian Serb com- 
mander, pledged to “to retake all 
territory lost to the Moslems and 
even more as a punishment". 

The Serb-dominated Yugoslav 
government in Belgrade, in one 
of its first pronouncements on 
the renewed fighting, issued a 
statement at the weekend con- 
demning the “deliberate and 
massive violation of the 
cease-fire agreement on the part 
of Moslem and . . . Croat 
forces". 

However, the statement con- 
tained no suggestion that Bel- 
grade's embargo against the Bos- 
nian Serbs, its former allies, 
would be lifted. This embargo, 
which has left the Bosnian Serbs 
badly short of fuel is viewed as 
one of the key factors behind the 
Bosnian government’s recent suc- 
cesses. 


aghast. “Don't they know he'sthe 
third most powerful man in the 
country?" asked an executive 
with Johnson Mat they Electron- 
ics, near Spokane, second largest 
city in Washington state. 

And Mr Tony Sandoval, presi- 
dent of the Washington state 
council of La Raza, the Hispanic 
community organisation, shook 
his head in wonder. “It's very 
important to have the Speaker of 
the House. You'd have to be 
brain-dead to pick somebody 
else," he said. 

But some people in Walla 
Walla despise the power of the 
Speaker's office and the very tan- 
gible benefits it can bring to the 
district “It 'helps’ to get more 
pork in the state, and I don’t 
believe in the pork barrel,’' said 
Ms Edith Largent. 

Although this is his 16th elec- 
tion, Congressman Foley's cam- 
paigning skills have rarely been 
put to such a test At a meeting 
with voters this weekend in the 
Red Apple restaurant, on Spo- 


kane's Main Street, he appeared 
deeply uncomfortable when 
appealing for votes. He relaxed 
only when offered the chance for 
a detailed lecture on policy. 

Nervously twisting a chair in 
his hands and often placing it 
like a fireguard between his own 
6 foot 3 inch frame and his vot- 
ers. he studiously avoided the 
classic political kissing opportu- 
nity presented by the toddler at 
his feet. He appeared diffident 
about claiming credit for the ben- 
efits bis clout has brought the 
district and reluctant to attack 
his opponent directly. 

But the campaign, like many 
across the US this year, has been 
unpleasant, with each candidate 
ferociously attacking the other in 
television and radio advertise- 
ments. The viciousness of the 
campaign has turned away voters 
such as Mr McClure, the farm 
machinery store owner. 

“I think they're both really fine 
gentlemen, but they are both try- 
ing to degrade each other to the 
point where we don’t want to 
watch it any more," he says. 


Airbus moves to bolster ties with China 


Continued from Page 1 


furthur “sweeten" deals negoti- 
ated with China on the sale of 
new aircraft Boeing, in its efforts 
to preserve its leading position in 
the Chinese market, signed an 
agreement In August for the 
manufacture of the aft section of 
its 737 twin-engine aircraft in 
China. The deal is estimated to 
be worth about $600m. 


Airbus, which has sold 35 wide- 
bodied aircraft to China since 
1985, indicated it would compete 
more aggressively with US manu- 
facturers to increase its share of 
what is expected to be a vast 
market for new aircraft in China 
over the next 15 years. 

Mr Pierson said Airbus aimed 
to capture half of new sales com- 
pared with the one-third share it 
had secured in the past five 


years. Airbus expects China to 
purchase 620 aircraft in the next 
15 years at a cost of about $30bn. 

That compares with a forecast 
by Chase Manhattan bank that 
China’s passenger aircraft fleet - 
currently standing at 350 - will 
increase fivefold by 2010, requir- 
ing the purchase of 1,200 new air- 
craft worth S90bn. Boeing pre- 
dicts sales of 300 aircraft at a cost 
of S40bn, 


Rightwing members of the UK's 
r ulin g Conservative party are 
threatening to block crucial legis- 
lation to increase Britain's contri- 
butions to the European Union, 
in retaliation for the govern- 
ment's delay in privatising the 
Post Office. 

Amid growing rightwing anger 
at the decision by Mr John Major, 
the prime minis ter, to give way 
to a handful of mainly leftwing 
Post Office rebels, cabinet loyal- 
ists sought to defuse the row by 
pledging that privatisation was 
still on the government's agenda. 

In a robust defence of the 
prime minister. Mr Jeremy Han- 
ley, the party chairman, told BBC 
radio that Mr Major retained the 
support of "the vast majority" of 
MPs. He said ministers “do not 
believe this policy is wrong, but 
maybe we do need to sell it bet- 
ter". Sir Norman Fowler, his pre- 
decessor as party chairman, told 
BBC television: "Anybody who 
thinks this Is the end of the mat- 
ter should t hink again. 

However, rightwingers queued 
up to blame the retreat on weak 
leadership by Mr Major. Mr Nor- 
man Lament, the former chancel- 
lor of tbe exchequer, said it was 
“absurd that the government 
should be held to ransom by a 
taxi-full of flotsam and bobtail". 

Mr Lamont said the rebels 
would have backed down if the 
prime minister had made the bill 
an issue of confidence, as he had 
done when faced with a right- 
wing rebellion against the bill 
implementing the Maastricht 
treaty on European integration. 

Mr Lamont said he would vote 
for the bill increasing contribu- 
tions to the EU. which imple- 
ments an agreement setting a 
higher ceiling for payments along 
lines he negotiated as chancellor. 

But. In a warning to the gov- 
ernment's business managers. Mr 
Lamont said the Post Office deba- 
cle would increase opposition to 
the bill by rightwing critics of 
the EU, who would demand "a 
very thorough examination of it". 

The bill, which will be included 
in the Queen’s speech to parlia- 
ment on November 16, is vulnera- 
ble because the number of com- 
mitted Euro-sceptics far exceeds 
the government’s House of Com- 
mons majority of 13. 

It is broadly supported by the 
main opposition parties, but 
Labour is working on parliamen- 
tary manoeuvres intended to 
embarrass the government into 
relying on a vote of confidence to 
force the bill through. 

Rightwingers praised Mr Mich- 
ael Heseltine, the trade and 
industry secretary, for seeking to 
press ahead with Post office pri- 
vatisation. 


Cold shoulder Tor EU from 
Norway's north. Page 2 
Chancellor plans cuts. Page 7 


FT WEATHER GUIDE 




Europe today 


Torrential rain and heavy thunderstorms 
wiH affect large areas of the 
Mediterranean, especially southern Italy 
and Greece. Heavy showers with thunder 
and snow will form over the Black Sea and 
the northern coast of Turkey. Western 
Europe will be calmer, with scattered 
patches of light rain and general 
cloudiness. Some areas wiH have fog 
throughout the day. The Alps will continue 
to have showers, which will be heavy in 
places. 

The open seas, south of Ireland, could 
have near gale-force winds. A strong front 
in northern Europe wfli form the boundary 
between wintry conditions in the north and 
much milder conditions In the south. 

There will be rain or wet snow in central 
Scandinavia. 


... 7 ■ \ 7 

- .w.. ■ 'TV v 


‘ail A 


<* 9 4 


fcr'-CA 


\ 14 17 


-_\ ^LOW 




Five-day forecast 

Wintry conditions in the extreme north wiH 
move south during the next two days and 
reach southern Scandinavia towards the 
end of the week. The Mediterranean, 
western and central Europe wiH again be 
very wet, with a risk of flooding in France 
and Italy. 


^ /OV ”, 

& -pi/43 > isatf 


if B £ 


6S-? 


1 020 

N. 

Warm front Cold front -*• A. Wind ip**d fr» KPH 




TEMPERATURES 


Situation at 12 GMT. Tamparaftms max/mum for day. Forecasts by Mere o Consult of (tie Nothortinds 



Maximuni 

Belong 

Cloudy 

15 

Caracas 

cloudy 

32 

Faro 


Celsius 

Belfast 

cloudy 

11 

Cardiff 

cloudy 

11 

Frankfurt 

Abu Dhabi 

sun 

34 

Belgrade 

fair 

12 

Casablanca 

cloudy 

21 

Geneva 

Accra 

cloudy 

31 

Berlin 

far 

11 

Chicago 

fair 

14 

Gibraltar 

Algiers 

fair 

22 

Bermuda 

cloudy 

26 

Cologne 

ran 

10 

Glasgow 

Amsterdam 

cloudy 

11 

Bogota 

drsd 

19 

Dakar 

lair 

29 

Hamburg 

Alhois 

cloudy 

IS 

Bombay 

lair 

34 

Dallas 

sun 

22 

Helsinki 

Atlanta 

cloudy 

22 

Brussels 

cloudy 

10 

Deft* 

Bun 

31 

Hong Kong 

a Ainas 

ssm 

27 

Budapest 

dowdy 

10 

Dubai 

son 

34 

Honolulu 

BJram 

Mr 

10 

CLhagen 

shower 

a 

Dublin 

cloudy 

12 

Istanbul 

Bangkok 

lair 

33 

Calm 

fob 

24 

Dubrovnik 

shower 

IS 

Jakarta 

Barcelona 

shower 

18 

Cape Town 

fair 

25 

Edinburgh 

fair 

10 

Jersey 

Karachi 

Kuwait 


We can t change the weather. But we can 
always take you where you want to go. 


Lufthansa 


L Angeles 

Las Palmas 

Lima 

Lisbon 

London 

LuxJbourg 

Lyon 

Madeira 


cloudy 

20 

Madrid 

Shower 

13 

Rangoon 

sun 

33 

rain 

10 

Majorca 

Shower 

20 

Reykjavik 

Shower 

6 

rain 

B 

Malta 

rain 

24 

Rio 

thund 

28 

shower 

20 

Manchester 

fair 

10 

Rome 

ram 

20 

fair 

10 

Mania 

thund 

30 

S. Freco 

shower 

18 

shower 

8 

Meftoume 

windy 

15 

Seoul 

sun 

16 

cloudy 

1 

Mexico City 

tfnmd 

23 

Singapore 

thund 

30 

sun 

27 

Miami 

cloudy 

28 

Stockholm 

Cloudy 

7 

fair 

29 

Milan 

tain 

Id 

Strasbourg 

fair 

a 

shower 

12 

Montreal 

ram 

S 

Sydney 

doudy 

25 

cloudy 

31 

Moscow 

fa* 

0 

Tangier 

shower 

20 

cloudy 

11 

Munich 

rain 

9 

Ted Aviv 

shower 

19 

sun 

35 

Nairobi 

thtxid 

25 

Tokyo 

cloudy 

18 

fair 

30 

Naples 

ram 

20 

Toronto 

shower 

9 

shower 

18 

Nassau 

thund 

29 

Vancouver 

cloudy 

10 

far 

24 

New York 

far 

17 

Venice 

ram 

15 

tan 

22 

Nee 

ram 

16 

Vienna 

fair 

10 

ratn 

17 

Nicosia 

sun 

24 

Warsaw 

lair 

T1 

fa r 

12 

Oslo 

shower 

5 

Washington 

fair 

19 

fair 

8 

Paris 

Cloudy 

12 

Wellington 

rain 

15 

ran 

12 

Perth 

fair 

38 

Winnipeg 

ram 

10 

doudy 

22 

Prague 

fair 

ID 

Zurich 

rain 

10 


THE LEX COLUMN 

Questionable AIM 


Pit)’ the Stock Exchange. When it 
announced the closure of the Unlisted 
Securities Market, politicians and rep- 
resentatives of small companies 
pressed for a change of heart. So 
against its initial judgment, the 
exchange decided that a new Alterna- 
tive Investment Market should rise to 
take the USM's place. It plans to cre- 
ate a lightly regulated market which 
does not impose excessive costs on 
small companies. 

Unfortunately, support is draining 
away. The fund management group 
M&G says it will not invest its unit 
trust money in the market because 
insufficient regulation will mak e it too 
risky for its investors. The City Group 
for Smaller Companies, the most vocal 
lobbyist for a new junior market, has 
become more enthusiastic about a 
rival scheme to create a European- 
wide market for entrepreneurial com- 
panies, modelled on America's Nasdaq 
exchange. 

The stock exchange is in a bind. If 
the regulatory burden is kept low, 
shareholders may be shy of investing. 
But if regulatory standards are raised, 
s mall companies may decide it is not 
worth the effort and cost There may 
be some way of achieving a compro- 
mise. But one cannot help thinking 
that the exchange should have stuck 
to its initial view that there was no 
commercial case for setting up a “son- 
of-USM” and resisted the political 
pressures to do so. The field would 
then have been clear for private 
groups to set up their own junior mar- 
kets - if. that is, they had bright 
enough ideas and could show that the 
business case added up. 


Expected Inflation 


10-year gflt yield minus Index linked yield 

3.0' 1 1 1 ‘ 1 1 * ‘ 

Nov 93 1994 N 

Source: FT Graphite 


□arrow spread could persist if the 
market is willing to accept a lower 
risk pr emium for equities than it used 
to demand or if dividend growth pros- 
pects are particularly strong at this 
stage In the economic cycle. 

The yield on index-linked gilts, at 
around 4 per cent, is consistent with 
the outlook for real interest rates. So 
if the gap between the market's and 
bank’s views on inflation is to close, 
yields on conventional gilts are likely 
to fall Anther. Over the last six weeks 
gilts have outpaced other government 
bonds. It would not be surprising if 
there was now a pause. But with UK 
institutions signalling a clear inten- 
tion to increase their weighting in 
recent surveys, there is good reason to 
expect continued relative outperform- 
ance. 


German governance 


Gilts 


Last week's report from the Bank of 
England widened the gulf between the 
bank's and the market’s expectations 
of inflation. While the bank cut Its 
medium-term forecast to Z5 per cent, 
the market's view - as expressed by 
the difference between yields on con- 
ventional and index-linked gilts - 
remained nearly twice that. If the 
bank is right, the relationship between 
conventional and index-linked gilts 
must change. The question is which 
side will move. 

Index-linked gilts look cheap com- 
pared with equities. In August UK 
equity yields fell below those on index- 
linked gilts for the first time since 
before the 1987 crash. Equities have 
since slipped back but their yield pre- 
mium is still under 10 basis points. 
Although lower than normal such a 


A consensus is emerging wi thin Ger- 
many that aspects of the country’s 
corporate governance need improve- 
ment. This is to be welcomed by the 
foreign shareholders who own a large 
proportion of the freely traded shares 
in German quoted companies. Cosy 
boardroom ties between management, 
hanks and labour have engendered a 
slack approach to delivering value to 
shareholders. The dismantling of some 
of these ties, combined with greater 
disclosure, will encourage manage- 
ment accountability to the broad mass 
of shareholders. Their legitimate 
desire for profits and dividends to be 
maximised should thus be better 
served. 

Despite the talk, there have so for 
been regrettably few tangible changes 
to German governance. Deutsche 
Bank and Daimler-Benz have set up 
audit committees - a step designed to 
correct some of the control weak- 


European chemicals : 

European chemicals groups reported 
strong third-quarter profits last week. 
The scale and speed of recovery lias 
been impressive. Increased volumes 
and sharply improved prices - in the 
case of high density polyethylene up 
65 per cent year on year - helped 
drive earnings sharply upwards. The 
recession's cost-cutting also bore fruit, 
substantially boosting profits. With 
the biggest commodity chemicals' , 
price increases implemented towards 
the end of the third quarter, the final 1 
quarter promises to be even better. . 

Those companies benefiting most 
are Involved in upstream activities - 
supplying plastics, titanium dioxide 
and other raw materials. Profits at BP 
Chemicals rose 60 per cent during the 
first nine months, while DSM turned 
an after-tax loss during last year's 
third quarter to a profit this time. 
Those closer to the customer are doing 
less well, squeezed between higher 
raw material costs and consumers' 
unwillingness to accept higher prices. 
ICI's paints division and Akzo Nobel 
were most obviously in discomfort 

The shares of ICL DSM and Akzo all j 
fell on profit-taking after their results. 
The only exception was RhOne-Poul- 
enc which surprised the market with 
better than expected figures. The ques- 
tion remains whether the chemical 
industry's recovery has been fully dis- 
counted. If the recovery is as brief as 
in the last cycle, the shares may be 
fully valued. But the market may have 
miscalculated and this cycle could be 
considerably longer than previous 
ones. That will depend partly on 
demand, particularly in Asia. The 
other factor is supply, which is 
entirely in the industry's own hands. 


This announcement appears as a matter of record only. 


B AT INDUSTRIES 


B.A.T Industries pic 


has acquired 

a majority shareholding in 



K- 


revealed in the two-tier board 
system. But their example has hot 
been widely followed. No other Ger- 
man company has followed Daimler’s- 
brave lead in reporting Its figures- 
according to US accounting rules. • 
None of the large German conglomer-: 
ates has taken steps to unbundle itself ■' 
aggressively with the aim of unlocking 
shareholder value. 

The impending privatisation erf 
Deutsche Telekom could do the canse . 
of governance a good service. So great 
Is tbe company's need for capital that. -. 
it will be obliged to woo. international 
Investors more seriously than any 
other German institution to date.-Tele- - 
kom should follow Daimler’s lead and, . ; 
seek a full listing on the "New York 
Stock Exchange. 


m /: _;K 




f 


: .Kr-, 



'asstmeen: 


erftEisrr--. 

isr ttr’* 


I >• 

3T.VW** • ■-* 


A/O JAVA Tabak, Moscow 


The undersigned advised B.A.T Industries pic 
in connection with the acquisition. 


Lazard Brothers & Co., Limited 

London 


Lazard Freres et Cie 

Paris 


November 19^4 


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NEARING THE END OF AN ERA 


A portrait of Ctifcta's igehior leader, Dm9 Xiaopfrig at the entrance of Belfrg's Museum of 
Rsrafattanay lii^ Deng, who took power In the late 1970s, hasheen 

CWna’jj most radical economic reftwmer. He last appeared in public when he was shown on TV . 
visaing Shang^d^Wi^yeer. Hp waa extri»>e(yfrafl. MeanwtiBe, various factions are- 
manoeuvring Wftjwar^ "sop . • Picture by Adrien Bradshaw. 

, . *■’ " Ut m+ it “* * '.. ; w m - *■ • . » .' -> . ■ V 


Monday November 7 1994 


As China proceeds further down the road of economic reform, the task 
is becoming more complicated, reports Tony Walker 


Reform momentum slows down 


A fter two years of spectacular eco> 
Domic progress, China is enter* 
Lng a winter of unease. The 
reform momentum is slowing, there are 
worries about inflation and worker 
unrest, and the prospect of transition to 
a new leadership when Deng Xiaoping 
dies, is weighing more heavily. 

Officials insist that there will be no 
let-up in the reforms, but it is clear that 
China has embarked on a period of con- 
solidation in its economic transforma- 
tion following recent advances. 

Concern about the deteriorating 
health of Deog is casting a long 
shadow. China is now enmeshed in the 
transition to a post-Deng era, re-inforc- 
ing a mood of caution among the lead- 
ership group. 

In the short-term, however, worries 
about Inflation are proving the most 
burdensome for the authorities, who 
have made the fight against rising 
prices their main priority. 

Chinese leaders have been predicting 
for much of 1994 that price increases 
would slow, but in spite of a stiffening 
of price controls earlier this year the 
underlying inflation rate remains stub- 
bornly high- Consumer prices leapt by 
27.4 per cent in the twelve months to 
September, and were up by two percent- 
age points on August. 

The government is also finding the 
task of reforming state enterprises 
more rhaiieng in g and politically riskier 
than expected. The p lanne d implemen- 
tation this year of a programme to 
rationalise 100 enterprises in 18 cities, 
including a pilot bankruptcy scheme, 
has been postponed until next year, 
because of fears of worker unrest, espe- 
cially in China's restive north-east 
industrial heartland. 

The official jobless rate among indus- 
trial workers stands at 2.4 per cent, but 
this vastly understates the problem ctf 
both unemployment and under-employ- 
ment. which is running as high as 20 
per cent in some urban areas. 

Sluggish activity in the state sector, 
which accounts for about 45 per cent of 
industrial production, has raised the 
spectre of “stagnation " in an economy 
that is decelerating. Real GDP growth is 
projected to slow to about 10 per cent 
next year, compared with 13.4 per cent 
.in-1993 and an expected U.5.per, cmL. 


this year. Since the introduction of a 
16-point stabilisation programme in 
July 1993, the government has insti- 
tuted a series of stoj>go attempts at 
restraining monetary growth to calm 
an overheating economy, loosening and 
tightening credit in alternate three- 
month cycles. 

Persistent demands for working capi- 
tal from ailing state enterprises, half of 
which are operating in the red, have 
greatly complicated efforts to restrain 
monetary growth. 

But while China faces enormous chal- 
lenges in managing its transition, from 
a centrally-planned monolith to a mar- 
ket-oriented system, the economic news 
is far from bring uniformly poor. 

Foreign investors continued to target 
China, pledging some US $57bn worth of 
new investment in the first nine 
months of the year. Actual investment 


which is preoccupying the leadership, 
and deepening the new mood of cau- 
tion. Heirs to the throhe wish to avoid 
any friy steps in this delicate transi- 
tional phase. 

At the fourth plenary session of the 
14th central committee held in Septem- 
ber, the C ommunis t Party emphasised 
themes of stability rather than reform 
in a resolution titled “Major Issues on 
Strengthening Party Building." This 
was hardly a ringing endorsement of 
the reform process: instead it indicated 
that the leadership was preparing for 
difficult times expected ahead. 

The fourth plenum resolution stood 
in marked contrast to that of the third 
plenum of November, 1993 which 
approved a blueprint for sweeping eco- 
nomic changes, including reforms of 
the financial sector and guidance for 
the corporatisation - a Chinese half- 


ON OTHER PAGES 

Political uncertainties; changes hi forefen poOcy 

Economic prospects; trade; labour reforms Pa 

Foreign to vestment, banking and finance F 

Cultural trends; doing business in China 

Editorial production: Michael Wiltshire 


Page 2 

ages 3 and 5 
Pages 6 to 9 
Page 10 


totalled $22.72bn, an increase of 49 per 
cent over last year. China now absorbs 
about half of all foreign direct invest- 
ment to developing countries world- 
wide. 

T rade figures so tar for 1991 are no 
less impressive. Exports 
rebounded strongly after growth 
slowed last year. In the first three-quar- 
ters of 1994. exports exceeded imports 
by $138bn, compared with last year’s 
trade deficit of $BL2bn. 

In fine with its much-improved trad- 
ing performance. China’s foreign 
exchange reserves grew strongly in the 
first half of the year, to stand at 
$3933bn at the end of September, a 87 
per cent increase on 1998. The contin- 
ued buoyant performance of townsbip 
and village enterprises was another 
bright spot 

Yet, although economic issues have 
dominated .the public agenda this year.; 
.it: is concern- about Mr Deng’s health 


way house to privatisation - of state 
enterprises. 

Slow progress in these areas in the 12 
mnnthg since the third plenum reflects 
a new. more hesitant mood which has 
been prompted by concerns about rising 
prices, unrest among the unemployed, 
agitation by peasants whose incomes 
have been squeezed by rising costs, 
greater incidence of crime across the 
country, and worries about the leader- 
ship transition. 

Added to that is the fact that as 
China proceeds further down the road 
of economic reform and in the process 
seeks closer integration with the world 
economy, the task becomes more com- 
plicated. Not least of the difficulties is 
marrying the country's own evolving 
trading laws and regulations' with those, 
of the outside world. - . 

Presiding over this extraordinarily 
complex transition, in place of Mr 
Deng’s generation of revolutionaries, 
.will ben. new, more technocratic cadre 


whose capacity to deal with the serious 
challenges which lie ahead in governing 
the world's most populous state is 
largely untested. 

China's new generation of leaders 
may be able to defer for the time being 
consideration of contentious issues 
such as the need for greater account- 
ability, but continued economic liberal- 
isation is certain to increase demands 
for a more representative system. Real 
political reform, as opposed to tinkering 
with party institutions, cannot be 
excluded indefinitely from the debate. 

While progress in economic reform 
has been patchy, there have been some 
impressive advances in forefen policy. 
President Clinton's decision in May to 
uncouple human rights issues from an 
extension of China's most favoured 
nation trading status in the US repre- 
sented a victory for Chinese diplomacy, 
though human rights lobby groups 
were outraged. 

Relations with the US have improved 
markedly in the past six months, with 
frequent exchanges of high level visi- 
tors and growing collaboration in a 
range of areas - from regional security 
to global arms control 

The agreement reached in October 
between the US and China to co-operate 
in efforts aimed at halting the spread of 
missile technology and fissionable 
nuclear materials was a significant 
development 

Chinese officials regard 1994 as a year 
during which Beijing placed greater dis- 
tance between itself and the massacre 
of pro-democracy protesters is Tianan- 
men square in 1989. Sanctions are still 
in place in the West against the sale of 
military hardware, but the Tiananmen 
issue as an irritant to relations with the 
international community has receded 
into the background. 

China’s foreign policy aspirations for 
the year would be more than fulfilled if 
success were achieved in its difficult 
negotiations on reentry to the General 
Agreement an Tariffs and . Trade, (see 
page fine in Ms survey). Gatt-entry, and 
the benefits which would accrue in con- 
sequence, would provide a fillip for a 
regime seeking positive economic news 
to counter some of the less positive 
developments of the latter part of the 
year. 



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IMTERNAT IONAI MET WORKING 









XI 


FINANCIAL TIMES MONDAY NOVEMBER 7 1994 



CHINA 2 


I t was hardly a ringing dec- 
laration of self-confidence 
in the future, end for that 
reason it was revealing of the 
political uncertainties that pre- 
vail in China as the nation 
waits for its paramount ruler 
to die and worries about the 
transition from one generation 
of leaders to the next 
The resolution of the fourth 
plenary session of the 14th 
Central Committee of Septem- 
ber 28 laid heavy emphasis on 
strengthening Communist 
Party institutions and rooting 
out corruption. Its message 
was one of consolidation, in 
marked contrast to the deci- 
sions of the third plenum, 
twelve months earlier, which 
had resolved to embark on an 
ambitious programme of eco- 
nomic reform. 

The Party must be capable 
of recognising, enhancing and 
upgrading itself under the new 
situation of reform and of 
opening-up, and must conscien- 
tiously study and solve the 
new contradictions and new 
problems that crop up in the 
course of its self-building,” said 
the resolution. 

China's “third generation" of 
leaders, as they are known in 
official parlance. Hod them- 
selves in the uncomfortable sit- 
uation of being expected to get 
on with asserting leadership, 
while at the same time re main- 
ing min dful of the fact that an 
Old man of failing health is Still 
the arbiter when it comes to 
important decisions - although 
it is not clear whether it is Mr 
Deng himself or those who are 
purporting to speak for him 
who are actually wielding 
authority. 

Mr Deng’s health may have 


Tony Walker reports on a transitional stage in politics as rival groups vie to succeed Deng 

The long wait for heaven’s mandate 


deteriorated to the point where 
his ability to monitor develop- 
ments is very limited, but until 
he dies the “mandate of 
heaven” cannot pass to his 
chosen successors. This is in 
spite of the fact that much has 
been made recently of the old 
man ’s confidence in the new 
generation with President 
Jiang Zemin at its “core." 

China, as it awaits Mr Deng’s 
demise, is embroiled in a pro- 
cess of “transitional politics” 
with various factions manoeu- 
vring for power arid influence 
in preparation for the post- 
Deng era. Thus, personnel 
changes at the top increasingly 
are seen through a prism of 
what they mean for the power 
balance after Deng. 

President Jiang Zemin, who 
also holds concurrently the 
positions of general secretary 
of the Communist Party and 
chair man of the Military Com- 
mission, appears to have been 
bolstering his position over the 
past year or so with key 
appointments to the party and 
military, and to the security 
apparatus. 

A thread running through 
these appointments is that the 
officials brought to Beijing 
were associated with Mr Jiang 
in his days in the 1980s In 
Shanghai when he served as 
mayor and then party secre- 
tary. This has given rise to talk 
of a “Shanghai faction” In the 



President .fiang Zemfre a stronger 

position now Htftnr Omg BMf. AP 

leadership, but such an assess- 
ment may prove to be simplis- 
tic since many leading figures 
with a Shanghai connection, 
including Mr Zhu Rongji, the 
vice premier in charge of the 
economy (Mr Zhu was. like Mr 
Jiang, mayor and party boss of 
Shanghai) are not so easily 
pigeon-holed. 

With Mr Deng's demise 
drawing nearer and with the 
leadership in something of a 
state of flux it will almost cer- 
tainly take time after his 
departure from the scene for a 
clearer picture to emerge of (he 
strength of the various key 
participants and. more impor- 


Premter U Peng: one of the main 

players WunOmnOmn neuter 

tantly perhaps, of the trends 
which they represent 

The principal actors at this 
stage include Mr Jiang himself, 
Premier Li Peng, Mr Zhu and 
Mr Qiao Shi. the enigmatic 
chairman of the standing com- 
mittee of the National People’s 
Congress and third ranking fig- 
ure on the seven-member 
standing committee of the rul- 
ing Politburo. But waiting in 
the wings are others who can 
be expected to make their bids 
for a share of power in the 
post-Deng phase. 

Mindful of the fact that Mr 
Deng’s reformist legacy will 
almost certainly come in for a 


Qiao Shi, chabman of (tie stamfing 
committee of the NPC muter 

buffeting once he goes, the 
authorities have, for much of 
this year, been seeking to rein- 
force the message that there 
can be no turning back, but at 
the same time they have 
mounted a campaign aimed at 
reminding people that eco- 
nomic reform does not equate 
with political liberalisation. 

People’s Daily, in a commen- 
tary echoing the theme of Sep- 
tember's central committee 
meeting, stressed adherence to 
democratic centralism, a code- 
phrase for continued rigid 
party control, and rejected 
what it described as the doc- 
trine of extreme democracy - 


Key rote: Zhu Rongp, executive 
vice premier rmirhtimpMaa 

the phrase employed by Chi- 
nese propaganda to impugn 
Western-style democracy. 

“We must perfect democratic 
centralism and associated poli- 
cies, so that there is no change 
because of a charge in leader- 
ship, and no change because of 
a change in the leaders' views 
or focuses of attention.” Peo- 
ple’s Daily said pointedly. 

Indications that Mr Deng’s 
legacy, which is meant to serve 
China for the next 100 years, 
will be for from immune from 
attack came with publication 
earlier this year of a controver- 
sial book whose author has 
thus far not been identified 


publicly. The book. Looking at 
China Through a Third Bye 
expresses the heretical notion 
that Mr Deng’s policies of 
explosive economic growth 
have led China into a trap in 
which socialist values were 
crumbling, and the ability of 
the authorities to exert c ontro l 
over a restless and disaffected 
peasantry was weakening. 

publication of such criti c ism, 
especially in the present cli- 
mate of unadorned official 
praise for Mr Deng, was sur- 
prising. but it does indicate a 
certain level of opposition. 
Party conservatives unhappy 
with the excesses of the eco- 
nomic transformation, and 
ideologues who fear a wither- 
ing of socialism - with or with- 
out Chinese characteristics - 
can be expected to be more 
outspoken in the post-Deng 
period. , , 

Criticism from party dissi- 
dents. who have been biding 
their time until Deng passes 
from the scene, may well pro- 
vide an early test of tire resolve 
of the leadership group. Chi- 
na's post-Deng collective, 
deprived of the ability to speak 
on behalf of a higher authority, 
will have to find new ways of 
d ealing efficiently with inter- 
nal dissent. 

Apart from Mr Deng’s 
anointed successor, it will be 
the veteran officers of the Peo- 
ple's Liberation Army who will 


play a crucial rote in the next 
phase. Although the army has 
undergone a fairly rapid pro- 
fesgtanalisation. and thus the 
introduction of younger offi- 
cers to its senior ranks sincek 
the late 1970s, old-guard cam- 
numders still hold sway. 

President Jiang Zemin’s 
chair manship of the . Central 
Mintar v Commission (the most 
powerful body in China aside 
from the Politburo standing 
committee), is - underpinned by 
the presence as viceiftaiiman 
on the commission of two Red 
Army stalwarts and' Long 
March veterans -• General Uu 
Huaqing, 78,. and General 
Zhang Zhen, 80. .. 

Their rote, and that another 
revolutionary commanders, 
will be critical in resoMi^ foo- 
tional struggles post-Deng, in 
preparation for the transition 
and to. assure continuity . the 
word has been put out' that 
Generals Liu and Zhang will 
continue tniheir posts for the 
time being. " 

The army and security appa- 
ratus has been standing by far 
months to crack-down, on any 
sign of trouble after Mr Deng 
goes. Security will certainly be - 
at the top of the list of con- 
cerns in the immediate post- 
Deng era. 

Indeed, General Zhang is 
reported to have stressed at a 
recent meeting of the CantraJ* 
Military Commission the need- 
for absolute loyalty of the 
army to the party in the next 
phase. His address also laid 
heavy emphasis on the need, to 
maintain stability in the army 
itself and in the nation at this 
time. These will remain stan- 
dard themes in these skittish 


&r 


* 


0 




iv: 


Diplomacy has been a key factor this year, reports Tony Walker 

Relations with US improve 


W hen Qian Qichen, Chi- 
na's Foreign Minister, 
addressed the US 
Council on foreign relations in 
New York recently, be spoke 
with more self-assurance about 
diplomatic achievements than 
might have been possible ear- 
lier in the year. 

Mr Qian also pursued a 
theme that is East becoming a 
staple of public utterances by 
Chinese leaders on a range of 
subjects from Gatt membership 
to regional security. It is that 
China, because of its growing 
economic weight, expects to 
play a much expanded role in a 
complex and unstable world. 

“People with vision have 
come to realise that the world 
needs China for peace, stability 
and prosperity just as China 
needs the world,” he said. 

As 1994 draws to a close, 
there is no doubt this has been 
a successful year for Chinese 
diplomacy with Beijing further 
distancing itself from the 
bloody events of 1988 in which 
the military turned its guns on 
student pro-democracy protest- 
ers. 

The US agreement in mid- 
year to sever the link between 
renewal of China’s Most 
Favoured Nation status and 
human rights issues repre- 


sented a significant break- 
through. 

Relations with the US have 
improved markedly as a conse- 
quence, although irritations 
continue over issues ranging 
from Washington's decision to 
upgrade ties with Taiwan to 
terms for China’s re-entry to 
the General Agreement on Tar- 
iffs and Trade (GATT). Among 
tangible signs of improvement 
was the joint Sino-US state- 
ment in October on “Missile 
Proliferation” in which the two 
sides agreed to work together 
to halt proliferation of missiles. 
They also resolved to cooper- 
ate in efforts to achieve an end 
to the production of fissile 
materials for nuclear weapons. 

In return for China's agree- 
ment to support a global ban 
on exports of missiles under 
the terms of the Missile Tech- 
nology Control Regime 
(MTCR), the US lifted sanc- 
tions on the export of high 
technology items. 

Since the disastrous visit to 
Beijing early this year of Mi- 
Warren Christopher, the US 
Secretary of State, marked by 
an unseemly wrangle over 
human rights, a steady stream 
of senior Americans has passed 
through the Chinese capital; 
among them, Mr Ron Brown, 


the Commerce Secretary and 
Mr William Perry, the Defence 
Secretary. 

The latter was the first visit 
to China or a US Defence Secre- 
tary since 1989 and yielded 
agreement on enhanced mili- 
tary consultations, and 
co-operation in such fields as 
defence conversion. The two 
sides did not address the issue 
of the continued US embargo 
on military aid to China 
imposed after June, 1989. 

T he growing frequency of 
Sino-US exchanges indi- 
cates that the two are 
bent on building a more con- 
structive relationship in both 
the commercial and political 
and security spheres. This is 
consistent with the Clinton 
administration’s desire to re-fo- 
cus its China policy in ways 
that make it less susceptible to 
human rights pressures. 

China would also be well sat- 
isfied with broader foreign pol- 
icy developments. The defus- 
ing, for the time being, of the 
North Korean nuclear crisis 
represented a success for Chi- 
nese diplomacy which had 
striven behind the scenes to 
avoid a sanctions process and, 
worse, the crisis spiralling out 
of control. 


DENTON HALL 


International Lawyers 

advising on trade, investment and finance in Asia and the 
People's Republic of China, including 

Telecommunications 

Energy 

Infrastructure Projects 
Corporate Finance 


CHINA PRACTICE GROUP 

John Kuzsok 
Denton Hall 
1 0/F Hutchison House 
10 Harcoun Road 
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Hong Kong 


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3325 China World Tower 
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SPECIALIST CONTACTS IN THE HONG KONG OFFICE 
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BEIJING BRUSSKIS HONGKONG LONDON IXKANGEIltS MOSCOW SINGAPORE TOKYO 
MEMBER OF THE DENTON INTERNATIONAL GROUP OF LAW FIRMS 


la a way. the North Korea 
issue provided a textbook case 
of Beijing's cautious foreign 
policy approach. China prefers 
quiet di plomac y to confronta- 
tion on most issues with the 
notable exception of questions 
involving Hong Kong. Taiwan 
Tibet and human rights. 

This much reflects the 
low-key non-ideological per- 
sonal style of Foreign Minister 
Qian as it does Beijing's desire 
to be regarded as a good neigh- 
bour in its own region and a 
constructive player globally. 

China, for the moment, 
appears sensitive to regional 
concerns about its growing 
economic strength, although 
Beijing's uncom pro mising pur 
suit of its claim to disputed 
islands and surrounding 
waters in the South China Sea 
risks confrontation, p rincipall y 
with Vietnam, see report this 
page. 

The Spratlys Issue is one of 
the irritants most often cited 
as an argument for the further 
development of a regional 
security consensus, but here 
again Beijing is cautious. 
While officials see merit in dia 
logue they are sceptical of 
grander schemes such as 
Europe's CSCE framework. 

This caution extends to Bei- 
jing's approach to the Asia 
Pacific Economic Cooperation 
forum (APEC). While China 
sees malt in APEC, it is not 
ready, at this stage, to embrace 
the grouping wholeheartedly 
as much more than a consulta- 
tive forum. 

Among China’s concerns is 
that APEC itself m ight develop 
into a trading bloc in competi- 
tion with other groupings, 
including the European Com- 
munity. China, whose trading 
ambitions are almost bound- 
less, is understandably against 
the idea of the world being 
divided into competing eco- 
nomic spheres. 

Apart from the US, China 
has also witnessed in the past 
months an improvement in its 
relations with key European 
powers, including Germany 
and France. 

The visit to France by Presi- 
dent Jiang Zemin in September 
followed a period of coolness 
over French arms sales to 
Taiwan, but the issue was 
defused earlier this year when 
France agreed to plare a mora- 
torium on new weapons busi- 
ness. 

China's relations with the 
Russian Federation have also 
been improving, culminating 
with the visit to Moscow to the 
autumn by Mr Jiang. This 
resulted in a series of frame- 
work economic agreements 
designed to propel the relation- 
ship into the next century. The 
two sides also agreed to stop 
targeting each other with 
nuclear weapons and to further 
reduce the deployment of 
troops on their lengthy com- 
mon boundary. 

The one really jarring ele- 
ment of China’s international 
relationships, apart from ongo- 
ing human rights pressures, 
remains the row over Hong 
Kong governor Chris Patten's 
attempts to broaden democ- 
racy, and the effect this is hav- 
ing on Slno-British ties. 

At this stage, there seems lit- 
tle prospect of an end to the 
friction and its negative impact 
on relations between Beijing 
and London. The 1,000 or so 
days between now and 1997 
promise a bumpy ride. 





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Dispute over offshore oil and gas resources 

Spratly Islands row heats up 


I t is possible that a group a 
submerged reefs in the 
South China Sea could be 
the site of the world’s next big 
conflict involving the owner- 
ship of oil resources. 

At issne is the ownership of 
the Spratly Islands and their 
surrounding seas which are 
claimed, in whole or part, by 
China, Vietnam, the Philip- 
pines, Malaysia, Brunei and 
Taiwan. 

The main protagonists In the 
dispute are, however, China 
and Vietnam. They have come 
to blows once - in 1988 when 
China sank two Vietnamese 
vessels with the loss of more 
than 70 lives - and continue to 
frustrate each other’s attempts 
to mine the oil and gas 
believed to be in liberal supply 
below the sea. 

The South China Sea is one 
of the world's most important 
shipping lanes. The possibility 
of a naval conflict over sover- 
eignty would engage the vital 
interests of Japan - 70 per 
cent of its oil Imports pass 
through the sea - and sur- 
rounding claimants. The US, 
which is not taking sides, 
would inevitably become 
involved if hostilities broke 
out - “the Chinese govern- 
ment’s position Is clear,” says 
Chen Bingqin, vice-president, 
China National Offshore Oil 
Corp. “We want to put the dis- 
pute an the shelf and explore 
[for oil and gas] jointly. It is 
the only way peacefully to 
explore the area.” 

On the question of sover- 
eignty, a senior Chinese gov- 
ernment official was adamant: 
“Sovereignty belongs to China 
and that’s a matter that 
brooks no discussion.” 

China claims that there was 
never any dispute abont its 
sovereignty in the South 
China Sea until oil and gas 
were discovered in the 1970s. 
The Spratly Islands are too far 



Oil rigs bum off natural gas in the South China Sea 


LoORalmondoJAP 


south to show on the above 
map of China. The size of Bei- 
jing’s territorial claim - 80 per 
cent of the South China Sea - 
Is breatfatakingly audacious, 
even by China’s standards. 
The U-shaped claim runs the 
length of Vietnam’s coast and 
along the western coast of the 
Philippine islands, meeting off 
the coast of Brunei and Malay- 
sia to the south. 

In 1990, Beijing offered to 
pot the issne of sovereignty to 
one side and embark upon 
joint development of the South 
China Sea. But in May 1992, 


China awarded Crestone, a rel- 
atively small US oil explorer, 
the right to drill for hydrocar- 
bons in a bloc situated at the 
extreme south-west of its 
claimed territory. 

In retaliation, Vietnam 
awarded a consortium of all 
companies, fed by Mobil of the 
US, a Moc adjacent to Cres- 
touc’s and within China’s ter- 
ritorial claim. This group 
began prospecting in June. 

Both countries have offered 
naval support to their respec- 
tive prospectors. In June the 
Vietnamese navy interfered 


with a Chinese vessel conduct- 
ing a seismic survey of Cres- 
tone’s bloc. The Vietnamese 
claim similar interference by 
the Chinese navy. For China, 
which is likely to remain a net \ 
oil importer for many years tof 
come, the promise of abundanT 
oil reserves in the South ChinaJ 
Sea would be a boon to its 
offshore oil industry. 

Since 1982, offshore oil finds 
In the Yellow and East China 
seas have failed to live up to 
early expectations. This year 
the China National Offshore 

011 Corporation expects to pro- 
duce 44m barrels of oil from 

12 fields. It hopes to double 
production by 1997 when other 
areas come on stream. 

Vie tnam, by contrast, is 
extracting 33m barrels a year 
from one field in the South 
China Sea, with production set 
to rise sharply with the addi- 
tion of two more oil fields in 
production by the end of this 
year. 

Simon Holberton 


PS; 


‘■6 ft* 



■ IBFD: SPECIALISTS IN INTERNATIONAL 
TAXATION ANP INVESTMENT FOR OVER SO YEARS 




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Taxation & investment In the People’s Republic of China: a detailed account of 
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The Foreign-Related Tax Laws and Regulations of the People's RepubBe of 
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FINANCIAL TIMES MONDAY NOVEMBER 7 1994 ★ 


111 


CHINA 3 


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How China has fallen into its inflation trap 


Foreign exchange reserves 
<%) 

| Annual rtta at ex chi n ga 

(loll scalp) 


'-30 



Consolidated fiscal deficit 

As a per cent of GDP (1387-93 average) 

■ intact borrowing tram People's Barit of China 
m Rtrecr burow no ton P6C frwfl 

7 □pofnestteftorowtig 
g ■ Foreign bonowng 
front reC 


Monetisation of the economy 


8 


1.8 


-20 


1890 91 92 83 M 

• Official reserve* erctude tawgi exrf ia nge fxAlan A 
train bar* ot CWna. AB wrw3 are amusSsad 
Sourar The Crarvi Arulva 

Seignorage revenues 

Increase in currency as a per cent of GDP 
(1980-95 average) 



L ower bo u nd Upparbound 

Sauce: Mn&ry d Pnane*, PBC. Wodd Bn* 


199* m as to 98 88 90 81 
SouTOK State satWeer auroeut. Wens Hank 


M2/GDP (9o) 
(196045 average) 


Inflation and Interest rates 


Financial RberaBsatton has created new sources of monetary growth. Above: crowds throng the Shanghai Securities Exchange Actum: Cathrm Tnmarn 



20 40 60 80 M0 120 


: WwwtJr* 


1960 81 82 83 84 

Soiree; PBC. Worid Bar* 


I nflation is the Achilles heel 
of Chinese economic 
reform. High inflation 
helped cause the conditions for 
the Tiananmen Square demon- 
stration in 1989, partly because 
of disgust over the associated 
corruption- Defeating the polit- 
ical opposition, then did grave 
damage to the credibility of the 
Chinese government, while 
towering inflation led to two 
years of real economic growth 
at 4 per cent virtual stagna- 
tion by recent Chinese stan- 
dards. 

Failure to rein in inflation 
this year might prove as dam- 
aging. Yet over-zealous efforts 
to slow the economy could also 
prove destabilising. 

The observer should examine 
the dilemma confronting the 
authorities as though through 
a zoom lens, starting with the 
close-up. 

According to China’s State 
Statistical Bureau (SSB), the 
cost of living nationwide was 
27.4 per coot higher in Septem- 
ber than in the game month 
last year, in response, to such. . 
pressures, argues vicepremier 
Li Lanqing, the authorities 
have to rely on a wide range of 
economic, legal and adminis- 
trative means. Accordingly, 
price controls were imposed an 
staple Jbodstufb in September, 
even though reformers realise 
that such measures . are at ’beEt ^ 
short term and can seriously , 
endanger longer-term reforms. 

Concern about the sharp rise 
in food prices over the past 
year is understandable: food 
makes up more than half of the 
total weight in the cons umer 
price index; food prices also 
rose 353 per cent in the year to 
August, whfle grain prices rose 
546 percent. 

Food prices may have 
soared, bid those of machinery 
and electronic products fell 
slightly over the same period. 
Producer price inflation has 
disappeared in response to the 
tightening of credit that ini- 
tially fallowed the 16-point pro- 
gramme of July 1993. master- 
minded by Mr Zhu Rongji, 
vice-premier in charge of the 
economy. 

This picture seems inconsis- 
tent with the hypothesis of 
general egress demand. Mr Qiu 
Xiaohua, spokesman, for the 
SSB, blames recent inflation on 
supply .shocks, pointing to 
drought in northern China and 
flooding -in the south. Also 
important has been long- 
needed administrative price 
rises for grain and other com- 
modities this year. Mr Lou 
JiweLdirecte of the macroeco- 
nomic department of' the State 
Commission for Restructuring 
the Economic. System, points 
also to higher prices of oiL 
Such analyses o ffe r support 
to the economists who ques- 
tion government policy. Mr 
Dong Fureng, vice-chairman of 
the financial and economic 
committee of the People’s. 
National Congress, argues that 


Martin Wolf examines China’s economic prospects 

Zooming in on the threat of inflation 


“if cost is pushing up prices, 
demand is not the best way to 
control inflation.” 

Mr Li Yining, vice-chairman 
of the law committee of the 
PNC, insists that credit control 
even aggravates underlying 
difficulties. With supply the 
main problem, he argues that 
China needs more investment, 
not less, fife Li has a point But 
what is required is more 
investment in efficient distri- 
bution and marketing systems, 
which is not what current dis- 
torted incentives would secure. 

Zooming out to a wider 
angle, the observer can see 
that the government's efforts 
to control credit expansion are 
indeed justified, for two main 
reasons. 

First, so-called cost-push 
inflation is usually a lagged 
response to previous excess 
demand, in China for example, 
adminis tered increases in food 
prices are a consequence of 
past failure to adjust prices in 
Imp with Inflation. Second and 


PBC may be too complacent 
about the prospects. 

In 1992 the ratio of M2 to 
gross domestic product in 
China was 105.7 per cent, far 
higher than in other develop- 
ing countries (see chart). 
Between 1984 and 1992, broad 
moneys velocity of circulation 
foil from 1.56 to 095 - a decline 
of around 6 per cent a year, 
(see chart). As inflation rose in 
1993, however, velocity 
increased by 5 per cent, the 
harbinger of likely embarrass- 
ment to come. 

Mr Lon argues that the 
money supply can expand at 20 
per cent a year without danger. 
If real economic growth were 
to be 10 per cent a year and 
velocity were to stabilise, this 
would indeed be consistent 
with inflation of 10 per cent 

Unfortunately, recent growth 
of the money supply has been 
much foster than 20 per cent. 
In addition, the velocity of cir- 
cnlation could start to rise on a 
sustained basis. One reason 



Money changes hands as food costs soar: the wony about the sharp 
rise in prices during the past year te understandable 


most important, uncontrolled 
growth of credit and money 
has become a serious threat to 
China's stability. 

Recently published monetary 
statistics show that the 
broader M2 monetary aggre- 
gate grew by 37.1 per cent in 
the year to the third quarter of 
1994 compared with 29.7 per 
cent in the year to the second 
quarter. Yet the target for 1994 
had been set at only 24 per 
cent 

Mr Dai Hangtong. a deputy 
governor of the People's Bank 
of China (PBC), attributed the 
excessive monetary growth to 
higher than planned capital 
spending by state-owned enter- 
prises (SOEs). lack of budget- 
ary restraint, large rises in 
wages and salaries for govern- 
ment employees and the 
Increases in payments to form- 
ers. By reveahng the figures so 
promptly, the PBC is trying to 
strengthen its famd in the fight 
against inflation. Yet even the 


1 40lfc ~**^ 


might be the effects of infla- 
tion, particularly since real 
interest rates are currently 
negative (see chart). Another 
would be an understandable 
desire on the part of the Chi- 
nese to diversify a way from 
money. 

Any flight from money could 
destroy economic stability. 
China’s past monetary expan- 
sion has created a delayed-ac- 
tion bomb. Unfortunately, it 
will be difficult to halt further 
increases in its explosive 
power, let alone defuse it 

One reason for the difficulty 
is the monetary effects of the 
accumulation of foreign-ex- 
change reserves. These 
reached US ?39.Sbn by the end 
of September, an 87 per cent 
increase on 1993 fsee chart). 
The expansion reflects 
attempts to keep down the 
exchange rate (unified at the 
beginning of this year) In the 
presence erf a trade surplus of 
US $1.4bn in the first nine 


months of 1993, plus a large 
capital inflow ($i4.7bn in the 
first eight months). 

Financial liberalisation has 
also created new sources of 
monetary growth. The assets 
of non-bank fmanriai institu- 
tions - Urban Credit Co-opera- 
tives (UCCs) and Trust and 
Investment Companies (TICs) 
- have grown explosively, from 
6.5 per cent of those of the 
state banks in 1987 to 12.5 per 
cent in 1992. These institutions 
offer state banks and local gov- 
ernments a way to evade cen- 
tral control over lending. Con- 
sequently. “augmented” broad 
money, which includes depos- 
its at UCCs and TICs, has 
g r own foster even than M2. 

The most important causes 
of persistently rapid monetary 
growth are, however, those 
alluded to by Mr Dai. The con- 
solidated budget deficit, which 
includes the directed policy 
lending of the PBC, has been 
running at an average of 
around 5-6 per cent of GDP 
over the past seven years, 
reaching 7-9 per cent in 1993 
(see repo r t Reform of the cen 
trul bank, page seven). 

If it were financed through 
bonds or asset sales, such a 
deficit need not be that danger- 
ous in the medium term for an 
economy as dynamic as Chi- 
na’s. But virtually all of it has 
been financed by the printing 
press. Seignorage - revenue 
derived from the government's 
access to the central bank, via 
expansion of money as a share 
of GDP - Is estimated to have 
varied from 6 to 9 per cent of 
Chinese GDP between 1988 and 
1992, an exceptionally high fig- 
ure by international standards. 

A little over two-thirds of the 
seignorage came from real 
money expansion and the rest 
from the inflation tax. As infla 
tion rises, however, these pro- 
portions will alter. But the 
monetary basis for seignorage 
would also start to collapse. 

The significance of such a 
shift for public finance can 
hardly be exaggerated. In 1992, 
for example, seignorage from 
reserve money creation, at 
some 6 per cent of GDP, 
amounted to just under 40 per 
cent of total budgetary reve- 
nues. Similarly, direct and 
indirect government borrowing 
from the PBC was just under 
30 per cent of those revenues. 
The Chinese government is, it 
appears, addicted to the print- 
ing press. 

Now zoom to the widest 
angle: behind the monetary 
threat lies the political frailty 
of central government vis & vis 
the interconnected interests of 
local government and larger 


Gross douwwtlc investment 


Foreign Direct 
20 -ftiwaftnent- 




.. 1980 .85. 

rea iW&H Bi 



WiSw&dpate--'.. 


•’ j" dtfn ' Ihirf ateo suftes 



1990 


1991 


1992 


1993 


■and 


" 

mwi 

jf'Sw?; 


v M al^ sitffere severe iiistabaity ..... 


v : v-f ■ - ■ 

~V .‘4 ■■fl amfl t a g a Change.oyer previous year 

• :VD% 




H* : P-- 1 ■ GOP growth 

1 . 'V ■* •* * inat ^ 


WtaUon 
(retail prices) 


• >;>■ , ;1 "{-.y/. .? ... \ S^csc C »a S Bttafcat 



SOEs. Beijing has transferred 
control over SOEs that gener- 
ate SO per cent of total SO E 
output to local governments, 
so loosening central control 
over their investment. The fis- 
cal autonomy of local govern- 
ment. plus its Leverage over 
local branches of the PBC, has 
exacerbated this loss of influ- 
ence. The resulting “invest- 
ment hunger” is revealed in 
the fact that nominal capital 
spending was more than 54 per 
cent higher in July and August 
1994 than in the same period of 
last year, despite supposedly 
tight central controL 

G overnment economists 
estimate that of the 
11.000 large and 
medium state-enterprises, one- 
third are in the red, while 
another third barely breaks 
even. 

According to the SSB. in the 
first nine months of this year, 
44.5 per cent of SOEs have 


made losses. One reason is the 
growing competition they face 
from township and village 
enterprises (TVEs), joint ven- 
tures and imports. 

Nevertheless, 61 per cent of 
total fixed investment (and 23 
per cent of GDP) went into 
SOEs in 1993. Much of this may 
not be investment at all, but 
rather means of disguising 
losses. Even where it was 
indeed investment, the absence 
of a bankruptcy constraint 
means that much may be 
wasted. An indication of this is 
that the share of SOEs in gross 
industrial output fell from 65 
per cent in 1985 to 48 per cent 
in 1992. even though their 
share in gross fixed capital for- 
mation appears constant. 

Beijing feeds the SOEs 
because they offer employment 
and social welfare to more 
than 100m people. Whenever 
tightening of credit leads to an 
expansion of inter-enterprise 
debt, the pressure to loosen 


control over credit becomes 
formidable. This ex plains the 
relaxation of credit in late 
spring and summer of 1994 

The inability of Beijing to 
control investment spending, 
combined with growing SOE 
losses, is the mam reason fin- 
weak discipline over public 
spending. Meanwhile, political 
decentralisation reduced reve- 
nue, as SOEs appropriated the 
profits they made and local 
governments took control over 
fiscal revenue (see reforming 
the tax system, page seven). 

Despite all tins, most observ- 
ers assume that the Chinese 
path of incremental reform is 
stable. Hitherto, however, the 
contradiction between macro- 
economic stability and decen- 
tralised SOE inves tmen t in the 
absence of bankruptcy has 
been resolved by the willing- 
ness of the Chinese to hold 
extraordinary amounts of 
money. It would be foolhardy 
to assume this will last, partic- 


ularly if inflation is hi gh 

The big question is whether 
Beijing can make the alterna- 
tives work. Funding fiscal defi- 
cits through borrowing on for- 
eign and domestic markets - 
now being started on a sub- 
stantial grate, with issuance of 
more than YnlOObn (US $i2bn) 
in domestic securities this year 

- will produce an increase in 
fixture fiscal deficits, as the 
interest bill rises. Positive real 
interest rates on deposits, to 
persuade people to hold 
money, would undermine 
weaker borrowers or increase 
the subsidy bilL Raising mare 
revenue at the centre means 
recentralisation of govern- 
ment Last but not least, curb- 
ing credit expansion necessi- 
tates either bankruptcy for 
many SOEs, or greater central 
control over their activities. 

The issue is, at bottom, one 
of reimposing discipline, while 
sustaining the impulse towards 
liberalisation. Further reform 

— to push the SOEs brin the 
market and bring local govern- 
ment within a more orderly 
political system - is urgently 
required. The big question is 
political, not economic. It is 
whether the Chinese govern- 
ment has the will and the 
capacity to do what is needed. 


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FINANCIAL times MONDAY NOVEMBER 7 1994 



1 


f, as has been said, there 
are lies, damned lies and 
statistics, Chinese data 
mast tall within a particularly 
obscure sub-category of the lat- 
ter. People want to know how 
poor (or rich) rihina now is and 
how fast its economy has been 
growing. Few questions about 
China are more important - 
anrf none are more difficult to 
answer. 

After 1949. flhtna borrowed 
both its economic system and 
its statistical approach from 
the Soviet Union. Instead of 
gross national product, statis- 
tics were prepared in accor- 
dance with the material prod- 
uct system (MPS). which 
excludes all services not 
directly related to production 
(such as education, health, pas- 
senger transport and govern- 
ment). 

This system also relies on 
comprehensive reporting from 
a directly-controlled network 
of productive units, instead of 
the more flexible sample sur- 
veys used in decentralised mar- 
ket economies. In a command 
economy, statistics on output 
are also management accounts, 
which means that reporting 
units have an incentive to 
e x ag g er at e their output 

Faulty in conception, China's 
statistical system was damaged 
by the Great Leap Forward. 
Then, during the Cultural Rev- 
olution, the national statistical 
system was closed down for 
approximately a decade. Even 
the collection of data on mate- 
rial product did not recover 
frilly until the middle-to-late 
1980s. 

Mr Qiu Xiaohua, senior stat- 
istician at the State Statistical 
Bureau {SSB), admits, in addi- 
tion, that output of township 
and village enterprises, which 
are Increasingly important to 
the Chinese economy, contin- 
ues to be scantily reported. 
Also inadequate is infjnnrmtinn 
on personal income and expen- 
diture, essential for the calcu- 
lation of gross national product 
and purchasing power parity 
(PPP) estimates of national 
income. Furthermore, the shift 
to the preparation of data in 
accordance with the United 
Nations System of National 
Accounts (SNA), which started 
only in 1985, will not be fully 
completed until the second half 
of the 1990s. 

Given such defects, serious 
difficulties arise if Chinese 
data are to be compared either 
with those of other countries, 
or over time. 

The simplest comparisons 
nhimiii be for GDP at market 
exchange rates. The World 


Martin Wolf examines the country’s economic structure and performance 


Baffling questions for China-watchers 



ji' 


Estimates of 


Alternative e st imates of China’s GOP 


8aosce of < raWmW 


Data* Total OOP Share at 


1992 GDP per head 

Selected regions 


Pattern of China's econoailc 


A80 


440 ' 


400 * 


380 


320 - 


280/ 




par capita 


world GOP [%) 


Population 

Pm heed 

WwMPo»<.ici«iiwtaqport WM » 
uwfrtteas* 







GDP« 

1880 

1000 - 1.200 * 

1 * 4-437 

6 /i -a i 

^hen^a )-:. ' 


•i jm 

New Ywfc Times (20 May 1993 > 

WMtf Bank 0882 ) * 

1900 

1890 

ljBOO 

ia» 

' 1 46 
Z 20 

4.0 

aa 

C|g »ntirt 0 TKr 

fSOWOO; 



WftnM Bank fl 98 $ w 

1891 

2 .CHO 

' £35 

103 

Easterner 

125 

780 

Simmeraa Hastonpeeqb 

1868 

3 LSOS 

. ZS 6 

140 

East interior** 

186 

310 

Aster MfaflSawt Journal 
< 31 MW 1893 |*» 

1880 

2 J*tt 

' 230 

133 • 

West artarfar*— 144 

290 

c (NrtWitaitfiF 'T. 



J 3 *ia total „• 

- 1 Vt 6 B- ' 

■ 470 


Annual compound growth {96) 


Consumotion 


aupiaaorg 


340 *- 


) hi the protcus tow 

><* MtftMs h) Bwproutatn iww 


1878 81 83 8 S fi? 88 . 9 188 
SflwBfcWWMgMte Want taentwwnt inipem 




Bank now suggests that GNP 
per head in 1992 was US $470. 
India's GNP per head was US 
$310, it says, but even coun- 
tries like Sri Lanka (US $540) 
and Zimbabwe (US $ 570) rank 
above China. 

The World Bank’s estimate is 
a big jump from previous ones, 
which derived directly from 
the SSB’s measure of GDP per 
head (in yuan). It is widely 
believed that the World Bank 
kept Chinese GNP per head 
down deliberately to ensure its 
eligibility for concessional 
lending. If so, it followed the 
Chinese lead. 


ow, however, the Bank 
has delivered an 
upward adjustment of 
34 par cent. Fourteen percent 
age point of this Is for report- 
ing failures. Particularly large 
corrections have been made for 
housing consumption, grain 
output, rural industrial output 
and rural service-sector con- 
sumption, all of which are 
thought to be significantly 
under-recorded. Meanwhile, 
eighteen percentage points of 
the adjustment are for price 
distortions, the argument 
being that the output of some 
sectors - notably housing and 
coal - are significantly under- 
priced relative to market econ- 
omies at comparable standards 
of living. (Note that the correc- 
tions are multiplicative, not 
additive.) 

Even after these upward 
adjustments, China’s GNP in 
1992 was only US $546bn, 
which was smaller than 
Spain’s. 

An alternative approach, 
which seems more realistic in 
certain respects, is to estimate 


the purchasing power of GDP 
at international prices. Since 
services are very cheap in 
poorer countries (because 
wages are so low), the result is 
to increase estimated GDP rela- 
tive to richer countries by sub- 
stantial fl mm g ifs 

Widely-reported calculations 
that China already has the 
third largest economy in the 
world are derived from what 
amount to guesses of its GDP 
per head at PPP. Bather more 
solidly based calculations on 
the same iin« ma fte India the 
world's sixth largest economy, 
which is less widely publicised. 
As the table indicates, China's 
GDP at PPP has been esti- 
mated at between US $1,000 
and US $3,000 per head. 

Nobody knows more pre- 
cisely as yet, because the nec- 
essary surveys have not been 
carried oat, although steps are 
now being taken to do so. But 
surveys will be particularly dif- 
ficult in China, because of the 
country’s size and the discrep- 
ancy in quality between Chi- 
nese goods and services, on the 

nma band , and those in more 

advanced countries, on the 
other. 

Some analysts have tried to 
solve the problem of estima- 
ting China’s real GDP by rely- 
ing on physical indicators - 
such as output of grain, coal or 
steel - or social indicators - 
such as longevity, number of 
physicians or school atten- 
dance. These are then related 
to the past performance of 
other countries, in order to 
obtain estimates of income per 
head for China today. 

Such comparisons are 
fraught with danger, because 
the s tr u ct ur e of China's earn- 



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investment , grew by 360 per 
cent in real terms between 1973 
and 1993 (a compound rate of 
growth of . U per cent), while 
consumption grew by only. 23 2 . 
per cent (a compound rate of 8 
per cent}. Given the uncer- 
tainty about the economic rate 
of return on investment, it 
may be wise to view the 
growth rate of consumption as 
a more accurate mdicator. of 
the economy’s performance 
than that of. .GDP. - 








O Z 4 6 8 10 

Sours: Stafcneal Yearbook. 1893J WorfdBartc 


30 '. v eo;.. '-eU' 


omy is quite dissimilar to that 
of market eco nomies . Its his- 
toric emphasis on commodity 
output and investment, means, 
for example, that comparisons 
with past levels of output in 
the Korean Republic or Taiwan 
almost certainly exaggerate 
Chinese GDP today. 

Still more risky is casual 
empiricism. Visitors to Shang- 
hai can see it is quite prosper- 
ous, but - as the chart shows - 
its income per head (at market 
exchange rates) is utterly unre- 
presentative of China as a 
whole. What is also important 
to remember is that it contains 
just over 1 per cent of China's 
population. 

The safe conclusion is that 

China is still a very poor coun- 
try, with a modest GDP at mar- 
ket prices. It has a for larger 
GDP at PPP, mainly because of 
the consequent revaluation of 
its low quality non-tradeable 
services. The Latter adjustment 
indicates nothing new about 
China's global significance, 
however, as is too often sup- 
posed, beyond what is already 
implicit in the huge popula- 
tion. 

Can any more confidence be 
placed in the reported rates of 
economic growth? Between 
1978 and 1993, according to SSB 
statistics, the Chinese economy 
expanded at a compound 
annual rate of 9 per cent a 
year, for an overall increase of 
260 per cent The largest coun- 
try that has ever reported com- 
parable rates of economic 
growth over a long period is 
Japan, which has only a tenth 
China's population. 

There are good reasons, how- 
ever. to question both the rate 
and the quality of reported 


rates of growth. If the mea- 
sured GDP per head in 1992 
and its reported growth 
between 1980 and 1992 are 
worked backwards. GDP per 
bead becomes US $195 in 1980 
(in 1992 dollars). If so, China’s 
income per head was then 
below India’s - indeed among 
the lowest in the world. 


I he problem becomes 
worse if China’s growth 
is worked still further 
back. If official rates of growth 
are run back to 1965, it turns 
out that China’s GDP per head 
was less than half of India's in 
that year. This is inconsistent 
with statistics on the quality of 
life in China, compared to 
India's, at that time. It is more 
plausible to assume the cur- 
rent relationship is roughly 
correct, but growth rates in 
China have been lower. 

In common with most state- 
socialist countries there is also 
a tendency to under-estimate 
inflation and exaggerate real 
output increases. One reason is 
that this is a way for managers 
of state enterprises to claim 


undeserved success. Further- 
more, GDP data for the late 
1970s and early 1980s are, in 
any case, known to be both 
incomplete and Inaccurate. 

According to successive 
World Development Reports 
China's GDP head rose only 
from US $260 in 1979 to US $370 
in 1991. a ruminal increase of 
only 42 per cent (see chart), 
even though the SSB reported 
a rise of 166 per cent in real 
GDP over the period. The rea- 
son for this discrepancy 
between the growth of Chinese 
GDP at domestic and interna- 
tional prices was the steep 
devaluation of the official 
exchange rate from YnL55 to 
the dollar in 1979 to Yn592 in 
1991. This slide (which implies 
a large depreciation in real 
terms) is a reminder of the 
price distortions that existed in 
the Chinese planned economy. 

These price distortions 
remain pervasive. Foodstuffs, 
urban housing, many services 
and coal have been under- 
priced, while many manufac- 
tures have been overpriced, 
particularly in view of their 


poor quality. In the presence of 
distortions, measured growth, 
may maan little Improvement 
in economic welfare. It may 
largely reflect transfers of 
income from under-priced to 
over-priced sectors. 

It Is worth remembering that 
reported rates of economic 
growth finder socialism in east- 
ern Europe and the farmer 
Soviet Union were generally 
foster than those of western 
Europe, while investment was 
also higher. Yet the opening up 
of these economies has shown 
that they were in fact falling 
further and further behind. 

China’s economy still 
remains state-socialist in 
important respects. White the 
share of the state enterprises 
in output has apparently fallen 
to below half of total industrial 
output, more than. 60 per cent 
of total fixed investment, 
fliwnimHng to over 20 per cent 
of GDP, still goes to the state 
sector. 

Chinese statistics report that 
nearly half of the increase in 
total output between 1978 and 
1993 was investment and that 


linafiy, whm considering 
the quality of growth it 
is worth remembering 
the rapidly-growing environ- 
mental problems: falling water- 
tables; dead lakes and- rivers; 
and polluted - air: Properly - 
accounted for, such costs 
would subtract substantially 
from past Chinese perform 
mance. Large sums will have-, 
to he expended oh cleaning ‘fr- 
ail up in fixture-"'. 

In sum, both the reported 
rate of economic- growth and 
its effects an economic welfare 
must he questioned. Bits of the 
Chinese economy are interns-/ 
tionaBy competitive: export 
performance demonstrates 
that. Equally obvious are 
improvements in : the .living - 
s tandar ds of the ' population. 
Even so, the view that the ! 
entire Chinese economy has 
beau growing as fast as South/ 
Korea’s may be a significant'; 

rrrnggprirHriri ' 

If one is to know accurately 
how well Chirm is perfon^og 
and how rich it is, the shHUn 
an internationally open : and 
domestically competitive mar- - 
ket economy needs to he com-. . 
pleted. There Is still quite a 
long way to go - and then the 
statistics must catch up. - 



Manufacturing company profile: 
Shanghai Fenghwa Ball Pen Company 


Earning an 
accolade 


I n China - notes Cai R uixfng , 
chairman of the S hang hai 

Fenghwa Ban Pen Company 
- the ownership of ball-point 
pens averages only 05 per per- 
son. hi the US the figure is 
nine . If C hines e consumption 
were to reach US levels, more 
than lObn additional pens 
would be sold. Against this, 
Fenghwa expects to make a 
mere 155m ban-point pens in 
1994, writes Martin Wolf. 

As is often the case in China, 
the numbers are stupefying. 
But they are not implausible, 
since pens are a relatively 
cheap luxury item. The poten- 
tial for growth must greatly 
exceed what Fenghwa has 
achieved since its founding in 
1948, even though it already 
supplies 46 per cent of the 
domestic market for ball-point 
pens. 

As China’s economy becomes 
more open, the company's 
growth will also depend on its 
international competitiveness. 
Bat Fenghwa does not have 
that much reason to wony. It 
already exports about a quar- 
ter of its output and derives 20 
per cent of revenue from its 
sales to markets in eastern 
Europe, the middle east, the 
US, Latin America, South 
Africa and elsewhere in south- 
east Asia, including Japan. 
Furthermore, the retail price of 
one of its medium-quality 
ball-point pens is only some 
Yn45 ($055). 

What has made such success 
possible is, argues Mr Cai, the 
programme of management 
reform, investment, innova- 
tion, quality improvement and 
attention to markets under- 
taken since 199L when he took 
over his present job. 

As important, Fenghwa's 
output lira squarely within the 
confines of China's compara- 
tive advantage. The manufac- 
ture of bail-point pens, propel- 
ling pencils, fountain pens and 
crayons demands precision and 
attention to quality. But the 
processes are Labour-intensive 
and not that technically 
sophisticated. As a medium- 
sized company, employing 
1,600 people and enjoying a 
strong domestic reputation, 
Fenghwa ought to thrive in 
China's new economic environ- 
ment. 

So haw has the company 
gone about becoming more 
competitive? 

Mr Cai points, first to the 
transformation of manage- 
ment noting the company's 
success in passing ISO 9001 (an 
internationally recognised 
standard of quality manage- 
ment) last year. An important 
aspect has been reform of 
employment practices. The 
enterprise remains responsible 
for providing housing, pen- 
sions and other benefits, as is 
normal in China. But the work- 
ers are now employed on con- 
tracts of up to five years. In 
compensation, they are paid 
relatively well by Chinese stan- 



ce Rubting: he keeps a dose 
watch on market trends 


dards, the average annual 
wage now being Ynll,300, a 
rise of 140 per cent since 1992. 

Second, Mr Cai stresses 
Fenghwa's investments, 
including its purchase of 
advanced foreign machinery 
and its move in 1992 to a new 
plant in a development zone 
across the river from old 
Shanghai - "ever since then," 
he notes, “we have enjoyed a 
fundamental transformation. 

finally, he notes the compa- 
ny's close attention to market 
developments and quality. One 
aspect is product innovation, 
with 50 per cent of the 180 
models developed In the past 
three years. Another is the 
company's recent assumption 
from the state of all responsi- 
bility for marketing - both at 
home and abroad. 

Central to the strategy was 
the transformation of Fenghwa 
from a traditional state-owned 
enterprise into a share-holding 
company. In September 1992, 
the company was listed on the 
Shanghai stock exchange and 
issued 56m shares. Altogether 
the company has raised more 
than Ynl20m in this way. This 
sum helped finance its invest- 
ments, although the company 
also relied on bank loans and 
re-invested profits. 

Now there are 84m shares 
outstanding, 60 per cent of 
which are owned by the state, 
25 per cent by other enter- 
prises and the balance by indi- 
viduals. 

The shares have at least 
been a reasonably good invest- 
ment Initially listed at Yn5.5 
per share, their price peaked at 
Ynl6 and was still - said the 
chairman, consulting one of 
Shanghai's ubiquitous bleepers 
- Yn9-2 on October 11. 1994. 

Where does Fenghwa go 
now? Its chairman has bold 
plans to turn It into a group. 
There will, he hopes, be three 
or four joint ventures with rep- 
utable foreign manufacturers. 

There are also plans for two 
office developments, one on the 
site of an old workshop in cen- 
tral S hanghai. But its Staple 
businesses will not be forgot- 
ten. Fenghwa has been called a 
"dragon head” plant in the pro- 
duction of ball-point pens. It 
expects to earn that accolade. 


LABOUR MARKET REFORMS 


Joblessness is 
rising rapidly In 
urban areas 


He roar of 1 

■ 


REPORT BY SIMON HOLBERTON 




ne of the thorniest nettles 
waiting to be grasped by 
China's Communist rul- 
ers is the wiflTmgpmMif: of the 
country’s labour market 

Reforming the labour marke t 
Is a prime requirement for Chi- 
na's transition from a planned 
to market economy. Yet reform 
in this area is potentially a 
threat to the Communist par- 
ty's control of Chinese society. 

At the heart of the party’s 
control in urban China is the 
danwei system - a cradle-to- 
grave set of welfare and social 
constraints which binds every 
urban worker and his family to 
a danwei, or "work unit” 
Implicit in this system has 
been the concept of a jab for 
life as well as constant vigi- 
lance over workers' political 
attitudes. This is underpinned 
by a system of “household reg- 
istration'’ which requires each 
urban resident to cany a per- 
mit to live in the city. 

Chinese state enterprises are 
some of the country’s largest 
work units. With officials 
admitting that a only a third of 
these state companies are prof- 
itable, the day of reckoning is 
dawning. The once-iran bonds 
which tied the worker to his 
workplace and city are begin- 
ning to break. 

China’s urban work force of 
180m is undergoing unprece- 
dented upheaval, the clash 
between a state sector and a 
vibrant private sector. Added 
to the stresses and strains of 
this big structural adjustment 
is the relentless pressure of 
population growth which is 
forcing the government to 
sanction, de facto, much 
greater job mobility. 


||hina's urban work force 
— grows by 10m a year as 
¥ school and college leavers 
enter the market for work. 

“We have a huge task to sat- 
isfy the employment demands 
of all able bodied workers in 
China," says Mr Zhang LiujL 
deputy minister of labour. 

Supply exceeds demand and 
we think this situation will 
last for a long time.” 

Joblessness is rising rapidly 
in urban China, giving rise to 
fears among Chinese leaders 
that unemployment if not 
checked may lead to social 
unrest and, possibly, political 
instability. China’s official 
unemployment figures only 
hint at the problem. The urban 
unemployment rate last year 
was 2.6 per cent; this year offi- 
cials expect it to rise to 3 per 
cent, or some 5.4m people. 

"Considering there are 5m to 
6m workers who have not been 
paid in months, the real unem- 
ployment rate would well dou- 
ble government figures," 
observed one official newspa- 
per recently. Worryingly, 
about 80 per cent of the unem- 
ployed are young people. 


The government expects 
unemployment to rise in the 
coming years, the sources of 
which are twofold. The first is 
the state sector where cur- 
rently 15m, or nearly 20 per 
cent of tiie total state indus- 
trial work force, are estimated 
officially to he redundant 
workers still drawing pay and 
entitlements. The second is the 
countryside where officials 
estimate there are 130m sur- 
plus workers, 30m of winch are 
expected to flock to the cities 
in search of work after the Chir 
nese new year holiday next 
year. 

“A whole bowl of rice has to 
be eaten one spoon at a time," 
says Mr Zhang, rejecting, any 
shock treatment fin* the state 
industries. He says it is the 
government's hope that by the 
end of the century state indus- 
try can be reformed suffi- 
ciently so that manning levels 
can be reduced to economic 
levels. A plan, however, to 
begin an "experiment" with 
China’s top 100 enterprises, 
including widespread job shed- 
ding, has bear deferred for a 
year. 

To deal with rising jobless- 
ness the government plans to 
expand Its provision of unem- 
ployment services; 

□ Employment exchanges. By 
the end of 1993 there were 

15.000 employment exchanges 
in China. These job centres 
placed 8m of the ll.4m job 
seekers in work. By 1995 the 
government hopes to extend 
the network of job centres to 
China's rural areas. 

□ Employment training. 
There are 2^00 training cen- 
tres in China which provide 
pre-employment for unem- 
ployed youth and women, as 
well as skills training for thnaa 
who have to change jobs. The 
job training centres have a 
capacity for 3m; by 1995 the 
government wants to raise that 
to 4m people a year. 

□ Subsidies. It also hopes the 
unemployed will seize the 
opportunities provided by sub- 
sidies to “employment service 
enterprises." 

These enterprises receive tax 
holidays, and cheap inane to 
buy equipment At the end of 
last year there were some 

200.000 such enterprises 
employing 9m; by 1995 the 
labour ministry wants to see 

240.000 enterprises employing 
10m. Say Mr Zhang; "It is more 
important to be employed than 
receive benefits." 

Alongside the worsening out- 
look for employment, however, 
has been a noticeable deterio- 
ration in conditions for the 
employed. This is to be expec- 
ted. given Chian's stage of eco- 
nomic development. However, 
industrial safety has become a 
big issue, especially after some 


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FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


V 



CHINA 5 





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reforms 


C hina, in the first nine 
months of 1994, regis- 
tered a marked turn- 
around in its trading perfor- 
mance with exports growing 
>much fader than imports. To 
the end of September exports 
exceeded imports by si.33bn 
compared with last year’s 
trade deficit of $i2.2bn. 

Not only does this reverse 
last year’s slowing of export 
growth, but the figures also 
reveal that foreign-funded 
enterprises are lewfinp the way 
in gmerating exports. T his is 
in line with the government's 
foreign investment strategy 
aimed at using foreign funds to 
build a strong exporting base. 

In the first six months of the 
year exports of foreign-funded 
enterprises (which Include 
wholly foreign-owned and joint 
ventures) leapt by about 45 per 
cent over the same period last 
year, and are now running at 


Tony Walker highlights the turnaround in China’s trade performance 

Foreign investors spur exports 


one-third of China’s total 
exports. For the nine months 
to September, exports 
increased by 29.7 per cent over 
last year to $79.44bn. Imports 
reached $78-06bn in the nine 
months, growing by 15.2 per 
cent. This compares with 
import growth last year of 
about 30 per cent 
The export surge has been 
attributed partly to the unifica- 
tion on January 1 of the Chi- 
nese yuan resulting in an effec- 
tive 50 per cent devaluation 
and partly to China's pconmqfa 
stabilisation programme Intro- 
duced in July last year which 


squeezed opportunities at 
home, making external mar- 
kets more attractive. 

Chinese trade officials have 
also been encouraged by the 
changing composition of 
exports. Miao Fuchun, spokes- 
man of the Ministry of Foreign 
Trade and Economic Coopera- 
tion (Moftec), noted that in the 
first six months of this year 
the "export mix continued to 
improve as demonstrated by 
further expansion of the pro- 
portion of exports of manufac- 
tured goods." 

These now account for 83 per 
cent of total exports, an 


so. 

* Chinese 

• S mar b* p 

rerauon * 

«* w to 



Dynamic Shanghai: China's principal part and the richest city in the nation. Last year, 3£50 foreign investment 
projects, worth $7bn, were approved In flw area. Construction wwfc Is evident in around 5,000 bidding sites 

CITY PROFILE: SHANGHAI 


increase of 3 percentage points 
over the previous year. Exports 
Of machine ry and electronics 
items continue to grow 
strongly and comprise a bigger 
proportion of total exports at 
24.8 per cent for the half-year 
compared with 23.6 per cent for 
the same period last year. 

In this new phase of its eco- 
nomic development China is 
seeking to encourage growth of 
higher technology investment 
at the expense of low technol- 
ogy industrial processing 
which provides low returns 
and is a drain ou scarce energy 
resources. 

While China's trading perfor- 
mance h.->g taken a sharp turn 
for the better this year, it is 
the wider issues of trade 
reform and Beijing's applica- 
tion to re-enter the General 
Agreement on Tariffs and 
Trade that 


have preoccu- 
pied trade offi- 
cials. At home. 

China intro- 
duced its first- 
ever “Foreign 
Trade Law" on 
July l and 
abroad its officials were 
enmeshed in difficult negotia- 
tions on Gatt entry. The new 
foreign trade law Is in part Chi- 
na's answer to Catt-related 
criticism of a lack of transpar- 
ency in its trading rules. One 
of the more persistent gripes is 
that in negotiations with Chi- 
nese officials reference is often 
made to unpublished regula- 
tions, many of which tend to 
be discriminatory. 

Governments and businesses 
have criticised the lack of con- 
sistency in trading regulations 
between Chinese provinces and 
regions. In response, Mr Miao. 
the Moftec spokesman, says 
I that China intends to spend 


It is little wonder that 
China prizes entry to 
Gatt so highly - the 
country probably has 
the most to gain 


three years on building up "a 
fairly complete system of for- 
eign economic and trade law 
and regulations.’’ 

Trade authorities have also 
pledged to improve the system 
of tax rebates for exports. 
Exporting enterprises, which 
are obliged to import raw 
materials or semi-finished 
products, ore often at logger- 
heads with the authorities over 
customs and other rebates. 

China has also opened fur- 
ther its export sector by 
encouraging the activities of a 
growing number or trading cor- 
porations - “whereas in 1978 
(the year that China resolved 
to open to the world} foreign 
trade was monopolised by 12 
Foreign Trade Corporations, 
today over 3,600 FTC's compete 
increasingly fiercely for export 
business,” says a recent World 

Bank study*. 

This year 
China also 
opened to ten- 
der exports of 
items subject 
to quota. Ini- 
tially. 13 such 
items were 
offered, including foodstuffs 
and raw materials. Trade offi- 
cials say the process will be 
extended to cover all items 
covered by quota. 

Overshadowing the complex 
issue of internal trade reform, 
however, are C hina 's difficult 
negotiations on Gatt re-entry. 
While officials insist that Bei- 
jing has reached the limit of 
“concessions” it is prepared to 
make to become Gatt-consist- 
ent, US negotiators are 
demanding further progress on 
a range of issues. 

In October, Charlene Bar- 
shefsky. the deputy US Trade 
Representative, said China 
would need to “put its foot on 


Foreign trade 



3ouoaKSpgnSteKtertBci^N^C^Npwt<W^.C»wO*»yBt^»M ttW <M«^W<awm 

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US trade deficit with Greater China 


$m 

Deficit with 
Greater 
China 

Oeflcft 

with 

China 

Deficit 

with 

Taiwan 

Deficit 

with 

Hang Kong 

1987 

25,876 

2,796 

17,209 

5,871 

1988 

20,624 

3,490 

12,585 

4,550 

1989 

22,644 

6,235 

12,978 

3,431 

1990 

24,411 

10,431 

11.175 

2,805 

1991 

23,673 

12,691 

9,841 

1,141 

1992 

28.371 

18,309 

9,346 

716 


Soacw USOBpMariwBflfConinwte.WtiTMliorMl'ilHWtAt iiM ang i kin.Larty' 


the gas pedal” if it were to 
meet requirements of Gatt-en- 
try in time for it to become a 
founder-member of the World 
Trade Organisation. 

The US. which represents 
the Gatt-co mm unity in negotia- 
tions with Beijing, has focused 
on key areas of trade reform in 
which it says China has made 
insufficient progress to satisfy 
Gatt- requirements. These 
include access to the services 
sector, finawrifli and non-finan- 
cial, and enforcement of regu- 
lations prohibiting infringe- 


ment of intellectual property 
rights. Ms Barshefehy said that 
the US expected China to elimi- 
nate “rampant” piracy in the 
audio-visual and computer soft- 
ware sectors. 

She also complained strongly 
about agricultural import bans 
saying restrictions were of 
“serious concern with respect 
to China’s agricultural sched- 
ule in the Gatt- WTO acces- 
sion l" 

Hie stage has thus been set 
for a tough final stage of nego- 
tiations. Li Zhongzhou, direc- 


tor general of the Department 
of International Trade and Eco- 
nomic Relations, said C hina 
would consider abandoning the 
Gatt and going its own way, 
thus threatening a “chaotic sit- 
uation" in world trade. 

Mr Li said China had 
reduced tariffs across the 
board by 65 per cent, and had 
also committed itself to phase 
out most quota restrictions by 
1997 in its efforts to satisfy 
Gatt requirements. But prog- 
ress in tariff reform is perhaps 
less impressive than officials 
suggest. As the 1994 World 
Bank study* ou China’s Trade 
Reform reported. “China's tar- 
iffs remain higher, more 
numerous and more dispersed 
than those of most other large 
developing countries." 

China’s interest in securing 
Gatt membership is attribut- 
able to its desire to be a 
founder WTO-member and. 
perhaps more important, to its 
interest in benefiting from the 
Uruguay round liberalisation, 
which is dependent on Gatt 
accession. 

The World Bank estimates 
that if protection levels in the 

The US expects China to 
eliminate ‘rampant* 
piracy in the audio-visual 

and computer software 
sectors 

EU the US and Japan were 
reduced by 50 per cent, China’s 
exports would increase by an 
estimated 38 per cent, or 
$11.4bn, in terms of 1988 prices. 
China would also benefit from 
Uruguay round tariff cuts that 
would erode the preference 
margins other developing 
countries enjoy, and China 
does not under the General- 
ised System of Preferences. 

It is little wonder that China 
prizes Gatt entry so hi g hl y . Of 
all the world's big trading 
nations, it probably has most 
to gain. 

* China: Foreign Trade 
Reform. (World Bank Study, 
1994) 


ess is 
idly in 
reas 

MJBERTON 


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The roar of the dragon 


S hanghai was opened up 
to the outside world: 
same 10 yearslaier than 
other coastal areas, such as 
v Guangdong and Fujian. But 
China’s largest city, with a 
population of dose to 13m, is 
desperately striving to make 
pp for that lost time. 

According to the official sta- 
tistics, the city’s gross domes- 
* tic product has been rising; to 
..real terms, at almost 15 per 
v cent a year over the past three 
years, if growth were to be sus- 
tained at this rate, Shanghai’s 
economic activity would dou- 
ble every five years. Already 
the richest place in China, it 
looks ahnost certain to be the 
first significant part of that 
vast country (apart from Hiong 
Kong) to attain developed sta- 
tus. 

Shanghai's recent dynamism 
represents a marked change 
from the 1960s. when Shanghai 
was kept an a chokingly tight 
rein by a ' central government 
dependent upon it for more 
than half its revenue. Between 
1985 and 1991, Shanghai's real 
income stagnated, while those 

of f hiangrinng and Fujian mote 
than doubled. But the decision 
to lowed the reins was finally 
taken at the highest levels of a 
government that contains, 
many officials from the city. 
Now ft is talked of as “the 
dragon head"' of the Yangtse 
riverbasin, home to more than 
■ 300m people. 

# eomrtxactton Is everywhere, 
'with weak continuing day ami 
fr nighL An official pu b lic at ion, 
Shanghai Today , writes of - 
5,000 constructions dies. - 
The statistics on Shanghai’s 
dynamism are as impressive as 
the visible signs of a ctivity . 
They have evidently impressed 
potential foreign investors. 
Last year SJE0 foreign invest- 
ment projects were approved 
for a total investment of $7hn, 
according to Wang Zn Kang, 
chairman both of Shanghai’s 
Foreign Economic Relations 
and Trade Commission and of 
its Foreign Investment Com- 
mission. (The first director of; 
the latter was, he notes, Zhu 
Rongji, now China’s senior 
vice-premier In charge of eco- 
nomic reform). In the first nine 
nwithc of 19M, a further 3,000 


projects have been approved, 
for a nominal value of $7.7bn. 
Two-thirds of all the projects 
approved for Shanghai since 
1988 have, in fact, been 
approved since the beginning 
of 1993. 

Tbs aim. of Mr Wang’s com- 
mission is, ha says, to provide 
“one stamp, one bridge, one 
window end one s tation" for 
ftaeign investors. This seems 
to work. Shanghai Is already, 
notes Mr Wang, home to 
investments (mostly joint ven- 
tures) by almost 140 leading 
multinationals, including 
Volkswagen, AEG and BASF of 
Germany, Pilkdngton of the 
UK, General Electric of the US 
and Philips of the Netherlands. 
The VW joint venture produces 


jFtoMgntq w s »to « l 


■•IV. 


. 1 - V 

- % -V« >v. ,V' ' s' - . .* ■ 





.... .. j» • 

- l e. 

100.000 cars a year and is, he 
says, expected to produce 

200.000 soon. 

The question that must 
occur to any visitor is where 
cars that end up in Shanghai 
will fit. The biggest disadvan- 
tage of the city, apart from the 
relatively high cost of land, is 
the creaking infrastructure. 
Shanghai. is choking. In rush 
hour, for example, it can take 
two hours to drive -from 
Pudong to the Bund, the cele- 
brated area of old Shanghai on 
the Huangpn river. 

In response, the municipal 
and central governments have 
invested Yn20bn (J2.3bn) in 
large projects in the past three 
years. These are now 10 more, 
whfie- investment is running at 
Yn20bn a year. The authorities 
recognise the scale of the 
required investment and hope 


foreign investors win help fin 
the gaps. Investments include 
two completed bridges, an 
overhead inner ring-road, an 
outer ring road, a port, a new 
airport new power plants and 
a new underground. Most 
important of all. In Pudong. 
across the river from old 
S hang hai , a new economic 
zone with an area of 522 sq km 
is being constructed. It already 
contains 4,000 industrial enter- 
prises with 400,000 workers. 

Yet the city possesses advan- 
tages along with the draw- 
backs, now being partially 
remedied. It is, for example, 
China's principal port, with 
exports and imports of £L2.7bn 
last year. It is also the coun- 
try’s financial capital, hosting 
the dynamic stock market and 
the still newer foreign 
exchange market, established 
only in April of this year. 

Shanghai contains China's 
largest reservoir of skilled 
labour. It has 50 colleges and 
universities, with a total enrol- 
ment of more than 120,000 stu- 
dents and 1,600 research and 
development institutes. For- 
eign employers praise the tech- 
nical skills available, although 
aVTOpd office staff is scarce. 

A particular concern - says 
Dr Hans Geelhaar, general 
manager of Shanghai Gao- 
BASF Dispersions - is a short- 
age of people who combine 
English with knowledge of 
modern accounting and 
finance. Employees used to tra- 
ditional practices can also 
prove somewhat reluctant to 
take responsibility and display 
initiative. - 

Inevitably, Shanghai has the 
problems of any old and long 
neglected city attempting rapid 
economic growth. But this par- 
ticular old city has huge poten- 
tial. Great difficulties lie 
ahead: same of the speculative 
bonding is, for example, cer- 
tain to prove a mistake. But 
there is no mistaking either 
the energy of the people or the 
determination of the authori- 
ties. As befits the head of the 
dragon, Shanghai is roaring. 

Martin Wolf 

Office rents compared: 
see key facts, page 9 


Shan> rise in labour disputes 


Coattauedfm 

high profile industrial acm* 
dents ’in factories owned. by 
investors from Hong Kong, 
Taiwan and Korea. 

Tfewe have 'been; widespread 
, demonstrations ill ‘Ch in a’s 
iftmribi-east.bver toe past year, 
^protesting at working condi- 
tions, low pay and rotempJoy- 
memt Nation-wide there has 
been a sbarp rise in labour dis- 
putes tbs year.; Rgmes for the 
first quarter dhbwed that there 
had been more than 3,000 dis- 
pntes referred; to in 30 yrm- 
incea and municipalities - 
some 66/per cent mrae than for 
the previous period of 
Officials. beAteve Ihere iB litite 


reasonto -expect that foU year 
figures wiH show much of an 
Improvement in labour rela- 
tions. Labour ministry officials 
hope ftat a new labour law, 
which came into force in July* 
wffl hdp to ameliorate some of 
the problems in China’s facto- 
ries. When introducing the law 
.earlier ^tins year MrlJ Boyong, 
the labour mhiister, said the 
law would protect the legal 
rights- of labourers and “estab- 
lish' and maintain harmonious 
’ relations between employers 
- and employees". 

It is unlikely that the -law 
will be succassfid in this aim. 
Its thrust is, ’after all, to pron 
■ mots labour market efficiency. 
-The law makes it easier for- 


companies to hire and fire 
workers; offer pay based on 
skiTls and performance rather 
than just seniority as was the 
case in the past; and negotiate 
the terns on which a worker is 
hired. 

Labour contracts were intro- 
duced experimentally in 1983 
and were formalised in 1986. 
They apply to new workers 
and greatly Increase the flexi- 
bility provided to enterprises 
to reject unsuitable candidates. 
Yet, in spite of tins, the pene- 
tration of the contract system 
in the stale enterprise sector 
was low - just 27.6 per cent of 
enterprises had adopted labour 
contracts by the end of June 
this year. 



|,A *Hr/| 


W? 

ms 


Hi vinjj i> j proud iiKmlvr til tin? World Truitrl St Tourism Council. 


Travel. Meet Your Neighbours 


Reading about a rulnnv i> preparation fur a trip. Noi a substitute. Try to understand curry without 
tasting it. Chinese opera without seeing ii. An evening breeze in Lamu without feeling it. The world 
is filled w ith wonderful places to see. interesting people to meet, rich opportunities to pursue. Go. 



c 






FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


CHINA 6 


F oreign investors continued 
to pour funds into Chinn 
in 1994 with actual utilised 
investment in the first nine 
mrrq thft rising (O US$22. 73tm, 
up 49 pea: cent on the corre- 
sponding period last year. 

But numbers erf new foreign 
Invested projects and the vol- 
ume of contracted Investment 
declined after the frenzied 
activity of 1993 in which 
pledged hinds exceeded those 
for the previous 14 full years. 

Numbers of new projects 
were down by 46 per cent to 
the end of September com- 
pared with last year, and 
pledged investment dropped by 
about 32 per cent to S57bn. 
Thi« inevitable slowdown also 
corresponded with attempts by 
the authorities to calm an 
overheating economy. 

But the figures, nonetheless, 
are impressive. From 1979 - 
the year that China opened its 
doers to foreign investors - to 
the end of September more 
than 210,000 foreign-funded 
ventures were approve d wit h 
pledged investment of $275bn. 
Actual investment had reached 
$8S.lbn 

Ministry of foreign trade offi- 
cials predict that u tilis ed 
investment this year wQl top 
830bn compared with f26bn 
last year. This will represent 
about half of all foreign direct 
investment to developing coun- 
tries worldwide, an indication 
of the strength of China's con- 


Foreign investment: US companies are increasing their involvement, reports Tony Walker 

Projects grow in size ss 

Delays in resolv- v project was S 


tinning appeal to international 
investors. 

But the figure could easily he 
much larger. Delays in resolv- 
ing inte rnal arguments over 
the appropriate returns for 
Investors in infrastructure pro- 
jects, especially power plants, 
is holding up at least half a 
dozen power projects worth 
several billions of dollars in 
foreign investment 

According to electricity min- 
istry officials, China will need 
to spend at least $67bn on new 
power plants by the end of the 
century to lift its generating 
capacity from the present 

183.000 Mw to a targetted 

300.000 Mw. About one quarter 
of these funds would come 
from foreign investors. 

The telecommunications 
industry is another that is set 
to increase sharply its invest- 
ment in China. The announce- 
ment last month that Hong 
Kong Telecom would invest 
$260m In a fibre optic link from 
Hong Kong to Beijing and a 
mobile telephone network in 
the Chinese capital is one of 
many instances of planned 
telecommunications sector 

T PV0 yliliWlt 

Motorola, AT&T, Ericsson, 
Northern Telecom, Alcatel, Sie- 
mens and NEC all have ambi- 
tious investment plans. Moto- 


rola, for example. wiU have 
invested $300m by the end of 
this year in factories producing 
cellular phones, paging 
systems and semi-conductors. 

AT&T, after a slow start, 
plans 8150m in investment in 
the next two years in nine 
joint ventures manufacturing 
such it ems as optical fibre 
cable, switching gear and 
transmission equipment. 

Consumer products compa- 
nies are also in the vanguard 
of foreign investors. Unilever, 
Procter and Gamble, General 
Electric and Electrolux have 
all recently announced ambi- 
tious plans to target the house- 
hold products and appliance 
markets. 

The petrochemicals and agri- 
chemicals sector is another 
that is poised to increase sig- 
nificantly its stake in China. 
Among large foreign institu- 
tions either involved in ven- 
tures on the ground or in nego- 
tiations are Aramco, the Saudi 
Arabian state oil company. 
Shell, ICL BP, Zeneca arid Du 
Pont 

Automotive companies have 
also stepped up their efforts to 


Direct overseas investment in China 

The top ten investors: 1979-1993 


Country 

Number of 
projects 

Pledged 

investment, USSbn 

1. Hong Kong/Macao 

114,147 

150.9 

2. Taiwan 

20,98 2 

18.46 

3. United States 

12,019 

14.6 

4. japan 

7,812 

&9 

5. Singapore 

3.122 

4.8 

6- United Kingdom 

616 

3.3 

7. Thailand 

1,399 

2.1 

8. Canada 

1,540 

1.8 

9. Germany 

569 

1.4 

10. Australia 

1,309 

1.2 


Soun FT atmaa 


secure a foothold. Car giants. 
Including Toyota, Ford and 
General Motors, are jostling for 
a share of what promises to 
become - by early next cen- 
tury - the world's biggest new 
market for passenger cars and 
commercial vehicles. 

But for many foreign inves- 
tors, large and s mall, involve- 
ment in China has been a frus- 
trating and, in many cases, 
expensive business. According 


to a recent government survey, 
between one-third and one-half 
of foreign-funded enterprises 
are loss-making in what is, by 
any standards, an extremely 
difficult commercial environ- 
ment. 

A western embassy in Bei- 
jing in a report warns potential 
investors to beware of what it 
describes as “China factors” 
before committing themselves. 
These include the parlous state 


of much of the country’s infra- 
structure; difficulties of arrang- 
ing distribution and supply 
due to a crumbling transport 
system; lack of convertibility 
of the yuan; bureaucratic stric- 
tures that complicate person- 
nel nwnagq rngnt; opaque rules 
and regulations; and an unreli- 
able legal system whose dis- 
pute-settling mechanisms are 
loaded heavily against the for- 
eign party. 

But for all these problems it 
seems there will be no stop- 
ping, for the time being, the 
“stampeding herd.” High pro- 
file missions such as the one in 
August led by Mr Ron Brown, 
the US Commerce Secretary, in 
which some $6bn in contracts 
and letters of intent were ini- 
tialled, tends to feed what is 
known as “China fever” among 
investors who perhaps lose 
sight of the difficulties in their 
desire to become engaged. 

Growing American business 
involvement on the ground in 
China is one of the striking 
features of the past year or so, 
and this in turn is being 
reflected in the investment fig- 
ures with a distinct trend 


towards larger-scale projects. 

In the first eight mouth, the 
average investment in a single 
project was $l.7m compared 
with 8L3m in the same period 
last year. 

These figures also reflect the 
fact that whereas Hong Kong 
and Taiwanese companies, 
many of which are involved in 
small-scale processing activi- 
ties such as textiles, d ominat e d 
the field initially, it is now the 
multinationals who are moving 
into China in a big way. Japa- 
nese companies, which were 
initially wary, are part of this 
trend, along with the South 
Koreans. 

Among other factors respon- 
sible for the drop this year in 
numbers of ventures and new 
pledged investment was the 
introduction of a new tax 
regime on January 1. This 
imposed a capital gains tax on 
property transactions, thus 
f ^ m pgning real estate specula- 
tion. The new measures also 
ended the practice of foreign 
funded ventures being allowed 
to import cars duty-free. 

The latter "privilege" had 
been widely abused with Chi- 
nese entrepeneurs es tablishing 
companies using relatives or 
friends abroad as "frontmen" 
to enable them to import lux- 
ury cars, free of customs duty. 


The establishment of thou- 
sands of such bogus enter- 
prises had vastly Inflated num- 
bers of so-called "foreign - . 
funded” joint ventures. i 

Apart from a trend towards 
larger projects, foreign invest? 
ment also became more widely 
distributed with inland prov- 
inces showing a bigger percent- 
age jump (from a low base) in 
new investment than coastal 
regions. According to a study 
by the State Administration for 
Industry and Commerce 
(SAIC), provinces like Guizhou, 
Hubei and Gansu doubled 
numbers of overseas-funded 
enterprises in the past year or 
so; although there r emains a 
vast development gulf between 
the coast and the hinterland. 

After China's 15-year open 
door experiment what emerges 
from the latest figures is the 
significant impact foreign- 
funded ventures are having on 
the nation’s trade. 

In the first six months of this 
year imports and exports of 
these ventures were up by 45 
per cent over the same period 
last year to $35.78bn or 36.7 per 
cent of total trade. Exports 
reached $l3.47bn, an increase 
of 44.5 per .cent over last year 
compared with a rise of about 
30 per cent In the national 
export figure. 

This will be a pleasing result 
for the authorities who look fcg 
foreign Investment to boow 

exports. 


ij0W> 


S urprised by the success 
in Beijing of Unilever's 
face cream, a visiting 
scientist recently asked a Chi- 
nese secretary at the Anglo- 
Dutch consumer goods group's 
local subsidiary what people 
had previously used to protect 
their skins against the very 
cold, dry winter winds. 

She was stumped for the 
product’s English word but 
wrote down its chemical for- 
mula - “Ah, glycerine!" said 
tiie scientist, grateful for the 
ans wer and impressed by the 
secretary’s scientific training. 
AWiwig h Unilever and! other 

multinationals are finding 
good staff, finding enough is a 
problem the Ummng 
factor affecting Unilever’s Chi- 
nese rate of expansion. “We 
couldn't grow any foster if we 
wanted to.” says a senior exec- 
utive. 

Starting with a handful of 
people in China a decade ago, 
Unilever has enjoyed one of 
the fostest growth rates of any 
foreign company in China. The 
700 people it employed two 
years ago have reached 2,500 


today, of whom only 80 are 
ex-patrlates. 

The local employees range 
from production workers to 
more than 50 recent university 
graduates who, like the secre- 
tary, are being drawn rapidly 
into the multinational's man- 
agement training programmes 
in China and abroad. 

From first contacts with Chi- 
nese authorities in the early 
1980s, the company moved in 
the mid-1980s to negotiating 
joint ventures and finally to 
investing $9m in its first three 
projects in the late 1980s. 

Today, Unilever has eight 
joint ventures running or 
planned, with 8200m of invest- 
ment spent cn committed. A 
further $100m will be spent 
each year for the next five 
years, it announced recently 
on the eve of opening an 
ice-cream factory in Beijing. 

China is “top of the list” of 
Unilever’s target emerging 
economies, says Mr Morris 
Tabaksblat, the group’s Dutch 
co-chairman. 

The group expects its Chi- 
nese sales to rise from $200m a 


Multinational case study: Unilever in China 


‘Wait - and you’ll be too late’ 



: 


4j, 





year to $l.5bn In 1999. It 
declines to discuss current 
profitability but "we should 
see good returns by the end of 
the decade,” says Mr Alexan- 
der Kemner, head of Unilever’s 
East Asia and Pacific region. 

Like some other multina- 
tionals, Unilever's Chinese 
roots go back many years. 
Lever Brothers, its British 
arm, built a factory In Shang- 
hai in the early 1920s. U 
became China' s largest maker 
of soap for laundry and per- 
sonal use but operations were 
nationalised in 1951. 

During the 35-year hiatus 
untfl it reestablished itself in 
China, Unilever's plant was 
used by state enterprises and 
its famous Lux brand lay dor- 
mant. 

Its first joint-venture in 1987 
took it back to the old Lever 


Brothers site but to a different 
factory in the complex. The 
venture, Shanghai Lever, is 
owned 54.5 per cent by Uni- 
lever, 40.5 per cent by the 
Shanghai Soap Factory and 5 
per cent by the Shanghai Daily 
Chemicals Corporation. 


T he venture is a factory 
within a factory. Fart of 
the soap factory was 
cleared, and re-equipped with 
the most modem machinery to 
make Lux toilet soap. The 
product range has grown to 
include shampoos, shower 
creams, fabric softeners and 
Idtcben/bathroom cleaners. 

The other two ventures in 
Unilever’s first phase were 
Shanghai van den Bergh (an 
equal joint venture with a 
local partner) to produce edi- 
ble fats, mainly for baking and 


ice cream, and Shanghai 
Pond’s (also equally split) 
making skin creams and 
lotions under the Pond's and 
Vaseline brands. 

Gaining experience in these 
projects, it has moved on to 
five more ventures in deter- 
gents, toothpaste, ice-cream 
and tea. It has taken a bigger 
stake in each successive busi- 
ness to a maximum of 85 per 
cent in its Beijing ice-cream 
factory. It says, however, that 
there will long be a need for a 
local partner to help gnide 
ventures through the bureau- 
cratic maze. 

Some foreign companies say 
they have been happy to leave 
their partners to solve prob- 
lems, such as unreasonable 
demands from local suppliers 
and officials. The solution 
varies but can sometimes 


require payments. Unilever 
says it has found no such prob- 
lems but has drawn heavily on 
its partners' local expertise for 
other purposes. 

Difficulties abound in virtu- 
ally all aspects of the busi- 
nesses from raw material sup- 
plies and transport to 
marketing and sales; price 
increases on some local raw 
materials have made imports 
cheaper; it can take three 
weeks to ship finished goods 
1,000km from Shanghai to Bei- 
jing; TV adverts have to be 
produced abroad and sent to 
some 300 individual stations; 
copy for print campaigns has 
to be sent to each of hundreds 
of newspapers and magazines. 

It can also take up to six 
months to get a price increase 
approved by officials; distribu- 
tion systems are product-spe- 


ii iM 





fe- 


In a Shanghai dopar tnwn t store, a shopper inspects Shanghai Lover 
products under the Lux brand 


cific so Unilever cannot, for 
example, send soap via its 
toothpaste distributor; reform 
of the gover n ment-dominated 
retailing system is only just 
beginning; and western-style 
advertising, marketing and 
management concepts have to 
be taught from basic levels. 

But for Unilever, the over- 


riding importance is to be in 
China building its experience, 
knowledge, brands and busi- 
ness - “if you waited until the 
risks in China were lower, 
then you would simply be too 
late,” says Mr Anton Lenstra— 
chairman of Unilever China. •• 


•• v '• 

s- : j 


Roderick Oram 


Manufacturing case study: Pilkington’s joint ventures 


Success In China Requires Guidance 
As Much As Purpose. 


An open door to opportunities Iftoblem ol 



Just as the ancient Chinese armies relied on straight and steady course 


the compass cart for direction, companies venturing 
into China also need an experienced guide to point 


the way. 


We are also well prepared to provide you with 
professional and efficient services through our nine 
offices strategically located in major Chinese cities. 


C hina represents a once-in- 
a-lifetime opportunity for 
companies across the 
whole range of industrial activ- 
ity, from automobiles to tele- 
communications and beyond. 
One company that has done 
better than most in laying 
down roots in China is Peking- 
ton, the UK-based glass maker. 

Piikington was one of the 
first western companies to 
walk through China’s "open 
door," pushed ajar by Deng 
Xiaoping, China's senior 
leader, in 1979. In 1983 the com- 
pany signed a joint venture 
agreement to install China's 
first “float glass" manufactur- 
ing plant using PUktagton's 
technology. By 1988 the 5,000 
tonnes a week plant was in 
production. 

Located in Shanghai's 
Pudong special economic zone, 
Shanghai Yaohua Piikington 
Glass (SYF), is in the enviable 
position of not being able to 
produce enough glass to meet 
demand. Since 1989, SYP has 
made a profit after interest and 
dividends; last year it was 
listed on the Shanghai bourse, 
fast becoming one of the most 
highly-rated listed companies 

in C hina . 

Mr Zhang Sanfu, the compa- 
ny’s ma n agi n g director, is now 
one of the most sought-after 
executives In China by western 
investment bankers. In Sep- 
tember he was in the US speak- 
ing at a conference organised 
by Merrill Lynch, the US secu- 
rities house. While there, he 
took soundings about the pos- 
sibility of raising capital to 


expand his glass works. 

The company is already 
adding a second "float line," 
which will have capacity to 
produce 2,500 tonnes a week of 
glass mainly for the automo- 
tive industry. It is due to begin 
production in October 1995. Mr 
Zhang wants to add a third 
float Une (capacity 3,500 tonnes 
a week) soon after the second 
line is completed. 

Piikington retains an &35 per 
cent in SYP, having being 
diluted from Us original DL5 
per cent at the time of the com- 
pany's flotation last year. Hie 
UK company maintains a close 
relationship with SYP In 
Shanghai and is keen to 
develop its business in other 
industrial centres in C hina. 

"It is fairly logical for us to 
look at China," says Mr Terry 
Ginty, vice-president Asia 
Pacific. “The market is grow- 
ing and there are significant 
opportunities." 


M r Ginty says that Pilk- 
ington’s strategy in 
China is simple and 
opportunistic - “you can’t 
have a hard-and-fast policy. 
You have to have a feel for 
opportunities and take them 
when they come along. It’s a 
big market. But in general our 
strategy is to look for manu- 
facturing opportunities where 
there isn’t a strong local glass 
maker.” 

The first opportunity the 
company took up was to part- 
ner Taiwan Glass in a venture 
in Qingdao. Taiwan Glass has 
been a partner of Piikington ’s 


for more than 20 years and 
when it decided to Invest In a 
float glass plant in Qingdao, 
Shandong province, it asked 
Piikington to join it The UK 
company has taken a 10 per 
cent interest in the plant 

The Qingdao Investment, 
however, was more by way of a 
favour to a long-standing cus- 
tomer and friend. What Piik- 
ington really wants to do in 
China is to take larger and 
larger stakes in ventures tar- 
geted at the automotive glass 
industry and the market for 
flat glass more generally. It is 
actively scouting sites in China 
to expand its activities in float 
glass. 

This year it has signed two 
joint venture agreements, one 
in Changchun. JQin province, 
and another in Wuhan, Hebei 
province, which has given it 35 
per cent of the former venture 
and 45 per cent of the latter. 
Both are in automotive glass. 

In Changchun, PiUdngton’s 
partner is Changchun Temper- 
ing Glass Company and the 
venture will supply automotive 
glass to the First Auto Works. 
This state company assembles 
Audi 100s for German car man- 
ufacturer. Volkswagen and 
additionally has a joint ven- 
ture with VW to produce the 
company’s Jetta sedan. Phase 
one envisages output of 150.000 
Jetta cars, rising to 300,000 
after the implementation of 
phase two. 

Pilkington’s other partner is 
SYP which owns 23 per cent of 
the joint venture company - 
"it Is looking for vertical inte- 


gration,” says Mr Ginty, who is 
also deputy chairman of SYP. 
The glass plant will have 
capacity initially for 200,000 
sets of auto glass. "They [the 
VW joint venture] will proba- 
bly look for two suppliers," he 
says. "Traditionally, one takes 
about 70 per cent of the pro- 
duction and the other, 30 per 
cent. We aim to be the prime 
supplier. We're confident that 
we can earn that position." 

The second foray into auto- 
motive glass - the joint ven- 
ture in Wuhan - is s imilar to 
the first. The foreign car 
marker this time is Citroen, 
and planned output levels are 
identical to the VW venture: 
150,000 Citroen ZX model 
sedans in the first phase, rising 
to 300,000 in the second. 

What is different is that KJk- 
ington has effective control, £• 
with 45 per cent of the equity^ 
"we wanted to get the feel v 




majority ownership and rua 
the company," says Mr Ginty 
"With Changchun, we couldn't 
get a majority - the value of 
the existing assets derided the 
equity shares. In Wuhan it was 
a matter of negotiation," 

The main partner here is 
China Yaohua Glass Company, 
the oldest glass maker In 
China. But, as with the 
Changchun venture. SYP has a 
stake in the company as well 
"Equity as such doesn't mean 
a lot in a joint venture," says 
Mr Ginty. "If you can't work 
together, you wouldn’t be in 
the venture in the first place.” 


Simon Holberton 


At Hongkong Bank, our aim is not only to help 
you conduct your business efficiently, but to 
complement that service with sound advice and 


alt linked by an advanced telecommunications 


Conglomerate profile: Citic 


system. 


So when you venture into the China market. 


clear guidance. 


With nearly 130 years of experience in 


you'd be well advised to stay on track with a 
partner who can point you in the right direction. 


Moving into sharper focus 


financing trade and business. between China and 


Alter all. we know that the only way we'il 


the rest of the world, we've learned to hold a 


succeed is by helping you to do the same 



A s China International 
Trust and Investment 
Corporation, (Citic), 
approaches its 15th anniver- 
sary, it has decided the time 
has come to get back to basics, 
writes Simon Holberton. 

"We are trying to narrow 
the spectrum of our invest- 
ments," says Mr Wei Mingyi, 
Citic's chairman. "We have a 
guideline for our subsidiaries 
- never open a restaurant 
again." 

That is a reference is to a 
prohibition on unrelated 
investments, no matter how 
attractive they may appear to 
be. For (Stic the management 


theme now is "focus” and the 
agenda Is crowded with large 
developments on the China 
mainland, including port 
development, power genera- 
tion, real estate and telecom- 
munications. 

In addition to sharpening its 
focus, Citic's Beijing manage- 
ment Is also tightening con- 
trols, especially those applying 
to investment - “we have 
more than 30 subsidiaries and 
we can’t control each and 
e veryo n e," says Mr Wei. “But 
we can control each project 
When any of [the subsidiaries] 
want to invest more than 
Yn3m they have to be referred 


to Beijing. We co-ordinate all 
the large projects." 

Taking pride of place among 
these developments is the 
transformation of Daxie 
Island, situated to the south of 
Nlngbo port and offering 
access to China’s industrial 
heartland in the Yangtze river 
delta, Citic plans to invest 
8500m seed capital in the proj- 
ect 

China’s premier conglomer- 
ate is looking, however, for 
83 bn to $6bn from foreign 
investors to turn the dream ol 
a 31 sq km industrial park, 
supporting a container port 
the size of that in Hong Kong, 


into a reality. Citic recently 
entered into a joint venture 
with Bechtel, the US construc- 
tion company, to provide mar- 
keting. operations and services 
for the island development . 

This month, Mr Wei expeitj 
a floating bridge connectidv 
Daxie with the mainland to be 
finished - “we will also begin 
construction of a temporary 
dock - with the capacity to 
handle 20,000 tonnes vessels - 
so that transport of equipment 
and cargo can be handled 
much more easily," he says. 

Already, overseas business 


Continued on page eight 






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CHINA 7 


BANKING AND FINANCIAL REFORMS 


Slow, painful progress 


China’s new banking system 

(under proposed banking law*) 


State Councfi 
(Cabinet} 


PeophTs Bank of China 
{Central Sank} 


■ . Virii -t; jaw. . 


State Monetary 
Policy Co mm ittee 




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“lit' ” !■--•; * .■>•: AsXtois 

Roderick f 


mmm oen the third plenary 
session of the I4to 

Among key elements of the 
new law is an end to the 

against inflation. The mone- 
tary policy committee would 

serving the credit needs of 
small-to-medium-sized enter- 

foreign financial 

* 

. Existing commercial 1 

-j” Spedafesd banks 

:! New commercial banks | 1 Pnfcy fending banka”] 

W central committee of 

bank’s direct financing of the 

lay down guidelines for manag- 

prises and the local economy. 

-j institutions 

banks 1 

[ (to become eommerdal) 

'pom ixten & na-al co-ops)]. <| j 


approved sweeping reforms of 
tiie financial sector in Novem- 
ber 1993, the decision was 

balled as a breakthrough. 

Twelve months later it is 
clear that actual reform of the 
banking system will prove 
painfully slow, and that it will 
be many years before China 
has constructed a modem 
financial sector to match its 
growing economic weight 
internationally. 

One indication of the difficul- 
ties Involved in pressing ghpad 
with financial reforms is the 
fact that the new Central Rank 
law is making slower -than-ex- 
pected progress through the 
review mec hanisms of the 
standing committee of the 
National People's Congress, 
some of whose deputies are 
wary of plans to expand the 
bank's authority. 

Discussion has focused on 
the role of a powerful mone- 
, tary policy committee, to be 
J established under the law. Sec- 
tions of the bureaucracy such 
as the planning apparatus, 
which have been used to the 
People's Bank acting as a 
a nvHhh cow for their needs, are 

* nervous about proposals to 

• ■ increase its independence. 


budget deficit. mg monetary 

Membership of the monetary Secondly, g 
policy committee will, of tationofthei 
course, be crucial to exerting the replacem 
continuing influence over the plan by indin 
central bank as it becomes a monetary con 
more independent institution est rates ai 
under the planned financial operations, 
sector reforms. The People's begun in 1 
Bank governor would be choir- through the t 
man, and members would Bank bills c 
come from ministries as well exchange, 
as the central bank itself. Thirdly, it 

Last November's party pie- regional “sn 
num nomi- 

areas for the China’s ‘Big Four* banks 

transformation have a total of 120,000 

of the People's branches and 1.3 million 

Bank into an emolovees 

ineKhi»inn that employees 


institution that K 

would, in the- 
ory, wield much the same 
power as its counterparts in 
North America, Europe and 
Japan, though under present 
circ umstances it is difficult to 
envisage any Chinese institu- 
tion freeing itself from fairly 
pervasive political influence. 

Under the plenum directive 
the People's Bank would first 
carry out independent mone- 
tary policy to maintain a stable 
value of the currency and to 
enforce financial regulations: 
in other words, lead the fight 


Secondly, gradual implemen- 
tation of the reforms would see 
the replacement of the credit 
plan by indirect instruments of 
monetary control such os inter- 
est rates and open market 
operations. The latter has 
begun in limited fashion 
through the trading of People's 
Bank bills on the Shanghai 
exchange. 

Thirdly, it is proposed that 
regional "snprabranches” of 
the central 

_ . . , bank be cstab- 

Four* banks , ished to 

of 120,000 replace existing 
1 1.3 million branches in 
provinces 
7 cities and 

towns. This 
streamlining and strengthen- 
ing of the People's Bank super- 
visory apparatus would be 
aimed at countering political 
influence at provincial level, 
one of the main threats to cen- 
tral bank independence. 

Other elements of financial 
sector reform endorsed by the 
party plenum included the 
transformation of the speci- 
alised banks into commercial 
banks, and also the conversion 
of rural and urban credit co-op- 
eratives into small-scale banks 


Honed the establishment of 
three policy banks to separate 
policy lending from commer- 
cial lending, thus creating 
favourable conditions for 
transforming the specialised 
banks into commercial banks. 
China's big four specialised 
banks, which include the 
Industrial and Commercial 
Bank (ICBC), the Agricultural 
Bank lABCl, the Bank of China 
(BOO. and the People's Con- 
struction Bank (PCBC) are 
weighed down by policy lend- 
ing responsibilities, chief of 
which is an obligation to con- 
tinue propping up failing state 
enterprises. 

The three new policy banks 
are the State Development 
Bank (SDB). responsible for 
channelling long-term develop- 
ment credit to infrastructure 
and the state's key industrial 
projects, the Agricultural Pol- 
icy Bank (APB), and the 
Export-Import Bank (BIB) 
whose mission is defined as 
lending to trade projects 
guided by trade policy consid- 
erations. 

In addition to the central 
bonk law, a commercial bank 
law, the Banking Act, is also in 
preparation. This would define 


Martin Wolf on the country’s central bank, the People's Bank of China 

Changing the climate of ideas 


A s Chhra becomes a mar - 
ket economy, albeit a 
“sodaHstf one, it needs 
a proper central bank. What it 
has, instead, is the People’s 
Bank of China. If the latter is 
to become a less nnsatisfac- 
toiy institution, major reforms 
most be made to its internal 
structure. But changes are 
needed still more to toe public 
finances, to the operation of 
local government and state- 
owned enterprises, to the 
financial system and, not 
least, to the climate of ideas 
about monetary policy. 

According to World Bank 
calculations, China’s consoli- 


dated fiscal deficit has ran at 
an average rate of between EL2 
and 6.2 per cent of gross 
domestic product over the past 
seven years. Moreover, the 
PBC has been financing about 
60 per cent of this. In 1993. 
total gross lending by the PBC 
to the financial system, largely 
for so-called “poficy-lending”, 
reached 8.5 per cent of GDP. 
While central bank financing 
on this sole is incompatible 
with monetary stability, alter- 
natives involve raising taxes, 
lowering spending, or raising 
money in more costly ways. 

Almost as important as the 
size of monetary financing is 


the loss of central control over 
credit expansion, largely a 
result or administrative decen- 
tralisation. Local government- 
led excess demand tends to be 
accommodated by the expan- 
sion of planned credit ceilings, 
which leads, in torn, to higher 
levels of PBC lending. 

Because government (at all 
levels) is so dependent for fin- 
ancing on the PBC*s printing 
press, the authorities have 
also had to restrict the finan- 
cial liberalisation that would 
allow the emergence of more 
competitive alternatives to 
cash and bank deposits. This, 
however, creates yet another 


obstacle to central bank 
reform: the lack of sophisti- 
cated securities markets, 
which would permit monetary 
policy to operate other than 
disruptively. through overall 
credit ceilings. 

This need to impose credit 
rationing is increased by the 
persistent tendency to keep 
interest rates low. PBC loans 
are snbsidised to different 
degrees below the base inter- 
est rates for bank loans, them- 
selves low. Moreover, rates of 
interest tend to be furthest 
below inflation when toe lat- 
ter is high, which is precisely 
when credit growth needs to 


■ Branches of foreign tanks 

■ * Sino-foraign Joint wntura 

banks 


■ Provfrtcted development 
banks 

■ Enterprise twnta 

1 Bank of CanwnurdCBtfons 


Sourox Trade Duvategmartf CxaKi (Hong KcxvjJ 


• People's Coraouctiofl 
Bank 

!• Agricultural Bonk 
• « Industrial and C um mo re lal 
, Bank 

■ • Bank of CNna 


' Runfl oo-opoattve banks 
Urban co-operetta bonks 


the legal rights and obligations 
of the specialised banks 
towards state enterprises, and 
in theory provide these institu- 
tions with legal protection 
from being obliged to make 
“policy" loans to foiling enter- 
prises. 

While the above constitutes 
an ambitious programme of 
reform, Chinese officials them- 
selves freely admit that the 
task is daunting. Not least of 
the problems facing institu- 
tions like the People's Rank is 
the sheer numbers of staff that 
would need to be shed before a 
meaningful rationalisation of 
its activities could take place. 

China's central bank 
employs 170,000 people in some 
2.500 branches and sub- 
branches spread across the 

country. Vast numbers of staff 
would become redundant 
under a planned new comput- 
erised payments system (settle- 
ment accounts held by com- 
mercial banks at city and 


Consolidated deficit 

as a % o( GOP. 1987-83 average 


county levels would be slashed 
from 115,000 to 10,000), but it is 
not clear that the People's 
Bank is ready to deal with the 
personnel upheavals that 
would be involved. The four 
specialised banks, if they are 
ever to be transformed into 
commercial institutions, face a 
similar problem, although of 
much greater magnitude. Chi- 
na's "big four" banks have a 
total of 120,000 branches and 
1.3m employees. 

But Ear beyond the adminis- 
trative barriers to reform of 
the specialised banks is the 
overwhelming problem of their 
obligation to continue f unding 
ailing state enterprises. 
According to official estimates 
20 per cent of loans to state 
enterprises are non-performing 
(what the Chinese describe as 
"problem" loans}, but the truth 
is that no-one really knows. 

An indication of the dimen- 
sions of the problem can be 
gleaned from the fact that at 


Reserve money & PBC claims on financial instituti on s 

Year on year growth (%) 





40 - •• 

Pofcy 

lending 

30 

from PBC 

aoN* 

Budget 

deficit 

A 



daimaan financial institutions 


Souk« Mrtnjr of Financvi PBC; MPi 
World Bank 

be curbed. The consequence is 
chronic excess demand for 
credit, exacerbated by the lack 
of a credible bankruptcy con- 
straint on state enterprises 
and local government borrow- 
ers. It has been estimated that 
more than half of the PBC’s 


o I I— J 1— 

1988 ST 88 80 

Sana: IMF 

loans are not repaid. 

to 1993, concern about over- 
heating and excessive lending 
led to centralisation of all 
authority for PBC lending and 
allocation of credit quotas in 
Beijing. In a country as vast as 
China, however, such central- 


isation must be temporary. 
When it is relaxed, so inelucta- 
bly is monetary control. 

Better monetary control and 
improved banking supervision 
depend on making toe state 
banks more autonomous and 
commercially minded. Simi- 


: * AgricvHura Dswiopment 
i Bank 

* Import an) Export CretBt 
Bank 

• State Development Bank 


the end of 1993, total loans of 
state banks amounted to 
Yn2,600 trillion, of which more 
than 70 per cent was working 
capital loans mostly to state 
enterprises. Mr Tang Xu, direc- 
tor of the Graduate School of 
the People’s Bank, commented 
ruefully in a recent article: 
"Some erf the enterprises are 
losing money and cannot repay 
loans on time, but the banks 
have no means to force them 
to do so. Worse stiff, they often 
have to increase loans to help 
maintain (political) stabili- 
ty ... the balance sheets of the 
banks, however, do not accu- 
rately reflect the situation and 
may even record profits 
because of the accrued Interest 
from these loans." 

China's World Bank advisers 
say that while progress In the 
reform of both the operations 
of the central bank and the 
specialised banks will depend 
to a large extent on stopping 
the haemorrhaging of state 


enterprises, glimmers of prom- 
ise lie in the fact that Chinese 
bankers now appear to have a 
better understanding of what 
is required to deal with the 
problem. 

But os with other developing 
countries China lacks the 
skilled manpower in its regula- 
tory agencies, such as the cen- 
tral bank, to monitor develop- 
ments and exercise control, 
especially at provincial and 
county leveL A weakness of 
the uew central bank law is 
the lack of provision for the 
adequate supervision of non- 
bank financial institutions 
such as trust and investment 
companies, some of which are 
offshoots of the banks them- 
selves. This is clearly an unsa- 
tisfactory state of affairs. As a 
World Bank official says: 
'‘Reforms of the financial sec- 
tor still have a long, long way 
to go." 

Tony Walker 


larly, monetary policy will 
remain a blunt instrument, so 
long as China's financial mar- 
kets remain undeveloped. If 
that is to be allowed to 
change, however, public 
finances most improve, which 
depends, in torn, on the suc- 
cess of current fiscal reforms, 
on cleaning out toe Angean 
stables of loss-making state 
enterprises and on disciplining 
the "investment hunger" of 
load government 
Bat before all else, people in 
authority need to appreciate 
the inflationary risk of contin- 
ued monetary financing of the 
consolidated budget At pres- 
ent many policy-makers and 
analysts are not only insouci- 
ant about inflation, but are 
unwilling to recognise its 
underlying monetary causes. 
The hope has to be that they 
do not end up learning their 
lesson the hard way. 


v'enturss 


initi 




: -TSr 


Taxation is one of the trickiest areas of reform, says Martin Wolf 

Problem of revenue decline 


octfS 


**■•» a . ^ . J ' ; > 

;;; ; :i- l ' * 

Hl’-b 

nor. 

v , Ir.i r.l'itfv 


a* 8 ? ?-V : 


The reform of China's system 
of taxation is - says Mr Xiang 
Hnaichang, recently appointed 
vice-director of the State 
A d mini st r ation of Taxation - 
among, the “riskiest and most 
difficult", elements of China’s 
reforms. It is also among the 
most important 
- to 1978*' budgetary revenues 
were 34.4 per cent of China’s 
gross national product. By 
1903, that had fallen to a mere 
15.4 per cent Meanwhile, the 
central government's shar e of 
total budgetary revenues had 
fallen from 59 to 41 per cent 
while Its share of expenditures 
bad fallen. only from 46 to 41 
per cent Because erf the lack of 
revenue, the government is 
forced to rely cm the printing 
press; because of the declining 
share of the central govem- 
* meat it is also unable to redfo- 
? ^ tribute revenue across China 
7 Much the most important 
^ cause of the dedlniug trend in 
* revenues was a reduction in 
budgetary contributions from 
state-owned enterprises, from 
20 per cent of gross domestic 
product in 1978 to a mere 4 per 
cent in 1992. This accounted 
for over 80 per cent of the total 
decline in the share of budget- 
ary revenues in national 
income. 

It was the intention of the 
reforms . of the 1960s to leave 
enterprises with greater cen- 
tral over their resources. Yet 
this also means that the Chi- 
nese .. people are obtaining 
almost no return from the 
investments they have been 
making .in these enterprises, to 
1993, for example, 23 per cent 
of GDP vras invested in state 
enterprises. Huge quantities of 
scarce resources are being 
swallowed up, therefore, 
largely for the benefit of the IS 
per cent of the labour force 
that works within them. 

Administrative decentralisa- 
tion has also played a role. 
Hitherto, revenue has been 
. raised by locally responsible 
tax authorities and shared 
with the' centre through a com- 
piex contractual system. This 
. has '.created' mceniives for local 
^governments to exempt' local 
W enterprises, at the expense of 
the centre. . 

* Meanwhile! local govern-' 
meats have made up the lost 
. revenues throagh levies that 
they- have 1 not had to share 
with the centre. Such "fiscal 
extra-budgetary funds” .have 
grown-from 2 i> percettt of GDP 
in 1978, to 43 per cent in 1993, 
and now -account for a quarter 

of total budgetary resources. 




State-owned enterprises are sffl absorbing huge quantities of scarce 
resources. Above: a woman wefeSng parts at a Datong locomotive plant 

; Oownunwit budgetary wwiw and expenditure 

r — 

- 

•.V' "-. : ’• • Total rewanua — I 

.10 — 


. & »■;- r - . ‘i — , i — -i .-- 1 — t- 

:■ Norsk' y Jar . ; ■ as : . ss ' a? 

• M wcr y af riraobo " 

budgetary revenues 


Income tax 
olu. prof v 


91 83 


Vi-> ' jr ,v * ■ * 






... . . _ , 

The decline of the centre’s 
share in a fiscal revenue whose 
share in national income is 
itself declining threatens not 
-Just the reform, but even politi- 
cal and economic stability. The 
- answer has teen sought in a 
comprehensive fox reform that 
was supposed to start at the 
beginning of 1994, but was, in 
foot, initiated in July. 

the reform programme cov- 
ets tax structure, tax adminisr 
tration and revenue sharing. 
The number of taxes is being 
reduced from SO to the main 
features being broadening and 
restructuring of the val- 
. ue-added tax (VAT?, at a rate 


of 17 per cent on most items, 
unification and restructuring 
of the enterprise investment 
tax (BIT), at a single rate of 33 
per cent, and restructuring of 
the personal income tax. At 
the same time, the tax service 
is being re-organised into a 
National Tax Service (NTS) 
and a Local Tax Service (LTS). 
As of July, the NTS is expected 
to collect all central foxes and 
shared taxes. 

Under the new revenue-shar- 
ing arrangement, taxes are 
assigned other to toe centre, 
to local government, or shared 
Of indirect taxes, VAT, the 
securities trading tax and the 


resource tax are subject to 
sharing, while customs duties 
and the new excise tax are 
assigned to the central govern- 
ment 

Of direct taxes, revenues 
from the enterprise income tax 
on socially owned companies 
are to go to the level of govern- 
ment that owns them (so con- 
tinuing the traditional socialist 
confusion between taxation 
and dividends). The system has 
been designed to ensure that 
no province becomes worse off 
than in 1993, but will favour 
the surplus and fast-growing 
provinces over the deficit and 
slow-growing ones. 

The World Bank estimates 
that central revenue collection 
would jump from 27 per cent of 
total taxes in 1992 to around 80 
per cent; the central govern- 
ment’s share of the total reve- 
nue collected would increase 
from about about 40 per cent of 
total revenue in 1992, to 52 per 
cent by the year 2000; and the 
net transfer from central to 
local government would jump 
from minus 14 per cent of tax 
collection in 1992 to plus 35 per 
cent There should, therefore, 
be a significant increase in the 
leverage of the central govern- 
ment over revenue and, 
thereby, over local govern- 
ment. 

One question concerns the 
new NTS. Mr Xiang recognises 
the difficulty of seizing effec- 
tive control over his army of 
580.000 tax officials in 4,000 
offices. Much greater comput- 
erisation is required, with 50 
cities to be linked in this way 
next year. 

The shortage of accountants 
is a concern. Another problem 
is the low pay of tax inspec- 
tors, who earned only about 
Yn4,400 (US$760) each in 1993, 
which must encourage corrup- 
tion. A survey of one city 
suggested that 13 per cent of 
revenue was not collected, but 
Mr Xiang admits this could be 
a si gnifican t underestimate. 

At least two other problems 
loom. 'First, that these reforms 
may not increase overall reve- 
nue much, if at all. Additional 
sources of revenue may soon 
be needed, the personal income 
tax being an obvious candidate 
for attention. 

Second and more important, 
tax reform can, at best, solve 
only half the fiscal problem. 
The other half is spending. 
There the problems of inade- 
quate overall control and 
unclear assignment of respon- 
sibility remain to be solved, 
even in principle. 


This announcement appears as a matter of record only 

0 WAMW 

THE PEOPLE S CONSTRUCTION 
BANK OF CHINA 

US$ 60,000,000 
Long Term Fixed Rate 
Export Finance Facility 

Tranche A: US$ 51,000,000 

Supported by 

Export Credits Guarantee Department 

Tranche B: US$ 9,000,000 
Commercial Loan 


For the supply and commissioning of 
Telecommunications Equipment and 
Software and the provision of Services 
by GPT (Exports) Limited 


ANZ Grindlays Bank pic 
Societe Generate - London Branch 

as Lenders 

Structured and Arranged by 

ANZ Grindlays Bank pic 

as Agent 


AMI 


Inly 1994 











FCSANC1IAL TIMES MONDAY NOVEMBER 7 1994 


. :1 .-.l 1. 


CHINA a 


The number of bond issuers is set to rise but tight government control 
on borrowing will be maintained, reports Conner Middelmann 


For now, Hong Kong remains the main internatio nal financial 
centre for the mainland, writes Louise Lucas 


Cautious policy on debt Hong Kong’s role is crucial 


T he presence of Chinese 
borrowers in the interna- 
tional bond markets is 
set to increase substantially in 
coming years as the country's 
massive infrastructure pro- 
gramme raises the need for 
more foreign investment 
Bat while the number of Chi- 
nese borrowing agencies and 
the volume of supply are likely 
to rise markedly, observers say 
China’s conservative foreign 
debt management will ensure 
that the market will not get 
swamped with, supply. 

“The key feature of China’s 
risk profile is its commitment 
to keeping debt under control,” 
says Mr Stephen Taran. direc- 
tor for fixed-income research 
Asia at Lehman Brothers in 
Hong Kong. 

“There should be an increase 
in the types of issuers, but 
changes wifi take place within 
a framework where the central 
government retains tight con- 
trol over borrowing. " 

Indeed, a fjnana» ministry 
official recently said that the 
government would closely 
monitor borrowing by state 
agencies and corporations to 
ensure that China's debt ser- 
vice ratio did not exceed 15 per 
cent. 

Chinese borrowers have 
something of a stop-and-go 
track record in the interna- 
tional bond markets. Spear- 
headed by the Rank of China 
and the C hina International 
Trust & Development Corpora- 
tion (Citic), the list of borrow- 
ers has expanded in recent 
years to include other banks, 
regional development corpora- 
tions and, most importantly, 
the finance ministry itself 
which raises funds on behalf of 
the People's Republic of China 
(PRO- 

Chinese entities borrowed a 
total of $3.75bn in the year to 
date, up from $3bn in 1993, 
$1.4bn in 1992 and $258m in 
1991, data compiled by Euro- 
money Bond ware show. 

After the resounding success 
of the PRC’s debut in the 
Dragon bond market in Sep- 
tember 1993 with an issue of 
$300m of 10-year bonds, its for- 
tunes turned with the launch 
of a $lbn global bond offering 
in early February. Priced at 85 


basis points over Treasuries - 
even tighter Own the 88-basis- 
point spread on the Dragon 
baud - it coincided with the 
sharp reversal in the global 
bull market In bonds, coming 
only two days before the US 
Federal Reserve increased 
interest rates for the first time 
In the current cycle. 

This caused its yield spread 
to balloon out - some say to as 
much as 160 basis points over 
Treasuries - and soured inves- 
tor yytinignt towards Chinese 
debt, it more difficult 

for issuers to tap the markets 
in an ailing months. 

“The pricing on the PRC 
Issue was too tight," says Mr 
Michael Roche, head of fixed 
Income at HSBC Asset Manage- 
ment in Hongkong. He says he 


Chinese borrowers have 
something of a 
stop-and-go track record 
in the international 
bond markets 


bought PRC bonds at issue, 
held them during the sell-off 
and recently sold his position 
at a small loss. 

Some say investment banks' 
and rating agencies’ eagerness 
to do l nntiwegg with China has 
led them to compromise on the 
quality of that business. “In its 
quest to become bankers to 
China, the underwriting com- 
munity has aimed to please the 
issuer more than the investors 
- as reflected in the pricing of 
the PRC issue," says HSBC's 
Mr Roche. As far as Chinese 
issuers are concerned, he adds, 
“the rose is off the bloom, and 
we're staying away from 
them." 

This, in addition to worries 
during the first half of the year 
over the renewal of China ’s 
most favoured nation status, 
economic problems at home 
and the dire performance of 
emerg in g market debt world- 
wide, pushed yield spreads on 
Chinese Issues out dramatic- 
ally, causing subsequent fixed- 
rate issues to be priced at a 
substantial premium over the 
underlying market. 

A fixed-rate Yankee bond for 


Citic, issued on October 19, 
was priced at a spread of 140 
basis points over Treasuries. 
The PRC’s global bond cur- 
rently trades at a spread of 
around 120 basis points over 
Treasuries. 

Much of this year’s issuance 
has also been in Japanese yen, 
where Interest rates have been 
less volatile than in the dollar 
block, and in floating rate 
notes, which have made up 
some 20 per cent of borrowing 
by Chinese entities this year. 

Despite this year's difficul- 
ties, Chin a is expected to perse- 
vere in its efforts to raise inter- 
national debt. One of the 
biggest borrowers in the com- 
ing years is likely to be the 
finance minis try, which plans 

to raise some $10bn interna- 
tionally over the next five 
years. 

The finance ministry will 
probably be joined by three 
new borrowers, the so-called 
policy banks which China cre- 
ated this year the State Devel- 
opment Bank, the Agricultural 
Development Bank and the 
China Import and Export 
Bank. They will gradually take 
over the country's centrally 
controlled policy lending, 
allowing other banks to 
sharpen their commercial 
focus anil concentrate on com- 
mercial lending. The commer- 
cial banks, too, are expected to 
gain controlled access to the 
inter national bond markets. 

China’s provinces are also 
expected to become bigger 
players in the international 
arena. The trend towards polit- 
ical decentralisation has ted to 
a devolution of reqxmsflnlity 
for infrastructure funding from 
the central government to the. 
pro vinces. 

Although their access to 

overseas mar kets will remain 
controlled by the central gov- 
ernment, the provinces, 
through their financin g agen- 
cies (often referred to as 
“Itics," such as Shanghai-based 
Sitic and Guangxhou-based 
Gitic) - are likely to increase 
their bond market profile. 

Lastly, corporates who have 
been raising funds via interna- 
tional equity offerings may 
also become bond market play- 
ers. “Partly privatised corpo- 


rates who have raised equity 
abroad will have a higher pro- 
file outside China and this may 
e nhan ce their capacity to bor- 
row internationally," says one 
syndicate manager. 

But will investor demand for 
Chinese paper rise in line with 
its supply? Many investors 
remain daunted by some of the 
problems overhanging China, 
including the overheating 
economy (11 per cent GDP 
growth expected this year), gal- 
loping. inflation (well over 20 
per cent), massive government 
subsidies to loss-making state- 
owned enterprises and fears 
over the succession to para- 
mount leader Deng Xiaoping. 

“The market is definitely 
worried about run-away infla- 
tion, political risk and double 
deficits," says HSBC's Mr 
Roche, adding: “the economic 
miracle has turned into an eco- 
nomic mess." In view of this, 
he feels that “relative to its 
sovereign peer group, Chinese 
debt is overpriced." 

However, others say fears of 
economic and political chaos 
are overdone - “some people 
pay too much attention to 
inflation and not enough to the 
underlying economic picture.” 
says Lehman’s Mr Taran, 
pointing to C hina ’s dynamic 
export sector which has caused 
its c ur r en t account deficit to 

shrmlr sharply and und erpins 

the country’s debt servicing 
capacity. Moreover, its high 
domestic savings rate (some 35 
per cant of GDP) supports a 
high level of domestic invest- 
ment and rnnanq tha t C hin a 

does not depend on foreign 
funds. 

On the political front, Mr 
Taran brushes aside worries 
over a return to the dark ages 
of collectivism. “Neo-Maoism is 
an absurd notion; after 16 
years of reform, it would be 
very difficult for China to go 
back," he says. He is sanguine 
as regards the eventual leader- 
ship succession: “In my view, 
the death of Deng Xiaoping 
will be a non-event from the 
bond market's perspective; 
there is broad consensus 
among the leadership in China, 
and the cement of that consen- 
sus is the drive towards mod- 
ernisation.” 


THE LEADING EDGE IN CHINA 


&&&&& aw 


fcABTJJ 


Jardine Fleming 

Established stodcbroJdng/research offices in 
Shanghai, 1992; Shenzhen, 1993; Beijing, 1994. 

Full corporate and financial consultative services 
provided to overseas companies interested in 
investing in China through Jardine Fleming and 
Robert Fleming global network. 

Jardine Fleming is a leading foreign broker of "B" 
share trading, with two *B" share seats on the 
Shanghai Securities Exchange and two ”B" share 
seats on the Shenzhen Stock Exchange. 

Three closed-end funds listed on the New York, 
Australian, and London Stock Exchanges, worth 
over US$260 million. 

JF China Investment Company Limited 
established in 1987 to invest dhtxtly in commercial 
opportunities in China. 



Jardine Fleming FLEMINGS 

The l e adin g edge in Asia Pacific. international investment banking 


LONDON • NEW YORK • HONG KONG - TOKYO - PARIS • FRANKFURT - MADRID • ZURICH - GENEVA - MILAN 
SYDNEY • WELLINGTON • BANGKOK •TAIPEI • MANILA • JAKARTA • SEOUL • BEIJING • SHANGHAI • SHENZHEN 
BOMBAY • KUALA LUMPUR ■ SINGAPORE • LAHORE • KARACHI • COLOMBO • JOHANNESBURG • BAHRAIN 


Issued by Robert Fleming & Co. Limited, a member of The London Siodc Exchange and The Securities and Futures Authority i-imii—i 


U ltimately, bankers and 
brokers expect Shang- 
hai to take on the role 
of China's New York: but for 
now, the mainland's ntumrtai 
centre is firmly based in the 
1,070 sq kms of territory now 
under British rule. 

Hong Kong has long capital- 
ised on its geographical posi- 
tion in terms of C hina trade, 
but Its role as a money-raising 
centre has emerged more 
recently and Is reflected In the 
growing number - and size - 
of foreign financial institu- 
tions setting up shop in the 
colony. 

Investment banks such as 
Goldman Sachs have doubled 
their Hong Kong head-count in 
the space of a year (in Gold- 
man’s case, to 400 from 200). 
While beefing up Hong Kong 
staffing levels is indicative of 
the lure of Asia in general, the 
emphasis on the colony over 
Tokyo or Singapore more par- 
ticularly underlines the star- 
ring role of China. 

China's massive spending 
programmes - such as a 
planned US$120bn over the 
next decade on power and 
Yn54bn ($&35bn) this year on 
building telephone lines - will 
ensure it is a regular user of 
the world capital markets. 
However, its relative inexperi- 
ence means that - for now - it 
is highly dependent on over- 
seas markets for experts who 
can dovetail its needs with 
those of international inves- 
tors. 

T his can be a frustratin g 
role for the colony’s 
bankers - as those work- 
ing in power project financing 
could testify. Nearly a year’s 
worth of economically viable 
power deals have been moth- 
balled because investors are 
demanding higher rates of 
return than Beijing is willing 
to concede. However, persever- 
ance is expected to pay off and 
many are looking for a relax- 
ation from Beijing during the 
course of next year. 

One of the biggest roles in 
China's cash-raiding drive has 
been played by the Hong Kong 
stock exdiange, Asia’s second 
biggest stock market and the 
first overseas bourse to estab- 


lish the regulatory framework 
for mainland companies to 
secure an overseas listing 
directly - that is, without first 
registering offshore or buying 
into a shell company to engi- 
neer a "backdoor listing.’ 

So far, 11 mainland compa- 
nies have raised a total 
HK$13.4bn (USS1.7bn) on the 
Hong Kong stock exchange 
through the creation of H 


mg, all of which are now trad- 
ing in Hong Kong. A second 
list of 22 companies fo llowed 
in January, of which around 
17 will have their primary list- 
ing in Hong Kong, and the 
expectation is for still bigger 
lists in subsequent years. 

Some 15 m onths on, senti- 
ment bas waned heavily: a 
reflection of concerns over 
China's overheating economy 


Company 

naira 

Listing 

Mn 

Issue 

price 

IT HK 
data 

Closing 
price at 
Oct 25, 
1994 
ki HXS 

Motet 
cwKta 
Oct 25 
1994 
b HKSm 


July 15 1993 

£80 

5JE0 

154238 

Stn^ful teal 

■hd? 26 1993 

USB 

£50 


Baton Printing Machinery 

Aognt 6 1933 

2JBB 

3225 

36250 

Gnragzhou SUpysd 

Augusts 1993 

288 

3875 

90002 

Haanshan Inn & Sled 

Nov 3 1993 

227 

£40 

4,15983 


Dec 7 1993 

128 

320 

20080 

Yfaheng Cbsmteal Fftre 

March 29 19M 

228 

2825 

2,92500 

Ttanpn Bahai Cheated 

May 17 1994 

120 

123 

429*40 

Doagtang Bectrical 

JaneS 1994 

£83 

425 

72250 

Luoyasg Glass 

July B 1994 

385 

4125 

1,031.25 

QtagOng Mata 

August 17 1994 

£87 

3.125 

3JI625Q 

| Same* FT <***** Hm* Knag | 


shares; some 15 selected com- 
panies are scheduled to follow. 

The role of conduit between 
Chinese issuer and interna- 
tional investor was conceived 
in early 1992, soon after Mr 
Charles Lee - who retired last 
month - took up the chair- 
manship. H shares, former 
mainl and state-owned enter- 
prises listing in the colony, 
were effectively borne out of 
the conclusion that growth 
potential must lie beyond 
Hong Kong - a conclusion 
many of the exchange's mem- 
bers were also discovering. 

The fruits of lengthy negoti- 
ations between regulatory 
authorities in Hong Kong and 
China - with the former seek- 
ing to ensure issuers complied 
with international standards - 
was a joint Memorandum of 
Understanding and the hugely 
successful listing of Tsingtao 
Brewery, the company respon- 
sible for China’s best known 
beer, in July of last yean the 
HK$889m issue was 110 times 
oversubscribed. Tsingtao was 
one of an Initial list of nine 
state-owned companies 
selected for an overseas list- 


ami the impending demise of 
paramount leader and archi- 
tect of China’s capitalist drive, 
Deng Xiaoping, allied with 
more widespread fears, such 
as rising interest rates, which 
are hurting markets world- 
wide. 

P rice earnings multiples 
have fallen sharply: 
from almost 18 in the 
case of Tsingtao to just nine in 
the case of QingHng Motors, 
the light duty track- maker 
which raised a total 
HKfl.04bn in August 
The stock exchange, how- 
ever, is not allowing the vaefi- 
lations of sentiment to under- 
mine its position as the 
premier exchange for the issu- 
ance and trading of China 
securities. In August, Hang 
Seng Index Services, which Is 
responsible for the colony’s 

bine ehfp hwlmr of Hw cany 

name, launched an H share 
index as a specific barometer 
for the mahtland companies, 
raising their profile and pro- 
viding an investment bench- 
mark. In its latest blueprint 
for the fhtnre. The Way For- 



Chinese stocks on Wall Street still lack appeal 


US reception remains cool 


A merican consumer goods from bur- 
gers to fizzy d rinks may be all the 
rage in China, but not all things 
Chinese can be assured an equally warm 
reception in US markets, as company and 
regulatory officials have learnt to their 
cost this year. 

US shareholders have broadly cold- 
shouldered mainland stock trading on 
Wall Street and the so-called N share. 

The N share is a recently introduced 
category of security offered to investors in 
the US, Europe and Asia, and its reception 
has prompted the Chinese regulatory 
authorities to look instead at facilitating 
dual primary listings - as achieved by 
Shanghai Petrochemical and its sponsors 
Merrill Lynch Hong Kong and Peregrine 
Capital last year. 

This would enable companies to widen 
their investor base with a US listing, while 
at the same h™ r ecognising that the bulk 
of demand, for now, will be in Hong Kong. 

In 1993, the first year of overseas list- 
ings, a \1 nine selected companies headed 
across the border for Hong Kong. This 
year, however, the Chinese authorities 
elected to send five of the 22-strong second 
batch to New York. 

For the companies concerned, this was 
initially seen as good news: compared with 
Hong Kong, price/earnings ratios tend to 
be higher and there is a perceived prestige 
premium attached to a US listing. 

Until the introduction of N shares, 
which began with Shandong Huaneng, a 
power company, four mainland companies 
were listed on the New York Stock 
Exchange: Brilliance China, China Tire, 
Ek Chor Motorcycle and Shanghai Petro- 
chemical. In October, Huaneng Power, an 


associate company, became the sixth US 
listed mainland company. 

Trading in Shanghai Petrochemical, one 
of the first batch of N shares, demon- 
strates the relative inactivity of China 
shares in the US tris d ois Hong Kong, 
where most activity takes place. Around 
four times the volume of Shanghai Petro- 
chemical shares are traded hi Hang Kong 
as in New York, although 70 per cent of 
the stock was first issued in the US. 

Bankers attribute this to Hong Kong's 
greater awareness of - and familiarity 
with - the China market, as well as an Its 
enhanced level of news about the country, 
plus research coverage. 


M ost recently, the lacklustre Ameri- 
can appetite for Chinese shares 
has been highlighted by the deci- 
sion by Shandong International Power 
Development (SIPD) to delay its listing 
while it monitors the performance of 
shares in the two power companies which 
recently hit Wall Street. 

SIPD last month called a halt on its 
HK$2.7bn listing In the colony, and 
planned issue of American Depositary 
Receipts (ADRs), in response to the US 
performance of Shandong Huaneng and 
Huaneng Power International 
Poor performances wrought by market 
conditions have been exacerbated in the 
Chinese power sector by a dearth erf des- 
perately-needed foreign funds for develop- 
ment 

Shandong Huaneng has seen the price of 
its ADRs slump about 23 per cent from the 
issue price of US$1425 on August 4 to 
about USIll^S. 

Huaneng Power International has also 


- ( f 


ward, the stock exchange 
shows its band will remain 
stacked in favour of China: 
“Most participants with whom 
the exchange met stressed that 
the single most important 
issue facing the exchange was 
how it conM best serve China's 
capital formation needs. It was 
felt that serving these needs 
represented the exchange’s 
best opportun ity of long term 
future growth.” 

The exchange is now consid- 
ering the introduction of a 
more active debt market, hi 
part to carve a farther niche 
in enabling China incorpo- 
rated institutions to raise capi- 
tal through bond issues in 
Hong Kong. While China 
bonds have been arranged by 
Hong Kong bankers - espe- 
cially where distribution Is 
aimed at the South Bast Asian 
market (the so-called dragon 
bond market) the trigger global 
issues tend to have been han- 
dled further afield. 

However, both the govern- 
ment and private sectors 
re ma in alert to the fact Hnnp 
Kong cannot take for granted 
its role as China’s premier cap- 
ital raising maritat 

Some believe that Hong 
Kong’s spiralling costs and 
d ete r io r atin g skills, especially 
in English and Putonghua, the 
main spoken language of 
China, could erode this role. 

Mr David Li, a member of 
Hong Kong’s Legislative Coun- 
cil and chief executive of Bank 
of East Asia, the third biggest 
listed bank In the colony, 
recently warned of another, 
altogether closer, rival: 

“Within rhina itself, Shang- 
hai is aiming to become the 
leading financial centre. There 
is talk that Shanghai may 
replace Hong Kong. It can 
sometimes be easier to recruit 
talented employees in China 
than It Is in Hong Kang. 

“The possibility that Shang- 
hai could replace Hong Kong 
is at the heart of the chal- 
lenges we face. Because many 
of our strengths can be repro- 
duced, or even transferred, the 
possibility of tomorrow’s 
shang hai u sobering, ft sug- 
gests that we could lose the 
race for greater competitive- 
ness.” 



seen its share price fall on Wall Street 
since its October 6 debut, despite cutting 
the share price 27 per cent to US$20 from 
US$27.50, the top price mooted In the pre- 
liminary fisting prospectus. 

In response to this, regulatory authori- 
ties are seeking to eliminate the barriers 
to dual primary listings. 

If measures can be developed in time, it 
is possible two of China's biggest overseas 
listings now earmarked for New York may 
be able to dovetail with a Hong Kong 
offering. These are the two airline compa- 
nies: China Southern Airlines, being 
brought to market by Goldman Sachs; and 
Chin a Eastern Airways, arranged by Mor- 
gan Stanley. 

The challenge has been swiftly picked 
up by the Hong Kong stock exchange and 
the Securities and Futures Commission 
(SFC), the colony's securities watchdog. 

The colony's regulators are eager to 
enhance Hong Kong’s international repu- 
tation and obtain the extra business gener- 
ated by offering a secondary market in . 
New York listed China companies. * 

However, facilitating dual primary list- 
ings means overcoming mechanical prob- 
lems such as those which arise, for exam- gf* 
pie, because of the different subscription 
systems used in the US and Hong Knng - 
Issues to be resolved include who bas 
jurisdiction in a simultaneous US-Hong 
Kong listing; prospectus differences - in 
the US an initial “red herring’" document 
is printed without prices while, in Hong 
Kong, prices are typically included. 
Another Issue is the underwriters’ role in 
price stabilisation) following a new listing. 

Louise Lucas 



He 

k;: 

: 

ISn 

LS£. 


Overseas interest in Citic joint venture 


Continued from page 6 

men from Singapore and Hong 
Kong have indicated a willing- 
ness to invest in the island. In 
August, a large mission from 
Japan, consisting of banking 
and industrial executives, vis- 
ited the island. Mr Wei says 
Citic has signed its first busi- 
ness contract with an indus- 
trial company in the chemicals 
indnstiy. 

Telecommunications is also 
a sector where Citic sees 
growth. AsiaSat 2, a telecom- 
munications and entertain- 
ment satellite, is due for 
launch in 1995. Citic has a 
third of the project 

“We are frying to get Chi- 
nese television networks to 
make use of the satellite,” he 
says. 

He hopes that Central TV, 
the main government-owned 
national broadcaster, will rent 
a transponder. AsiaSat 2 will 
employ “Kn band" transpon- 
ders which are more powerful 


than the previous generation 
of transmitters. This means 
that households need only own 
a small receiving dish - which 
Citic has the capacity to manu- 
facture in Beijing, Xian, and 
elsewhere. 

“There are so many isolated 
and mountainous regions in 
China," he explains. “The 
peasants have the money [to 
boy a dish]; the economy in 
many rural areas is catching 
up- They need a communica- 
tion channel that is clear and 
stable." 

C itic may have been 
mainland China’s first 
experiment with capi- 
talism but its pursuit of profit 
has been tempered recently by 
the government's request that 
it take over and manage two 
ailing state companies - a 
civilian buck and auto parts 
complex in Shaanxi, and a 
heavy machinery manufac- 
turer in Lnoyang. 

The re-organisation of the 


Shaanxi factories - 10 in all - 
is still not complete. Citic has 
pumped about YnSOm into the 
complex over tbe past four 
years; seven factories have 
returned to health - “the 
other three need money," says 
Mr Wei. “But Citic is not 
going to put any more money 
in. the other seven can." 

Although he is not best 
pleased with the Shaanxi com- 
plex, he recognises that there 
was a social need for Citic to 
help. 

“They have more than 
10,000 workers and their fami- 
lies, so 40-50,000 depend on 
the factory," he says. 

Tbe rehabilitation of most of 
the Shaanxi factories has 
enabled the creation of Citic 
Automobile, a subsidiary 
which brings together Citic 
anto assets tinder one 
umbrella. 

The requirements of the 
Lnoyang acquisition were 
manag er ial not monetary. The 
factory, now known as Citic 


Heavy Machinery Company, is 
China’s biggest producer of 
heavy cranes, diggers, and 
dock loading equipment. 

The factory was basically 
profitable, but tbe plant was 
under-utilised and the com- 
pany focused too much on 
domestic sales to the exclusion 
of export possibilities. 

“The company was owned 
previously by the mining 
industry, but it did not order 
. very much equipment," he 
says - “It was a big factory 
with a small sales staff and no 
one to look after the overseas 
market We have helped them?* 
to export” gy 

Stffl, one gets the impression 
that Mr Wei does not see 
Chic's involvement in “pasto- 
ral care" for ailing state indus- 
tries as central to the conglom- 
erate's mission. 

In answer to another ques- 
tion about finance for state 
companies, he says: “We do 
lend to state enterprise - care- 
telly. very carefully.” 


1 li 
1 . 








FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


CHINA 9 


IX 



ru ciai 


crn 


l he 


SHANGHAI STOCK MARKET 

Focus on the 
short-term 


.'•SsfSS 

fusils * iss 
!l1 

r^tescba^i 
t he 3%. 

to carr e d ! b [tttt!^i 

* ®»abli B - J.N5S* 

5afisv3*^6 

^“stSSS 

a* *?* its™ 

-gftaati-afiiS 

However. b 0lh ,, 

;^g cannot t^ [( N. 
^easChinaTJ^ftb 

Some believe tbt . - 
‘°&g s spiraliino ^ 
cterioratintr e t “*» t ^ 


W hen stockbrokers 
start b laming their 
clients, it is a clear 
sign that it is not going to be a 
good year. So, if the com plaint s 
to be heard in Shanghai these 
days are an indication, 1994 is 
s hapi n g up as a very poor year 
indeed, unites Simon Holberton. 

“Investment strategy is very 
short term," says Mr Huang 
Jun, head of Institutional sales, 
at Shanghai International 
Securities (SIS). “There is a 
lack of knowledge about funda- 
mental analysis. Investors look 
at financial statements but 
lack the expertise to interpret 
them.” 

“The investment situation is 
not ideal,” agrees Mr Huang 
GuexLan, a senior director of 
Shenyin Securities, a large 
Shanghai brokerage. “There 
are many individual investors 
and few institutions. The indi- 
viduals are mostly investors 
who lack long-term inten- 
tions," 

The cry of short-termism is 
often heard in Shanghai Only 
recently the Liberation Daily, 
the Communist party's mouth- 
piece in the city, upbraided 
investors for being far too pre- 


iTKS 3 ? 1 ** skiI k SB* • pared to trade on rumour 

** *~-SllSa and “Seim** iTInml mctihitinrM o nr 


and 

»a»n spoken iaBnafc 
erode S’ 

Mr David u a 

!pe Song's UjS* 

isted bank in 
?ren:iy warned of * 
itogether closer, mat 
Within China iiseiLa»- 
m , 15 *p-iog w bea^i 
cenntfc 

5 talk iha: Shanfai). 
epiace Hong Kong. h . 
o|aetines be easier 10 J 
a:en:ed employees ta(fc 
aan ii is in Hong £m» 
“The po&sifatlitv -bait 
a: redd replace Bongfe 
s at the heart of to* 
rages face. Became* 
if cur strengths can berqt 
terse. cr even transfer^ 
:oss ibii.tj af romans 
shanghm is sobering, hs 
,Tsts that we could kat » 
ace for greater compete' 
IAS." 


“Some illegal Institutions and 
big shots are coming rumours 
to force investors to sell at a 
loss. At other times they con- 
jure up non-existent news to 
attract followers,” the paper 
said last month. 

The Shanghai market has 
performed like a yo-yo so far 
this year. Share prices in 
Shanghai had been cm a steady 
decMne until the end of July, 
when the A-share index hit an. 
all-time low of 32EL9. A-shares 
can be owned only by Chinese 


nationals, while foreigners 
have a limited access to Chi- 
nese stocks through B-shares. 

To cries of “Do something!" 
from brokers and investors 
alike, the China Securities Reg- 
ulation Commission (CSRC) 
announced a series of mea- 
sures to support the market 

These measures included a 
re-iteration of the ban on new 
A-share issues for 1994; a prom- 
ise to control more rigorously 
A-share issues in 1995; an 
undertaking to permit Sino-for- 
eign joint venture investment 
funds to invest in A-shares; 
and the extension of selective 
credit lines to securities com- 
panies to help fund their trad- 
ing. 

The announcement of these 
measures had the immediate 
effect of boosting prices. By the 
end of August the A-share 
index was about to break 
through the 1,000 point barrier 
- more than three times its 
level of not quite two months 
before. 

Since then, however, the 
market has been buffeted, 
mainly by rumours concerning 
the health of Deng Xiaoping, 
China's 90-year-old senior 
leader. By the middle of last 
month the index was hovering 
around 650 - 35 per cent off its 
peak for the year. 


I 


Deal 



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TiffHimim 
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250,000 So. Ft. 

The Best Offices... 
in The Best Iocahoh. 

Avaiuble 1995 

2rOOOSo.fr. 
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% MARTIN CLARKE 
ASSOCIATES 

CHAIUEKD SURVEYORS 

44 171-224 5888 

53 Qubn Anns Sramr, 
London W1M9FA 
Fax: 44 171-224-2368 


n addition to complaints 
about rumours, the failure 
to follow through the July 
measures has disappointed bro- 
kers. Mr Himif dismissed the 
moratorium on new A-share 
listings as “nothing new.” 

For foreign investment bank- 
ers the gyrations of the Shang- 
hai market are those expected 
of a market in the early years 
of development They axe more 
intent on building their offices 
for the day - not too far off - 
when foreigners win be able to 
trade A-shares. 

They are also looking for- 
ward to the time when the Chi- 
nese corporate sector becomes 
more attimed to western corpo- 
rate finance techniques of capi- 
tal-raising, and mergers and 
acquisitions. 

For Mr Richard Graham. 
cMaf representative of waring , 
the UK investment bank, in 
.Shang hai , corporate research, 
carried did by properly-trained 
local staff is the place to start. 

‘ “You have to create your 
research team on the ground. 
China is no different,” he says. 
“Hong Kong and Taiwanese 
analysts are not weHsutted to 
looking at Chinese companies. 
They don’t understand the cul- 
ture. They come in wearing 
flashy clothes, speaking bad 
and aggressive Mandarin - it 
doesn’t go down vary well with 
hassled local executives.* • 

. The prospect of a unified 
stock market, where the dis- 
tinction between A and B 
shares fs removed, will be good 
for the foreign investor, Mr 
John Crossman, general man- 
ager of Jar dine Fleming in 
Shanghai believes. Capitalisa- 
tion of the A-share market in 
Shanghai is more than four 


times thr»* of the B-share mar- 
ket 

In corporate finance Mr 
Crossman notes that China’s 
preference for equity rather 
than debt means there are 
opportunities for bringing 
together foreign equity and 
technology in strategic alli- 
ances. “We’re seeing where we 
can expand,” he says. 

Baring’s Mr Graham also 
.sees this as fertile ground. 
“The real question for invest- 
ment banks here is the future 
of mergers and acquisition 
work;" he notes. “You won’t 
get Chinese companies to pay 
for that sort of advice at the 
moment, but foreign compa- 
nies might” 



. ft is now widely accepted that 
China offers probably the most 
exciting potential of any market 
in the world today. . 
Published bi-monthly m Chinese 
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T his time last year Chi- 
na’s securities market 
regulators and partici- 
pants were looking forward 
with confidence to the nation’s 
first securities law, a law that 
would bring market supervi- 
sion. licensing and regulation 
under one authority. 

Today, summing up the situ- 
ation. one regulator described 
his position as “dismayed and 
ineffective.” China's attempts 
to emulate the West in devis- 
ing a regulatory framework for 
its rapidly growing securities 
markets appear to have fallen 
foul of bureaucratic politics in 
Beijing. 

The problems which policy- 
makers in Beijing have met in 
producing a unified securities 
law are emblematic of decision- 
making in modem China. To 
some observers the process is 
an endless series of behind-the- 
scenes horse trading as inter- 
est groups in the bureaucracy 
jockey for preferment and posi- 
tion. The outcome is often a 
second-best solution to the 
problem. 

The local and foreign stock 
broking community in Shang- 
hai - the financial centre on 
the mainland of China - is 
almost completely agreed on 
the need for a coherent set of 
rules, administered by a single 
institution, by which to oper- 
ate. Mr Huang Guexiau, a 
director of Shenyin Securities, 
the biggest broker in Shanghai, 
says the securities industry in 
Ghinn is in urgent need of an 
all-encompassing securities 
law. 

“If companies from other 
provinces want to list here we 
can only regulate them using 
Shanghai regulations,” he 
says. 

“We are in urgent need of 
such a law. The market also 
wants a unified power. If every 
province goes its own way, you 
get a contradiction in regula- 
tion. You can set up a branch 
of the regulator in S hanghai 
who represents the power." 

Shanghai's small but grow- 
ing group of western invest- 
ment bankers share Mr 
Huang's views. Mr John Cross- 
man, general manag er or Jar- 
riinp Fleming in Shanghai says 
that what the market has 
hoped and argued for is a regu- 
lator in Beijing based on the 
model of the Securities and 


Local and foreign stockbrokers want one authorfty to 
admininster a single set of rules, says Simon Holberton 


Disputes delay 


securities 


Exchange Commission (SEC) 
in the US - “we've been telling 
them; ‘Give us an SEC, tell us 
what the ground rules are and 
enforce them for alL' 

”1 suspect we are not going 
to see a securities law for some 
time,” he adds. 

Not all. however, agree that 
changes to the proposed law 
will be bad. Mr Huang Jun, 
head of institutional sales at 
Shanghai International Securi- 
ties, says: “You just can’t put a 
US system here. It needs sub- 
stantial changes. The delay in 
the securities law Is to make 
the law more acceptable to 
local conditions." 

The failure by Beijing to pro- 
duce a securities law - it was 


A bruising contest 
between big institutions 
has hindered progress 


due out this summer - appears 
to be the result of bruising con- 
test between the China Securi- 
ties Regulatory Commission 
(CSRO and a number or pow- 
erful institutions, such as the 
People's Bank and the Ministry 
of Finance, which are loath to 
yield power to the CSRC, an 
institution less than two years 
old. 

The battlefield for this con- 
test has been in the standing 
committee of the National Peo- 
ple's Congress - China's parlia- 
ment - in whose name 
national laws are promulgated. 
The participants have been the 
prownmir anri finance subcom- 
mittee of the NPC - with sup- 
port from the CSRC's - and the 
legal work committee. Both 
committees produced conflict- 
ing versions of a securities law 
and have been unable to recon- 
cile those differences. 

The exact details of where 


the two proposed bills disagree 
is not known. A key difference 
is believed to be the authority 
conferred upon the CSRC. 
Under the economic and 
finance committee's law the 
commission was to be the sole 
regulator. The draft prepared 
by the legal work committee is 
believed to have left the issue 
of which institution has regula- 
tory power vague. 

“The legal work committee 
wants to leave it fuzzy,” says 
one knowledgeable observer. 
“So regulatory power will be 
divided between the State 
Council, Ministry of Finance, 
the central bank, CSRC... ev- 
eryone. 

“They said they didn’t want 
to make it clear because noone 
wants to mike it clear.” 

Observers in Shanghai also 
say that the delay in the publi- 
cation of the law reflects a cer- 
tain hesitancy by the authori- 
ties. Western brokers say that 
it has been difficult for the Chi- 
nese authorities to come to 
grips with what a securities 
market is and bow it can work 
for the benefit of C hina. 

“They are trying to regulate 
what should happen, rather 
than describe a framework in 
which a market can work," one 
broker observes. 

“f think they have become 
confused and don’t know what 
to do with the securities law; 
they don't want to make a mis- 
take.” 

Mr Richard Graham, chief 
representative of Baring, the 
UK investment bank, detects a 
change in policy that appears 
to be political - “there was a 
definite change from the Party 
Congress [in 1992] to this 
year's National People’s Con- 
gress typified by the change in 
language from *1610™' to ‘sta- 
bility’.” he observes. 

This, he claims, led to a 


law 

change in the central hanVing 
law, which drew back from 
allowing banks the freedom to 
set interest rates and reserved 
that power for the People’s 
Bank. The securities law is a 
victim of the same thinking . 

“The law was going to con- 
firm the (SRC as the regulator 
of the securities industry but 
the People’s Bank put its foot 
down: it wants to control the 
listing of companies and the 
supervision of the stock 
exchanges,” he said. 

The bureaucratic infighting 
about the securities law has 
raised fears that it may end up 
with similar deficiencies to 
those from which China’s 
newly promulgated company 
law suffers. 

The company law came into 
effect on July 1 and is ambigu- 
ous as to the precedence of 
national over provincial law, 
especially in the area of securi- 
ties. This leaves vague the 
position of Shanghai and Shen- 
zhen regulations in relation to 
the national law. 

Moreover, the law lacks ade- 
quate provisions for the over- 
seas listing of mainland compa- 
nies; it fails to specify the 
maximum proportion of a com- 
pany which any individual 
may own (as did previous regu- 
lations): or. what constitutes a 
quorum at an annual general 
meeting of a company. In short 
it is wrak in adequately defin- 
ing ownership. 

In the particularly harsh 
judgment of one local observer, 
the company law as drafted is 
“in congruent with the princi- 
ple and practice of company 
law." 

In the view of the Hongkong 
and Shanghai Bank, “the tran- 
sition from the old to the new 
system envisaged under the 
company law will certainly be 
marked by confusion and may 


New business clubs prove popular 


B usiness club elitism 
seems to be an idea that 
goes down well in nomi- 
nally socialist China where 
access and contacts are the 
keys to success, writes a corre- 
spondent m Beijing. 

Twenty business, private and 
country dubs are either open 
or in the works in Beijing, all 
of than vying to raise member- 
ship among foreign executives, 
Chinese tycoons and even gov- 
ernment officers forced by offi- 
cial rules to enrol under the 
name of their wives or rela- 
tives. 

The Chinese press estimates 
that 60 business and golf clubs 
are under construction across 
the country. 

New dubs market their pres- 
tige and facilities fiercely, 
advertising in print and on the 
radio, offering such incentives 


as free trips and pitching enrol- 
ment in limite d memberships 
as an investment that wUl pay 
off handsomely in the future. 

“I am besieged with calls 
from these clubs, i refuse to 
speak to them any more." says 
an executive with an American 
bank. 

Perched on the 50th floor of 
Capital Mansion near a north 
Beijing diplomatic enclave, the 
Capital Club is the latest entry, 
boasting a panoramic view of 
the smoggy Chinese capital 
and a board of governors that 
is a mini Who's Who of Beijing 
government and business. 

A joint venture between the 
China International Trust and 
Investment Corporation (Citic) 
and the Club Corporation of 
America, the dub will soon fill 
its 400 capacity membership 
rolL In addition to a wood-pan- 


elled corporate ambience and 
dining areas designed like 
boardrooms, the dub also has 
a recreation centre with a 
glass-domed swimming pool, 
bowling lanes, billiard tables 
and a golf simulator. 

The membership fees of 
17.500 for corporations and 
35.000 for individuals indude 
access to 200 associated private 
and country dubs in 14 coun- 
tries. 

“We are trying to provide 
better opportunities for each 
member to do business and for 
foreign and Chinese business- 
men to exchange views,” says 
Robert Deriman. chairman of 
Club Corp. of America, opera- 
tor of two other clubs in the 
southern Chinese cities of Zhu- 
hai and Zbaoqing. 

Other facilities in Shanghai 
and G uangzh ou are planned. In 


December, the Ghangan Club - 
entrance fees are $28,000 for 
corporations and $20,000 for 
individuals - with private ten- 
nis courts, saunas, gymnasi- 
ums and dining rooms, will 
open not far from the walled 
citadel of China’s Communist 
leadership. Zhongnanhai. The 
club is a venture between the 
Beijing Sports Commission and 
Fu Wah International Enter- 
prises of Hong Kong. 

Some business sceptics ques- 
tion whether the plethora of 
planned private clubs will 
attract the gilded ranks of Chi- 
na’s new millionaires - “Bei- 
jing citizens still don’t under- 
stand the concept of the 
business dub. 

“It's the same old problem 
here: the old culture could go 
on for another 25 years," com- 
ments one dub manager. 


Key facts 
on China 


Population and main cities 

China’s main cities indude Shanghai 
(population 13.4m); the capital, Beijing 
(formerly Peking, 10.9m), Tianjin (9.1), 
Shenyang (4.5m), Wuhan (3.7m), 
Guangzhou (Canton, 3.Sm). Office rent 
and occupation costs have bean rising 
sharply in Beijing and Shanghai (see chart, 
right , also Shanghai report; page five). 
Other main cities with populations of wed 
over 2m are Harttn, Xian, Nanjing, 
Chongqing, Dafian, Jinan, Changchun and 
Qingdao. China’s es tima t e d population is 
1,185,170,000 - nearly a quarter of the 
world’s total population. 


Ethnic groups 

The number and percentages of main 
ethic groups include Han (Chinese), 

1.042 bn (91.96%); Zhuang, 15.4m 
(1.3796); Manchu, 9.8m (p.87%); Hui 8.6m 
(0.70%); 7.3m (0.65%); Uygur, 7.2m 
(0.64%); Yi, &5m (0.58%); Tufia 5.7m 
(0.50%); Mongolian 4.8m (0.42%); Tibetan, 
4.5m (0.41%). 

Race and language 

The population of China is primarily of 
Mongoloid descent About 93 per cent Is 
Han, ihe remainder consisting of 56 
groups known as the minority nationalities. 
Four major language families are found in 
China, the most Important being the 
Sino-Tibetan, spoken by the Han Chinese. 


Currency. 

The yuan/renminbi is illegal tender for 
payment of hotel, travel and other services 
by foreigners travelling In China. The 
current exchange rate (November, 1994) is 
approximately Yn8.5 to US $1- Foreign 
currency must be declared on entry. 

Visas 

Visas are essential for visitors to China. 
Regulations regarding visas have been in 
a state of flux: it is now posable to 


Shanghai: foreign invested 
prefects & pl e d g e d foreign capital 


Nunber ol projects S3 ■ Pladgad capital (SM 



3EWKCK Started 


present oneself at any large Chinese point 
of entry and be given a two-week visa on 
the spot. Visas are also issued by the 
Hongkong office China Travel Service at 
77 Queen’s Road, Centra), Hongkong, or 
at 27-33 Nathan Rd, Kowloon and at the 
People's Republic of China Visa Office. 
China Resources Building, 26 Harbour Rd, 
Wanchai, Hongkong. Application can be 
made by mail or in person. 

Travel agencies arranging China tours, 
especially in Hongkong, will frequently 
obtain a visa on your behalf. 

Changes in itinerary after arrival may 
require approval. For travel to all but 257 
specified destinations, travel permits are 
also required. 


Ministries in Beijing 

Government ministries indude: 

Ministry of Agrictdture: Fuxing Lu, B 15. 
Beijing 100862; tel. (1) 8512594; telex 
22349; fax (1) 8515048. 

Ministry of Chemical Industry: 
Liupukang. Andingmenwai, Beijing; tel. (1) 
446561; tax (1) 4215982. 

Ministry of Civil Affairs: 9 
Xihuangchenggennan Jie. Xicheng Gu. 
Beijing; tel. (1) 551731. 

Ministry of Coal Industry. Beijing. 
Ministry of Commerce: 45 Fuxingmennei 
Dajie, Xicheng Qu, Beijing 100801; tel. (1) 
668581: telex 20032. 

Ministry of Communications: 10 Fuxing 
Lu. Haidian Qu, Beijing; tel. (1) 8642371: 
telex 22462. 

Ministry of Construction: Baiwanzhuang. 
Western Suburb. Beijing; tel. (1) 8642371; 
telex 22462. 

Ministry of Culture: Jia 83, Dong an men 
Bei Jie. Beijing; tel (1) 442131. 


Office rents compared 



Ministry of Finance: 3 Nansanxiang, 
Sanlihe, Xicheng Qu. Beijing; 
tel. (1) 868731; telex 222308. 

Ministry of Foreign Affairs: 225 
Chacyangmennei Dajie, Dongsi, Beijing, tel 
(1)553831. 

Ministry of Foreign Trade and Economic 
Co-operation: 2 Dong chan gan Jie, 
Dongcheng Qu, Beijing 100731; tel. (1) 
553031; telex 22168. 

Ministry of Forestry: 18 Hepingii Dongjie, 
Dongcheng Qu, Beijing; teL (1) 463061; 
telex 22237. 

Ministry of Geology and Mineral 
Resources: 64 Funei Dajie, Beijing 
100812; tel. (1) 6031144; telex 22531. 
Ministry of Internal Trade: 25 Yuetanbei 
Jie, Xigheng Qu, Beijing. 

Ministry of Justice: 11 Xiaguangli, 
Sanyuanqlao, Chaoyang Qu, Beijing; tel. 
(1)668971. 

Ministry of Labour: 12 Hepinglizhong Jie, 
Dongcheng Qu, Beijing. 

Ministry of Machme-BuBding industry; 
Sanlihe. Xicheng Qu. Beijing. 

Ministry of Metallurgical Industry: 46 
Dongsixi Dzyie, Beijing; tel. (1) 557431. 
Ministry of National Defence: Beijing; tel. 
(1) 667343 

Ministry of Personnel: 12 Hepinglizhong 
Jie. Beijing. 

Ministry of Posts and 
Telecommunications: 13 Xlchangan Jie. 
Beijing 100804; tel. (1) 660540; telex 
222187. 

Ministry of Power Industry: 1 Baiguang 
Lu, Ertiao, Xuanwu Qu, Beijing. 

Ministry of Public Health: 44 
Houhaibeiyan, Xicheng Qu. Beijing 
100725; tel. (1) 4034433; telex 22193. 

Continued on next page 


U MARKET REVIVAL MEASURES IN CHINA 


Rowing the boat out 

■ 1993: 

October 13: 

The Shenzhen Stock Exchange (57F) announced that the 
irarimum time stowed between buying and sefflng 
B-shares would be reduced from three days to one day, 
as of 18 October, to order to stimtdate market activtty- 
Reportocfly, from November 1, the Shanghai Stock 

Exchange (SHE) would allow i nves t ors to see B-shares on 
the seme day they bought them. 

■ 19Me 

February 22: ... 

The SZE announced that new listings of A-shares on the 
SZE would be suspended unto further notice. The 
suspension was lifted on April 6, apparently because the - 
measure farted to hefp revive the market 

March 12: 

Securities Supervisory Commfttee chairman Liu Hoqgnj 
announced four measures, effective fmmecfiatejy, to revive 
the market: 

□ The issue of Rmb 5L5bn-worth of new shares planned 
for 1994 would be postponed imtB Ihe second half of tttis 
yea- or early next year. 

□ No stock transaction tax wotrid be levied for 1994 or 
199 & 

□ State and legal person shares would not be fisted on 
either stock exchange, and wodd not be merged with 1 
Individual stives this year. 

□ Rights issues by Bated companies would be strictly 
eontroSed. 

April 7, 25c 

Both the SZE and SHE reportedly set a target of US$1 OOm 
for this year’s new B-share issues, .the same as in 1993, In 
order to restore market confidence. 

May 13: 

The State Council Securities Com m ittee announced that, 
wNh immeefiate effect, all c om p a nies preparing for fating 
on the SZE or SHE had to undergo six months* coaching 
by the relevant department before being fisted. This was 
to enable companies to set up a system comparable to a 
share-holding company- The introduction of the new rule 
effectively postponed aM new A-share listings planned for 
1994 (Hits next year. 

«My2& 

□ No more A-share Issues in 1994. 

□ A-share Issues m 1996 to be controlled tightly. 

O New rules on placements. 

□ Domestic mutual funds to be encouraged. 

Q Sfno-foreign investment trasts to be atowed. 

□ Crec& to be nwrfe easier for securities companies. 

Simon Holberton 


take years to accomplish." 

The new securities law may 
not have been able to rectify 
the errors in the company law 
- some of which wiS be the 
subject of 21 supplementary 


regulations currently being 
drafted - bat officials and 
investment bankers had hoped 
the law would have coherence. 
It is not now clear if those 
hopes are weD-founded. 


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27 Wilfred Strew, l-ondon. SWIEGPR. UK 
Tri. 0171 KM 7676. F«; 0I7J 073 0136 







FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


CHINA lO 


Since the mid-1980s, 
Hong Kong and Taiwan 
have become the real 
cultural trend-setters on 
the Chinese mainland, 
writes Geremie Barme 


Voices for reform versus the traditional party line 


.*V*. 



' * 

f 











Stop me and buy one: western-style ice cream for sale on the Great WaH of China ~ see Unlever report, page 6 


I n China, packaging is 
everything. Even cultural 
dissidents have learnt that 
with the correct marketing 
ploys, being on the fringe does 
not mean you are on the “out- 
side.’' 

While Labour activists and 
human rights campaigners - 
especially those in the prov- 
inces who have never enjoyed 
the international media lime- 
I light in Beijing or Shanghai - 
are regularly harassed and 
jailed, the more colourful and 
controversial rowdies enjoy an 
enthra l lin g , symbiotic relation- 
ship with the authorities. 

Take, for example, the case 
of China Through the Third 
Bye, the publishing cause 
celebre of recent months. 
Highly critical of the condi- 
tions of “primitive capitalism" 
that many of the Communist 
Party's economic reforms have 
inculcated in China, including 
social inequities and rampant 
corruption, the book gained a 
wide readership over the sum- 
mer . An official ban was issued 
and the black-market value or 
the volume soared. 

The author of the book had 
given voice to a number of 
“conservative” opinions (this 
depends on your reading of the 
Chinese political spectrum 
which can mean anti-reform, 
pro-state authority, or leftist 
deviatiooist). and it was touted 
as being the incisive work of a 
German scholar. 

Yet no such scholar can be 
found: it turned out that for 
mnrimum publicity-value, the 
publisher and the real author, 
a man who goes under the 
name Wang Shan, had created 
the foreign persona. 

In the days when Party cen- 
sorship was at its height, such 
a book would not have hit the 


Cultural elite are 
ready for change 


streets. Today, as In the case of 
so many works (like Jia Ping- 
wa’s best-selling 1993 porno- 
graphic pulp novel The Necrop- 
olis). publishers produce and 
sell a book before the authori- 
ties bather imposing a ban. 

Subsequently, copies are 
withdrawn and a suitable fine 

- in some instances, negotiated 

- is then imposed. In the 
meantime, everyone has been 
able to read the offending vol- 
ume and dividends are shared 
all around. Such a state of 
affairs begs some questions: Is 
this ironical censorship, a state 
where everything banned has 
after-the-fact quotation marks 
around it? Is China the first 
post-modern totalitarian 
nation? Or is it that the com- 
missars' hearts are just not in 
their work any more? 

Meanwhile, mainstream offi- 
cial culture still churns out its 
usual product-line of stodgy 
propaganda pieces gxissied-up 
in the tawdry drag of Hong 
Kong and Taiwan pop culture. 
There are endless 'soap operas' 
about Party officials and the 
good fight, the regulation num- 
ber of politically-correct war 
movies and tear-jerkers, plus 
reams of printed propaganda 
fulfilling state quotas at every 
level. 

But strapped by limited 
funds and suffering from a 
serious image problem, the cul- 
tural authorities - a nation- 
wide network of bureaucracies 
covering every aspect of cul- 
tural activity and life in the 
country - have been in retreat 
for some years. The impact of 
more ideologically steadfast 
elements is summed up in the 
common Beijing saying that 


We Aren’t Just Moving Into China, 
We're Moving Into The Future. 



Now chat Asia-Pacific has clearly established itself as the major economic powerhouse of the future. Wharf has initiated a detailed 
strategic analysis of commercial opportunities in China. We began by promoting an ’Economic Tripod 1 between Hong Kong, Wuhan and 
Shanghai along with a 'Five-Point Strategy 1 to include Sichuan and Beijing, By responding directly to the Mainland's needs step by careful 
step, we believe we are uniquely placed to plant the seeds for China's growth well into die next century. 


"their rule doesn't extend 
beyond the Third Ring Road 
(of Beijing),” since all they con- 
trol is a couple of journals and 
newspapers, and they only 
have the support of a handful 
of officials. 

The real mainstream these 
days is the sensational tabloid 
press. More than 2,000 newspa- 
pers are now registered for 
publication, many of which 
have appeared in the last two 
years. Scandal, murder and 
mayhem are the stuff of popu- 
lar entertainment 


WHARF 


— ' 1 


S tarved of such pap on 
television - unless they 
have a satellite dish, or 
wok as dishes are called in Chi- 
nese - to receive StarTV or 
MTV, the masses turn to mov- 
ies (mostly pirated offshore 
videos); pulp fiction (Mills and 
Boon has recently fixed a gim- 
let eye on the Chinese main- 
land market); and saccharine 
Canto-pop from Hong Kong 
and Taiwan. 

Since the mid-1980s, Hong 
Kong and Taiwan have become 
the cultural trend-setters on 
the mainland . They are mod- 


em, their communications 
more developed and their con- 
sumer cultures more sophisti- 
cated than those of the more 
stodgy and out-of-touch capital, 
Beijing, in the north. 

Even the “underground" - 
non-official musicians, artists, 
film-makers, writers and think- 
ers - have increasingly sur- 
faced to sign contracts with 
Hong Kong and Taiwan out- 
lets. 

Younger cultural figures 
have noted the success erf the 
leading film-makers Zhang 
Yimou and Chen Kaige. and 
even their own Cringe col- 
leagues such as the middle- 
aged poet Mang Ke. a founding 
editor of the nonoffidal 1970s 
journal Today, whose novel 
Unruly Acts, a fictional 
account of his early literary 
career, was published earlier 
this year. 

They see the possibilities of 
using China as a backdrop for 
artistic endeavours that are 
aimed at an elite Western or 
middle-class Asian audience, 

and the BTi goncias of exploit- 
ing China’s reputation as a 
repressive totalitarian state for 


file marketing of their work. 

T,ifca their Bong Kong and 
Taiwan compatriots this group 
remains at the forefront of a 
process of “Othering the 
Motherland," a process q| 
exploiting the mystique or 
socialist China. 

They still get banned and 
harassed, but those who 'have 
made, 3 name for themselves 
are fSted interi»tionany.;;f ; T;' 

It should be pointed long 



however, -that there are' roll' 
many cultural taboos. '■ While 
gay themes ■ have v tjeeii 
exploited more readily, cross-, 
undressing is a mcHio. In ndd- 
June, the transgressive cress-, 
dressing performance artistUa. 
Liumihg of Beijing stripped _ 
himself .naked in his courtyard 
house in front -of an audha&e . 
nf wing. He then proceeded jfo. 
cook a large pot of sweet pota-” 
toes garnished with an esw§% 
and a watch.. Thte ste<w: w&s. 
then ceremoniously ^ioterre^ 
The coup de grace came when 
police detained the’ pertqnwav 
his assistant and the entire 
audience. •’.-rU«y>V 

Ma may have follai.info^ 
little bother, but his stimi has 
set him on the! path to proteo- ■' 
five renown. His “work" i» fea- 
tured in a new snazzy non-offi- 
cial art journal that appeared : 
in Betjiog in September. JH$ 
nm by editors who commute 
between the Chinese capita^ 
and New York- ™ 






□ The miter, Geremie Barmt, ~ 
is co-author of * New Ghosts, Y 
Old Dreams: Chinese Rebel 
Voices" 




DOING BUSINESS IN CHINA 


Patience is paramount 


D oing business in China 
today is dramatically 
different from ten years 
ago. 

As China continues its dizzy- 
ing rush toward moderniza- 
tion, many of the rules have 
changed. Into this fluid and 
chaotic situation poor senior 
executives from countries all 
over the world. In an atmo- 
sphere reminiscent of a gold 
rush, China has become an 
intensely competitive 
free-for-all in which foreign 
companies are fighting for 
market share, skill ed personnel 
and office space. 

“Everyone is focusing on 
China - companies see it as 
having a huge market poten- 
tial,” said Phil Carmichael, 
president of the American 
Chamber of Commerce in Bei- 
jing. “Everyone’s competitor is 
focusing on C hina and they are 
willing to undercut each other. 
Your real market competitors 
are the foreign manufacturers 
your company faces else- 
where." 

Companies seeking to do 
business in this environment 
wiD find that in many ways 
conditions have Improved dra- 
matically. 

One result of the China 
boom has been a striking 
improvement in the logistics of 
doing business, with better 
infrastructure, easier access to 
faxes, copiers and Interna- 
tional phone calls, and greater 
availability of taxis and mini- 
buses. Moreover, after a decade 
and half of exposure to the out- 
side world, the Chinese are 
much more open to dealing 
with foreigners and there is a 
greater effort to make public 
rules and regulations. 

In another significant 
change, managers in state-run 
factories have more power to 
make their own decisions and 
even own a stake of the equity. 
The work force is more mobile 
and foreign companies are able 
to hire well-qualified local staff 
of their choosing. 

For all of the changes, 
though, certain fundamentals 
of doing business with the Chi- 
nese have not changed. For 
newcomers, good advice is to 
look outside the main cities (rf 
Beijing and Shanghai to see 
the real chaotic China where 
basic infrastructure lags well 
behind its economic develop- 
ment and aspirations. 

“If you only go to Beijing 
and Shanghai and zoom 
around in taxis, you'll get a 
distorted picture," says Anne 
Stevenson-Yang, chief repre- 
sentative of the US-China Busi- 


ness Council. Experienced 
China traders also say that 
having patience is still an 
absolute necessity. Under tre- 
mendous pressure to produce 
results because of the high cost 
erf being in the country, foreign 
businessmen often cannot 
move slowly enough to adapt 
to the market. 

“China moves incredibly 
slowly,” says Steve Crandall, 
president of Crandall Ford 
International, a dealership rep- 
resenting the American auto 
ghmt in Tianjin. “A standard 
US$500,000 negotiation here 
takes seven 12 -hour days." 

Negotiations about pur- 
chases of imparted products 
will often start with what 
would be considered a given in 
western countries: For exam- 
ple, car sales discussions 
involve such basics as whether 
a motor would be included in 
the price. 

In addition, the approval pro- 
cess for using foreign exchange 
to buy imported products can 
take a year or longer as it goes 
through the bureaucracy. 

“If a person conies in today, 
he or she won’t see results for 
12 to IS months," says 
AmCham’s president Phil Car- 
michael. “If your company has 
put up one to one to $L5m up 
front and doesn't get an imme- 
diate return, that doesn't mean 
your rep is not going a good 
job. He could be sowing seeds 
for your company the follow- 
ing year." 


racing to sign a letter of intent 
without investigating other 
options. Although three docu- 
ments are not legally binding, 
the Chinese present . .them 
internally as proposals for 
joint ventures. The Chinese 
would rather negotiate with 
foreigners than tell their own 
officials to give up a point. 

“Be careful what you sign," a 
western attorney warns. "It 
may look innocent enough, bat 
It may come back to bite you.” 

Investors should carefully 
weigh the benefits of establish- 
ing a wholly-owned enterprise 
or a joint venture. -White joint 


ventures may be a suitable-*, 

nnHnn even with a laiffl * 


L ooking for a compatible 
partner is one of the most 
challenging assignments 
and one that often goes easily 
wrong. Businessmen stressed 
the importance of not entering 
into a deal with the first indi- 
vidual claiming to have special 
contacts. 

“A lot of companies are sent 
off on the wrong track because 
they know one American or 
overseas Chinese who eiflhnq 
to have good connections with 
b urea ura cy.” says Stevenson- 
Yang. “Even if he has good 
connections in one ministry, 
this could become a liability if 
you 'tie your horse to only one 
wagon.'" 

Researching the background 
of potential partners is vital to 
avoiding problems later. Many 
sources of information are 
available, including embassy 
commercial sections, other 
companies in similar Indus- 
tries, consultants, and even 
reports from ministries that 
rank domestic companies’ per- 
formances. 

Another common pitfall Is 


option, even with a large ^ 
equity stake, they are often an 
uneasy marriage, with prob- 
lems arising over profit distri- 
bution, management, and the 
number of workers. 

Partners need not always be a 
in the same industry as th eT 
foreign company as long a ap 
both parties have a common 
vision. Baskin Robbin’s, an 
American ice cream maker, 
relies on its sales agent, a sub- 
sidiary of the military-run 
Great Wall Company which is 
involved In satellite launches, 
for its knowledge of how to 
work the bureaucracy in order 
to bring its American-made ice 
cream through customs. 

A tight property market has 
made office premises and resi- 
dential accommodation in Bei- 
jing almost as expensive as 
those in Hong Kong. There are 
long waiting lists for every 
first class building in the capi- 
tal, but a downturn is expected 
in mid-1996 as more commer- 
cial space becomes available. 

Until then, the best practice 
is to remain flexible, sign only 
short term leases and look for 
creativ e alternatives, such as 
renting space from a customer. 

With executives working 
long hours and travelling on 
the road much of the time, £ 
China is not an easy place fob 
an unoccupied spouse. 


Tven 


becai 


Spouses with. Chinese Ian* 
lage skills have a reasonable 


guage skills have a reasonable 
chance of finding a job with a 
joint venture company or one 
of the many western compa- 
nies doing business here. 

But for those who do not, 
taking crash courses in Chi- 
nese can help with basic com- 
munication. Other options can 
include pursuing a particular 
interest, or, for a fluent 
English speaker in today’s cli- 
mate, marketing that ability to 
land a job as an English 
teacher or polisher. 


Lynne Curry 


Key facts 


Continued from previous page: 

Ministry of Pubflc Security; 14 Dong chan gan 
Jia, Beijing; tel ( 1 ) 553871. 

Ministry of Radio, Film and Television: Fu 
Xing Men Wai Dajfe 2, POB 4501, Beijing; tei. 
(1) 862753; telex 22236; fax (1) 8012174. 
Ministry of Railways: 10 Finding Lu, Haidian 
Qu, Beijing; tei. (1) 864061; telex 22483. 
Ministry of State Security; 14 Dongchangan 
Jie, Beijing; tel. (1) 553871 . 

Ministry of Supervision: 35 Huayuanbei Lu, 
Haidian Qu, Beijing 100083; tel. (1) 2016113. 
Ministry of Water Resources: 1 Baiguang Lu, 
Ertiao, Xuanwu Qu, Beijing 100761; tel. (1) 
3260495; telex 22456; fax (1) 3260365. 


sub-tropical in the south-east In Shanghai, the 
hottest months are July and August, ranging 
from 23-82 degrees C; coldest month, January, 
1-8 degre es. ,n the north there are extremes of 
temperature, ranging from -15 degrees (January) 
to 40 degrees C (July-August). The northern 
cities, Including Beijing, experience cold winters. 


Time zones 

2dne 1 (Urumqi), six hours ahead of GMT, 
zones II, 111 and IV (Chongqing, 

Lanzhou, Beijing, Shanghai. Harbin) eight hours 
ahead of GMT, nine hours ahead of GMT during 
Beijing summer time, mid-April to mid -October. 


Public holidays, 1995 

These indude January 1, (Solar New Year); 
January 30 - February 2 (Lunar New Year): 
March 8 (Women’s Day); May 1 (Labour Day); 
August 1 (Army Day); September 9 (Teachers’ 
Day); October 1, 2 (National Days). 


Climate 

Continental, with extremes of temperature; 


Working hours I 

The usual business hours for government 
offices are Sam to noon, and 2 pm to 6 pm, 
Monday to Saturday, though appointments are 
usually not made on either Friday or Saturday 
afternoons. Sunday is a holiday. 

The Sank of China in Beijing is open for money 
exchange from 9 am to noon and from 1.30 pm 
to 4.30 pm, Monday to Friday; 9 am to noon on 
Saturday. 

□ Details compiled by Peter Cheek, FT Library 
end Statistics Department 








•^£ laiK 
! »?v have fen 
' . ; -''j'-fer, bu, SV 

on uTiN 

a -" d *^ : .v W k Chin ^ 


Ragkin on the move (left to right): A monorail at Merry MB shopping centre, Briertoy HSI, Bnka tow stops in the complex; the name of the statue in Birmingham's Centenary Square is ‘Forward*; Graham Taytor is leafing 
the revival at Wolverhampton Wanderers FC; the Hyatt Regency hotel towers above Birmingham’s Gas Street basin - the canal network is being cleaned up as part of a plan to renew the city centre now* Tiwtrthmftmm 


dnc S-v. York • MM ben delegates to the 

UW annual conference of 

- u.n: KT fi m W the Confederation of 

- s Cvcuikvr British Industry approach the 

U-ti IncQfn, ' ( .r^k International Convention 

'""of. Centre in Birmingham this 

- ' morning, they will see the 

% evidence of a publicly-funded 
!NA exercise in economic 

— — - diversification. 

- The centre, along with the 

National Exhibition Centre and 

i^Tl | | tel the nearby National Indoor 
I I SUl I fir Arena, represent an attempt by 
1 *V civic leaders to demonstrate 

that there is more to 

= 1 Birmingham than its 

hT-vaie^. traditional position as the UK’s 
Aliiv-'jjij industrial heartland 
;V “ v ‘ ; ' lecjlfc Yet it is the traditional 
t ;‘‘ : vreseu industries - the engineering 

:rt - u? proper an ^ automotive companies - 
; •vr.:ur« Tkg that have led the West 

■■ - ' rtr.o: q eSM3l ^dlands out of recession. 

:hia juw Surveys from regional 
-ti<- 5 -v? up“ ;jr . chambers of commerce have 

r;ha- tc£ reported a steady rise in the 
,v. proportion of manufacturing 

xc'.'r tc- companies with fatter export 
: “.v ;*:~c order-books. Service 

; 77 i;/*'. -". liv-.N®' companies, cm the other hand, 
... saw the growth in export 

r- / '."d.- T ^ orders flatten out in the middle 

7 “ V" of the year. For both 

~ r T m manufacturing and services, 

' !rV "■./ \~'~J J . the flow of domestic orders 

:V, '/ i slowed fa the second and third 

V. ^ Apart from exceptions such 

85 companies -tied, to tbe 


Manufacturers matter again 


i mount 

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vr?>H! 

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--rr-^r?. to: 
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aerospace and construction 
sectors, there has been a rise 
in onput But there is scope for 
more. “One of the concerns is 
whether the chancellor of the 
exchequer is trying to slow 
down growth because of 
capacity constraints, but 
nobody I’ve talked to has got 
capacity constraints,” said Mr 
David Probert, chairman of 
W. Canning, the chemicals 
company and president erf the 
Birmingham Chamber of 
Commerce. 

Notwithstanding such reser- 
vations, the region is moving 
out of recession with relative 
smoothness, and economic 
forecasters agree that, in the 
short and medium term at 
least, growth is likely to be at 
or near the national average. 
Oxford Economic Forecasting 
and Northern Ireland Eco- 
nomic Research Centre, for 
example, estimate that gross 
domestic product across the 
West Midlands will expand in 
1995 by 3.4 per cent, compared 
with 3.5 pm 1 cent for the UK. 

Hie longer-term future Is 
more difficult to predict, and 
the question of finding the eco- 
nomic balance between manu- 


The region is moving smoothly out of recession - and traditional 
industries are leading the way, writes Paul Cheeseright 


featuring and services remains. 

Manufacturing is the main- 
stay of regional wealth but not 
the source of jobs: indeed, 
Ereaco, the European research 
organisation, forecasts a 6.7 
per cent fall in the region's 
manufacturing employment 
every year until 1997. 

Although output from the 

services Sector in Birmin gham, 

the regional centre, is forecast 
by the Bir mingham Economic 
Information Centre to grow 4.1 
per cent a year until 1997 and 
19 per cent a year until the 
year 2005, job expansion over 
the same periods is predicted 
at 1.78 per cent and 198 per 
cent respectively. 

The services sector - 
through the development of, 
for example, the complex that 
houses the National Exhibition 
Centre, the International Con- 
vention Centre and the 
National Indoor Arena and its 
associated business tourism; 
the Merry Hill shopping centre; 
and back office facilities in 
Coventry - has created an 


impetus of its own since the 
early 1980s. Both financial and 
business services have expan- 
ded. 

But none of this has been 
sufficient to remove manufac- 
turing from its pivotal position 
in the regional economy. What 
was deemed a weakness in the 
1980s. when fashionable think- 
ing downplayed manufacturing 
as a source of growth and 
looked to services as the basis 
of expansion in an advanced 
economy, is now deemed a 
strength. 

“No advanced economy has 
survived without a manufac- 
turing base,” said Mr David 
Ritchie, regional director for 
the Government office of tbe 
West Midlands. “If this country 
is going to become competitive 
in any realistic sense in the 
future, it has to have a manu- 
facturing base." The UK gov- 
ernment is so keen to advance 
manufacturing that it is plan- 
ning a celebration of industrial 
achievement in tbe West Mid- 
lands next year. 


For manufacturing in Britain 
to prosper. Birmingham and 
the West Midlands must 
thrive. Figures from the 1991 
census oi production showed 
that, in terms of gross value 
added during the manufactur- 
ing process, Birmin gham was 
by for the strongest centre in 
the UK. Coventry was third; 
SandweU, in the Black Coun- 
try. was fifth. Stoke-on-Trent 
11th and Wolverhampton 14th. 


I n any event, the futures of 
the manufacturing and ser- 
vices sectors in the region 
cannot be disentangled. A 
report for the CBL from Coo- 
pers & Ly brand, accountants, 
noted that 40 per cent of jobs 
for men and 16 per cent of jobs 
for women were directly depen- 
dent on manufacturing, with 
much of the service industry 
base directly dependent on 
supporting manufacturing 
activity. 

The difficulty is that the 
manufacturing sector, after the 


retrenchment set off by the 
1980s recession and the ration- 
alisation caused by the 1990s 
recession, is too small for com- 
fort, suggested Mr David Bot- 
terill, chief executive of the 
Engineering Employers Feder- 
ation West Midlands. 

“What is there is infinitely 
healthier. It’s much stronger, 
more alive and more interna- 
tionally competitive. It’s made 
considerable inroads into Euro- 
pean markets,” he said. 

Sharp cost rfUT e rgntiak have 
emerged between UK engineer- 
mg companies and their conti- 
nental European competitors. 
They have enhanced the abil- 
ity of West Midlands engineer- 
ing companies to supply com- 
ponents to, for example, 
German car manufacturers. 
“To penetrate French and Ger- 
man markets it used to be vir- 
tually essential to have a plant 
there. Now they are prepared 
to buy from outside," said Mr 
Probert. 

At the same time, the exis- 
tence of the cost differentials 


has helped speed the flow of 
inward investment into the 
region, taking the sums com- 
mitted back to pre-recession 
levels. “The 45 investments 
from European companies rep- 
resented the largest source of 
inward investment into the 
region," reported the West Mid- 
lands Development Agency. 

In common with other 
regions, there has also been 
over the past year an increase 
in mergers, acquisitions and 
management buy-outs. 
Demand for capital to expand 
still lags behind 1980s levels, 
however, according to 31, the 
venture capital group. 

Over the longer term, the 
region needs sustained Invest- 
ment, directed not only at tbe 
creation and expansion of com- 
panies and the introduction of 
new products, but also at the 
development of a better infra- 
structure. 

Disparate organisations are 
combining to seek UK and 
European funding, and to 
devise new partnerships 
between the public and private 
sectors, to work on a lengthy 
list of improvements, such as 
new roads in the Black Coun- 


Ssnrices provide (be jobs 2 

Where greats ere needed 2 

Eralvtog partnerships 3 

Academia spurs fcmara&on 4 

Communications 4 

A region wffbotti cohesion 4 

The sldHs shortage 5 

VthrJn «lfc» C 

unmc onretssty . .a 

Sector performance B 


try and east Birmingham, a 
light rapid transport system to 
join Birmingham and Wolvei> 
hampton, and expansion of the 
airport. 

Tbe second essential require- 
ment is to raise the level of 
education and skills in the 
regional workforce. According 
to government analysis, the 
West Midlands has the poorest 
qualified labour force in Great 
Britain: in spring 1993 nearly 
three in 10 workers had no 
qualification. 

Because the lowest levels of 
attainment are in the cities, 
and frequently in the inner 
areas where there is a high 
proportion of ethnic minorities, 
the social implications are pro- 
found. There is already a grow- 
ing proportion of people in the 
inner city areas who, because 
they lack skills, are perma- 
nently outside the jobs market 

During the next decade, said 
Mr Bruce Epps, director of 
strategic management at Bir- 
mingham City Council, “we 
have got to get around the fact 
that a lot of the jobs in the city 
are filled by people from out- 
side.” 

It is a reminder that the 
gloss of the city centre, with 
the bustle of the International 
Convention Centre, is a world 
away Cram the tower blocks 
which look down on it 


;-r: '.-raws 

I'lTr.iTi 3X!E; 


“I’ve never been there 
because I don’t like it’’ 


Then you won't enjoy being at the centre of a unique motorway, rail and air 
neiwork to all of the UK, Europe and beyond. Or having access to a skilled 3 million 
workforce. Or being in the manufacturing centre oF the UK with the largest financial 
sector outside London. Ot reaping ihc benefits of the UK’s strongest Economic 
Development Department offering full Development Area Status and providing the 
best levels of relocation assistance available. Or benefiting from business support 
agencies like Birmingham Business Link, the Chamber of Commerce and Industry, 
the Training and Enterprise Council (both the largest in the UK) and City 2000 — the 
financial and professional development organisation. Or being minutes away from the 
unique conference and exhibition facilities of the NEC and International Convention 
Centre. Or indeed enjoying our world class cultural attractions such as The 
Birmingham Royal Ballet, City of Birmingham Symphony Orchestra at Symphony Hall 
or The D’Oyly Carre Opera Company. 

Call Philip (’alcmt at the Birmingham Marketing Partnership on 0121 603 2000 for 
more inlormatinn on Europe’s meeting place. You've never been to a place like it. 


SI 

Birmingham 

Europe's meeting place 







FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


BIRMINGHAM AND THE WEST MIDLANDS 2 


Exports are leading the region out of recession, says Tom Lynch 


West Midlands: economic areas 


Services provide the jobs 


May 1904 


As the UK pulls haltingly out 
of recession, there is more con- 
fidence around in the West 
Midlands, which, as home to a 
large concentration of manu- 
facturing industry. Is particu- 
larly encouraged by the 

strength of exports. 

In the last few years, unem- 
ployment has fallen more 
quickly than in the UK as a 
whole because of inward 
investment, which to some 
extent diluted the region's 
dependence on a small group 
of large producers. The region 
also boasts highly competitive 
wage rates, and the differential 
with the rest of the UK is 
growing. 

But the optimism is tem- 
pered by concern about that 
continuing dependence on 
manufacturing. It has exagger- 










Research shows the 
region is perceived as 
desirable, and above the 
UK average, as a 
business location 


a ted the impact of the last two 
recessions in the region, with 
unemployment rising more 
sharply at the start of each, 
and recovering more quickly at 
the end than in the UK as a 
whole. 

Mr David Ritchie, regional 
director for the Government 
Office of the West Midlands, 
insists tha t manu facturing hyfl 
to be underpinned: “No 
advanced economy has sur- 
vived without a manufacturing 
base. If this country is going to 
became competitive, it has to 
have a manufacturing base." 

Birmingham alone still has 
128,000 people working in man- 
ufacturing, in spite of diversifi- 
cation. 

There have been huge 
improvements in competitive- 
ness among the region's larger 
companies, such as the big 
vehicle assemblers - which 
represent 30 per cent of the 
region's GDP, against 8 J> per 
cent for the UK as a whole. But 
there is still a long way to go 
among the ■gmaii and medium 
companies - the foundry 
industry is seen as a sector 
where improvement is particu- 
larly needed. 

The close ties of much of the 
region’s economy to die motor 
industry promise a challenge 
to the region in the longer 
term, with increasing competi- 
tion from the Far Bast and 
from other parts of Europe. 

As Mr Martin Booth, chief 
economist at the West Mid- 
lands Enterprise Board, points 
out manufacturers are always 


Centenary Square, one of Bfrrmngham's newest meeting points, was 
opened hi 1991 to nark the 100th anniversary of the city's charter 


going to look at where they 
can get the best deal in assem- 
bling new models. 

The UK has done well in this 
respect, aided by the low level 
of the sterling exchange rate 
and the competitive work prac- 
tices stimulated by Japanese 
transplants. 

But, says Mr Booth, as east- 
ern Europe develops, countries 
such as Hungary and Poland 
could compete for new car 
plants. 

And since the sale of Rover 
Group to BMW of Germany, 
there is no large UK-con trolled 
car maker, and all strategic 
dpriHinnq are taken outside the 
UR. 

Current growth is also bene- 
fiting the components sector, 
with the big assemblers work- 
ing increasingly closely with 
first-tier suppliers. 

The relationship, dependent 
on quality and price, is based 
on component pices continu- 
ing to fall, which Is less easy to 
achieve if volumes stop grow- 
ing. 

Mr Chris TOlett, a principal 
with accountants Coopers & 
Lybrand in Birmingham, says 
that West Midlands industry is 
more vulnerable than the rest 
of the UK to the effects of 
increased competition within 


the European single market, 
revisions to Gatt and to 
changes In the distribution 
system. 

As an example, he cites the 

increasing jTitarnati n iwBaatim i 


of retailing, with companies 
such as household products 
group. Dtea, able to supply its 
growing market share in 
ceramic products - an impor- 
tant industry around Stoke-on- 
Trent - from a range of inter- 
national suppliers. West Mid- 
lands companies, which iawH 
to be small, are less well placed 
to compete in international 
markets. 

Some of the forecasts are 
enormously depressing. 
Ereaco, the European research 
organisation, says employment 
in manufacturing mil drop by 
6.4 per cent a year until 1997 in 
West Midlands. 

But research also shows the 
region doing well in services 
and with a location quotient - 
a measure of how desirable it 
is perceived to be as a business 
location - above the UK aver- 
age. 

There is also a growing 
pocket of electronics compa- 
nies around Telford; and Wol- 
verhampton and parts of Bir- 
mingham are competitive in 
what they can provide In 
regional assistance. 

Most commentators expect 
any employment growth to 
come In services such as retail- 
ing, and that therefore the 
region’s economy will become 
more dependent on lower- 
waged and part-time jobs. 

A recent report from the Bir- 
mingham Economic Informa- 
tion Centre - run by the city 
council and the training wn<t 
enterprise council - said 
starkly: "Relatively high levels 
of unemployment, leading to 



ffi< 


V ¥<•*-;,; 


European atmau 
MEIOfai>c*»2arM 






gJOaMtafxnantares 
■ Rural dMfapfTMntorea 
O Cfty CtnOonea ««a 
<5) Ufcsn dUMtopRNrt 
cMporadon 

=*flc»d - 




r 


H frap- 


As? ' 


O WriaaB 
0 Wofrat«mpt u n 
0 Upton 


Upton 

murnrn 


® «** douttry DC |£ 

r =lK^iAl K 


»>• .i . 

jV ** 1 . 
y.y ' 

rj ■ 


Source Daft FtogfamtnKnk'e (Mttooca tar ft* Hfttt latent* 




Percentage cha nge in employment: 1981-1992 


Bj nwh g jham 


Manufacturing 

Services 

Seff-amptoyment 

Total 


W Midlands 

n.i..!... . 

rtogicm 

-31 M 
16.116 
39.4% 
-0.7% 


Sources 13B1. Cm nf BTOtagnjng 1983. Emptayrmni Gantt— a BBC gttngw 


serious social and economic 
deprivation in some parts of 
the city, are likely to persist 
for many years to come. These 
problems represent a further 
constraint on local economic 
growth as they depress levels 
of consumer spending power." 

There may be less help avail- 
able from diversification 
which, says Mr Booth, was 
helped in the 1980s by service 
companies moving out of Lon- 


don - for instance, the TSB 
head office move to Birming- 
ham and Barclays Bank's back- 
office functions to Coventry. 
The property and labour cost 
pressure for such moves has 
now eased. 

Mr Booth also points to the 
region's shortage of greenfield 
sites - be doubted whether any 
site available in the West Mid- 
lands could have taken the 
Toyota plant which went to 


Bnmaston in Derbyshire. A 
number of "brownfield" sites 
are being reclaimed, but some 
investors, notably those from 
the US, are wary of sites 
which they fear could bring 
nasty surprises. 

The region also has a poor 
recent record in new c omp any 
formation. The number of 
VAT-registered businesses in 
the UK rose 33 per cent 
between 1979 and 1990 - the 
figure for the region was 24 per 
rant and for Birmingham just 9 
per cent 

There are bright spots in the 
region. Coventry, says Mr T51- 
lett, is “holding its own," as is 
Solihull; while Warwickshire is 
forecast to have one of the fast- 
est growth rates in the UK 
over the next few years. . 


Also doing well are the 
smaller centres to the south 
and west of Birmingham 
Red ditch, - Kidderminster, 
Worcester, Telford. Like Bir- 
mingham, Stoke is struggling 
and Burton has suffered from a 
shakeout in the brewing and 
food industries. 7 


*<?• f 


The region faces causideiv c v 
able challenges in its drive 
towards urban renewal New 
man ufac turing needs to be J 


attracted, local companies need 4 

(a roar nit In win l*nntrsi>l«''* 




to gear up to win contracts'' 
from the inward investors who 
are setting up plants in the 
region and, perhaps most 
importantly, local industry 
must invest and develop to 
meet the increasing competi- 
tive pressures freon elsewhere. 






Regeneration needs public funding 


Mwtrapnlltan authorities - Revenue Support Grant (fim) 


Grants are the remedy 
for region’s needs 


Birmi n gh a m 

Coventry 

Dudley 

SandvraO 

SoBhuB 

Waissfi 

Wolv e rhampton 


Seen from Brussels, the West 
Midlands is one of the poorer 
regions of the European Union. 
Viewed from Whitehall, its 
gross domestic product falls 
below the UK average, and its 
inner dties register same of the 
worst poverty in the country. 

These are uncomfortable fads 
that detract from the messages 
put out by the promoters that 
the region is the m anuf a cturin g 
heart of Britain, which has 
attracted substantial inward 
Investment and whose principal 
city, Birmingham, sells itself as 
the meeting place of Europe. 


Both claims can be substan- 
tiated. Yet to assume that all of 
the region is rundown and its 
people poor would be errone- 
ous. It is inoeaslngly urban - 
or rather, suburban - with 
pockets of wealth In those puts 
of the shire counties that are 
within commuting distance of 
tfn> conurbation. 

On the other hand, the 
extremities of these counties 
(except Warwickshire) have 
recently been designated by the 
E u ropean Commission as rural 
areas in need of development 
(Objective 5b). 


taw rfb,\Mipdl-*plr. 



Coming back into the centre, 
the unemployment blight in 
Birmingham and Wolverhamp- 
ton was acknowledged by the 
government, winch gave then 
development-area status. 

What all this will add up to 
in terms of regeneration and 
the region’s economy will 
depend largely on the response 
of the private sector. 

The Department of Trade and 
Industry is encouraged that 
grant approvals are tunning at 
a higher level titan last year 
(136, against 91). Grant money 
adds up to £21-3m so far in 
1994-5, compared with £14.1m 
for the same period of 1993-4. 
Recovery in the manufa c turi ng 
sector explains some of the 
increase in demand. The new 
development-area status also 
seems particularly to have 
caught the eye erf Birmingham 
business. 

Jaguar Cars easily tops the 
list for the size of grant 
approved in the region. The two 
plants - Castle Bromwich in 
Birmingham, and Browns Lane 
in Coventry - will stare £9.4m 
towards upgrading facilities to 
produce the X100. The fact that 
the Birmingham plant could 
qualify for the higher rate of 
assistance helped to win the 
project for B ritain against inter 
national competition, and to 
secure it in the West Midlands 
against Ford (Jaguar’s owner) 
plants in other parts of the 
country, according to the DTL 
The grant was approved 
because it would safeguard jobs 
rather than create new ones. 

Regeneration of the old 
industrial and inner -city areas 
is also closely linked to the 
response of the private sector - 
developers, manufacturers and 
service producers. Most of the 
government’s programmes have 


been brought under the 
rnnhrgllfl of the Single Regener- 
ation Budget (SRB) since the 
start of the current financial 
year. The whole region, how- 
ever, is eligible to apply. Bids 
submitted tins autumn are now 
bring assessed. If all of the bids 
were successful, some £40m 
would be paid out Considering 
that the total SRB far Rngfa"d 
is ElOOrn, there will have to be 
some scaHngdown of expecta- 
tions. 

As government spending gets 
tighter, Brussels is the real hon- 
ey-pot for file region's needs. 
Much of the older, urban sec- 
tion of the region has been 
retained as eligible for Euro- 
pean Regional Development 
Fund support (Objective 2). (Tri- 
ford and Stoke-on-Trent were 
not deemed to be in need any 
longer). The three-year alloca- 
tion, to December 1996, for 
these areas is £287m. Redun- 
dant coalfield areas scattered 
around the region have also 
qualified for European money, 
to assist development and train- 
ing- 

The European Commission's 
aim is to help the poorer 
regions of the EU to come closer 
to the average regional profile. 
So It wanted a plan not just for 
bits and pieces of the West Mid- 
lands, but for the region over- 
all. In the absence of any 
regional government institu- 
tions such as exist in Germany, 
France and Daly, the West Mid- 
lands Regional Forum of Local 
Authorities pulled together the 
plethora of ideas and pro- 
grammes into a coherent over- 
view of the region’s needs unto 
the end of the decade. 

Tbe progress of the current 






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Brussels round niarim the end 
of the so-called integrated 
operations programmes, which 
tended to favour industrial 
dties and sub-regfons. Birming- 
ham, winch did well from the 
structura l funds to support its 
city-centre renewal programme, 
expects to find it tougher in the 
current session. 

Consequently the govern- 
ment’s City Pride exercise, 

w hich Rlr mlngltani, Marim^lw 

and London are ™np»**n|y for, 
is all the more important It is 
not dear, however, whether 
Whitehall intends to fund City 
Pride from the Single Regenera- 
tion Budget, in which case 
these dties could lose other 
funding. 

European money has to be 
matched by funds from other 
sources. With local government 
capital spending severely con- 
strained, Brussels increasingly 
supports projects where the 
other part of the funds come 
from urban development corpo- 


rations, such as City Challenge. 
The aim af these bodies is to 
™«imk a the Euroeoaient by ... 
putting together schemes which '<* 
incorporate support from the 
European Social Fund for 
training largely - and other 
E u rop ea n sources. { 

Brussels’ rapport for alterna- ^ 
five economic development in 
the mare marginal rural arena?- 
in tiie West Midlan ds totals ' 
£32m, which puts it anxmg tbe 
most successful bids in the 
more developed members of the 
EU, and is substantially compie- 
nunted by the government's 
rural development area pro- 
gramme. Money can also be 
applied for to hrip add value to 
agricultural products. The Brus- 
sels pot might yield a little 
extra for the inner cities, and 
the region is also pushing to be 
included on the list of areas 
whose rail networks might 
qualify for extra hrip. 


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The 


Hazel Duffy 


Big 



to h 


at ICC, 
Home of 


att< 


KM* 


Of tl 


Where better to successfully mix business with 
pleasure than the International Convention Centre? 
Offering every conceivable facility for meetings and 
conferences, it’s also central to a whole spectrum of 
diversions and delights. 

The quality and sheer variety of die c'ny’s music 
venues attracts artists from around the globe - from 
pop superstars to internationally acclaimed orchestras. 

Delegates at a recent CBI 
conference however, may have MTERNATIONAL 

been particularly pleased to be right ^’^CENtSeP * 1 

next door to Symphony Hall — 
home to the talents of Sir Simon 
Rattle and the City of Birmingham 
Symphony Orchestra. Quite 
definitely the best of British. 


Wor| 


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FINANCIAL TIMES MONDAY NOVEMBER 7 ] 994 


BIRMINGHAM AND THE WEST MIDLANDS 3 


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P artnerships are on the 
increase, spurred by a 
government that has 
made them a pre-requisite in 
the competitive bidding pro- 
cess for regeneration money. 

There is nothing new about 
the concept. In the 1970s, the 
partnership was between cen- 
tral and local government, the 
former channelling money 
through local authorities to be 
spent on physical renewal. 

During the 15803, the word 
was applied by Mrs Thatcher 
to a relationship between the 
public and private sectors. A 
further dimension was added 
as a result of the corporate sec- 
tor’s involvement with volun- 
tary agencies and schools - for 
instance, to bring extra 
resources to areas of economic 
and social deprivation. 

The 1990s has seen the birth 
of the training and enterprise 
councils (Tecs), requiring yet 
another sort of partnership 
between central government, 
which finances most of their 
activities, and local companies. 
And with the City Challenge 
programme, whereby, local 
authorities co-ordinated a num- 
ber of agencies to put a hid for 
money to government, the 
community became formally 
involved. 

The community is now repre- 
sented on many of the 37 part- 
nerships across the West Mid- 
lands region, which are 
waiting to hear if they have 


F oreign investment in the 
West Midlands is increas- 
ing after three years of 
decline. Probably it now 
accounts for 20 per cent of the 
UK total, restoring the region 
to the position it occupied in 
the late 19B0& as the English 
area most favoured by overseas 
companies. 

Figures assembled by the 
West Midlands Development 
Agency (WMDA), the focus of 
regional activity in attracting 
new fa vestment, show that, fa 
the year to last April, foreign 
investment readied £652. 72m, 
excluding the £800m takeover 
of Rover, the vehicle manufac- 
turer, fay BMW of Germany. 

But of the 83 projects 
involved, 47, with a value of 
£309.39m, covered expansion 
fay foreign-owned companies 
already established in the 
regions. The other projects 
were 19 acquisitions, worth 
£31 6.1m, 14 new investments 
valued at £22J>9m and three 
joint ventures. 

“This year' the number of 
project s is slightly down but 
cap ita I expenditure is ahparf of 


ticc. 

of 


f, 

3P 


rot?’ ' 


Partnerships are not new. Hazel Duffy examines their evolution 

The community has its say 




been successful in capturing a 
slice of the Single Regenera- 
tion Budget. These partner- 
ships are variously led and co- 
ordinated by local councils, 
voluntary agencies, higher 
education, and Tecs. 

Some partnerships have eco- 
nomic stimulus as their objec- 
tive. Coventry city council, for 
Instance, has teamed up with 
surrounding local authorities 
to form an embryo “city 
region”, bringing more poten- 
tial development sites into the 
catchment area than could be 
produced in the city itself 

It is hoped that this 
approach wQl bring increased 
opportunities to seek money 
from Europe, as well as from 
the government through such 
agencies as English Partner- 
ships, which will be responsi- 
ble for City Grant and money 
to restore derelict land. Coven- 
try also hopes that the private 
sector, with seven seats on the 
board of the partnership com- 
pany. will be encouraged to 
bring forward investment 
plans. 

The private sector is in a 
leading position on partner- 
ships in several other areas. 


the 1993-94 total,” reported Mr 
Paul Richards, the WMDA’s 
chief executive. 

The high* proportion of 
spending on company expan- 
sions underlines the signifi- 
cance of foreign investment for 
the region. 

Since 1988 foreign invest- 
ment fa the West Midlands has 
topped £2£bn, creating 22*000 
jobs. Indeed, it is estimated 

that foreign-owned companies 
now account for about 20 per 
cent of regional output 

"Unemployment in the sec- 
ond half of the 1980s came 
down foster in the West Mid- 
lands than in the US as a 
whole, because of inward 
investment," said Mr Chris Til- 
leit, of Coopers ft Lyhrand, 
accountants, fa Bi r mingham. 

Further, regional surveys 
showed that, during the reces- 
sion, overseas companies were 
more inclined than indigenous 
companies to follow through 
their in v estment plans. Argu- 
ably, then, they softened tile 
impact of recession. 

The greater part of the 
investment Is coming from tra- 


includfag Stoke-on-Trent, New- 
castle-under-Lyme. Burton and 

Cannock, which have put in 
bids to the government 
The role which corporate 
leaders - many of whom are 
already Involved in Tecs - and 
other partners will take in the 
implementation of some of the 
schemes emerging from suc- 
cessful bids is less clear. Even 
where schemes have a specific 

Some partnerships will 
be adaptable, while 
others might not survive 
beyond the immediate 
purpose for which many 
were set up 

economic, rather than social, 
goal, the local authority is 
likely to emerge as the partner 
that ensures things get done. 

Chief executives sometimes 
fulfil a largely symbolic role, 
yet they are easier to bring 
into the partnership circle than 
representatives of the commu- 
nity, says Steve Martin, 
research fellow in the local 
government centre at Warwick 
Business School Centre. More- 


over, community representa- 
tives often do not represent all 
parts of the community, and 
some use it as a platform 
which could get them out of 
the area. 

“What is important in all 
partnerships is that each part- 
ner brings something distinc- 
tive into it. In that way, they 
can avoid clashes over turf," 
says Mr Martin. 

Current government think- 
ing is that publicly funded 
schemes should demonstrate 
that they will benefit the com- 
munity. The four City Chal- 
lenges in the region - in Wal- 
sall, Wolverhampton, Tipton 
and Birmingham - all want to 
get property development 
schemes off the ground, 
whether they centre on a 
supermarket, a science park, 
housing or a combination of all 
three. This brings the potential 
developer into the partnership 
as well. But it has to be demon- 
strated that these plans will 
include extra activities, such 
as training and childcare, so 
that local people have a chance 
to get work. 

The short-term nature of 
government programmes set 


up to address long-term prob- 
lems of unemployment and 
social deprivation points to the 
need to identify the people - 
the partners - who will take 
on the mantle after the agen- 
cies arc wound up. 

The two urban development 
corporations in the area, Black 
Country and Birmingham 
Heartlands, are already prepar- 
ing for their demise. They have 
taken on some responsibility 
for other publicly funded 
schemes that no longer exist, 
like the government’s task 

force in East Birmingham. But 
they have only shurt lives 
ahead of them, so must foster 
arrangements for the future. 

Some partnerships will be 
adaptable, others might not 
survive beyond the immediate 
purpose for which many were 
set up. Local government has 
been pushed into the partner- 
ship mode by the very fact that 
it does not have the resources 
these days to strike out on its 
own. But councils across the 
region will probably prove to 
be the mainstay of many of 
these partnerships, because 
they are still better geared up 
to make things happen at the 



In Coventry, the city council has teamed up with surroumfing local authorities to form an embryo 'city region’ 


local level. They are also the 
only democratically elected ele- 
ment in partnerships. 

Birmingham, in particular, 
has had much experience with 
partnerships. Some councillors 
would like the Heartlands area 
to return to the sort of develop- 
ment agency partnership 
between private contractors 
and the city council which 
existed before the government 
turned it into a development 


inward investment: Paul Cheeseright traces its growing importance 

Carmakers are the magnet 


ditional areas. Last year Euro- 
pean companies woe involved 
in 54 per cent of the projects 
and North American compa- 
nies 39 per cent The pace of 
Japanese investment has 
slowed, while the expected 
growthin interest from compa- 
nies in Korea and Tfeiwan has 
not materialised. 

Although the sectoral spread 
of investment remains wide, 
ranging from electronics to 
food processing, the automo- 
tive sector holds predominant 
importance. Three factors are 
at work here. 

First, the expansion of car 
assembly in the UK is drawin g 
in suppliers wishing to be 
closer to their customers. Sec- 
ond, overseas companies are 
using the West Midlands, a 
vehicle manufacturi ng area, as 
a platform from which to enter 


the wider European Union 
market. Third, cost patterns 
have been shifting within the 
European auto industry. 

“Not only is the UK cheap, 
but the West Midlands is even 
cheaper," noted Mr Tillett 

The US department of labour 
calculated that average total 


The drive against inflated 
costs has induced German car 
manufacturers like Mercedes 
Benz and Volkswagen to widen 
the geographical sourcing of 
their components. At the same 
time, the level of West Mid- 
lands costs has made it feasible 
for their traditional suppliers 


Since 1988 foreign investment in the West Midlands has 
topped £2.5bn, creating 22.000 jobs 


labour costs per hour in the UK 
are $11, against $15 in the US, 
$16 in France and $22 in Ger- 
many. Coopers & Ly brand 
noted that average gross male 
earnings in the West Midlands 
are 92 per cent of the UK aver- 
age. It assessed that operating 
costs of a typical Coventry 
plant would be less than two 
thirds those of a German plant 


to consider setting up 
operations in the region. 

Yet there is no guarantee 
that the stronger flow of 
inward investment will con- 
tinue. Costs are only one factor 
in an increasingly competitive 
race to secure new employ- 
ment This is a race which sets 
country against country, 
region against region, and even 


within a region, district 
against district 

The latest figures from the 
WMDA are the fust since the 
government revised the bound- 
aries on its map of assisted 
areas and the European Com- 
mission defined the areas 
which it considered qualified 
for aid. Hiis has meant that 
Telford, a focus for investment 
since the mid-1980s, and a 
number of other locations, no 
longer have the opportunity to 
offer subsidies to incoming 
companies at the level of past 
years. 

This h»s maito little differ- 
ence so far. Hie easy access to 
greenfield sites and the com- 
fort to be derived by incoming 
companies from the presence of 
their peers has led to what Mr 
David Rogerson, director of the 
Telford Development Agency, 


corporation. But it would have 
to be adapted for the mid-1990s, 
which would suggest more 
partners than originally. 

The chamber of commerce 
has played an important role 
in city partnerships with an 
economic slant, and, with the 
Tec and the council, initiated 
one of the first Business Links 
in the country. 

Local government is having 
to be adaptable in working 


described as "the highest level 
of inquiries during the last few 
months we’ve ever bad”. 

In the first half of this year, 
seven foreign companies estab- 
lished themselves in Telford, 
compared with 11 in the whole 
of 1993 and nine in the whole 
of 1992. 

Yet 60 per emit of the jobs 
created or safeguarded by for- 
eign investment In the West 
Midlands were in the Birming- 
ham-Black Country conurba- 
tion during the year to last 
ApriL 

The competitive attractions 
within the region may be 
changing, f-anri assembly pro- 
grammes or government agen- 
cies are coming to fruition. 
They have led, for example, to 
the Black Country Develop- 
ment Corporation’s planned 
automotive components park 
and the Birmingham Heart- 
lands Development Corpora- 
tion’s proposal for a new busi- 
ness park on land purchased 
from Leyland Daf Vans. Space 
Is becoming available in the 
conurbation where there was 
none before. 


with others, in order to satisfy 
the European structural funds' 
masters, who want the empha- 
sis to be on the region and 
sub-regions rather than indi- 
vidual councils. 

Partnership similarly 
requires a degree of agility if it 
is to make a real impact. The 
more partners there are, the 
greater the skill that is needed 
to reconcile what is attainable 
with over-ambitious goals. 


This is good news for the 
WMDA, because it widens the 
range of site possibilities it can 
offer to potential investors. 
Inward investment agencies 
are searching for new services 
which can be provided for 
Incoming companies, not only 
to help them bnt to link them 
in to the local network of sup- 
pliers. 

"Inward investment used to 
be about a piece of land. Now 
it’s much more a company say- 
ing, 'What resources have you 
got to support my business?*” 
said Mr Richards. Meeting this 
sort of demand, acknowledging 
that snstainlng companies 
which have already set np can 
be just as significant as draw- 
ing in new arrivals, is likely to 
change the WMDA. 

New forms of collaboration 
between local agencies in the 
West Midlands, partly in 
response to the growing role of 
t raining and enterprise coun- 
cils, should diminish the reli- 
ance of the WMDA on the 
department of trade and indus- 
try, its prime source of fund- 
ing, and the local authorities. 






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rv 


FINANCIAL TIMES MONDAY NOVEMBER 71994 


x:>- 


BIRMINGHAM AND 



MIDLANDS 


B irmingham University 
has floated the idea of a 
Birmingham Investment 
Fund. It would seek to attract 
long-term capital so that it 
could support the science and 
technology from which will 
come the next generation of 
industrial products. 

Coventry University is plan- 
ning an innovation centre 
which would enable graduates 
from its product-oriented 
courses to start up and run 
new companies which would 
capitalise on the ideas they 
have themselves developed. 

These two examples illus- 
trate universities’ increasing 
search for ways in which they 
can help to foster regional eco- 
nomic growth. 

The intellectual activities of 
universities can be a source of 
industrial innovation. The 
problem Is how to strengthen 
the Unto between academia and 
industry. And. given the high 
importance of manufacturing 
in the regional economy, the 
way this problem is handled is 
critical for the West Midlands. 

“If you don't innovate, 
you're dead,” said Mr David 
Storey, head of the centre for 
inwall and medium-sized enter- 
prises at Warwick Business 
School. 

In the six months to last 
April, according to the West 
Midlands Business Survey, 13 


Industry and the universities: Paul Cheeseright looks at the nexus 


Academia spurs innovation 


per cent of companies intro- 
duced new products to the 
market, compared with 4 per 
cent In 1991-92. 

“If we don’t make val- 
ue-added products, we won't 
reverse decline," warned Mr 
Bob Bushaway, director of 
research support and indus- 
trial liaison at Birmingham 
University. 

There have always been ties 
between commerce and the 
institutions: in many cases, the 
one provided the funds for the 
formation of the other. But 
now the mutual dependence is 
Increasingly recognised, as 
companies understand the 
store of expertise locked in the 
universities and the universi- 
ties are required increasi ngl y 
to act tike businesses. 

For the universities, there 
are hard financial reasons for 
re-examining ties with indus- 
try. “The Higher Education 
Funding Council notice that 
we’re going to have a 14 per 
cent fall in funding concen- 
trated minds ." said Mr Charles 
Leonard, head of commercial 


development at Coventry Uni- 
versity. "The only way to 
Improve the situation Is to deal 
more effectively with the funds 
you’ve got, or to generate 
more. All the universities in 
the region are looking at gener- 
ating more.” 

On the face of it, the 
restructuring or industry gives 
the universities a commercial 
opening which did not exist 
before. “Industry has now shed 
a great deal of the R&D 
[research and development] it 
had in-house. So there is an 
opportunity for universities," 
suggested Mr Bushaway. 

But Mr Leonard is doubtful 
whether much more research 
work will be farmed out. 
“Some companies have aban- 
doned research altogether, 
rather than commissioning 
research by others.” 

The universities - Aston, 
Birmingham, Central England, 
Coventry, Keele, Staffordshire, 
Warwick and Wolverhampton 
- are rivals to the extent that 
they vie for undergraduates 
and post-graduates. Many have 


links with companies for par- 
ticular courses: Birmingham 
Business School and Powergen 
for the MBA, for example. 

But all do contract research, 
and In the industrial world 
they frequently have niche 
areas of expertise: Birmingham 
(advanced materials), Warwick 
(manufacturing systems), Staf- 
fordshire (ceramics). This 
reduces the changes of the uni- 
versities tripping over each 
other in the attempt to create 
lucrative links with business. 

“There’s so much business 
for universities [that] we 
shouldn't be in competition. If 
we did it all, we couldn't cope," 
said Ms Anne Doughty, direc- 
tor of Staffor dshir e University 
Enterprises. 

“There’s a lot of networking 
with other universities at 
working level, but not at insti- 
tutional level," noted Mr Colin 
Rickwood, director of Birming- 
ham’s business school. 

Indeed, officials from each 
university, responsible for liai- 
son with industry, meet regu- 
larly at the government's 


regional offices to exchange 
notes. So universities are being 
drawn more deeply into the 
web of agencies Interested in. 
or responsible for. economic 
development. 

For example, Birmingham's 
prospectus for City Pride, an 
invitation from the govern- 
ment to set out a vision of 
future development, recognised 
that “there must be better 
exploitation of Birmingham's 
research and development 
capability.” It stated confi- 
dently that “partnerships will 
be developed to provide the 
key brokerage-entrepreneurial 
role linking research activity 
to business and markets.” 

The suggestion of a 
Birmingham Investment Fund 
is one way of creating such a 
partnership; but how, in more 
genera] terms, this role might 
materialise is unclear. In any 
case, it is a role which is of 
most relevance to smaller 
companies. The larger ones 
will go their own way, creating 
their own university 
relationships, as Rolls-Royce 



Aston Science Park is a development by Aston IMversily, the CRy of 
Bir mi ng ham and Lloyds Bank 


and Lucas have with 
Birmingham, or Rover with 
Warwick. 

Universities themselves have 
tended to see business or 
science parks as a link with 
the wider commercial world. 


Such parks, attached to 
universities, are scattered 
across the region and growing 
in number Wolverhampton is 
the latest to develop one. They 
could be the incubators for 
future high-technology 


companies. ■ 

Looking at the Warwick 
park, arguably the best known 
in the Midlands and home to 00 
companies. Mr David Storey, of 
the university's business 

school, identified three types of 
tenant academics seeking a 
commercial spin-off from their 
activities; businesses which 
seek links with the university, 
in either an academic or social 
sense; and- businesses that, see 
the parks- as a desirable 
location but are not seeking to 
exploit a formal link with the 
university. It is to this last, 
category **>at universities will 
look first in their -search to 
tighten the academic-industrial 
nexus. 

There could be obvious 
benefits in economic terms. 
Research at Warwick 
University, said Mr Storey, had 
shown that “science-based 
independent businesses have 
foster growth rates and lower 
failure rates than typical 
businesses.” 

In terms of job creation then, 
there is a strong regional 
incentive to draw the 
universities into the 'wider 
commercial community- - 
which explains the 
government’s interest in 
Coventry's plan to encourage 
suitably able graduates to 
waste no Mme in. plunging into 
commercial waters: 




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The extensive transport system is still inadequate, say businesssmen 


Unease at the nation’s crossroads 


Hie West Midlands region has 
an extensive road system, the 
UK’s main north-south rail 
Hntr and an international air- 
port within easy reach of Bir- 
mingham city centre. 

However, businessmen argue 
that the principal roads are 
congested, and they point to 
the increasing need for supplier 
companies to meet the foster 
and more accurate delivery 
times required by big manufac- 
turers. They complain about a 
hdt of investment in the mafti 
west coast railway tine, just as 
it is becoming a vita] access 
route to the Qiaimri tunneL 

The airport is gearing up for 
expansion and is hoping to 
attract travellers who currently 
prefer to use Heathrow or Man- 
chester. 

Mr Tony Bradley, home pol- 
icy manager of Birmingham 
chamber of commerce, argues 
that transport is the key to 
everyone else’s industry. The 
transport network that grew up 
to save West Midlands manu- 
facturing became one of its 
strengths as its dependency on 
exports increased. 

Birmingham found itself at a 
transport crossroads, and pres- 
sure on links intensified as 
more motorists used roods built 
to serve industry, and as those 
roads became through-routes 
on the south-east to north-west 
axis linking the country's three 
main conurbations. 

The stretch of the M6 across 
the north-west of Birmingham 
Is a prime example. Built to a 
capacity of 80,000-90,000 
vehicles a day, it is now carry- 
ing 115,000. A second public 
inquiry is under way into a pro- 
posed new motorway - the Bir- 



Mebotend: how it may look at Bteton bus station interchange 


nringham northern relief road 
- to take throngtetraffic away 
from the conurbation. 

After the first public inquiry 
the road was approved, but 
then the government decided it 
wanted it to be the UK's first 
private-sector tolled motorway. 
This time there are more objec- 
tors, as some believe a toll 
motorway would put the area 
at a disadvantage. 

Further north, there are 
plans to widen the M6 between 
Stafford and Manchester. 

Much local lobbying has tried 
to persuade the government to 
allow the upgrading of the 500- 
mile west coast main Hue, the 
railway linking London, the 
Midlands, north-west England 
and west-central Scotland. Inter 
City, the train operator, is 
doing its best, running a ser- 


vice on 30-year-old equipment 
Ralltrack and WCML Develop- 
ment, a private sector consor- 
tium, are carrying out a feasi- 
bility study for the upgrading: 

Planning permission has 
been given for two regional 
freight terminals - at Daventry 
and Hams Hall - to serve Chan- 
nel tunnel services. 

The West Midlands is one Of 
the few conurbations of any 
size without an underground or 
tight rail rapid transit system. 
This is a deficiency the region 
is anxious to put right It 
regards the plan for a three- 
stage development, starting 
with a tine from Birmingham 
to Wolverhampton, as a main 
contender for government help. 

There are also hopes that this 
metro would have a link with 
the airport whose finance 


director, Mr Stephen Green- 
wood, argues that expansion 
couM he an important jobs gen- 
erator. The airport will handle 
about 5m passengers this year 
- a farther lm, he said, could 
add 1,000 jobs to the local econ- 
omy. 

Birmingham airport’s expan- 
sion plans are based on getting 
a bigger share of the market in 
its own back yard. The airport 
meets abont half the region’s 
leisure demand (compared with 
Manchester’s 95 per cent) and 
41 per cent of scheduled 
demand (65 per cent). Thirty- 
mgfal per cent of West Midlands 
passengers for Paris use Heath- 
row In spite of Birmingham's 
offering nine flights a day. 

To rectify the situation, the 
airport this month opens a mar- 
keting campaign based an the 


slogan; “The world on your 
doorstep.” It witi emphasise the 
services, as well a s the airport’s 
relatively easy access and park- 
ing and its claimed advantage 
over Heathrow in speed of bag 
gage and passenger handling. 

The airport’s expansion plans 
involve more than doubling the 
main terminal area, and 
OTjmnding Hip Eurohub termi- 
nal used by British Airways to 
create capacity to handle at 
least 11m passengers a year by 
2005. Planning permission will 
be applied for early next year. 

In the longer term, the air- 
port wants to extend its run- 
way from the present 2,600 
metres to 3,100m. to enable it 
to serve the most distant long- 
haul destinations. Mr Green- 
wood emphasises that the air- 
port can expand regardless of 
that extra capability. It is cur- 
rently in public consultation, 
especially with affected commu- 
nities, and will not seek plan- 
ning permission for two to 
three years. 

Crucial to any large expan- 
sion is the airport’s plan to end 
its public-sector states, so that 
it can fund its £150m-£200m 
development without an impact 
on the public sector b o rrowin g 
requirement. It is owned by 
seven local authorities - Bir- 
mingham. with 38 per cent, and 
Solihull, Coventry, Dudley, 
Walsall. Sandwdl ami Wolver- 
hampton In 8-12 per cent par- 
cels. 

The councils have agreed to 
become a minority shareholder, 
and control collectively no 
more than 49 per cent The rest 
will he disposed of fay attract- 
ing strategic partners to invest 
in the airport, placing shares 
with institutions or a combina- 
tion of the two. The govern- 
ment has approved the move in 
principle, and the airport is 
aiming for partial privatisation 
by next spring. 


Tom Lynch 




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Hazel Duffy examines the region’s lack of cohesion 


V 


Wheels within wheels 


The West Midlands is a 
disparate area which exists as 
a region for the purposes of 
government administration 
rather than for any historical 
reasons. 

It has no distinct lobbying 
strength in Whitehall in the 
way that Scotland and Wales 
have, for instance, with their 
Cabinet representation; or 
even as the north-east of 
En glan d has managed to put 
together in the past decade. 
The new government regional 
nffirnc in Rn gland do not h&VB 

a direct line to the Treasury, 
but must go through each of 
the relevant Whitehall depart- 
ments when 


the other. 

The pre-eminence of Bir- 
mingham as the centre for 
business services is undis- 
puted. Other local councillors 
in the region may have 
resented the city’s dominanc e 
in the past, but there is now a 
growing awareness of the need 
fin: the region to upgrade and 
compete more effectively in 
every sense, and for the differ- 
ent parts to rampipmewt each 
other. 

Except that it is not a region 
in any cohesive sense. Eco- 
nomic geographers saw the 
West Midlands as straddling 
the traditional north-south 


bidding in the 
public expendi- 
ture round. 

The West 
Midlands* cities 

- Bi rmingham mmmmmi 

and Coventry - and the urban 
and industrial mass of the 
Black Country have not been 
as successful as, say, Glasgow, 
Manchester and Sheffield in 
forcing the hand of govern- 
ment towards aiding their 
regeneration - no doubt 
because, until the mid-1970s, 
this was a much more success- 
ful area. 

In pushing for better trans- 
port and communications, the 
West Midlands has had little 
success. The road to relieve the 
congested M6 north of Bir- 
mingham is unlikely to come 
into being until the end of the 
decade. 

Birmingham and the Black 
Country are still without a 
good passenger transit system, 
and the area bas yet to see the 
investment in the Inter-City 
rail line which would speed up 
services to London. 

Traffic at Birmingham air- 
port is expanding, but the 
range of international destina- 
tions is considerably smaller 
than those from Manchester. 

In earlier years when efforts 
were being made to reduce 
dependence an manufacturing 
the appearance of Birming- 
ham, strangled by roads, and 
shorn of the sort of buildings 
that were being smartened up 
elsewhere, could be seen as a 
liability. 

The city fathers, Labour and 
Conservative, have been suc- 
cessful in prising money out of 
Brussels to smarten up the city 
centre. Birmingham city coun- 
cil, with the biggest budget of 
any local authority, still sees 
itself as the powerhouse in the 
region, in spite of the erosion 
of local government responsi- 
bilities in favour of govern- 
ment-appointed quangos. But 
there is cooperation between 
the council and the quangos - 
and between Birmingham and 
the Black Country authorities 
on the one hand, and Birming- 
ham and Coventry councils on 


Reconciliation lies not with any single 
body, but a forum of authorities 
complemented by the government office 


divide of Britain, with the 
south of the region relating 
more to the prosperous south 
of the country and the north 
having more in common with 
the Industrial landscape of the 
north. 

The sharpness of the divide 
may have been alleviated by 
the impact of recession on the 
south-east and the regenera- 
tion of the north, but it still 
exists in the sense that the 
pressures to expand and 
develop are greater to the 
south than to the north. They 
have been intensified with the 
completion of the M40 and M42 
motorway network which has 
made more attractive the areas 
to the south of Birmingham 
and Coventry. Meanwhile, the 
brake on development in the 
north of the region was conse- 
quent on the long delay in 
commissioning a relief road to 
the MS. 

The government’s draft 
regional planning guidance on 
land use, issued in September 
1991 is clear about the need for 
local authorities to steer devel- 
opment to the north and west 
of the region, and resist pres- 
sure from developers to take 
bites out of the green belt to 
the south. The so-called Middle 
Ring of towns - from War- 
wtck\Leamington through Kid- 
derminster\Stourport, Telford, 
and round to Lichfield - have 
been on the receiving end of 


the flight from the metropolis. 
The aim is to develop not here, 
but in the tamer areas of foe 
depleted cities. 

Developers will be inclined 
to exert pressure on authori- 
ties to develop where they see 
the best return. Considerable 
subsidies will be needed to 
temp t' them into the mnwi- city, 
emphasising the need for 
urban authorities to produce 
schemes which will win a 
chunk of the government's Sin- 
gle Regeneration Budget for 
the region. Birmingham has 
recently won development area 
status, although the lobby was 
more from local government 
than local busi- 
ness, which 
was reluctant 
to be tagged 
with a label 
that Indicates 
nmmmi that the area is 
in dire need. 

Birmingham and area .busi- 
ness chiefs have been working 
to boost the city within Europe 
in the past few years. But they 
have yet to constitute a power- 
ful base akin to the business-^ 
based teams in some American 
ciltes, or even other parts of 
Britain, which have helped to 
improve the environment and 
attract newcomers. Business in 
in the region seems only 
recently to have become aware 
of the environment 
In the 1960s, developers and 
architects, and a few leading 
companies, together with the 
city council, Conned a conve- 
nient, informal coalition. The 
scene is now more complex. 
Many family-owned companies 
were swallowed up, or simply 
went out of business. Birming- 
ham still has more head offices 
than any city outside London, 
but executive decisions on 
behalf of the big companies are 
made outside the city, mid out- 
side the country in some cases. 
Lobbying-power and tnfingnrp 
lies more with a few individual 
business chiefs than with insti- 
tutions. 

Parts of the shire counties 
have very different concerns 
from the built-up areas of thou 
region, isolation, rather that™ 
congestion, can be the problem * 
here. The image conjured np " 





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Continued on facing page 


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FINANCIAL TIMES MONDAY NOVEMBER.7 1994 


j3 


3 rfJ 


AS 


BIRMINGHAM AND THE WEST MIDLANDS 6 




Ingineerfng companies across the 
region have been reporting fatter 
I order-books during the past three 
quarters. There is mote optimism than at 
any time since 1990. 

“Companies were very nervous at the 
start, but latterly it seems to be generally 
accepted that business in most sectors has 
improved considerably," said Mr David Bot- 
tflrlU, chief executive of the Engineering 
Employers' Federation West Midlands. 

But recovery is by no means uniform. The 
leading performers have beat dm automo- 
tive and the electronic sectors. The laggards 


Sectoral performance: Paul Cheeseright looks at different parts of the regional economy 


Engineers point way out of recession 


and construction industries. 

Thus, on one hand. Rover reported a 9 per 
cent increase in volume sales over the first 
three quarters of the year, and announced 
the recruitment of 1,450 new staff; and 
Ureas Automotive reported a 13 per cent 
increase in sales for the year to last July. 

On the other Vy»iri. Lucas Aerospace also 
reported difficult conditions in the aerospace 
and predicted little improvement 
until 1995-96, while smaller groups active in 


the sector, such as Hampwn Industries and 
TransTec, saw their profits deteriorate. 

Mr BotteriU noted that, in the electronics 
sector, performance was strong where sales 
related to the automotive industry or to 
machine tools and investment equipment. 
Significantly, in that contest, production 
this year at Cincinnati Milacron. the 
irwrfiiTw too] make r in Bir mingham, has 
been running at double the rate of 1993. But 
in the consumer electronics sector, the per- 
formance has not been so strong. 

Despite the overall improvement in the 
performance of the sector, immediate prob- 
lems remain. Pressure on m argin s remains 
very tight In the third year of recovery, 
marg in replenishment has not gone as Ear as 
one would have expected," said Mr BotteriU 


Indeed, customers are resisting price rises, 
and manufacturers are being forced to 
absorb increases in raw material prices. 

More fundamentally, the pressure on the 
original equipment manufacturers to reduce 
the number of their component suppliers, 
most noticeably in the automotive and aero- 
space sectors, is resulting in continuing 
rationalisation among component makers as 
they strain to retain their competitive posi- 
tion. 

The West Midlands is acutely sensitive to 
such changing commercial patterns. This 
follows from the structure of manufactur- 
ing, the heart of which is in Birmingham. 

‘There is a marked specialisation in a 
narrow range of inter-linked engineering 
industries, specialising in the production of 


motor vehicles, investment goods and asso- 
ciated components and materials," noted the 
Birmingham Economic Information Centre 
(BEIC). 

This concentration did not serve the city 
well in the 1980s when growth was rapid in 
sectors such as computer hardware, phar- 
maceuticals, aerospace, plastics and elec- 
tronics. More recently, restructuring has 
tended to concentrate on the introduction of 
new technology, which, in turn, has elimi- 
nated more basic metal -bashing. 

Over the past two years, the engineering 
sector has underpinned the movement out 
of recession. BEIC predicts, between now 
and the year 2005, annual growth rates of 
more than 3 per cent in the city's produc- 
tion of metal goods, more than 6 per cent in 


investment in manufacturing' 
like its peers. Grove Is fir 
conditions easier hut not easy.. "Hie econ- 
omy is quite buoyant Ttere’s a tot of pres- ' ' 
sure cm margins, to the past when the UK 4$ 
started to generate growth of 3 per cent V . 
then companies were able to push prices up 
and ontenwM margins. That is no t happen- 
giMtrlcai, ftityfmnir. and «% p- . jug at the moment, 1 * Mr Grovessaid. 

neerh^ and mm* than 4 ner cent fa motor “I see varying signs of inflation. I see a 

labour situation where there is a sbnrta© of 
skilled labour and managerial talent 
Here’s also a significant increase in raw 
material prices, especially over the last six 
months,” he added, noting polypropylene 


* 


'iiBp 


neering, and more than 4 per cent in motor 
vehicles. 

"We need a long period of low inflation, 
consequent low interest rates and sustain- 
able levels of Investment,” said Mr BotteriU 


30 


i 


■ PROFILE; Grove Industries. The acquisi- 
tive group, based in Stratford-upon-Avon 
and ran by Mr David Groves, is looking for 
engineering companies to add. to its coOsc- 
tion of Interests in press work, machined 
components and injection moulding. 

The group, which lids year will make 
pretax profits of about £2m on turnover of 
£40m, is half owned by Close Brothers,- the 
London merchant hank and half by Mr 
Groves. Close uses Grove as a vehicle for its 


board increases of 20 per cent _ 

As a sub-contractor, Grove is intent on 
building long-term relations with the 
systems makers. “We’ve developed t e c h nic al 
teams whereby they are able to help with 
T&eogineering the products and reducing 
the costs." it is the key to staying in the 
game. “We want to be involved with design, 
-.work alongside, make them more re lian t an 
lbs, as wb are on than." 









Financial services expands again 


The regional financial services community, 
Centred on mr nniigtiaTttj ri»pmis 
business. Hr Petra- Willis, chief executive of 
Birmingham Oiy 2000, which acts as an 
umbrella group for the sector, says some 
firms are considering whether to resume 

recruitment 

"Activity levels are rising. Part of [the 
reason] is that there’s a huge backlog of 
projects which have been shelved over the 
past four years,” he explained. 

Ernst & young, accountants, said its man- 
agement consultancy activities had 
increased by 30 per cent over the past year. 
®, the largest venture capital group in the 
UK, reported that; fat the West Midlands, it 
had invested more during the first half of 
1S94 than in the whole of 199a 

There is increased activity, too, among 
solicitors. Eversbeds declared a 5 per cent 
increase in turnover to £16m at its Birming- 
ham office daring the year to April, and 
observed that the increase was accelerating 
this year. Edge & Ellison said its business 
was running 15 per cent ahead of last year, 
although there was p re s sur e on margins. 

The finawriai services community in Bir- 
mingham has started to grow again. During 
the recession some eS the London merchant 
banks withdrew. Now, Henry Ansbacber has 
arrived. BWD Rensburg has Joined the 
ranks of the stockbrokers, a s mall commu- 
nity where the leading operator is Albert 
EdSharpi 

In state of the revival, the main preoc- 


cupation of the financial services commu- 
nity to to keep regional business within the 
region. “Once an initial transaction has 
gone to London, there is much less opportu- 
nity for the local financial community to 
service it,” said Hr Willis. 

Flows of business are diffic ult to monitor, 
but there appears to have been some success 
in stopping business drifting to London. 
“There have been a load of management 
buy-outs in the last five years which would 
have been done hi London before,” said Mr 
Digby Jones, deputy sailor partner of Edge 

4 RlHann. 

There have also been some highly publi- 
cised transactions using wholly West Mid- 
lands services - for example, the arrange- 
ment by Coopers & Lyhrand, accountants, of 
the Leyland Daf Vans management buy-out 
from the receiver in 1993, 

That also showed bow accountants have 
been moving into the market gap left by the 
merchant banks. 

The difference between Birmingham and 
the much larger London financial services 
community Is that the latter has a life of its 
own. Binniugham does not: 

ma nufa ct uri n g , sakl Hr Willis, Is abso- 
lutely vital: “We cannot get away from the 
fact that tiie skills of the West Midlands are 
transferring materials into products. That is 
the core of flmnrfa! services activity. Other 
firings become important adjuncts to that” 

Growth of the sector thus becomes a mat- 
tor of preventing local business from going 


elsewhere and developing an international 
approach to business, which tics in with the 
more export-oriented manufacturing compa- 
nies. “We could be a professional step- 
ping-stone for those who want to do busi- 
ness in Europe. Why should London be the 
only stepping-stone?” joked Mr Willis. 


■ FROFILEl: 3L The venture capital group 
invested £26m in West Midlands companies 
during the year to March, and now Mr Chris 
Rowlands, the regional director, reports 
increased business. 

Buy-in and buy-out activity has continued 
strongly in 1994. Demand for expansion cap- 
ital, mainly from companies seeking to 
make acquisitions has also been growing, 31 
reports. 

Alongside this corporate activity, the 
demand for $ funds from existing compa- 
nies, to assist expansion, has been sluggish 

Mr Rowlands said that, in the late 1980s, 
about 40 per cent of 3i funding had gone 
into such projects. Now, it was more tike 20 
per cent 

He has noticed another difference. "Over 
the last 18-24 months, there has been a 
significant change in the way the mid-size 
corporate deals - for companies with turn- 
overs between £l5m and £50m - are being 
done. 

"Predominantly, they are being handled 
by regional professionals. What are organi- 
sations going to do if they are based only in 
London?” 


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WalsaH town centre to the site ot a regeneration project by CherbmS Land, City ChaBengs, WateaH counci and the British Waterways Board. The 
cinema wffl make way for a Woohworth’s store, and the car park wSl become the new canal basin. The buflcBngs on the left wffl be strops 


Distribution survives the downturn 





■a*; 


Weekend still a problem for hotels 


Hotel and catering business across tbe 
region is picking up as the economy moves 
out of recession. 

“Sales are moving forward far everyone," 
said Mr Clive Stone, managing director of 
Redcliffe Catering. For Bir min g ham, he 
puts the increase in business, compared 
with 1993, at up to 7 per cent during tbe 
Brat nine months of the year. 

*7n the last six to nine months, we have 
seen a general upturn and a strengthening 
of bookings, and that seems to be spreading 
to advance bookings,” Mr Stone said. 

But the advance is off a low base. There 
was a surge of hotel building in Birming- 
ham during the late 1980s and early 1990s - 
just in time for the recession. Birmingham 
Marketing Partnership's hotel-occupancy 
figures for 1993, covering eight city-centre 
hotels, showed an average occupancy rate 
of 56.42 per cent 

Although mid-week business is described 
by Mr Stone as “reasonably good”, Birming- 
ham hotels face the perennial problem of 
finding weekend occupants. Moreover, hote- 
liers are forced by immediate market condi- 
tions to offer keener prices than their peers 
in London and Edinburgh. 

Yet the underlying conditions are sound. 
According to Department of National Heri- 
tage figures, bared on the number of stay- 
ing visits, Birmingham Is the fourth most 
visited city in the UK after London, Edin- 
burgh and Glasgow. 

The region has its share of tourist attrac- 


tions, including Shakespeare at Strat- 
ford-upon-Avon; lronbridge, the birthplace 
of the Industrial Revolution, in Shropshire; 
and the Alton Towers theme park. 

But the main aim of policymakers since 
the 1970s has been to build up tbe regional 
services sector. There has been extensive 
public-sector investment, both in the 
National Exhibition Centre, the Interna- 
tional Convention Centre and tbe National 
Indoor Arena; and also In the growth of a 
cultural sector based an the City of Bir- 
mingham Symphony Orchestra and the 
inward migration of the Birmingham Royal 
Ballet and the D’Oyiy Carte Opera Com- 
pany. 

Yet the pattern of future development is 
difficult to predict “There is nervousness 
about long-term capital investment,” 
suggested Mr Stone. “There is no problem 
for the next one to three years. The concern 
is three to 15 years out” 

In his view - which is not unique - the 
key to future growth in the sector is: first 
the continued development of Birmingham 
Airport and the NEC-ICC-NIA complex; and 
second, a substantial tourist attraction to 
draw in daily visitors. 

The distribution-hotelscatering category 
of employment is already one of the three 
largest in tire West Midlands, accounting 
for 21 per cent of jobs. Birmingham 
Economic Information Centre forecasts a 
growth in sectoral output of over 30 per 
cent by 2005. 


■ PROFILE: Solihull Moat House is the 
only 4-star hotel In Solihull, the town near- 
est to the National Exhibition Centre. But 
unlike the Metropole, which is adjacent to 
the NEC and drawing much of its business 
from the centre, the Moat House depends on 
local business. 

“The majority of our customers are local 
privileged people on contract rates," said Mr 
Brian Dunn, the manager. “Tto get a consist- 
ent base through the year, we prefer to deal 
with local companies.” He had in mind 
groups such as British Gas and Lucas. 

As such companies undertake more train- 
ing courses, so they bring their employees 
into tbe hotel. Like the hotels in Birming- 
ham. the Solihull Moat House has seen busi- 
ness pick up this year. But, said Mr Dunn, 
“the growth is not in occupancy volume but 
more in price". 

The hotel has U5 bedrooms, and is cur- 
rently running on a 72 per cent occupancy 
rate. This opens up the possibility of faani- 
ening the rates charged to customers. “At a 
top-dass hotel the challenge is getting tbe 
rate. A 4-star hotel could (be filled) every 
day if it charged the same as a 3- or 2-star, it 
would be just offering better service for 
less." said Mr Dunn. 

It is an indication of tbe recovery in the 
sector that, as Mr Dunn put it "The whole 
market is beginning to firm up and we can 
firm rates up. It's like the aircraft business. 
£f BA has seats available, then there are 
more offers available.” 


Business parks are being developed or 
considered right across tbe West Midlands 
- in urban and rural areas, along the MG 
and the M42, and at the northern ends of 
the M5 and the M40. 

The region, at the centre of England and 
within easy reach of big concentrations of 
population, has provided a firm base for 
certain types of property investment. Geo- 
graphically, it is convenient It has not been 
subject to the same sharp movements of, 
for example, the London office market This 
steadiness has not escaped London invest- 
ment managers. 

“Distribution and warehousing markets 
in the West Midlands have proved to be 
relatively recession-proof,” said Mr Andrew 
Nesbitt property director of AXA Equity & 
Law Investment Managers. “Demand for 
space has remained constant and supply 
has stayed tight” 

This may not be the case in future. Jones 
Lang Wootton, chartered surveyors, has 
estimated that around 20 motorw ay junc- 
tions within 25 miles of Birmingham (here 
are 1,500 acres of land for which planning 
permission to establish distribution parks 
exists or is being sought 

This could translate into between 22m 
and 25m square feet of built space, accord- 
ing to Mr Dick Harvey, in charge of JLW's 
Birmingham office. “That’s a lot of space. 
With low inflation, you have to get the 
product and the location right to get it 
away," he said. 

By comparison with south-east England, 
land prices are modest between £200,000 
and £250,000 an acre in tbe Birmingham 
area. And rents, said Mr Andrew Jackson, 


industrial property specialist at WeatheraR 
Green & Smith, are not really moving: 
"They stay fairiy flat at the moment which 
is a function of the available space. But 
that is getting absorbed steadily.” 

He quoted rods of £4J>0£5.00 a square 
foot along tiie M42, E4.00-&L50 hi Btrmmg- 
hara and KL50-S4.00 in the Black Country. 
They had been at these levels for at least 
two years, bat “for existing bufktmgs, the 
level of incentives is starting to fall and 
that is the first sign of rents beginning to 
rise." 

hi any case, for new property, leasing 
arrangements will have to reflect the 
higher construction costs which are emerg- 
ing as raw-material prices rise from levels 
depressed by the recession. 

Healey & Baker, chartered surveyors, 
noted: “Demand for design-and-bafid units 
is Increasing across the Midlands Bran focal 
industrialists, bat 60 per cent of warehouse 
demand currently comes from third-party 
contract distribution companies seeking 
only 5-10 year (eases.” 

Given that the development of the West 
Midlands distribution sector has gathered 
pace aver tiie past 10 years, this points to 
changing patterns of demand for space. 

"On the warehousing side, the move 
towards a more efficient form of distribu- 
tion was led by retailers," explained Mr 
Jackson. “But in recent years there has 
been an increasing number of manufactur- 
ers who have been taking space. If they are 
able to bold stock more efficiently, they can 
save money, because they'll hold less of it - 
but also their customers want them to pro- 
vide much quicker delivery times." 


PROFILE: Hams Had is an old' power star 
tion site which Is now the location for a rail 
freight te rminal and busmessdfetribatimi 
park on the grand scale. 

“It is the largest by miles of any such 
project which can be biatt over the next few 
years,” claimed Mr Alan Whiter, manag in g 
d ir e ct o r of Trafalgar House Properties. - 
The site is owned by PowoGen, which 
has a joint venture with Trafalgar House to 
provide the infrastructure. The joint ven- 
ture will then sell land for development 
“We are not going to build speculative 
space, "said Mr Whiter. 

Powergen’s land is dose both to tiie junc- 
tion of the Mg and M42, and to the railway 
network on the east side of Birmingham at 
Coleshfll. There are 380 acres, winch offer 
the possibility of about &Sm square fed of 
business and distribution space in addition 
to the rail freight terminal. - ■ 

The project provides an example of the 
way in which redundant industrial land is 
being transformed through alternative 
uses. 

Mr Winter does not expect to sign any 
deals with potential occupiers until work 
on the site has started next year. But the 
interest is coming primarily from West 
Midlands industrial companies. Theoreti- 
cally, the first freight train could ran into 
Hams Hall in 1996, he said. 

Whatever happens with tbe privatisation 
of British Rail, Hams Ball goes ahead. It is 
probably running slightly ahead of a simi- 
lar project cm a greenfield rite near Davro- 
try. “If bath schemes are up and running, 
they do compete," Mr Winter acknowl- 
edged. 


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No, this isn't some strange 
geographical conundrum. 

We're simply pointing out 
that if your business is in the 
Black Country, you'll never be 
marooned when it comes to 
importing and exporting 

Quite the reverse, 
in fact. 

The Black Countiy is 
right in the middle of 
virtually everywhere. 

And that includes Britain's 
major seaports. Most of which 
can be reached inside a single 
day's HGV drive from anywhere 
in the Black Country. 



ff you are heading for the coast 
(the north, south, west or east 
coast that is), there's quick access 
to the M5, the M6 and the whole 
of the UK's motorway network. 

As for setting up in the - 
area, the Black Country/ 
Development \ 
Corporation will dof 
everything to make ) 
things plain sailing. 

Be it a question of site 
selection, planning or funding. 
Fact is, for any business with 
business overseas, the 
Black Country could be the 
perfect berth. 


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FINANCIAL TIMES MON DAY NOVEMBER 7 1994 







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In 1992, 7.3 per cent of West 
Midlands school leavers had no 
qualifications, compared with 
a UK average of 6.6 per cent 

The UK has set national 
training targets, Lifetime 
target I is that 80 per cent of 
the workforce be qualified to 
NVQ (national vocational 
qualification) or equivalent 
level by 2000. 

Lifetime target nr is that half 
be qualified to NVQ level 3. 
The West Midlands is the third 
worst UK region in its progress 
towards the former and the 
worst in respect of the latter. 

Surveys, such as the recent 
review by the Birmingham 
Economic Information Centre, 
suggest that the skills 
problems are greatest in the 
manufacturing sector, which is 
the mainstay of the West 


Continued from facing page 

by the West badlands is the 
built-up mass which extends 
from Coventry to Wolverhamp- 
ton - the only break being the 
bit of green belt between Bir- 
mingham and Coventry. But 
die region also includes rural 
areas of Herefordshire and 
Shropshire. The continuing 
exodus of young people, in 
' search of work, is the concern 
here; whereas in the inner 
areas of Birmingham and Cov- 
entry a different sort of depop- 
ulation, of the economically 
active, has been going an far 
more than 20 years. 

At the official level, the rec- 
onciliation of the needs and 
demands of this div erse region 
lies not with any single elected 
body, but with a forum of local 
authorities which has no pub- 
lic profile, complemented by 
the equally low-profile govern- 
ment office which will be 
attempting to co-ordinate 
departments and convey to 
Whitehall its priorities for the 
region. 


BIRMINGHAM AND THE WEST MIDLANDS 5 


T here is no doubt about 
what Mr David Ritchie, 
the civil servant 
appointed to co-ordinate the 
gov er n ment's work across the 
West Midlands, sees as the 
main problem for the region’s 
economy. 

“The single most important 
difficulty we have in this 
region is in skills and training. 
We have the worst-trained 
workforce in UK," he says. 

Employers complain that 
school leavers do not have the 
levels of literacy and numeracy 
required in a world where 
skills in the workplace need to 
keep pace with technological 


The skills shortage is causing employers anxiety, reports Tom Lynch 

A vital role for training 


Midlands economy, and 
particularly among the <m» a n 
and medium-sized companies. 

Many small companies cont- 
inue to prosper without 
bothering with tr ainin g a 
caricature of such a company 
would be one r un by a 


of Birmingham, does not fit 
that caricature. 

A former chairman of 
Centec, the training and 
enterprise council for the area 
south of Birmingham, he is 
something of a missionary for 
the training cause. 


Qualiflcaffom of Birmingham's resident workforce 


All higher level quaSfled 
as a percentage at 
Econcmicafiy active 
Adtft population 

Wgher level qualifications 
(% of adult population): 

Higher degrees 

Degrees 

Diplomas 


self-made e nt repr e neur with no 
formal training, whose 
employees are all trained to 
work their machines, and who 
continues to make enough 
profit to draw a good living 
and drive a big car. 

Mr Edward Roberts, chair- 
man of Heath Springs, a 
spring-maker with 112 
employees in Redditch, sooth 


Birmingham 


W Midlands 
region 


Seuax 1991 CWwm at PogAVMn 

Most companies, he says, 
“train because people say it's 
necessary, but they are not 
quite sure what it is and they 
don't relate it to the require- 
ments of their business.” He 
cites as a particular weakness 
reluctance among the 
owner-managers of some 
companies to accept that they 
mi ght benefit from training. 


The majority of companies 
are reasonably good at 
statutory training, such as 
health and safety and first aid, 
he says, but because they don't 
think about tr aining for the 
long term strategic develop- 
ment of their crrmpFTiipc skill 
shortages are inevitable. 

There are skill shortages 
already, even at this stage of 
the recovery, says Mr Roberts. 
He identifies a shortage of 
good people in the 35-45 age 
bracket with experience of new 
equipment 

For his company, this moan« 
no night working - the 
employees do not have to do it 
His overseas competitors do 
not have the — mp restrictions. 
"Twenty years ago, our 
competition was all within 25 
miles. Now it is not in the UK” 

Like many small suppliers to 
the automotive industry. 
Heath Springs is wrestling to 
retain the did skills - which 
Mr Roberts refers to as the 
“black arts” needed to run 
older machines which appear 
to have personalities of their 
own - while also developing 
skills to deal with fast- 
changing demands from 


customers, to flatten the 
management structure and 
cope with concepts such as 
statistical process control. 

Skill requirements have 
changed dramatically in the 
past five years, he says. 
Customers expect his company 
to be much more pro-active in 
design, development and 
control of the parts it 
produces, while the Batter 
organisation "needs people 
who can communicate with 
other people and with 
customers". 

Mr Roberts believes training 
in team leadership has paid offi 
as employees are encouraged 
to produce ideas. And more is 
being demanded in ha<n> skills 
- be needs employees with 
managerial potential to have 

lan gnn gp skills unthinkable 20 

years ago in the UK, t houg h 
not overseas. 

But there is a downside, 
especially for the smaller 
company in a sector where it is 
oue of only a few that take 
training seriously. 

Its training investment can 
be wasted If a competitor pays 
a small amount of extra salary 
to snatch away an expensively- 



OW afcflfc children risk Broadflafcl House Glass Museum, Dudtey, 
ref u rnished to celebrate a traditional Black Country industry and to 
provide the base on wfdch to develop a national glass museum 


trained craftsman. Mr Roberts 
says he lost one a week after 
he returned from an expensive 
trip to the US. 

As a former training and 
enterprise council (Tec) 
chairman, he is positive about 
the new national vocational 
q ualification system, and the 
way it enhances the self- 
esteem of people whose skills 


were once not accompanied by 
certificates. He is also 
supportive of Investors in 
People (HP), the personnel 
development quality standard 
being backed by the govern- 
ment 

He believes the larger 
companies which already 
subscribe should promote it 
among their suppliers, in the 


same way as they promoted 
the quality standard BS5750. 

Many commentators believe 
this is the way forward - if the 
big manufa cturers required 
suppliers to take training 
needs seriously through HP, 
there would be more of a level 
playing-field for companies like 
Heath Springs, and more 
trained people available in the 
region. 

Rover Group says it takes an 
interest in the “whole business 
environment” of suppliers, 
althoug h it did not currently 
specify any training measure. 
It might in future start 
specifying a measure, which 
might be IIP. 

Mr Chris Tfilett, a principal 
with Coopers & Ly brand in 
Birmingham, says most new 
investment is expected to be in 
small companies, which will 
not have in-house tr aining 
capacity. 

If there is not a supply of 
skilled people, it will be more 
difficult to compete with other 
areas for investment - 
Hertfordshire, for example, is 
trumpeting the availability of 
skills from the aerospace 
industry. 

Mr Tillett says the better 
educated parts of the region, 
such as Shropshire and 
Warwickshire - are attracting 
higher value-added activities. 
For the Birmingham, conur- 
bation, however, skills r emain 
a serious issue. 


A recent survey from the Bir- 
mingham Economic Informa- 
tion Cent re (BKIC) rites "dear 
statistical evidence” of discrimina- 
tion against ethnic min or ity groups 
tn the labour market. 

It says unemployment among 
minority groups is doable that 
among whites. nBpmpl n y m mt awwig 
those with higher qualifications was 
8A per cent for ethnic minorities, 3-2 
per cent far whites. 

The 1991 census figures on tbe gulf 
between rich and poor surprised 
man y people by their scale and by 
the d e teri o ration vnre the 1981 cen- 
sus. Researchers from the BEIC - set 
up by die city council and the train- 
ing and enterprise council - used the 
census to compile a study of depriva- 
tion, comparing tbe city's electoral 
wards. 

Unemployment in hmerrity Spark- 
brook was 32A per cent, while in 
leafy Sutton Four Oaks it was 4.7 per 
cent. In Spaifcbrook, 135 per emit of 
households woo over crowd ed (more 
than one person per room), compared 
with <15 per cent in Floor Oaks. In 
Sparkbrook, 35^ per cent of nan-pen- 

MMW riy lin 


Ethnic diversity gives business a lift, but also raises problems 

Beyond the corner shop 


income, against 4J2 per cent in Four 
Oaks. Spaifcbrook had a black and 
ethnic minority population of 66.6 
per cent, Hour Oaks of 2£ per cent 

Workers from overseas - particu- 
larly the Indian subcontinent and 
East Africa - were lured to the West 
Midlan ds in the boom after the 
war, when factories were short of 
labour, hi Bi rmingham alone, th ere 
are now estimated to be 66A0Q people 
of Pakistani origin. 51,000 Indians 
and 134)00 BangfaHpdiig. 

As workers in the older Industries 
- often unskille d and semi-sklfied - 
many were among the victims of fac- 
tory closures in the 1970s, though, 
says Mr Ripan Sachdev, a chartered 
accountant in Coventry, some pat 
their redundancy money to work in a 
small business. 

He says the latest recession has 
damaged tbe Asian community sig- 
nificantly, with fewer opportunities 


for those made redundant 

Some of tbe small shops winch had 
prospered are faffing victim tn the 
squeeze tn retailing generally, while 
they and other small bu siness es do 
not have the technology and market- 
ing toehn iqn aa increasingly needed, 
for survival. But as same areas suf- 
fer. there is hope in the way that 
younger Asians are faking over fam- 
ily businesses, with skills newly 
acquired in colleges in self-help 
community initiatives. 

Many textiles businesses were noto- 
rious as sweatshops. But Mr Sachdev 
says the sector is modernising, as 
companies bring in info r mati on tech- 
nology and employ designers, aiming 
to seQ to tbe high street retailer 
w Hwr tfian the mark et stall. Some 
children of earner-shop owners are 
exploring other market sectors. 

Mr Davinder Pane s ar, of the Indian 
Community Centre in Coventry, is 


attempting to build cm the Asian tra- 
dition of woriring from home. He 
wants to replace the women’s sewing 
machines with personal comp u ters, 
to encourage the gro wth of telework- 
ing. “We have the skills base, we 
have the drifts in business, we have 
the ethic and philosophy of women 
working from home.” 

With a large co n tribu ti on - about 
£340,000 - from a local Asian busi- 
nessman, there are plans for a trie- 
working centre with a nursery 
attached, so that childcare can be 
provided while the women train and 
work. 

T.ik<> Mr Sachdev, Mr Panesar sees 
great difficulties for people seeking 
work. Some had committed them- 
selves to helping their parents in cor- 
ner shops, which then went down in 
the recession. Competition for jobs is 
intense, though Mr Panesar plays 
down the role of crude racial discrim- 


ination — often, he says, a youngster 
from college is competing with a 
redundant executive with a track-re- 
cord and a network. He also briieves 
the new generation has lost some of 
the vigour and vision which drove 
their parents tn build their busi- 
nesses. 

Working with the University of 
Cove ntry , the centre saw a need far 
an academic platform for Sikh 
culture - 54 pa* cent of the city's 
ethnic mi nori t y population is Sikh - 
and tbe un iv e rs ity has agreed to help 
accredit a course in Sikh philosophy 
and theology. 

fn the field of practical skills, a 
national vocational qualification is 
being developed in authentic Asian 
cuisine, gaining aco w tifaiiwi for flw 
ability that thousands of people, espe- 
cially women, already have. 

The Aslan oommnnity has tn the 
past, says Mr Panesar. been “quite 


disorganised". Now, locally-educated 
British Asians know the country’s 
systems and standards and have the 
skills, especially with co mputers , to 
use their knowledge. Mr Panesar says 
tbe community is organising itself 
and building networks across 
regions, counties and cities - "and 
soon across countries”. 

Snrii initiatives will make a differ- 
eras, but more help from outside is 
needed to address the intractable 
problem of the tamer dries. 

The economic review from the 
BEIC issues a start wanting. A grow- 
ing proportion of school leavers will 
be from ethnic minorities, it says. 
“Discriminatory and other b ar riers 
will need to be addressed urgently by 
employers and others if a satisfactory 
supply of labour is to be maintained. 
In p a r ticular, reentitment of Asian 
women needs to he encouraged,” it 
says. 

“Some employers will only con- 
sider recruiting from minority groups 
when the economy grows quickly. 
Without intervention, these trends 
will have major implications for the 
Birmingham economy.” 

Tom Lynch 


Glynwed 

International 




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LIMITED 

Subaru tux) Ltd. • SsangYong Motor Distributors Ltd. • Isuzu (uk)LkL • l.M. Properties PLC. 
Juin Petite Ltd. • Internationa] Motors (Sverige) AB. 

I.M. Group Limited, Ryder Street. West Bromwich. West Midlands. b?o oej. Telephone 0121 522 2000. 




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FINANCIAL TIMES 

brother. 

COMPANIES & MARKETS 

»:THE FINANCIAL TIMES LIMITED 1W4 

TYPEWRITERS 

WORD PROCESSORS 
PRINTERS 
COMPUTERS 

FAX 






MARKETS 


THIS WEEK 


BRONWEN MADDOX: 

GLOBAL INVESTOR 
In the past year, investors’ 
enthusiasm for commodities has 
looked like a rare example of 
perfect timing. But one of the main 
props for prices is inflationary fears, 
fuelled partly by the rising cost of 
commodities themselves. Page 22 

MARTIN WOLF: 

ECONOMIC EYE 
According to some estimates, 

China already has the world's 
second or third largest economy. 
But, argues Martin Wolf, these 
figures definitely do not mean that 
it is, or very soon will be, a 
superpower. Page 22 

BONDS: 

The Treasury bond market seems Ukety to remain in 
a jittery mood this week. With the Federal 
Reserve's policy-making committee due to meet 
eight days from now, there seems little immediate 




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London - The 3,100 mark on the FT-SE 100 Index 
scale is beginning to replace the Berlin WaH in the 
minds of UK Investors. New York - two themes - 
rising bond yields and fears of inflation - are likely 
to continue to haunt the stock market which no 
longer has the crutch of encouraging corporate 
earnings to rely upon. Page 23 

EMERGING MARKETS: 

Strong economic recovery after years of recession 
underpins the stock market boom that is making 
Lima the new darling among Latin American 
emerging markets. Page 23 

CURRENCIES: 

The dollar wiU remain the centre of attention, even 
if intervention by the Federal Reserve last week 
effectively put a short-term floor under the 
currency. Page 23. 

COMMODITIES: 

At the London Metal Exchange board meeting on 
Wednesday members wUl be paying particular 
attention to see if there is any development on 
plans to extend the exchange's warehouse 
coverage to the US. Page 22 

UK COMPANIES: 

Ordinary investors. in Queens Moat Houses, the 
heavi^Mndebted hotels group, may find their Stares 
are not completely ^worthless when. .the protracted 
£1 .3bn debt restructuring Is agreed later this 
month. Page 20 

INTERNATIONAL COMPANIES: 

Banco Ambrosiano Veneto, the Italian bank, 
claimed at the weekend that the takeover planned 
by Banca Commerctale Italians (BCf) and 
announced only last week was already doomed to 
fail Page 21 


Deutsche Bank braced for battle 


By Andrew Fisher in Frankfurt 
and John Capper In London 

Deutsche Bank will mount a 
legal challenge to any move by 
the German government to force 
it to reduce its equity holdings in 
companies without tax relief, 
according to Mr Hilmnr Kopper, 
chairman of Deutsche's manag- 
ing board. 

Mr Kopper said that Deutsche 
would take its case to the Federal 
Constitutional Court if political 
objections to the level of its hold- 
ings - which surfaced In Ger- 
many's recent election campaign 
- resulted in legal curbs. 


He said in an interview with 
the Financial Times that such a 
move would constitute expropria- 
tion of assets. “Why should a citi- 
zen of this country be forced to 
divest some of his assets and 
share the proceeds with the gov- 
ernment?" he said. 

Its holdings, including 24.1 per 
cent of Daimler-Benz, the vehicle 
and aerospace group, have a mar- 
ket value of DM25bn (Sl6.7bni. 
The proceeds from sales would be 
subject to taxes of around 60 per 
cent on realised capital gains. 

“If we were forced to sell off, 
and that would mean paying 
taxes on unrealised gains, we 


would think that was definitely 
unconstitutional," said Mr Kop- 
per. He said he believed this 
point was so clear that no such 
law would be passed. 

Before October's election, the 
opposition Social Democratic 
Party <SPD> proposed a law 
requiring banks to cut industrial 
holdings. It is likely to be rein- 
troduced in the next session, but 
with little chance of success. 

However, some members of the 
Free Democratic party r FDP). the 
junior party in the Bonn coali- 
tion. also support a reduction and 
political debate about banks' 
influence on industry continues. 


Among other companies in 
which Deutsche Bank has signifi- 
cant stakes are Allianz. Europe's 
largest insurance group (10 per 
centi. Continental tyres (10.5 per 
cent) and Philipp Holzmann con- 
struction (25.9 per cent). 

Deutsche has a policy of trying 
to reduce its larger equity stakes 
- many of which were acquired 
in debt-for-equity swaps when 
the companies concerned were in 
trouble - in order to diversify its 
industrial portfolio. 

Mr Kopper said that the bank 
wanted to keep its portfolio at 
the same size, but would be inter- 
ested in buying holdings outside 


Germany, particularly in other 

European countries. 

Although bank shareholdings 
account for less than l per cent 
of all quoted German companies' 
market capitalisation, the high 
visibility of some stakes has led 
to adverse publicity. 

As the holdings were mostly 
acquired many years ago. their 
valuation b) the balance sheet is 
well below market levels. “Their 
book value is low, and the yield 
that they generate is very good 
as a stabilising factor in our 
profit and loss account," Mr Kop- 
per said. 

Rebuilding a reputation. Page 17 


Patrick Harverson writes from New York about a controversial bonds market pay move 


Salomon forces directors to Sa,on,on 


cause for buyers to come back to the market. 1 • 

pm * paseM share Dam 2 

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Profit/loss (Sm) 


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STATISTICS 


Base lending rates 27 

Company meetings 14 

Dividend payments 14 

FT-A World Ireflcea 22 

FT Guide to currencies _. 23 
Foreign exchanges ...... 27 


London recent Issues — 27 
London share service . 30.31 

Managed funds 28-29 

Money martcets 27 

New Int bond issues 24 

World stock mkt indices.. 26 


Is Salomon Brothers turning into 
Goldman Sachs? Thirteen years 
after Salomon went public, the 
Wall Street bond trading firm 
appears to be metamorphosing 
back into a private partnership. 

Just like its celebrated rival 
Goldman. Salomon has come to 
the conclusion that the best way 
to motivate its top executives - 
the ones who generate the bulk 
of the firm's earning s - is to tie 
their pay directly to performance. 
This way, the Interests of the 
employees are closer to the inter- 
ests of the whole firm. 

However, Salomon is not going 
to mimic Goldman exactly. Salo- 
mon is owned by its sharehold- 
ers, and there are no plans for a 
management-led buy-out Nor are 
there plans to use senior execu- 
tives' money as risk-taking capi- 
tal, as happens at true private 
partnerships such as Goldman. 

Instead, Salomon's ruling tri- 
umvirate - chairman Mr Robert 
Denham, chief executive Mr 
Deryck Maughan, and chief 
shareholder Mr Warren Buffett - 
are seeking to create a hybrid, 
what Mr Maughan likes to call a 
"synthesis of public capital and 
private partnership”. 

Ten days ago, Salomon took 
the first step towards that goal 
when it unveiled a new system 
for compensating the 140 or so 
managing directors in its client- 
related businesses - the top 
bankers, salesmen, traders and 
analysts who serve the broking 
and investment banking needs of 
Salomon's institutional clients. 

Under the new pay plan, which 
will be introduced in January, 
the managing directors will be 
paid a guaranteed minimum 
annual salary totalling just 35 


per cent of their 1994 compensa- 
tion. They will not begin to earn 
any bonuses (which traditionally 
make up the bulk of their earn- 
ings) until the entire client- 
driven business earns at least a 7 
per cent return on equity capital. 
Once that threshold has been 
exceeded, the managing directors 
will receive 40 per cent of any 
additional profits. 

At the same time, a new pay 
plan is being introduced in Salo- 
mon's proprietary trading 
operations, where the firm trades 
its own money in the financial 
markets. From next year, manag- 
ing directors in proprietary trad- 
ing will be paid from multi-year 
deferred accounts. These 
accounts will pool traders’ 
bonuses over a period of several 
years, but if proprietary trading 
loses money at any time during 
the period, some of the bonuses 
from profitable years will be 
retrieved from the pool. 

The aim of the new compensa- 
tion plan at Salomon is to intro- 
duce a notion that is truly radical 
by the standards of Wall Street’s 
public firms - downward mobil- 
ity in managing directors' pay. 

Salomon's management 
believes the lack of pay flexibility 
is the problem with the current 
system. At the moment, when 
the firm prospers, so do the high- 
est-paid employees, in the form of 
big bonuses. The shareholders 
also benefit, in the form of a 
higher Salomon share price and 
dividends. When Salomon suf- 
fers, the shareholders bear the 
brunt of the poor performance 
through a lower share price and 
dividends, while the managing 
directors are cushioned by com- 
pensation packages that are gen- 


erous enough to ensure Salo- 
mon's pay remains competitive. 

This divergence between pay 
and performance is exactly what 
Salomon is experiencing this 
year. Barring a spectacular recov- 
ery in the fourth quarter, the 
firm will lose money in 1994, 
while employee compensation 
will decline only slightly (cur- 
rently, pay costs are down only 7 
per cent compared to a year ago). 

While the new pay system may 
help Salomon control its costs 
better in coming years, it will do 
nothing to address the underly- 
ing problems that have left the 
firm nursing losses on both its 
client-driven and proprietary 
trading businesses this year. 

Salomon remains relatively 
sanguine about the poor perfor- 
mance of its trading unit, which 
has lost $2lm so far this year. 
The firm points out that its pro- 
prietary trading strategies are 
designed to be profitable over the 
long-term, and says that the 
results of the business should not 
be judged aver any period shorter 
than four quarters (over the last 
12 months, proprietary trading 
has made a profit of S487m). 

Salomon has had a harder time 
explaining why its client-driven 
business has performed so badly. 

Salomon has lost $526m on its 
client -driven business so far this 
year, compared to profits of 
SS05m in the same period of 1998. 
This dramatic deterioration was 
attributed to mismanagement of 
derivative like securities known 
as collateralised mortgage obliga- 
tions (CMOS). The value of CMOs 
plunged earlier this year when 
the mortgage-backed bond mar- 
ket slumped. 

Since then, Salomon says it has 



Ota 1993 1994 

Total op e r a ting Income 

(Sm) 

1.000 


Otm 1993 


1994 


Employee compensation 

(*m) 

— 1.000 



Otrs 1993 


1994 


Otrs 1883 


1994 


cleaned up the mortgage-backed 
mess, bringing in new manage- 
ment to the department selling 
off a large part of its inventory of 
CMOs, and introducing strict 
new position limits for its trad- 
ers. The rest of its client-driven 
business, the firm insists, is 
healthy. 

Salomon’s managing directors 
must hope so, because from Jan- 
uary, their meagre salaries will 
only be supplemented if the cli- 
ent-driven business generates 
substantial profits. 

The firm says that the changes 


to compensation have the sup- 
port of most of its managing 
directors, bat admits there is 
some unhappiness. To reassure 
them that the changes are for the 
good, Mr Maughan has already 
begun to talk of the role of “part- 
ners" at the firm. As a former 
Goldman Sachs investment 
banker, Salomon's chief execu- 
tive knows only too well about 
the risks and rewards of partner- 
ships. His managing directors 
can only hope that in the coming 
years, the rewards will compen- 
sate for the risks. 


Lloyd’s 
capacity 
forecast 
to shrink 


By Ralph Atkins, Insurance 
Correspondent, In London 

The underwriting capacity of 
Lloyd's of London will shrink 
next year - in spite of the injec- 
tion. of fresh capital from corpo- 
rate investors, according to Mr 
Peter Middleton, the insurance 
market's chief executive. 

Lloyd's authorities are expec- 
ted to begin work next year on a 
three-year business plan, to start 
in 1996. They hope that 1996 and 
1997 will mark a decisive revival 
in the markets' prospects after 
the heavy losses reported in 
recent years. 

Mr Middleton said Lloyd's had 
to make substantial progress in 
cost control if it was to ride out 
an anticipated downturn in 
insurance rates. He hinted that 
the trend towards direct policy 
writing would lead to a review of 
the markets’ relationship with its 
brokers. 

He added that one of the most 
decisive events would involve 
Newco - the company Lloyd’s 
has set up to take over outstand- 
ing liabilities on old policies, par- 
ticularly US asbestosis and pollu- 
tion niaimc dating fr om the 1940s. 

Mr Middleton envisages put- 
ting the 1985 and prior liabilities 
into Newco at the end of 1995. He 
said the other “open years" - 
1986 and later - would he put 
into Newco at the end of 1996. 

Lloyd's leaders believe that if 
Newco is successful, corporate 
capital could be attracted back to 
a trouble-freed Lloyd's. That sce- 
nario. however, also a 

settlement Is reached with the 
loss-making Names seeking com- 
pensation in court 

Mr Middleton said applications 
had been made by about 30 corpo- 
rate vehicles to enter the market 
next year. But investors* appe- 
tites have waned, with shares in 
most quoted Lloyd's companies 
trading below listing price. Mr 
Middleton forecast corporate 
investment next year would be 
only about £250m ($41 0m) more 
than the £900m committed in 
1994 (the first in which corporate 
capital was allowed). 

Under Lloyd's rules determin- 
ing the amount of business being 
underwritten, that should 
increase capacity by about 
£500m. But an estimated 1.000 
Names have resigned and others 
are expected to reduce their 
underwriting in 1995. Thus total 
capacity is forecast by Mr Middle- 
ton to fall to between about 
£9.25bn and £9.5bu from £10Abn 
in 1994. 


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UNILEVER 

Ice cream sales 
help sweeten 
pre-tax profits 

^ Soaring ico cream sales could be the 
third-quarter success story Unilever 
chooses to highlight on Friday when it 
% reports a rise of some 9 per cent in 
• pre-tax profits to £7l0m ($l.lbn). 

The Auglo-Duteh consumer products 
group, the world's largist Ice cream 
maker, will be grateful tor any topic, 
which takes minds off Us detergents 
war with Procter & Gamble. 

Since the spring launch of PersU 
Power in the UK and Omo Power on the 
continent. P&G has ceaselessly 
exploited the products' flaw. Its 
manganese catalyst reacts with some 
dyes, leading to a deterioration in the 
textiles. Unilever says the problem is 
now under control with any damage 
falling outside garments' life span. 

Unilever has successfully cordoned 
off the Power problem in invest ors* 
minds, pointing out that the detergent 
forms only some 1 % per cent of its 
global sales. The research, development 
and marketing expenditure cm Power 
has been large, however. Sales, sharply 
curtailed by bad publicity, are a long 
way from giving a reasonable return on 
the investment- * ■ 

Ice cream is a different story. . 
Unilever has 40 per cent of the $9.84bn 
European market, and an upturn in the 
' thiid quarter should lift the group's 
total European profits, which were flat 
at the interim stage. North Ame rican 
profits should get a similar boost from 
the acquired Breyers ice cream 
.business. - • 

Personal products, such as soaps and 
■ shampoos, and specialty chemicals, will 
also contributeto the quarter’s upturn, 
as will another sharp rise in.profits 
from Unilever's busmeGses.in 
developing economies. 

On theoBgatlveside,mterest costs 
are risingrapROy^Net debt is "up and 
fovomable intarest rate differentials 
have reversei The third quarter . - 
dividend, however, is forecast to rise • - 
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Share price (pence) 
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S G WARBURG 

Analysts upbeat on 
earnings forecast 

Investment bank S. G. Warburg on 
Tuesday will announce earnings tor the 
six months ended September 30. 
Securities analysts are offering no 
prizes for guessing the results. 

Last month Warburg put out a profits 
warning, saying it expected to report 
earnings of £55m ($90.2m) to £65m for 
the period, down sharply from the 
£l48£m in the same period in 1993. 

Analy&s at BZW predict the actual 
number will be near the higher end of 
the forecast range. However, those at 
James Capel estimate that the actual 
profits may be higher than forecast. 

Even so, analysts said the investment 
hanking division is unlikely to have 
provided a return on capital of more 
than one per cent 

Given that Warburg's 75 per 
cant-owned subsidiary. Mercury Asset 
Management, has said it expects 
earnings for the period to be somewhat 
above the £50.4m it reported last year, 
the statement suggests the investment 
bank's profits were modest 
' Mr Philip Gibbs, analyst at BZW, 
notes that the investment bank has 
several divisions such as custody and 
sales-aid teasing which atone could 
account for the difference between the 
MAM profits and the Warburg full 
group profits. 

Analysts said Warburg’s profits 
picture tuiderscores the.merits of 
maintaining a healthy asset 
management arm. 


OTHER COMPANIES 

Siemens in line with 
beleagured sector 

Siemens: Preliminary 1993/94 results 
from Siemens on Wednesday are 
expected to reflect the lagging recovery, 
lower financial earnings and ferocious 
competition afflicting the electrical and 
electronics sector. There has been no 
change In official forecasts of a 10 to 15 
per cent fall in net earnings in the year 
to end September, though profits were 
down only 6 per cent after nine months. 

■ Veba: Nine months sales and order 
data due on Thursday is expected to 
□nderpta forecasts of strong 
improvements. However, the 
information most keenly awaited is the 
identity of the group’s partner for its 
growing telecoms business. Mr Ulrich 
Hartmann, the chairman, has said 
potential partners must have 
experience of liberalisation and be 
several years ahead of Veba. 

■ Japanese steel: Japan's steel 
companies will anno unce half-year 
results on Friday. Total recurring 
losses, before extraordinary items and 
tax, at the top five steel companies - 
Nippon Steel Kawasaki Steel. NKK. 
Sumitomo Metal Industries and Kobe 
Steel - are forecast to expand by 7.3 per 
cent to Y12Gbn (31 Jlbn). The figure is 
smaller than earlier predictions due to 
cost cuts and increased crude steel 
production. 

■ Wcstpac: Analysts expect profits of 
around A$700m (S538m) when Westpac 


reports its September year-ends on 
Tuesday. They also predict around a 10 
ceut final dividend, giving shareholders 
a total of around 18 cents for the year, 
compared with 12 ceuts last year. The 
results are being viewed as a test of the 
managerial skills of Mr Bub Joss, 
installed as Westpac's managing 
director in January 1993. At that time 
the bank was beset by problems in its 
loan portfolio and reported a A$1.5bn 
net loss for 1991/2. 

■ Cable & Wireless and British 
Telecom: Interim pre-tax profits of 
£550m ($902m> to £580m are forecast for 
C&W, which at mid-point is about 11 
per cent up on last year's £509m. 
Continued strong growth at Hongkong 
Telecom. C&W's largest profit earner, 
will be offeet by slower growth at 
Mercury, its UK subsidiary, which is 
fighting rising competition. Analysts 
predict BT second-quarter pre-tax 
profits of il750ni to £600in. after about 
£100m in redundancy charges. That 

compares with £74om last year after 
redundancy charges, giving underlying 
profits growth at mid-point of about 4.5 
per cent. 

■ Commercial Union and Royal 
Insurance: Two of the UK's largest 
insurance companies, Commercial 
Union and Royal Insurance, are 
expected to report sharply higher 
profits for the first nine months of 1994. 
CU results on Wednesday are forecast 
to show pre-tax profits of about £285m 
($467.4m) compared with £I44m last 
time. RJ is expected on Thursday to 
report pre-tax profits of about £310m, 
against £11 jm last time. 


Companies in this issue 


ABN Amro 

21 

Deutsche Telekom 

21 

London UnneC 

20 

Airbus Industrie 

1 

Domtar 

21 

Lu*ottica 

21 

BCf 

21 

Ebro 

21 

Mownpich 

21 




21 

Nissan 

18 

Banco Ambroveneto 

21 

Edizione Holding 

20 



Queens Moar Houses 

Banco Santander 

21 

Fisher and Paykel 

21 

SME 

21 

CrecSop 

21 

Grupo Terras 

21 

SPH 

21 

Cnjdlto Italians 

21 

Interbank 

21 

Salomon Broiners 

19 

Credits RomagnoJo 

21 

In 

21 

Tadpole Technology 

20 

Deutsche Bank 

19 

Lloyds 's 

19 

TeieWest 

20 


This announcement appears as a matter of record only. 


Moscow Narodny Finance B.V. 

t incorporat'd ui The Netherlands with limited liability and having its stanaary seat in Amsterdam ) 


U.S. $75,000,000 Guaranteed 
Floating Rate Notes due 1999 


irrevocably and unconditionally guaranteed by 

Moscow Narodny Bank Limited 

t incorporated in England and Wales with limited liability) 


West Merchant Bank Limited 

Merrill Lynch International Limited 
Barclays de Zoete Wedd Limited Standard Bank London Limited 

October. 1994 






FINANCIAL TIMES MONDAY NOVEMBER 7 1994 



COMPANIES AND FINANCE 


Ordinary holders may get 
small part of Queens Moat 


By Peggy HoWnger 

Ordinary investors in Queens 
Moat Houses, the heavily-in- 
debted hotels group, may find 
their shares are not completely 
worthless when the protracted 
£l.3bn debt restructuring is 
agreed later this month. 

Initial Indications are that 
ordinary shareholders will be 
left with a slice, albeit small, of 
the company which is expected 
to seek a relisting in the new 
year. 

The battle to keep ordinary 
shareholders in the picture has 
not been an easy one. There 
had been strong demand from 
banks to leave ordinary share- 
holders with little more than 
option paper. 

However, a Queens Moat 
adviser said this weekend that 
"shareholders may be pleas- 
antly surprised" when they 
read the details of the refinanc- 
ing. 

These are likely to be pub- 
lished at the end of this month 
or early next and will include a 


substantial debt-for-equity 
swap and extended maturity 
dates on certain tranches of 
debt 

Before that can happen, how- 
ever, Queens Moat's 74 lenders 
will all have to sign on the 
dotted line. Reaching agree- 
ment in principle - a stage 
which Queens Moat is expected 
to complete almost any day 
now - is only the first step. 

After that, it is likely to take 
between two and three weeks 
for the banks to return the offi- 
cial documentation, which will 
allow Queens Moat to present 
its hard-won refinancing to 
shareholders. 

Investors will then have 
three weeks in which to peruse 
the details before being asked 
to vote on the issue at an 
extraordinary general meeting. 
If approved, the refinancing 
can start and the company will 
then approach the Stock 
Exchange for a relisting. 

All this means that share- 
holders are not likely to see a 
refinancing circular before the 


end of this month, or possibly 
early next A relisting will cer- 
tainly not be possible before 
next year. 

Such delays should be famil- 
iar to the thousands of inves- 
tors who have been largely left 
in the dark for the past year. 

In spite of almost immediate 
support from most of the 
group's 74 lenders when pro- 
posals were first sent out in 
April this year, the process has 
been held up by a number of 
behind-the-scenes setbacks. 
These have included disputes 
with lessors of certain hotels 
over concessions to be made as 
part of the package and objec- 
tions from secondary-debt trad- 
ers. 

Most of the objections have 
now been resolved. Only Trust 
Company of the US - which 
bought Queens Moat debt in 
the secondary market - and a 
continental European bank are 
still holding out. Nevertheless, 
Queens Moat is confident it 
will be able to complete the 
refinancing before Christmas. 


TeleWest attracts institutions 


By Raymond S noddy 

Institutional Interest is 
believed to be considerable In 
the flotation of TeleWest, the 
largest cable company in the 
UK and the first to come for a 
London listing. 

The pathfinder document to 
be published today will suggest 
a likely value for the company 
- a joint venture between TCf 
of Denver, the largest US cable 
operator, and US West the 
regional US telephone com- 
pany - of between £1.6bn and 
£l-9bn- The company will place 


about 20 per cent of its ordi- 
nary shares in Loudon and 
New York in a move designed 
to raise between £300m and 
£390m in new money. 

The flotation will test the 
market for new media stock in 
advance of the much larger 
British Sky Broadcasting float 
later in December. 

Although satellite television 
has more than four times the 
number of subscribers as the 
cable networks, many analysts 
see cable as the better 
long-term bet because it can 
offer a wide range of services 


apart Cram television, includ- 
ing telecommunications and 
new interactive services. 

Mr Fred Vierra, executive 
vice-president of TCI responsi- 
ble for international operations 
wiU become non-executive 
chairman of IfeleWest 

The non-executive directors 
will include Sir Gordon Borne, 
former director general of Fair 
Trading and a current non-ex- 
ecutive director of the Mirror 
Group, which has recently 
announced Its intention to 
launch a new television chan- 
nel for cable networks. 


New Tadpole PC will tap greater market 


By Alan Cane 

Tadpole Technology, market 
leader in high performance 
notebook workstations, will 
announce today that it has 
developed the world's most 
powerful portable personal 
computer. 

The new machine will be 
available from the beginning of 
□ext year. It will give the Cam- 


bridge-based manufacturer 
access to a vastly greater mar- 
ket than its existing workstat- 
ions, which are intended 
chiefly for scientists and engi- 
neers. 

Workstations are more pow- 
erful than PCs and are corre- 
spondingly more expensive. 

According to Mr George 
Grey, Tadpole chief executive, 
the P 1000 is likely to find a 


ready market among personal 
computer users with a need for 
substantial computing power 
on the move. He gives as exam- 
ples three-dimensional model- 
ling, multimedia demonstra- 
tions, data collection and 
real-time analysis. 

Tadpole’s reputation rests on 
its ability to shoehorn complex 
computing electronics into 
notebook sized packages. 


Smallest 
companies 
outperform 
the rest 


By Bethan Hutton 

The very smallest companies 
are continuing to outperform 
all other sectors so far this 
year, according to Hoare 
Govett's new smaller company 
index. 

Over the first three quarters 
of 1994. the a G 1000 index 
produced a return of 4.4 per 
cent, or 6.7 per cent for the 
version excluding investment 
trusts, compared with nega- 
tive returns of between 0,7 and 
8.6 per cent for the FT-SE 100, 
350. AU-share, Mid 250 and 
Smallcap. 

The HG 1000 index, which 
was launched officially in 
August but has been calcu- 
lated since the start or 1993, 
covers the bottom 2 per cent 
by market capitalisation of the 
UK equity market, excluding 
investment trusts. 

When investment trusts 
within the same market capi- 
talisation limits are inclnded, 
the trust has 1,000 constitu- 
ents. The largest companies in 
the index have market capital- 
isations of jnst over £50nu the 
smallest are under £lm, and 
more than half are valued at 
less than £I5m, though in 
value terms, half the iudex is 
accounted for by companies 
capitalised at £30m or more. 

During 1993, the HG 1000 
index produced returns of 60.8 
per cent (60.4 per cent exclu- 
ding Investment trusts), com- 
pared with returns of less than 
30 per cent for the FT-SE 100, 
350 and All-Share. Hoare 
Govett's main smaller compa- 
nies Index, the HGSC which 
covers the bottom 10 per cent 
of the market returned 44 per 
cent. 

When the index was back- 
calculated to 1955. its average 
annual total return was 21.1 
per cent a year, against 14.5 
per cent for the All-share 
and 18.7 per cent for the 
HGSC. 

A report on the index says it 
acts as a complement to the 
FT-SE-A All-Share Index: 99 
per cent of the All-Share’s con- 
stituents are too large to be 
Included in the HG 1000. 

However, the report's 
authors acknowledge that 
liquidity can he a problem at 
this end of the market 


Vultures 

Alison Smith oh 

V ultures seem to be hov- 
ering over some UK life 
insurance companies. 
Across tlie sector, companies 
have had to cope with the ris- 
ing costs of meeting increas- 
ingly tough regulatory stan- 
dards. and have bad to accept 
that selling opportunities are 
being forgone as sates forces 
spend more time being trained. 

These difficulties come 
against a background of wide- 
spread public concern about 
the possible mis-selling of per- 
sonal pensions to people opting 
or transferring out of occupa- 
tional schemes, which has 
depressed new business. 

A further consequence is 
that many independent finan- 
cial advisers are likely to go 
out of busuiess in the process 
of compensating the vie tuns of 
poor pensions advice. This 
would intensify competition 
among life Insurers to win 
business through the remain- 
ing independent advisers. 

Even before the Securities 
and Investments Board, tbe 
City's chief regulator, focused 
attention on the cost of pen- 
sions compensation - which 
one estimate puts at £2bn - a 
forecast by actuaries Bacon & 
Woodrow suggested that 
within a decade about 40 life 
companies would be struggling 
still to sell life insurance. 

Just two days after that fore- 
cast was published in late Sep- 
tember. the life sector received 
a further reminder of the fra- 
gility of some companies. Str 
Mark W^teerg. a leading fig- 


ready to pick the weakest 

a likely shake-out in the life insurance industry 


ure in the UK life industry, 
announced plans for a new 
company with £l00m capital to 
acquire life companies, close 
them to new business and 
manage their existing funds. 

Though Sir Mark dislikes the 
term, the venture is a version 
of what many in the life sector 
call “vulture life". It depends 
on picking up life companies 
which can no longer survive 
on their own and living off the 
business they have already 
acquired. 

The plan is a joint venture 
with New York Life World- 
wide, whose subsidiary. Wind- 
sor Life, has already been in 
this line of business in a 
smaller way. 

All this has sharpened inter- 
est In which companies are the 
weakest and what the options 
available to them are. 

Mr John Wybrew, chairman 
of Windsor Life and chief exec- 
utive of the new company, sees 
small and medium-sized 
mutual Insurers as most vul- 
nerable. They are owned by 
their policyholders, and cannot 
raise money through share- 
holders. They could thus suffer 
from lack of access to capital. 

On the other hand, the lack 
of any institutional share- 
holder reduces the prospect 
that a company's management 
would find itself forced to 
address its fixture if it did not 
want to do so. The other cate- 
gory widely identified as poten- 
tially vulnerable is small and 
medium-sized subsidiaries of 
overseas parent companies. 


Bacon & Woodrow's report 
showed that the 37 life compa- 
nies of this type had the high- 
est average expense ratio in 
the sector, putting them in a 
weak position if competition 
took the form of a price war. 

Two other characteristics 
could also be important for 
tfrfc type of company. First 
they could be particularly hard 
hit by the need to compensate 
vict ims of poor pensions 
advice. As "unit-linked" com- 
panies. the structure of the pol- 
icies they sell does not . give 
them the discretion available 
to companies selling "with 
profits" policies, where signifi- 
cant amounts of money in free 
reserves have not been strictly 
allocated to policyholders. 

S econd, the decision would 
ultimately be not for the 
management of the life 
company but for the parent 
group, which could be 
approached directly by a preda- 
tor and might decide it was 
time to leave an increasingly 
competitive UK market 
For companies deciding that 
they cannot survive alone, 
there seems broadly two 
options: sale to a "vulture 
fund" or takeover by a large 
insurer which would want to 
keep them as part of a continu- 
ing business. The expectation 
is that many managements in 
that position would prefer to 
be part of a going concern. 

Sir Mark, however, identifies 
a third option - splitting a life 
company and selling different 


elements to different buyers. 

“There is no reason why a 
c o m pany shouldn’t be unbun- 
dled into a sales operation and 
a closed fund,” he says. It 
offers a chance for the com- 
pany buying a sales force to 
improve its distribution capac- 
ity quickly, without the costs 
of recruiting and training. 

As an example of demand for 
direct sales forces alone, he 
points to Allied Dunbar's pay- 
ment in March for the right to 
recruit the 600-plus sales force 
available when Hill Samuel 
closed to new life and pensions 
business. 

This approach depends on 
the sales operations being seen 
as a separate source of value 
rather than of expense. Mr 
Michael Wadsworth, a partner 
at consulting actuaries Wat- 
sons. is not convinced. 

"Usually in those circum- 
stances. the distribution is not 
worth very much, either 
because the sales operation is 
not very good quality, or 
because - In the case of a com- 
pany selling through indepen- 
dent advisers - it merely repli- 
cates the potential purchaser's 
existing ability to sell." he 
says. ' 

The gloom over the sector 
need not translate into a cull of 
life companies tomorrow: even 
tbe smallest have millio ns of 
pounds in funds and do not 
need to decide Immediately 
that they canno t survive. The 
longer-term trends mean, how- 
ever, that the vultures will 
continue to circle. 


London United 
in £23m buy-out 

By Graham Bowrtey 

London United, the west 
London bus company, has been 
bought by its staff in a £22. 9m 
deal, backed by Montagu Pri- 
vate Equity and 3i, the invest- 
ment capital group. 

It becomes the ninth London 
bus company to be sold by 
London Regional Transport 
this year and almost completes 
LRTs privatisation programme 
which so far has raised more 
than £2 Urn. 

London United, operates 450 
buses in south-west London, as 
well as tbe Heathrow to central 
London Airbus, it employs 
1.450 staff and had £36.6m turn- 
over in the year to March 1994. 


CROSS BORDER M&A DEALS 


BIDOER/tNVESTOR 

TARGET 

SECTOR 

VALUE 

COMMENT 

Astra fSwedenVMerck 
(US) 

Astra Merck (JV) 

Pharmaceut- 

icals 

£517m 

Developing 
earlier accord 

Thomson Carp (Canada) 

Information Access Co 
(US) 

Computer 
services . 

£293m 

231! continues 
disposals 

Allied Domeeq (UK) 

Domeeq (Spain) 

Drinks 

£2804m 

Minority taking 
put option early 

Carter Holt Harvuy 
(New Zealand) 

' Unit at Bowatsr (UK) 

Papa & 
packaging 

Cl 59m 

Bowater Australian 
disposal 

Laid law (Canada) 

US Pollution Control 
(US) 

Waste 

management 

■Cl 42m 

Exclusive talks 
under way 

HNV Acquisition (US) 

Heron International (UK) 

Property 

Cl 42m 

Bondholders 
oppose bid 

Softbank (Japan) 

Unit of Ziff Comms (US) 

Business 

services 

El 27m 

Ziff trade 
shows disposal 

Amcor (Australia) 

RIG Rentsch (Switzerland) 

Packaging 

£S2m 

Continuing aggress- 
ive expansion 

Saga (UK) 

Saari (France) 

Computer 

services 

C18.5m 

Second French 
venture 

Caparo Group (UK) 

Sharon SpedaBty Steel 
(US) 

Steel 

El 6.4m 

Buying bulk of 
assets 


EH 


GREEK EXPORTS S.A. 

(Founded & Owned by ETBA S.A.) 
DENATIONALISATION 

INVITATION FOR EXPRESSIONS OF INTEREST IN PURCHASING 
THE ASSETS OF GENERAL AND INDUSTRIAL ENTERPRISES - VEPOL S-A. 

NOW UNDER SPECIAL LIQUIDATION 

GREEK EXPORTS S.A.. established in Athens at 17 Panepistimiou Street, in its capacity as special 
liquidator of GENERAL INDUSTRIAL ENTERPRISES - VEPOL S.A. (in accordance with Decision 
No. 7820/1992 of the Athens Court of Appeal, by which VEPOL SA. has been placed under special 
liquidation) and within the framework of article 46a of Law 1892/90, as supplemented by article 14 of 
Law 2000/91 and complemented by article 53 of Law 2224/94, 

INVITES 

interested investors to express their interest in purchasing the total assets of GENERAL INDUSTRIAL 
ENTERPRISES - VEPOL S.A. now under special liquidation, by submitting a non-binding, written 
expression of interest within twenty (20) days from today. 

Brief Description of the Company under Liquidation 

GENERAL INDUSTRIAL ENTERPRISES - VEPOL S.A. was founded in 1970 and set up a factory 
in the Eposkopi area of Naoussa in the province of Imathia ( on the Vcrria-Edcroa National Road at the 
crossroads of the road to Episkopi) for processing and standardising fruit and gardening products. 

The company's basic factory equipment includes: a) a tomato paste production line, b) a complex for 
refining and concentrating tomato pulp, c) apricot sorting and pit-removing machinery, etc. 

The factory is built on a plot of land 46,9 stremmas in area. Near it, there is another plot of land 
belonging to VEPOL S.A. 12-9 stremmas in area (the plots are separated by the road that leads to 
Episkopi). 

The total area of the buildings owned by the company is 9.279 m2 as follows: a) Factor)' buildings: 
4,500 m2, b) Storehouses: 3,834 m2, c) Various auxiliary buildings 945 m2, d) Total: 92279 m2. 
Because of serious economic problems faced by VEPOL S.A. the factory has not been operating in 
recent years. 

Details concerning the public auction 

Prospective buyers, after signing a written undertaking of confidentiality, may receive the Offering 
Memorandum from the offices of the liquidating company. 

They will also have access to any other information they may seek and may visit the premises of die 
company under liquidation. 

The Offering Memorandum will describe in detail the total assets of VEPOL SA. for sale and any 
other information considered useful for the prospective buyer. 

The announcement of the public auction will be published within the prescribed time limits and in the 
same newspapers. 

For any further details or information please apply to: 

a) GREEK EXPORTS SA. [7 Panepisrimou Street, ( 1st Floor). Athens. Greece. 

Tel. +30- 1- 324 3 1 1 1 Fax:+30-1-323.9185. 

b) The head office of EBTA S-A. Holdings Department, S7 Syngrou Avenue (4th floor). Athens, 
Greece, TeL +30-1-929.4611 and 929.4613 


A 


=x 

sitary \ 


US. $150,000,000 
Floating Rate Depositary 
Receipts Doc 1999 

lirunl I* Tkr Ln, DrbrMurr 
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pm qRgretiur fvmn/ul tom utu uf 
V.S. S1.V.OOOMJO ntrft 

Q CS/& csntPtL® 

London Branch 

In aciMxfcuKc with l be pnrviswo- of 
Ihe Dtptukanr Receipt-- nonce is 
hereby giten dui Ibe Ram uf [men.-* 
lor liM three month penal ending 7ih 
February 19*>J tui been li-cd at 
S.8SI5fth per annual The inlav-t 
.waving lor MKfi three iircith period 
will be U.S. SIJ.9S per US. SI.IJU0 
Receipt. US. SIW.5J per U.S 
SlOjmn Jtautpl and U S. SI.4V5.JO 
per U S. SlnujKO Receipt up-aunt 
ptevrouikio of 0.-1 pm Nn I. 

FIRST CHICAGO 

Tlw first Ncaoral ct OUcago 

7lh November. 1944 

Agon Bank 





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History on Compact 
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IS YEARS OF HISTORICAL PRICES FOR 
CASK. FUTURES. OFTIOS AND 
INDEX MARKETS 

® YEARS OF FUNrMMHJTAL INFORMATION 
C*t OVERBUCOMWCWTTES 
SlmBor to Ibe tatormubo round M Ihe CRB 
Ceomu&y Year Buuk. Ac TriNe’ of ihe 
hum tnikony. in oddliton M 
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price opfoccs via KHrOnulc, Knight- KhMcrY 

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dtacdlv into ytjnr ibUhmr. 
INFORMATION: Bbnifer Vakil 
KR I Ur*. 7R Fleet Street. LardJnECJY UlY 
Td: r-WlOt 71 842 JUST 




ASF! NAG 


Autobahnen- und SdmeUsuasen- 
Finanzierungs* Akliengeselfcchaft 
u.s. s 2 n. 000.000 

Guaranteed Floating Rote 
Notes due 1996 

In acwolancc with the provisions of 
the Notes, notice is hereby given 
that the Rate of Imetwx for the 
three month period ending 6ih 
February. IW has been lived .it 
5.5875'Si per annum. The interest 
accruing for such three month 

? eriod will be U.S. S14S.9U per U.S. 
10 . t»n Beater Note, and U.S. 
Sl.45H.9ft per U.S. SIOOJKX1 Bearer 
Note, on ftdi Fvbmary. 1995 against 
presentation of Coupon No. 9. 
Union Bank of Switzerland 
London Brandi Agent Bank W 

2nd November. 1994 


LEGAL NOTICES 


INTHE HIGH COURT OF JUSTICE 
CHANCERY DIVISION 

IN THE MATTER OF 
CANNON LINCOLN INSURANCE 
SERVICES LTD 
-•ad- 

in the matter of 

THE COMPANIES ACTS ISIS 

NOTICE IS HEREBY GIVEN that a Petiuon 
on the Mh dav of October IW pex'iwJ to 
Her MajcvtrS High Conn af Jvsllcc for the 
conflnuDcii of the mlootus of Hie Share Capital 
of Ihe above-runni Company Turn OtU.'JOfUni 
to &LSM.OOO by tolci alia mailing capital 
which U la etceu of Ac wants id the Company . 

AND NOTICE IS FURTHER GIVEN Hut the 
said Petition u directed to be heard before the 
Rcghuar of the Coca panic* Cowl at the Royal 
Cuuna of Jmtke. Strand, tur n i n g. WCZA 2AL 
on W orinrnta y Ibe 7lb day of December I **>4. 

ANY Creditor or Sharrholilei of the said 
Company dobing to oppose the nuking of an 
Older for the conRnubon ot the ail icUnctxw 
oi' Share Capital ehoajd appear at tbe time ot 
hearing h) penon or by Couavl (ot that (vrprc. 

A Copy oi the ml Petition ■•ill be (umhbcd i>, 
any such penon reguiritg the same by the 
oadermenrfoned Sotiaion on jurmenr uf i he 
regained darge for the same. 

DATED 4Ui day uf November, |VM 
Tbe Bnmgh Steered! La* Partnership 
OneDyen Balldings 
LuoJuaECIN 2SX 

Sofcawn for the above- named Company . 


No.iwsmofunj 

IN WJjH5H.COHHT Of JUS3TCE 
QlANCEBr PIVBiqS 

IN THE MATTER OF 
CITY OF WESTMINSTER ASSURANCE 
COMPANY LLWrTED 
•nad- 

I]t THE MATTER OF 
THE COMPANIES ACTS l«S5 

NOTTCE IS HEREBY GIVEN tkal Ihe Order td 
the High Court at tnnee. Chancery Divieam 
dated 20th October inoj eualttimng ibe 
redaction ot abate capital ul the above nnwd 
Company l root C2S JIliUKu to fc* vnuon and 
the Mtnare -nvru-vd by the Court alhn-ui y uah 
tecpccl to foe capital of foe Company it abend 
foe trverel particular* retired by the above- 
mentteed Act were rcgmttcd by foe Rcftuiai 
at CuoBunlea tm Si (\mtrr I V9J. 

DATED tbe Jib day of November l‘*M 

Tbe Brough Shentll Law Partnership 

One Dycn BelUtnea 

London ECIN »X 

Sd idton Cor the atove-omed Company 


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FT CONFERENCES 

WORLD ELECTRICITY 
London, 7 & 8 November 1994 

The 1994 FT meeting, arranged Jointly with Power in Europe, wfi consider how 
utilities are responding to a more competitive environment: review 
developments in a number of key markets and discuss new fuels and new 
technologies in power generation. Speakers Include: Commissioner Norman 
Shumway. California Public Utilities Commission: Richard Cokhrall. The 
National Odd Company; Harvetta Asamoah, US Department of Energy. Hans 
Lundgren, Vattenrall AB; Dr Gregory Yurek. American Superconductor 
Corporation; Marc Ledbetter. BattaSe Pacific Northwest Labo r ato r y; Ian Brown. 
Hungary - EC Energy Centra and Michael Brown, Cogen Europe. 

NINTH EUROPEAN PETROLEUM AND GAS CONFERENCE 
Amsterdam, 15 & 16 November 1994 
This year’s meeting, timed to coincide with the PetroTech 94 Exhibition, wffl 
focus on European on refining end the market to the year 2000, considering 
current and future European capacity, product trends, new refinery Investment 
and environmental issues. Speakers include: TomiMro Tanlguchl, International 
Energy Agency, Phil Trimmer. BP Oil International: Mohammed Saleh Shalth 
Alt, The Bahrain National Oil Company Mohamad Yousef, Tamofl Itatta SpA; 
Dr Leonard Magrill, Texaco Limited; Gfibert Portal. EUROPIA; Chris Baxter, 
The Chase Manhattan Bank NA; Terry Davies, Pwvkt & Gerti Inc. and Jean- 
Pleire Reyrter. European Automobile Manufacturers Association. 

THE PETROCHEMICAL INDUSTRY - PROSPECTS FOR THE 
MID-1990S AND BEYOND 
London, 21 & 22 November 1994 
The shah FT petrochemicals conference, arranged In association with Chemical 
Matters, brings together a most authoritative panel of speakers to discuss global 
prospects tor this key industrial sector. Speakers Include: Bob Wilson. Exxon 
Chemical Europe Inc: Juha Rantanen. Borealis Holding A/S; HE Mr Ahmad 
Rahgozar, National Petrochemical Company and Deputy Petroleum Minister. 
Iran; Mohammad Al-Kalhlrl. SABJC Europe Ltd; Nyun Tae Kim, Yukong Ltd; 
Bryan Sanderson. BP Chemicals; James F»gg. Amoco Corporation and Andrew 
Butler. Dow Europe. 

DOING BUSINESS WITH SPAIN 
Madrid, 23 A 24 November 1994 
The FTs ‘94 conference, to be arranged with Expansion and Actualldad 
EconOmica. will take as Its theme ‘Spam Competing in Europe', focusing on 
economic reoovery, compemMty and liberalising markets. Speakers Include: D. 
Pedro Solbes Mira. Spanish Minister of Economy & Finance; D. Josft Maria 
Aznar, Partido Popular; D. Luis Angel Roco, Banco da Espana; O. Jos6 Antonio 
Gtlnan Martinet Spanish Minister of Labour & Social Security; D. Mlquel Roca 
Junyent. Convergence i Unl6 (CIU); D. Alberto Recarte Garcfa-Andrade, 
Centunion: D. Taonio del Pozo. BT Telecomunlcaclones SA; Mr Bernard 
Dumon, Saint-Louis Group SA, Professor Pedro Nueno Interna, IESE. 

FINANCIAL REPORTING IN THE UK 
London, 28 November 1994 

This year's conference will provide essential guidance for preparers and users 
of accounts on interpreting the complexities oi existing and emerging ASB 
standards. Issues to be covered wffl Indude: Accounting tor off-balance sheet 
fkrance; merger and acquisition accounting; valuing intangibles and brands; 
accounting lor derivatives. Speakers Include; Sir Sydney Lipworth DC. 
Financial Reporting Counci: Mr Chris Swlnson, Stay Hayward; Mr John Kallas. 
KPMG Peat Marwick; Mr David Cairns, international Accounting Standards 
Committee; Ms Mary Keegan, Price Waterhouse; Mr Peter Hoigate, Coopers a 
Lybrand: Mr Michael Blritin. Inlertorand Group Pic; Mr Michael Renshall, 
Financial Reporting Review Panel; Mr Ken Wild, Touche Ross A Co. 

DOING BUSINESS WITH HUNGARY 
Budapest, 14 & 15 November 1994 

With a new Government recently elected to office, this maJCT FT contwence win 
provide a timely opportunity foe a re-appraisal of Hungary's attractiveness as a 
location for foreign direct, and increasingly, portfolio investment. Speakers 
wdude: Dr Gyula Hon. Prime MWster of Hungary; Dr L Adi Bikesl. Minister ot 
Finance Hungary Professor BtHa KAdAr. Former Minister of International 
Economic Reianorts (1ER): Mr Ernst Hofmann, Opel Hungary; Mr Peter Atos 
Bod, National Bank of Hungary; Mr Ferenc Bartha, Government Commissioner 
tor Privatisation, Hungary; Dr Janos Manonyl. Former State Secretary. Ministry 
of Foreign Affairs. Hungary: Dr La)os Bokros, Budapest Bank Ltd and Budapest 
Slock Exchange,- Dr Qyorgy Surinyi, Centra/ "'European International Bank Ltd: 
Dr Mark von UBenskkdd, MATAV. 

THE POLISH HIGHWAY PROGRAMME - 
OPPORTUNITIES FOR PRIVATE FINANCE AND INVESTMENT 
Warsaw, 12 & 13 December 1994 

This Financial Timas conference, arranged m as sociation with The institution ol 
Civil Engineers (ICE), will marie the commencement ol the for t hcoming $8bn 
Highway Construction Programme wkh this high-level forum to explore the key 
chMenges - financial, technical, managerial and operational -to mounting mafor 
Infrastructure projects in Poland. Speakers Include: Mr Bogus! aw Uberadzld, 
Polish Minister for Transport and Maritime Economy: Mr Andrszej Patslas. 
Agency for Motorway Construction: Mr Mode] Oiax-SzezytowBkf, Schraders 
Poiand; Mr A Kern Rlffey. Bechtel Untiled; Mr Henry LJszka. Boris Poland; Mr 
Stephen Hoffman. Arthur Andersen Poland. 


Al enquiries should be addressed to: Ffnandal Times Conferences, P O Bo* 
36S1. London SWia8PH.UK. Telephone: 081-673 9000, Fax:061-6731335. 


THE HEVDUJA GROUP 

is pleased to announce the launch of 



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Subordinated Floating 
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interest Rate 
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Interest Amount per 
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MONDAY NOVEMBER 7 1994 


21 



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Ambroveneto claims bid 
by BCI is doomed to fail 


COMPANIES AND FINANCE 




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By Andrew Hill in Milan 

Banco Aznbrosiano Veneto, the 
Italian bank, claimed at the 
weekend that the takeover 
planned by Banca Commer- 
cials Italiana (BCD and 
announced only last week was 
already doomed to fail. 

Mr Giovanni Bazoli, Ambrov- 
eneto's chairman, confirmed 
on Saturday that the bank’s 
largest shareholders had 
agreed to renew and reinforce 
their defensive pact, which 
controls a majority of the 
' bank's shares. 

BCI wants to buy a 50.1 per 
cent stake in Ambroveneto for 
about Ll.750bn (Sl.ibnj, as the 
rationalisation of the highly 
fragmented Italian banking 
sector gathers pace. 

Another big Italian bank, 
Credito Italiano (Credit), is pre- 
paring to bid more than 
L 2. 000bn for a majority stake 
in the Bologna-based Credito 
Romagnolo (Rolo). Neither 


bank has yet tabled a formal 
offer. 

Mr Bazoli said at the week- 
end that Ambroveneto would 
strengthen its links with its 
two largest shareholders. 
Credit Agricole of France, and 
Crediop, part of San Paolo di 
Torino. Italy's largest banking 
group, each of which owns just 
over 15 per cent of the bank. 

Under the terms of the share- 
holder pact, they will buy most 
of the 13.52 per cent stake 
offered to them by a group of 
small banks from the Veneto 
region. Another shareholder - 
Gruppo Banca San Paolo di 
Brescia - has agreed to main- 
tain its 12.7 per cent stake as 
part of the pact. 

BCI has so far declined to 
comment on the latest develop- 
ments. let alone admitted 
defeat. Ambroveneto's share- 
holders have also remained 
silent, but Mr Bazoli believes 
the bank is now impregnable. 

“Integration [with BCI] 


would have destroyed half the 
value built up over 12 years of 
rebuilding Ambroveneto," he 
said on Saturday. 

Alleanza, the Italian insurer 
which owns 12 per cent of 
Ambroveneto, has still not 
decided whether to renew its 
commitment to the share- 
holder pact. Alleanza is part of 
Generali, Italy's biggest 
insurer. It is seen as an ally of 
BCI because all three compa- 
nies are linked to Mediobanca, 
the influential Milan-based 
merchant bank. 

Meanwhile. Credit has taken 
on J.P. Morgan, the US invest- 
ment bank, and Vitale Borgh- 
ese, an Italian merchant bank, 
to advise on Its bid for Rolo. 

The Bologna bank, which is 
being advised by Morgan Stan- 
ley and Goldman Sachs of the 
US, has resisted the Credit 
approach and is planning a 
defensive merger with its local 
rival, Cassa di Risparmio in 
Bologna. 


e: 



- ; --r.-a c - 

: .r;ic) 

■* ‘-i-i 

;-n 


.v 


Singapore 
Press lifts 
earnings 

By KIsran Cooke 
in Kuala Lumpur 

Singapore Press Holdings, the 
Island republic's largest pub- 
lishing group, has announced 
pre-tax profits for the year end- 
ing August 31 1994 Of S$403m 
(US5269m). a 31 per cent rise 
on the previous year's figure. 

Group turnover was up 16 
per cent to S$787.5m, mainly 
due to a 17 per cent rise in 
advertising revenue and a 7 
per cent increase in circulation 
revenue. 

Group investment income 
tnmased by S$l7m to S956m 
due to higher interest income 
and a S$23m profit from the 
sale of securities. 

Among extraordinary items, 
SPH says it made a SSISm 
profit from the sale of its stake 
in Hong Kong’s South China 
Morning Post newspaper. 

SPH publishes most of the 
leading titles in Singapore, 
including The Straits ’rimes, 
the Business Times, and the 
Sunday Times, leading Chinese 
and Malay newspapers, and a 
variety of popular magazines. 


Domtar returns to the 
black in third quarter 


By Robert Gibbons 
In Montreal 

Domtar, the Canadian forest 
products, packaging and build- 
ing materials group which last 
month replaced its president 
and chief executive after a 
boardroom policy dispute, has 
returned to profitability in its 
third quarter, with net profit of 
CS22m or 16 cents a share, 
against a loss of CS22m or 18 
cents a share a year earlier. 

Operating profit was C$64m 
(USS47J2m) against a loss of 
CS2m, and sales were up 31 per 
cent to C$573m. 

Nine-month net profit was 
C$4lm or 30 cents a share 
against a loss of C$85m or 69 
cents a share. Sales were 
C$1 .5bn p against C$125bn. 

Domtar, which is 42 per cent 
owned by two Quebec govern- 
ment agencies, was restruc- 
tured in 1992-93 after heavy 
losses due to the long north 
American recession. Its two 
newsprint mills were sold in a 
C$28Gm public offer last spring. 

The pulp and fine paper and 
packaging divisions posted a 21 
per cent third-quarter gain in 


sales, benefiting from higher 
product prices and a weaker 
Canadian dollar. Most produc- 
tion is exported in US dollars. 
Linerboard prices passed the 
1989 peak. 

The building materials divi- 
sion, which includes timber, 
w allboard and decorative pan- 
els and has plants in Canada 
and the US, improved operat- 
ing results. Plans to sell the 
waUboard business have been 
deferred. 

“We are now well positioned 
to make substantia] gains dur- 
ing this economic cycle," said 
Mr Stephen Larson, who has 
taken over as president 

Domtar also plans capital 
outlays of about C$350m in the 
next two years to raise effi- 
ciency and meet new pollution 
standards. 

• Investors Group, a financial 
services subsidiary of Power 
Corp of Canada, posted a net 
profit of C$61. 4m or 58 cents a 
share for the nine months to 
September on revenues of 
C$414m. up from C$48.7m or 46 
cents a share on revalues of 
C$468m. Sales of mutual funds 
were firm at C$3.4bn. 


ABN Amro 
expected to 
buy ailing 
Polish bank 


By Christopher Bob inski 
in Warsaw 

ABN Amro, the Dutch bank is 
expected to purchase the Inter- 
bank, an ailing Polish private 
bank, by tbe end of this 
month, according to officials 
at the National Bank of Poland 
(NBP), tbe central bank. 

The successful bid for Inter- 
bank, which reported a loss 
last year and is currently con- 
trolled by the NBP, comes 
against competition from 
Deutsche Bank, which also 
wants to establish a wholly- 
owned subsidiary in Poland. 

Both banks have chosen tbe 
takeover route for entry into 
Poland under pressure from 
the NBP, which has said it will 
not issue licences to new 
banks but wants investors to 
buy into existing banks which 
would thus consolidate the 
sector. Chase Manhattan, 
another unsuccessful appli- 
cant. has recently been 
reminded by Ms Hanna Gron- 
kfewicz Waltz, bead of the 
NBP, that this policy remains 
in place. 

interbank has two branches 
and losses worth 104bn zlotys 
(S4.5m) at the middle of this 
year, while its capital is val- 
ued at 167.6bn zlotys. 

ABN Amro is reportedly 
offering to pay 40 per cent 
over the nominal Interbank 
share price of 640.000 zlotys to 
existing shareholders and to 
invest $40m in the b ank . 

The Dutch bank is currently 
a partner in tbe Internationa] 
B ank in Poland, a joint ven- 
ture with two local banks, 
Credit Lyonnais and Banco 
Commerciale Italiana. 

The NBP recently issued a 
joint banking licence to Dresd- 
ner Bank and BNP in recogni- 
tion of the former’s role in 
negotiating Poland's recent 49 
per cent commercial bank debt 
reduction deal. Commerzbank 
of Germany has also just been 
given a permit to purchase up 
to 21 per cent of the stock in 
the Export Development Bank. 

The handful of foreign 
banks currently present in 
Poland, inclnding Citibank. 
Creditanstalt, ING and Raiffei- 
sen, were granted licences 
before 1992, when policy was 
tightened. 


Santander regains Edbro stake 


By Tom Bums in Madrid 

The fall of Barcelona financier 
Mr Javier de la Rosa, the for- 
mer chief Spanish executive of 
the Kuwait Investment Office, 
who is being held pending 
investigations into his business 
dealings, has prompted tbe 
return of Banco Santander as a 
major shareholder of Ebro, the 
leading domestic sugar and 
rice producer. 

The development raises 
questions about the continua- 
tion of Grupo Torras. the KIO's 
investment arm in Spain, as 
Ebro's biggest shareholder and 
could prompt a major equity 
restructuring of Spain's unset- 
tled sugar sector, paving the 
way for new investment, both 
domestic and foreign, in the 
industry. 

Santander recovered 9.9 per 
cent of Ebro through the exe- 


cution of the stake held in the 
company by Mr de la Rosa. The 
banking group had sold the 
equity to Mr de la Rosa in 1992 
and the shareholding had been 
offered by the financier as col- 
lateral for the loan he had 
received from Santander for 
the acquisition. 

Santander is now the second- 
largest shareholder of Ebro 
after the 36.5 stake held in the 
company by Torres, a purchase 
that was masterminded by Mr 
de ia Rosa before Torres began 
losing heavily two years ago 
and the KJO severed its rela- 
tionship with the financier. 

The return of the sharehold- 
ing to Santander eases the 
instability at the company 
which followed the fall-out 
between Torres and Mr de la 
Rosa, and could prompt the 
removal of its chairman Mr 
Manuel Guasch, who was 


brought into the company by 
Mr de la Rosa. 

The banking group, which 
has a policy of disinvesting 
from industrial assets, is likely 
to sell its Ebro stake as soon as 
it Judges the price to he right 
and the unresolved question is 
whether the KIO will use this 
development to dispose of its 
equity. 

"Torres has to take 3 drastic 
decision: whether it finally 
pulls out of Ebro or whether it 
stays as a stable shareholder 
and contributes to the growth 
of the company," said Mr Juan 
Bastos, of Madrid brokers Iber- 
securities. 

Last year, Torres indicated 
its willingness to sell its stake 
in the food group, which con- 
trols 54 per cent of Spain's 
sugar quota, but the continued 
presence of Mr de la Rosa as a 
major Ebro shareholder kept 


prospective buyers away. At 
the time Torres was under- 
stood to have sounded out Tate 
& Lyle. Germany's Stidzucker 
and Ferruzzi of Italy. 

The potential disposals at 
Ebro come in the wake of an 
attempt by Banco Central His- 
pano (BCH), to sell its control- 
ling stake in General Azuca- 
cera. the second-ranked 
domestic sugar producer, to 
Saint-Louis of France and the 
UK’s Tate & Lyle. Last week 
BCH was forced to drop the 
sale following strong objec- 
tions from the Spanish agricul- 
ture ministry. 

The ministry said it opposed 
BCH's planned sale to protect 
Spain's sugar quota in the 
European Union and stressed 
that any change in Azucacera's 
equity should be part of a 
wider restructuring of the big 
domestic sugar groups. 


Bonn to limit Telekom fees 


By Andrew Fisher In Frankfurt 
and Michael Undemann 
in Bonn 

The German government 
intends to hold down the costs 
of the planned DM15bn (SlClbni 
privatisation of Deutsche Tele- 
kom by keeping a tight rein on 
the fees of h anks handling the 
issue. 

Officials involved in the 
pl anning for the issue, expec- 
ted early in 1996. said total fees 
to banks should be under 3 per 
cent; this would comprise sell- 
ing, management and under- 
writing charges. They said the 
international trend was to a 
lower level of fees now the task 
of assessing investor interest 
was being made smoother by 
the book-building process. 

In the recent Lufthansa pri- 
vatisation. which raised some 
DMlbn. fees were just above 3 


per cent. This would mean a 
fee total of DM450m or so far 
the Telekom issue - in which 
25 per cent of the shares will 
probably be sold off in the first 
tranche - compared with the 
DM400m or less the govern- 
ment is considering. 

The choice of banks to head 
the issue has still to be made. 
Deutsche Bank and Dresdner 
Bank are expected to share 
overall management. Deutsche 
is likely to handle the interna- 
tional side - it said a week ago 
it was basing its investment 
banking activities in London - 
and Dresdner domestic sales. 
Several UK, US and Swiss 
banks are vying for the role of 
global co-ordinator one will 
also advise the government 

The officials said the govern- 
ment was keen that the Tele- 
kom issue should help promote 
the concept of share ownership 


among the German public and 
also encourage companies to 
offer more employee shares. 
Not enough companies and 
employee representatives took 
advantage of tax concessions 
intended to encourage 
employee share ownership. 

Nor is Germany as equity- 
conscious as some other coun- 
tries like the US or UK, they 
noted. Only 6 per cent of Ger- 
man households own shares 
and their private financial 
assets of some DM4,000bn 
include only 5 per cent in equi- 
ties and more than 40 per cent 
in bank deposits. 

The government does not 
want Telekom shares priced 
especially low just to encour- 
age small investors but it 
would like banks to reduce or 
waive (for, say, two years) han- 
dling fees for shares deposited 
with them by private investors. 


Better margins boost NZ group 


By Terry Hall in Wellington 

Strong growth from its 
Australian white goods divi- 
sion helped Fisher and Paykel 
boost after-tax profits by 82 per 
cent to NZS19.4m (USS12m) in 
the six months to September 
30. Sales rose by 20.8 per cent 
to NZS381m. 

Sir Colin Maiden, the chair- 
man. said that the increase 


was largely due to improved 
profit margins. Margins also 
improved in the healthcare and 
Panasonic divisions. 

Overseas sales rose by 35 per 
cent to NZ$1 60m. and now rep- 
resent 44 per cent of trading 
revenue, up from 39 per cent 
last year. 

Australian white goods sales 
were up 47 per cent to 
NZS104m, representing a 


growth in market share in all 
categories. 

Increased production also 
lifted sales to Asia, where the 
company has developed prod- 
ucts suited to the climate. New 
Zealand sales rose by 11 per 
cent to NZ$91 m. and Panasonic 
division sales fry 8 per cent to 
NZ$73 .8m. 

The interim dividend is up 
by one cent to nine cents. 


Group to pay 
premium for 
SME stake 

By Andrew Hill 

The Italo-Swlss consortium 
that won the contest to buy the 
Italian state's controlling stake 
in SME, the supermarket and 
restaurant group, will pay a 
premium of more than 20 per 
cent for the shares. 

lri. the state holding com- 
pany which controls SME. 
revealed on Friday that the 
consortium had offered 
L4347.4 for each SME share, 
against a market price of just 
under L4.000. That values the 
whole company - which now 
owns only the GS supermar- 
kets and Autogrill restaurants 
business - at L2200bn ($L4bn). 

The consortium is led by 
Edizione Holding, the Benetton 
family's holding company, 
allied with Mr Leonardo Del 
Vecchlo, who heads the Luxot- 
tlca spectacles group, M&ven- 
pick, the Swiss hotel and res- 
taurant group, and Crediop, 
the Investment finance subsid- 
iary of the San Paolo di Torino 
banking group. 

The consortium, which must 
keep GS and Autogrill together 
for five years, will buy 32 per 
cent of SME from Lri then 
launch a public offer for a fur- 
ther 32 per cent Some of Irl’s 
residual stake will be sold to 
the consortium and the rest to 
ordinary investors. 


GROIP 


ERL AND i LTD. 

: bunnina iradirom 

AV .4- 4 




*ertaad» ud ‘ 

l2 l! Geneva l 


E 






O' 


Th* table below given the tateet avaflable ratal at wnhange (nowndad) against four key currenctea on Friday, November 4, 1894 . In some cases the rale Is nominal Mamet rales are the average a* buying and selling rates accept 
where they are shown to be otherwise, m some cases market rates have been coiaialad from those of foreign currencies to which they are tied 


US C D-MARK 


VSI 
PC 1001 


CSTO 


us s 


YBJ 
» 100) 


YBI 
cx iooj 


AiQhwfeun 

IMal»9 

4194 X 3 

. 2808.15 

1711 JB 4 

2867 X 2 

«re*i - 

HjM 

181.16 

100205 

55.7788 

102 X 87 

Mgaitt : 

{Dterfl 

85 X 881 

40.8457 

288103 

41.7677 

Andorra 

PrFri 

6.4057 

52273 

3 X 311 

03*63 


(SpP ~“9 

204 X 24 

127 X 51 

83 X 941 

128 X 10 

Angob. 

/flaw Knranza) 

2263722 

. 140701 

82303 

143030 

Antigua 

(Cart) 

4 X 511 

£7053 

1.7758 

£7086 

ArgMna 

(Preo) 

1 X 078 

0 X 907 

0 X 562 

. 1.0223 

Anrba 

OTohrt 

2 X 846 

1.7936 



AuxtraU 

IAusS) 

£1489 

ixaoe 

0 X 77 

1 X 803 

Aumta 

( 3 chBng| 

17 X 507 

10.7267 

7 X 408 

109608 

Asm 

9 *ort EocucJo) 

250 X 89 

155.895 

102-196 

158 X 1 


(Bahama 81 

1.8082 

1 

0.6583 

1.0825 

Bahrain 


06063 

0 X 77 - 

02474 

03855 


(Sp Pavroa). 

204 X 24 

127 X 51 

83 X 941 

129 X 10 

BonfpKtaaB 

{S 3 

835220 

38 X 988 

25 X 202 

403904 


Mgluni 


IBwbO 
IMoR) 

M 

ICFAfll 
Bemuds (BemwareS 

(NauBunO 

(BaftnsnEt 


■ JLS 412 
604027 
3-2230 

WaSTD 

1.6082 

606040 

M4E3 


£DIM 

31.341 

2-0041 
522 J* 
1 

31.404 


*4 


Botswana 


4X008 

Brass 

(Baa# - 

1X673 

Brand 

(Brunei S) 

2X858 

Btegrafa 

Orel 

104.057 

BurtanoRHS 

ICFAFf) 

840870 

Burma 

POnri 

9X780 

Burundi 

puadB] 

387.900 

Csmfaodta. 

(RM) 

4173.79 

Comnon 

(CFA Fo 

840X70 

Canada 

'{CanodreS) 

£1019 

Carary b 

Qp. Varda 

ira 

204X24 

13X700 

Cayman la - 

(09 

13348 

CantAfr. Hep 

ICFA ft? 

840670 

Chad 

pFAFrt 

840870 

CMa (CMaennuo) 

862X97 

area 

(Vtre« 

13.7078 

Cotomwa 

os* 

(Ooi Peso) 

1338X7 

1X2830 

4975.75m 


2.0667 

0 .B 43 B 

1_470b 

85.0771 

522-74 

BJBBB 

241.201 


. 623-74 
13567 

127.061 

03.1401 

08200 

622.74 

322.74 

411337 

nagas 

330373 

08381 

30RUS 



Comoro* 

Congo {Bra zz) |3FAI 

W Coaa Rica ■ (Cots . 

T . Cite d'hote {CPA RJ 
Croatia peurei 

Cube . (CutwiPWHf 
Cypfu* ItypnnQ 

Czech Rap. fftaiuwl 
Dante' prteh Krone) 
□fbalIMp tirbft} 
DorouVGa BCenaiSl 
DemMean Rep (D r 


630.938 
B4CL87Q 
237 £30 
840870 
B8S74 
18118. 
0.7S14 


582.74 

1SB837 

KHSJ4 


18228 

205718 

18154 

341117 

08663 

20613 

38783 

1.7803 

08830 

00885 

42.7183 

343.117 
3.7845 
18832 

170152 

843.117 
08003 

83 3941 
64^716 
05447 
■341117 

343.117 
270355 

68047 
640436 
04188 
203084 
267 .61 8 
343.117 
104JH4 
341117 


2JXOB 

82.0485 

00403 

634X39 

1X225 

32.1129 

4.7957 

2-7288 

0883 

1 X 041 

80648 


Gambia 

Bormany (D-Mutd 

Ghana (Cadt) 

COnker <G,b 0 

Greece {Drachma) 

Greentand (Donah Krona) 
Grenada (ECwrSt 

Oi fWo upn Meal Fr) 
Guam (US SJ 

Qunamala (Quotar-i 
QUnee . ffd 

Gteee-BMau ptag 
Guyana (Ouyanaaen 

Hast (Gouda) 

Honduran ftjanpne 
Mono Kong 8*8) 

Hungofy (ForinQ 

ioe*nd feriandk: Mena) 
Indta pmflen Rupee) 

Pupa*) 


Iraq 

man Hep 


RWy 

Jamaica 


5X968 

246X48 


26B3X 


13073 

120019 

98X168 


834X39 


421.185 

8.7158 

849.73 

nmw 

3183X3 

401.181 

634339 

180445 

534X39 


Gary Quart 
(Punt) 
<Shete« 
a*aj 
(Jamaican I) 
Japan (Yenl 

Jcadan pontanun Dfeiat] 
Kenya (Kenye&hMng) 
KHtsU (AustralanSj 
Korea Note, (Won) 

Korea SouBi (Wan) 

Kuw*l (KuvoU Dans) 
Laoa (New KM 

Latvia (Lata) 

(UfconesB E) 
(MafcjH) 
BJMlanfl 
(m g! Din ar) 
(Eretaa Frt 
Lithuania (Litas) 

LuMtnbaurg (Lux Ft) 


Uteris 

Libya 


Madeira 


0X067 


300,000 


re 

| 

,onnft is 


"s r,'*. - -o'? 

-* __ ■: w ,-‘ / 


v- ’*- ^ 
•" FtfiV * 


Eqioal GUm ■ (CPA Fr) 
Estonia . 8 «n»n} 

Ethiopia (Bhroprei Bn) 

FSttndls (FnkO 

Panels p*mr\ KronaS) 
Ryfc f* 5 ® 

FHend CMrsfdra) 

Franco • flj 

Fr. raw Africa (CPA Fr) 

Fr. Guta* 8-OCJ4 Ft) 

Ft. Pacific la (C rt> Fit 

fCFAft) 


4X311. 

22-287D 

ast&iso 

328077* 

04729 

14.1008 

840.070 

19X288 

■87021 

1X0 
9X087 
2X006 
7X422 
84087 
840X70 
.8X007; 
■ 152X66 
840X70 


i nrg» 
04872 
27X880 
5X736 
178X88 
2.7086 
13X583 
2277.18 
20Z8.T 
8X027 
8.7870 

522.74 

12X054 

5.411 

0X218 

5X735 

1X306 


0X577 

cjoee 
18. 10 
3X209 
118X92 
1.7738 
9X003 
1404X9 
1329,24 


1.0348 

0.4777 

28-2014 

8.1084 

182.105 

2.7888 

14.1711 


2070X1 

3X795 


5X273 

522JA 

62273 

06.1094 

522.74 


3J3S1 

'343.117 

8X114 

38517 

0X081 

39209 

06388 

9X783 

3X311 

343.117 

94311 

82.428 

349117 


634X39 

12X809 


WO Fi| 
pen Escudo) 
(Kwacha) 
*4ataysia WnoaO 

WUnk (Ruflyo) 

Mai Hap (CFA Fr) 

Mata Maltese LHf 

ManWpue (Local Ft) 

(tt&lya) 
frtaerajpae) 
(Mexican Peart 
Mquakm (Local Ft) 

Monaco (French Ftt 

IE Carr* 
pattern 
(Mated) 


Mrema 

Morocco 

MtnaniWque 


PA Rand) 
(Aiwbalanp 


0X588 

31064 

1X826 

4.7957 

33453 


5X453 

97-2663 

534X30 


Nauru Iq 


Nethar*Mg 
NrndAfltJtoe <A/G4dM) 

NMZtetand (NZ 1} 

Mcarasue (Gold Cordoba) 
Mg- Ban {CFA Fr) 

Nigeria Nan) 

Norway (Nor. Krorm 
Omen 


(RMOmanQ 


15X316 
2X501 
1681.79 
1.00 
377X35 
9.E007 
4XS11 
8X087 
18082 
9X811 
1576.63 
20077.7 
227 706 

30X185 

14X748 

12X314 

174.131 

107X90 

506040 

349314 

2985X0 

0X883 

1X140 

4X484 

2613M 

52X7S& 
157X77 
1.1129 
85X881 
£.1489 
3X647 
1281 .7B 
0X798 
1180X8 
08888 
2889X3 

1.608? 

0X885 

£0504 

8A880 

60X027 

12X072 

5858X7 

260389 

25X055 

4.1225 

19X413 

840X70 

0X800 

8X087 

20 3X08 

202970 

SX13B 

8X067 

8X087 

844.800 

43611 

14X388 

10006.6 

5X583 

2.1488 

705275 

£7500 

2X848 

£0018 

11X887 

840X70 

35X024 

10.0910 

0X192 


9.7199 
1X236 
1027.1 
0 6218 
234.943 

5X735 

£70SE 

5X273 

1 

5.7711 

979.748 

12484.6 

141X9 

19X389 

£9383 

7.73 

106.277 

88.7785 

31X04 

217206 

178068 

0X511 

08305 

30135 

15632 

32X887 

97.7989 

0692 

40.7835 

1X302 

£15« 

797X28 

029B3 

721.477 

0X388 


3X171 

1 

03025 
1X749 
4 0208 
31.341 

8X009 

3517X1 

155X95 

15X487 

£5834 

11X644 

52274 

0X61 

5X273 

126.79 

17586 

3X284 

5X273 

5X273 

400X21 

27D55 

0.7283 

8221X1 

£5171 

1X362 

49X512 

1.7090 

1.7938 

1X178 

7X047 

522.74 

21X883 

6.6*78 

0X85 


8X799 

1 

674.172 

04081 

154.212 

3X209 

1.7758 

3X311 

0.6563 

3788 

643008 

8194.66 

92X37 

12.4988 

5.0689 

8X738 

71.0709 

43X308 

20-613 

1425.71 

1168.73 

0X617 

0X136 

1X78 

1026X6 

21X761 

84.162 

0X542 

26.7695 

0X77 

1.4141 

523.154 

0.1958 

473X64 

0X536 

1089X6 

2X085 

0X583 

a 1965 

£8308 

£839 

205716 

5X517 

2308.83 

102.195 

10X058 

1.8825 

7X532 

303.117 
0X366 
3X311 

832223 
11 5496 
2X503 
3X311 
34311 
263.091 
1.7750 
5.7298 
4083.75 

2X085 

0X77 

3X4588 

1.1224 

1.1773 

1X019 

4 729 

343.117 
14JB77 

4X634 

0X527 


9X393 
1X578 
1050.29 
0.6358 
240246 
6.7084 
2.7666 
5X453 
1 IWM 
6X013 
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1776a 4 
144.786 

10X807 
914 
7 9044 
110.721 

68X838 
32.1123 
2221 II 
1820 75 
0X835 
06447 
20815 
159849 

33X018 
100.004 
0.7076 
41 7041 
1X863 
2X03 
815X16 
0X05 
737.763 
0.551 
1607X2 
3X985 
1X£S 
0X093 
13037 

4 1114 

3ICM85 
81815 
3596 6 
158 21 
15X997 
28212 
12X345 
534 539 
0X801 
5X453 
129.052 
17.9831 
3.5058 
5X453 
5X453 


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a 

8302X5 
3.5966 
13683 
50X674 
1 7485 
1X341 
1 8543 
7X673 
534539 
22X834 
17970 
0X937 


Pakictor (Oji,. Ruuai 

49J406 

30.6184 

20X073 

31X095 

Panama 

rBoOxo) 

1.6082 

T 

06563 

1022*. 

Paoua N** Giwwa iWna) 

1.8294 

1.1376 

0 74*6 

1 1632 

Paraguav 

[Guarani 

TOS0.05 

132143 

1261 19 

1964 81 

Pwu 

(Wow Son 

JS629 

22154 

1 4541 

2X654 

PnxpjHT'i 

(Peso) 

39 5005 

24 5992 

16 1461 

25.15*5 

Pitcram to 

(t Swvling) 

1.00 

0 6218 

0 4081 

0.0358 



2 6018 

1 SI 78 

1.0619 

1.6543 

Poland 


j'437 7 

23279 3 

15280.1 

2380*7 

Portugal 


250389 

136.695 

102.195 

159X1 

Puerto Wco 

lUSSl 

16082 

1 

0.6563 

1 0225 

Qatar 

(Riydfl 

5X55* 

3.6474 

23941 

37298 

Reunion b de Ur 

I IF/Fl) 

8.4ri67 

5X373 

3*311 

53*53 

Romma 

(Leul 

28M.OO 

1778 39 

1167 3 

1818. SJ 

Ftmnda 

(Fit 

21620CI 

114 4J6 

88 2412 

137*71 

SiCwWfcf 

IE Con SI 

4.3S11 

2. TOSS 

i 7756 

X 7808 

Si Hale™ 

ft) 

1>3 

0 6218 

0 4081 

Cl 6358 

Sr Luda 

lECrart) 

4 3MI 

2 jnss 

r 7756 

27666 

Sr Piene 


8 4067 

52273 

3.4J11 

5.3*53 

Si Vmceni 

itC«S 

4 3511 

2 7065. 

1 7768 

X 76613 

Sar Manna 

Itooar Lnu 

251 J tu 

1663 2 

1026.06 

1566 4* 

Suo Tome 

(Dowa) 

1334.82 

830.071 

644.8*3 

8*8X08 

Saudi Antha 

fRiysh 

6 0325 

3 751 

24621 

33357 


(CP* Ffl 

840 870 

522 74 

343,117 

534539 


iRupoel 

7 K-38 

4 8649 

3 1932 

4 3747 

Smra Leone 


960900 

601231 

194 637 

614003 

Singapore 

tSi 

2 MM 

1 4709 

0 965.5 

1.5041 

ttevutia 

ihdunjj 

49X30 

31 0471 

20 3787 

31 7479 

Siov^nia 

(Torai 

I94j[d1 

120 65? 

79 1971 

123 J01 

Solomon k. 

1S1 

52505 

327134 

2 1*M 

33*42 

Somolr Rep 

Hhfcig) 

4222 13 

2625 38 

1723X5 

2684 64 

Scuh Alnca 


S«Mc 

35171 

2 3085 

35<*5 



6 553*g 

i.0’48 

26746 

4.1660 

Spam 

(Peieiaj 

204.324 

127 051 

83 19*1 

129 919 

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N Afnca i 

Sp PevXfl) 

204X24 

127 Oil 

83 3941 

129 910 

3n Lan*Ji 

lRupa« 

78 7753 

48 9835 

32 1518 

SOOBP2 

Sudan Rep 


50.1177 

31 1638 

20.4553 

31 8872 

Swum 

iGteklert 

480 164 

286 IV. 

187 B1* 

292X85 

Swaailard 

lUangenii 

5 6563 

3 5171 

2 3085 

3.S96S 

Sweden 

(MWUI 

11 6529 

7 3702 

4 0077 

75300 

Swnraiarci 

iFrt 

2 0504 

1X744 

0 8368 

1 3037 

Syria 

(Et 

31 U27 T 

19 7905 

17 9901 

20 X372 


(St 

41.8823 

26 0.23 

17 0941 

26.8308 

Tunzerea 


866X87 

539 104 

36 3 858 

551X73 

Thttland 

iBuJm 

Mijti 

2J -JS42 

16 J7(M 

25X175 


ICF4 Frt 

840.670 

522 74 

34J 117 

534 539 

Tonga b 


2.1489 

1 13^ 

0 877 


Tnradnd/Toe.iao 

(51 

90002 

5 59*4 

3 6734 




1 5671 

0 0744 

0 6396 

08664 

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56408.0 

364189 

23839 

37138 7 

Turlo 4 Cmcas 

(US SJ 

i 6082 


0 6563 

1 0225 

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2.14W 

i 3362 

0 »77 



1477 75 

918 682 

603 139 

939 620 

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126663 9 

?e?bi j 

5-697 4 

80539 1 

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6 9182 

360 

24154 


UnriiU ungaom 

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1 00 

0 6218 

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(US S) 

i 6062 


0 6663 

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8 7WI8 

5 4713 

35912 




180X17 

112 497 

0X406 

115 036 



2513 94 

1M3 2 

KI26 » 

1598 49 

Venenjela 

IGui'vart 

273 1 77 

169 865 

111490 

173.699 

Vwnflm 

iDanru 

17882 9 

11088.7 

7278 44 

11339 

Virgin l>Bnnm 

fUSSi 

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IUS9 

1 6082 

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0 6S6J 


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4 (K29 

2 5388 

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VMMA (Rtp cfl 

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54 9081 

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56.1*5* 

Yemen (Boo ifl 

ItWlBlI 

0 688401 

0 428 

02809 

a*377 

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Zone Fteo 

Cnrrcl 

4140.00 

257J 31 

1W9 73 

2S«*2 



1078.71 

671 370 

440 08 


Zmbab*.e 

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134660 

8 3671 

5 492 

8.5559 


Spedal DBBrtiB Rtf«s ftowrtbn 3. 199» Laded Kagdan £0X14005 UiHea Sanaa *1X8213 Oarntny DM2X4400 Jncnn VWA Euopm Curran cy Link Rates Ncventwr 4. 1994 United Kaipdon, £0 WW L*vrea 5ui«a SIXS770 l*rmany DM1 91519 Jjpjn 
Y1 23X07 

.. . • . Fn- ^ HBteknare rare; (drawanercte rata : M CodOtaad rata: M Easandu imports: (0) RnanoM raw 19 Exports, fl Non ca mma rote raw. ffl Busawas rawu Buymp *■*. nt Iwuy o«xh, uni raw. irr Puooc ErenvKoen rare, m Orficrol 

rg»M wiwtSte raw M penial rats M Safco rate: ffl Tourist rare M CUrondM M agarer m* US DoMr M Roafttg rata ; f OS appaes to stsrae « urn Zone in rugosHt C*nm rair t.\ Ci thrarhu, mi- ta 31 394 oi lemara 
Srto'SSTsoqw SodlSteheciiTW^ CLDSWO SPOT RATES 8 Bank of America. Eeanemtes Depertmenr, London Trading Centra. Enquire* 071 634 

Friday, November 4. ib&c 








If the sun rises we fly 
from Europe to Japan. 

JAl ii.iv-. 4 J. - n**: l-ni.r Lurt.«j.>*r *o f rs'*iCJ OftoKa. 

1 1_> _ ) \ , i ‘ ' trrrn l ii'Vf- .m r:>orr ihon my other cyrricr. 



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Union Bank of Switzerland 
Finance N.V. 

U.s. 5250,000,000 
Guaranteed Floating Rate 
Notes due 2002 

In aavrda/ict; w/lli the provisiornof 
the Notes, ncuice is hereby given 
that the Raw of Interest for the ux 
month period ending 4th May. 
|W has been fixed ot 5.75% per 
annum. The interest accruing for 
such six month period will be U.S. 
$28.91 per U.S. SLOW Bearer 
Note, and U.S. S2W.10 per U.S. 
SIO.OOU Bearer Note and U.S. 
$2.fi90.97 per U.S. SICKUJUO Bearer 
Note on 4th May. 1995 against 
presentation of Coupon No. 3. 

Union Bank of Switzerland 
London Branch Agent Bank 
2nd November. 1994 


Bradford 

&. B 1 NG LEY 

£150,000,000 
Floating rate notes 1999 

Notice a hereby given that 
the notes will bear tnterest 
at 6.3l2S% per annum from 
3 November 1994 to 3 
February 1995. Interest 
payable on 3 February 1995 
will amount to &1S9. 1 1 per 
510.000 note. 

Agent; Morgan Guaranty 
Trust Company 

JPMorgan 






















FINANCIAL TIMES 



22 


MONDAY NOVEMBER 7 1994 


H 0 St) IS \i 


FINANCIAL TIMES 


MARKETS 


Best Emerging 
Markets Bank 



INGJteBANK 


ft r jj 'i 


F\\ » "I 



For most of 
this year, com- 
modities have 
looked like a 
one-way bet. 
Alumlni um 
and copper, the 
two most 
heavily-traded 
metals, have jumped by 70 per 
cent in the past 12 months, and 
cocoa, coffee and orange juice, 
like many soft commodities, 
have also shown sharp gains. 

For all those investors who 
get vertigo at the size of the 
rises there have been others to 
argue that, judging by com- 
modities’ behaviour in previ- 
ous economic recoveries, fur- 
ther large gains are still on the 
cards. 

On the back of this enthusi- 
asm, investment and broking 
houses have rushed in the past 
few months to put together 
commodities indices, as well as 
specialised funds to make 
access to the markets easier. 

That marks a sea change 
from the 1980s, when most 
investment houses took a dis- 
tinctly haughty stance towards 
non-income yielding invest- 
ments, and towards the com- 
modity markets in particular. 
Familiarity with a wider range 
of zero-coupon instruments 
and zero-dividend shares has 
bred tolerance. 

However, as commodities 
prices have continued to rise in 
the past few weeks, some who 


Global Investor / Bronwen Maddox 


Prodding the commodity bubble 


were previously bullish have 
begun asking whether specula- 
tive activity is now driving the 
prices above levels justifiable 
on analysis of demand and sup- 
ply alone. It is the right point 
at which to ask that question: 
although evidence of specu- 
lative participation is at the 
moment anecdotal, it does sug- 
gest that such trades are 
an increasingly important 
element. 

The bullish case is still vigor- 
ously espoused, nonetheless. 
Goldman Sachs, the broker, 
and one of the loudest advo- 
cates of commodities’ attrac- 
tions, has been urging large 
private pension funds to keep 
5 per cent of their global 
portfolios in commodities, a 
high level by traditional stan- 
dards. 

Goldman bases its argument 
on a projection of steadily ris- 
ing worldwide demand as 
European and Japanese econo- 
mies gather steam. It has on its 
side indications such as the 
shortages of aluminium 
already reported by industria- 
lised countries. It could also 
point out that demand for cop- 


Bubbling commodities 


Aluminium (3-month, Spar tonne) 

2noo - 

inoo - -■ 

1.600 

1.400 -- - 
1,200 - 
inoo 



1.000 


Copper (3-month, Sper tonne) 
2300 


Cocoa (S per tonne) 
- - - 1300 



Now 93 1994 

Source: FT Graphite 


Now 93 


1994 


per and nickel rose by 7 per 
cent in the first half of 1994 
compared with the correspond- 
ing period in 1993. 

The more specialised the 
material’s use. the more dra- 
matic the effect of such 
increases in demand: the price 
of palladium has doubled in 
the past year simply because of 
booming world-wide demand 
for mobile telephones and per- 
sonal computers. 




LM E studies US warehousing 


The London Metal Exchange 
on Wednesday holds its first 
management board meeting 
since its move a week ago to 
new, bigger premises in Fen- 
church Street. Members will be 
paying particular attention to 
see if there is any development 
on plans to extend the 
exchange's warehouse cover- 
age to the US. 

This Issue has been brought 
to the fore in recent weeks by a 
tightening squeeze on copper 
supplies that has distorted the 
price structure of that metal's 
contract at the LME. 


Exchange warehouse stocks 
of copper have fallen to the 
equivalent of five and a half 
weeks’ consumption - an 
uncomfortably low level, 
according to some analysts. 
But some suggest that that is 
not the whole reason for the 
growing “backwardation’’ 
(price premium for nearby 
delivery over forward posi- 
tions) in the market. An addi- 
tional problem, they say, is 
that most of the LME stockpile 
is in Europe, while most of the 
short-term demand is in the 
US. 


In normal circumstances for- 
ward positions in the metals 
markets are at a premium to 
nearbys (as they are at the 
moment for all other LME con- 
tracts), reflecting the costs of 
holding physical metal - lost 
interest, Storage, insurance etc. 
But tight availability of sup- 
plies for nearby delivery can 
reverse this position: and inad- 
equate warehouse coverage 
can make matters worse. 

It has also been suggested 
that Wednesday's board meet- 
ing could discuss extending 
warehousing in south-east Asia 



. .... i • 


C R E DIT RATIN G S 

DM © Knl© fcgj -8 fn) gj ' Ouf ! (2 



ui: 


This new 

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Mexico * Oman • Pakistan • Philippines • Poland • Portugal • Qatar 
Romania • Russia • Saudi Arabia « Singapore • Slovenia • Slovakia 
South Africa • Sri Lanka • Taiwan • Thailand ■ Tunisia • Turkey 
United Arab Emirates • Uruguay • Venezuela 

The ratings of 30 international and local credit rating agencies are included 


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Total return in local currency to 3/11/94 

% change over period 



US 

Japan 

Germany 

France 

tta* 

UK 

Cash 

Week 

0.09 

0.04 

0.09 

0.10 

0.16 

0-09 


0.42 

0.19 

0.41 

0.45 

0.69 

0.46 

Year 

3.69 

i19 

5.88 

8.31 

8411 

5.44 

Bonds 3-5 year 

Week 

-0.25 

0.32 

0.10 

0.07 

-0.08 

0-58 


-0.33 

-0.02 

0.80 

0.31 

1.09 

1.41 

Year 

-2.59 

-0.71 

0.64 

-0.68 

1.41 

-0-03 

Bonds 7-10 year 

Weak -0.35 

0.53 

-0.03 

-0.09 

-0.86 

0.49 


-0.88 

0.01 

0.97 

-0.33 

0.44 

1.67 

Year 

-7.14 

-1.92 

-4.50 

-7.47 

-5.65 

■4.05 

Eqiaties 

Week 

0.6 

0.0 

1.8 

2.7 

2.8 

2.4 

Month 

1.7 

-0.6 

1.6 

2.6 

-5.0 

4.2 

Year 

4.3 

-2.9 

-2.6 

-7JS 

10.9 

2J2 


Somec Casti & Bonds - Ldvnan Brotfiarv Eourt»es-C NaiWmt oec 

The FT-Actuartee WWW Micas are johttv cwned by The Financial Times United, 
QokSnan Seats & Co., and NatWwt Securities Lrnrtsd 


The current proponents of 
commodities also argue that 
not much capacity has been 
added in recent years In com- 
modity-producing industries. 
They argue instead that the 
fall in eastern European pro- 
duction has contracted supply. 

It is unclear yet how many 
houses are following the bulls' 
advice. However, analysts are 
starting to say, with more 
conviction than a few months 


ago, that the price of commodi- 
ties, both metals and soft, has 
risen higher than can be 
explained by levels of demand 
and supply. 

For a start, market traders 
ami analysts estimate that 
banks and investment funds 
have put S16bn into metals so 
far this year. They also reckon 
that banks control some 75 per 
cent of the London Metal 
Exchange stocks. 


There are also signs that 
investors are losing their dis- 
crimination between commodi- 
ties. The zinc price, for 
instance, has followed that of 
the other metals upwards 
despite European overcapacity. 

One weakness of the bulls’ 
argument is that it does not 
recognise the rapidity with 
which patterns of supply and 
demand can change in 
response to the price rises. 


Although it is true that sup- 
plies of metals have not 
increased greatly in the past 
few years, they could now do 
so. enticed by higher prices, 
locked in by manufacturers 
through the futures markets. 
Meanwhile, traders acknowl- 
edge that the price rises could 
cause a permanent drop in 
demand, if substitutes are 
found for raw materials, or if 
investment to raise efficiency 
is stepped up. 

But the central weakness is 
that investors’ use of commodi- 
ties as an escape route from 
bond and equity markets trou- 
bled by inflationary fears is 
misguided. From one perspec- 
tive, this is a sound bet, as 
commodity price rises may 
eventually feed through into 
retail prices. 

If this does happen, and 
inflationary pressures do 
emerge again, commodities 
could fore well initially. But if 
interest rates rose in response, 
investors would be likely to 
desert commodities in favour 
of interest-bearing invest- 
ments. 

On the other hand if manu- 


facturers fail to pass on 
the increases in raw material 
costs to co n s umer s, commodity, 
producers will eventually 
find themselves restrained 
in their ability to charge 
more. 

In recent sets of UK data, the 
sharpest price increases in 
manufacturing output were 
reported in sectors with great- 
est exposure to world commod- 
ity prices, such as pulp and 
paper, metals, rubbers and 
chemicals. However there are 
also signs that manufacturers 
have had to absorb much of 
the increases in raw material 
prices without passing them 
on, and that margins are being 


In the past year. Investors’ 
enthusiasm for commodities 
has looked like a rare example 
of perfect timing- But increas- 
ingly. one of the m ai n , props 
for commodities prices is sim- 
ply inflationary fears, fuelled 
partly by the rising cost of 
commodities themselves. That 
is a fragile argument on which 
to he resting even a small slice 
of a portfolio. 

There are enough powerful 
advocates of commodities’ 
attractions at the moment, and 
demand for raw materials is 
growing fast enough to give 
investors an opportunity to 
begin to unwind positions 
which they have built up this 
year. It is a chance they should 
consider taking. . . 


outside Singapore. Metal Bulle- 
tin magazine said this week 
that there had been talk ema- 
nating from China that Shang- 
hai could be a candidate, 
ft On Thursday the Interna- 
tional Primary Aluminium 
Institute is to issue its assess- 
ment of western world stocks 
of the metal In September. 
LME traders will be anxious to 
see evidence of a continuation 
of the drawdown, following the 
multilateral production-cutting 
agreement reached earlier this 
year, that has helped to lift 
prices to four-year highs. 



Is China the 
□ext economic 
superpower 
and. if so, how 
soon will it 
achieve that 
status? Those 
who say it is, 
or very soon 
will be. point to calculations 
of the kind shown in the 
chart. 

Among them is William 
Overholt in an important 
recent book.* Citing an esti- 
mate of $2,500 per head for 
Chinese real income put for- 
ward by Larry Summers, 
when chief economist of the 
World Bank, he argues that “if 
Summers' calculation is cor- 
rect. China's economy will 
pass the US economy in sheer 
size within 11 years". 

Yet even if that were true, 
China would not have the 
most powerful economy in the 
world. To see this, it is neces- 
sary to understand what such 
estimates actually mean. 

Consider India, for which 
more reliable calculations 
exist than for China. At mar- 
ket exchange rates, its GNP 
per head was $310 in 1992. this 
being only 13 per cent of the 
US level. But the average 
Indian did not survive on a 
real income 98.7 per cent 
smaller, since so much of 
what Indians consume is far 
cheaper. At common interna- 
tional prices (or purchasing 
power parity - PPP), Indian 
income per head was $1,210, 5 
per cent of the US level. 

There are three main rea- 
sons why internal relative 
prices differ across countries: 
protection at the border inter- 
nal taxation and subsidisa- 
tion; and differences in costs 
of labour (and land). In tire 
case of comparisons between 
developing and more 
advanced countries, tbe last is 
much the most important 

Market exchange rates 
equate only the prices of 
tradeable goods and services 
across frontiers (net of protec- 
tion). Generally, however, ser- 
vices are both less tradeable 


Economic Eye / Martin Wolf 


China as next 
superpower? 


How economies rank by purchasing power 


PPP GNP 



GDP rank 

US D 
Japan El 
China QB 
Germany B3 
France E3 
India mm 
Italy Q 
UK Q 
Russia Q3 


PPP* GNP par head 


6 4 2 0 (at mafcet 0 

S'OOD bn exchange rates) 

Source: World Bonk. World Development Report 



20 25 
SHOO 

' Purchasing power parity 


and more labour-intensive 
than goods. A resident of Los 
Angeles could save a small 
fortune by buying haircuts in 
Madras. She cannot do so, 
however, because transport 
costs are too high. Accord- 
ingly, GNP per head of poor 
countries at PPP is far higher 
than it is at market prices. 

The Bank's estimate of Chi- 
na's national income per head 
in 1992, at market exchange 
rates, is $470, while its guess- 
estimate of the country's GNP 
per head at PPP is $1,910. the 
relationship between the two 
being roughly the same as for 
India. (For a more detailed 
analysis of Chinese wealth 
and economic performance, 
see the article on page 4 of 
this morning’s China survey.) 

Because primary data have 
not been collected in China, 
the PPP number is derived 
from a cross-country statisti- 
cal relationship linking GNPs 
at market exchange rates to 
those at PPP. Other estimates 
of China’s GNP per head at 
PPP in the early 1990s vary 
between $1,000 (which would 
make tbe economy a little 
larger than that of France) 


and $3,000 (which would make 
it even larger than Japan’s). 

The uncertainty is huge. 
But concentrate on the Bank 
estimates. China's 1992 GNP 
at market exchange rates was 
only $506bn, smaller than 
Spain's and eighth largest in 
the world, while its GNP at 
PPP is estimated at £L230bn. 
What has changed? The 
answer is that China has tens 
of millions of tax inspectors, 
teachers, builders, hairdress- 
ers. policemen, judges, doctors 
and so forth, all of whom are 
paid a pittance. Adjust their 
wages to international prices 
and the size of China's econ- 
omy explodes. 

The economy does not just 
become far bigger at interna- 
tional prices, its structure 
changes. On the plausible 
assumption that spending on 
manufactures at market 
prices is roughly the same as 
at international prices, manu- 
facturing would be only 10 per 
cent of China's GNP at PPP. 
down from 40 per cent at mar- 
ket prices. It is obvious, how- 
ever. that China is not made 
more powerful by having mil- 
lions and millions of cheap 


teachers, hairdressers and so 
forth. This merely means the 
country is poor and populous. 

Because the weight of ser- 
vices is much larger in GNP at 
PPP, growth rates will also be 
lower. The reason is that man- 
ufactiiring has been the fast- 
est growing sector of the Chi- 
nese economy. If it is given a 
s maller weight, the growth of 
the economy will also be 
reduced. 

Yet there is one respect in 
which the PPP numbers do 
say some thing about eco- 
nomic size. Convergence of 
GNP per head between China 
and more advanced economies 
will be faster than projections 
of recent real rates of growth 
from GNP at market prices 
would suggest The reason is 
that real wages will rise as the 
economy grows. Those 
increases in real wages will 
show up as an appreciation of 
the real exchange rate. The 
explanation is that productiv- 
ity growth in tradeable goods 
will be faster than in services. 
At an exchange rate that 
keeps international prices of 
tradeable goods roughly in 
line, those of non-tradeable 
services will rise. The effect 
will be particularly large in 
the case of China, because its 
economy is likely to grow par- 
ticularly quickly. 

Nevertheless, purchasing 
power adjustments of GNP are 
relevant for estimates of eco- 
nomic welfare, but not of a 
country's international eco- 
nomic influence. That depends 
on the scale of its participa- 
tion in trade and capital flows, 
its technological sophistica- 
tion and the size and diversity 
of Us manufacturing, on all of 
which the PPP adjustment is 
at the least misleading. The 
question is when China might 
become more powerful than 
the US in such respects. This 
is a vital matter for the future 
of the world, to be addressed 
two weeks from today. 

* William H Overholt. China: 
the Next Economic Superpower u 
(London: Weidenfeld and'9 
Nicholson, 1993). 





a — * 


gjjSl'nT 


Peru 








K 


FT- ACTUARIES WORLD INDICES 


jonwy compl , M bv Th* Krona* Tin*- Lid.. Goldman. Sac to 4 Co. and NolWest Secuntte Ud. *, conMictta, 1ft* Institute ol Actuate end tfte Faculty « Actuaries 
NATIONAL ANO 

REGIONAL MARKETS — 1 R1IOAY NOVEMBER 4 1994 THURSDAY NOVEMBER 1 1ROi tMncv 

Figure* n parentheses US %chg Pound Local Local % Grass US PoSd N ° VEMBER 3 DOLLAH INDEX— 

CunencyCftg from Dfv. Dollar Sterling Yen DM Currency 52 52 week ago 

l *WeK hMex Index mgft Low leppro*) 


snow number at lines 
oi stock 


Dollar since SlertJrg Yen 
Index 3U1S&3 index Index 


DM 

inday 


Index 31/12/93 Yield Index index 


Australia (68) -....170.96 

Be^rni 135) 

... . 168 78 



Denmark (33) .... 

247.61 

Finland (24) 

France (1011 

194.37 

170.92 

Germany (581 

143.56 



lUUy (59) „ 

77.61 


£.5 

-06 

38 


Japan (488) -160.82 

Malaysia 197} -SC8.78 

Mexico (18) - -2120.03 

Neuterlartd (I9i Jib 37 

New Zealand 114) 77 16 

Motwny C3) 193 69 

Singapore (4*) 39&20 


-2.5 

0.2 

57.8 

-2.9 

2.4 

- 21.0 

12.1 

132 

237 

-10.9 

- 11.2 

9.7 

13.6 

112 


South Africa (53j 338 34 

Spctn (38) -...141.00 

Sweden (36) .229.71 

Switzerland |47| 164.23 

Thtotd (46i 18C.77 

United Kingdom C04) .....202.37 

USA (5151 — .189 03 


26.6 

11 

17X1 

2.5 


-1.3 

-0.5 


157.60 

169.58 

155.59 
161.47 
122.12 
228.27 
170. TB 
157.57 
132.35 
356.37 
19133 

71.56 

14&35 

485.61 
1954.30 

201 31 
71.12 

184.08 
38£L25 
311.90 
129.98 
211.77 
151.40 

166.09 
166.56 
174.26 


105.89 

113.72 

104.34 

10628 

81.89 

153.08 
120.16 
105.66 
88.75 
238 B8 
uaJt 
47.98 
99.48 

325.65 
1310.61 

135.00 
47.68 

123.45 
244 93 
209.16 
87.17 

142.01 
101.53 
111.38 
125.11 

118.66 


135.41 
145 70 
133.66 
138.73 
104 92 
196.12 

153.95 
135.38 

113.71 
30619 
184 39 

61.47 
127.46 
417 23 
1679.16 

172.96 
61 10 

158.16 

313.81 

267.98 

111.58 

18195 

130.08 

142.70 

160*9 

148.72 


151.94 

145.71 
130.46 
272.12 

130.15 

207.18 
191.31 

140.15 

113.71 
383.66 
1B4 38 

90.61 

99.48 

520.07 

7947.04 

170.44 

66.28 

180.19 
26857 
301.35 

135.72 
25064 
129.81 
174.50 
188.56 
188.03 


-7.1 

-12.5 

- 10.0 


0.0 

-11.9 

27.8 

-14.0 

-103 

- 21.0 

-0.4 

33 

8.4 
-15.3 

-2JJ 

-3.4 

2.8 

-1.7 

-1.4 

20.3 

- 10.1 

3.4 
-11.9 


-92 

-OS 


3.87 
1.10 
4.23 
076 
162 
1.48 
074 

3.09 

1.83 
3.13 

043 

1.73 

0.77 

1.61 

1.29 
139 
3.67 

1.84 
f.57 
2.12 

4.30 
1.60 

1.87 
1.8? 

4.09 
2.89 


170.23 

184.43 

169.29 

170.66 

133.39 

249.31 

197.00 

17026 

14336 

385.77 

20825 

77.05 

161.09 

521.60 

2082.55 

219.13 
77.20 

Mare 

394.58 

334.42 

141.25 

231-54 

164.72 

10058 

203.83 

191.14 


156.02 

169.04 
155.16 
156 41 
122.25 

229.05 

180.56 

156.05 
131.40 

353.57 
190.87 

71 as 

147.64 
478.07 

1908.72 

200.85 

70.75 

18357 

361.65 

308.50 
129.46 
212.21 
150.97 

165.51 
188.82 
175.19 


105.03 
113.78 

104.45 
105.29 

82.30 

154.19 

121.54 

105.04 
86.45 

238.01 

128.49 

48.03 

99.39 

321.82 

1284.88 

135l20 

47.63 

123.57 

243.45 
206.33 

87.15 

142.85 

101.63 

111.42 

125.76 

117.93 


134.04 

146.22 

133.31 
134.38 
105.03 
186.78 
155.12 
134,06 
112-88 
303 77 
163.99 

61.30 

126.85 

410.73 

1639.84 

172.56 

60.79 

157.71 

310.71 
283.33 

111.22 

182.32 
129.70 
142J0 

160.51 

150.51 


152.43 
14552 
129.86 
265.28 
131.27 
201.70 
191.98 
138.74 
112.88 
382.81 
183.34 

90.38 
99 39 
514.21 
7823 61 
169.90 

68.57 

179.63 

367.06 
239.32 

135.07 
251.67 

129.43 
174.73 
18682 
191.14 


189.15 

198.83 

777.04 


149U36 100.43 

167.46 17584 

ISO. 60 15281 


145.31 

275.79 
201.41 

185.37 
150.40 

506.56 
216.60 

97.78 

170.10 

821.63 

2647.08 

22330 

77.59 

211.74 

401.38 
3J2.00 

155.79 
242.68 

176.56 


120.54 133.4* 

23027 24106 

718.85 127.71 

159.34 154.42 

12837 133.78 

341.29 369-84 

172-05 17708 

57.88 6828 

124.54 14al3 

430.71 487.72 
1696.28 1824.88 

187.01 197.07 

59.22 66.15 

165.52 181.89 

294.66 31867 

202.72 213.43 

128-88 141.37 

17523 202.42 

143.64 145.08 


iar 


214.98 

196.04 


181.11 18856 

178.96 186.M 


S tav s 


Americas W64) _... 

Europe (707) 

Nordic 1116) 

...176.92 
...1 73.12 
. 22X77 

2.8 

1B.1 

16309 

15929 

20628 

109.37 

107-te 

136.33 

140.13 

137.12 

17723 

147.01 
150 74 
207.48 

-8.7 

2.8 

2.82 

0.10 

1.43 

178.85 
173 7 1 

163.74 

15921 

11022 
107.18 
13929 
105.06 
105 B8 
115.72 
95.02 
160.32 
108.92 
108 40 
116.79 

140.88 

138.79 

146.48 

1 5035 

178 58 

154.79 

15ftA 


Paofic Basin (793) 

Extra- Pacific 11500) 

.. 1 70.25 
...171 34 

17.4 

1&S 

156.95 

157.95 

10526 

105.92 

134.85 

135.71 

11020 

128.40 

4.2 

-1.8 

1.10 

1.95 

1702a 

156.07 

15720 

171.90 

13J.08 

110.07 

23321 

176.86 

173.19 

134.79 

1924& 

157.67 

V 

North America (618) 

Europe Ex UK (503) 

...185.52 

...153.83 

-0.5 

42 

17103 

14181 

114.69 

95.10 

14694 

12104 

184.98 
129 78 

-0.4 

-03 

2.68 

2.50 

187.56 

154.01 

147.88 

12127 

187.03 

175.14 

192.73 

143.88 

175.67 

158.36 

182-87 


Pacific Ex Japan 1325) ... . 

260.92 

-9 0 

240.54 

161.31 

20607 

231.12 

-13.4 

2.76 

259.85 

238.16 

158.83 


158.12 

135.94 

140.72 


Work! Ex US (1708) 

...173.13 

10.1 

189.61 

107.03 

137.13 

130.11 

-12 

1.95 



230.52 

29621 

232.54 

240.14 


Work! Ex UK (2019) 

.. 174J7 

62 

161.30 

108.17 

138.58 

144.47 

-0.1 

2.08 


136.46 

129.85 

176.65 

145.58 

159.17 

* . 

Worid Ex Japan (17551 

...18818 

02 

173.47 

11603 

149.04 

176.99 

-4.3 

2.90 

18929 

173.49 

149.05 


178.59 

15528 

185.07 


The World index p??3) 

...177,38 

62 

163.52 

109.66 

140.49 

14829 

-1.0 

2.28 

178.18 

16321 

109.93 

14020 

148.66 

180.80 

158-85 

167.16 



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FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


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EQUITY MARKETS: This Week 


NEW YORK 


Patrick Harverson > 



Rise in rates Dow Jones Industrial Average 

now seen as 
almost certain 

November is shaping up to be a cruel 
month for the us stock market, if the 
first few days are anything to go by. 

Last week, the Dow ran up a loss of 123 
points, or more than 3 per cent. The fail 
was prompted primarily by a jump in 
bond yields to 8.16 per cent, their 
highest levels since August. 1991. and 
by renewed concerns about inflation. 

This week, those two themes - rising 
bond yields and fears of inflation - are 
likely to continue to haunt the stock 
m arket which, with the third-quarter 
reporting season now over, no longer 
has the crutch of encouraging corporate 
earnings to rely upon. 

All investors have to look forward to 
over the coming weeks are higher 
interest rates. Short-term rates are 
almost certainly going to go up within 
the nest week and a half because the 
Federal Reserve appears poised to 
tighten monetary policy for the sixth 
time this year. 

There is near-unanimity among 
analysts that the move will come on 
November 15, when the Fed's 
policy-making open market committee 
nest meets. Recent data have done 
nothing to dispel the notion that the 
economy is growing at such a rate that 
the central bank must tighten the 
screws soon to ensure inflation does not 
get out of hand in 1995. 

Hie only disagreement among Wall 
Street's sages Is over how big the rate 
increase will be: 50 basis points (which 
would take the target on the Fed funds 
rate up to 514 per cent) or 100 basis 
points. A 50bp rise is already priced 
into both stocks and bonds. If the Fed 
were to raise rates by a full percentage 


point, then the markets would probably 
suffer a nasty, if short, sell-off. 

As for long-term interest rates (as 
measured by the yield on the 30-year 
bond), they continue to test the record 
highs of recent years. Money continues 
to flow into stocks, but at some stage 
the steady climb in bond yields could 
cause investors to reverse those flows. 

Recent figures show that money 
market funds have been attracting a 
considerable amount of cash as 
investors move funds out of an 
increasingly sickly-Iooking stock 
market It may not be long before 
longer-term bond funds enjoy a similar 
renaissance. 

That moment could come soon. 
Analysts at NatWest Securities point 
out that when bonds have yielded three 
times more than stocks, the equity 
market has run aground. With bonds 
yielding &2 per cent and the Standard & 
Poor's 500 about 2£ per cent, this 
particular alarm bell could sound at 
any moment. 

The only good news this week is that 
there will be no trading in government 
bonds on Friday because US h anks will 
be shut for the Veteran's Day holiday, 
which means the stock market will be 
able to stop worrying about rising bond 
yields, if only for a single day. 


'toKibdijiVTlY;-;; 


CBI warning 
revives fears 
of tightening 

The 3.100 mark on the FT-SE 100 Index 
scale is beginning to replace the Berlin 
Wall in the minds of UK Investors. 
Some large and highly profitable deals 
arc being done in equities, the sole of 
Elf- Aquitaine’s stoke In Enterprise Oil 
providing but one example. But across 
the broad range of the market, 
institutional interest remains light and 
stockbroking firms not on the right 
networks are finding it hard to make 
profits in a market which has made 
virtually no consistent progress since 
the end of July, anil has now returned 
to its levels of 12 months ago. 

Strategists at the leading UK 
securities firms offer little comfort for a 
break-out in the Footsie range this 
week. "Only a tightening of monetary 
policy (in the US) can have any 
sustained impact upon the dollar and 
US Treasuries,” comments NatWest 
Securities in reviewing the Federal 
Reserve's activities in currencies. 

Assuming that this will not happen 
until after Tuesday's US mid-term 
elections, the market will continue to 
worry ahead of the meeting of the 
Federal Reserve's Open Market 
Committee meeting on November 15. 

On the domestic side. NatWest is 
equally forthright ns well as in the 
mainstream of City belief in 
emphasising that the Bank of England's 
inflation report leaves unchanged its 
forecast that “base rates will rise 
another 0.5 per cent early next year"; 
but it adds that “it is a close call 
between then and this week". 

The sudden appearance of danger this 
week is pinned on the Confederation of 
British Industries warning that 


FT-SE-A All-Shard index 



1.525 


28 Oct 
Souico. ft GrapWio 


1994 


Nov 


industry needs to pass on its higher raw 
material costs to customers. 

A rate rise in December, so soon after 
the budget, is ruled out but NatWest 
thinks the Bunk of England might just 
elect to raise rates now and ignore the 
uproar from a market just informed 
that the Bank feels happier about 
inflation. 

The stock market felt mildly 
affronted last week when the news 
agencies reported the Bank's inflation 
views immediately while its reminder 
on base rate trends led the following 
morning's newspapers. 

Sluggish market conditions are 
beginning to take toll of the the new 
issues among smaller capitalised 
stocks, those with flotation 
capitalisations of £250m or less. 

BZW warns that, with more than 55 
per cent of its sample of this year's 
small-cap new Issues now trading at or 
below their flotation price, the 
institutions arc likely to set themselves 
significantly higher "quality control" 
standards in the final quarter of the 
year. This could imply more attractive 
new issue possibilities ahead, especially 
if some of the deals recently pulled 
make a reappearance. The scale of 
under-performance by 199-1 small-cap 
new issues can hardly be repeated. 




OTHER MARKETS 


FRANKFURT 

The Bundesbank meets on 
Thursday but James Capel 
says the sharp rebound in 
Tnflnufaffh irin g orders in 
September suggests that it is 
unlikely to be persuaded to 
ease its monetary stance, in 
spite of some disappointment 
over industrial output figures. 

The broker adds that the 
strength of other European 
economies points to a strong 
fourth quarter in Germany 
while the already high level of 
capacity utilisation heralds an 
inflationary threat, probably in 
1996. 

On the corporate front, 
Munich Re's balance sheet 
press conference tomorrow is 


likely to reveal more about the 
1993-94 figures, and Siemens 
will release preliminary figures 
for the year to September 30 on 
Wednesday. 

The company has already 
said operating profits are 
expected to decline by 10-15 
per cent over the year. In the 
first nine months, group net 
profit fell to DML2Sbn from 
last year’s DM1 -32bn for the 
same period, while last time’s 
full-year group net profit was 
DM1.98bn- 

UBS is awaiting Veba's 
nine-month figures on 
Thursday. It expects another 
increase in pre-tax profits, of 
about 50 per cent to DM42Qm, 
which is at the upper end of 
expectations and should be 
viewed positively. - 1 


AMSTERDAM 

After a good set or company 
results last week, attention 
now turns to the two 
Anglo-Dutch heavyweights, 
Royal Dutch and Unilever, 
quoted both in London and 
Amsterdam, writes John Pitt. 

Hoare Govett said it was 
broadly neutral toward energy 
stocks, and was targeting an 
oil price of $16.70 a barrel for 
Brent by the end of this year, 
rising to $17.30 by the end of 
1995. 

While Royal Dutch would 
benefit from its announced 
redundancy plans in Europe, 
as well as the recovery In the 
chemicals sector overall, the 
broker said that while the 
stock looked reasonable value 


against the market, it did not 
expect it to outperform a rising 
market. 

Hoare was more positive on 
Unilever, and recommended 
taking a buy position since the 
current low valuation was 
primarily the result of 
“negative sentiment with no 
material impact on 
fundamental results". 

STOCKHOLM 

A spate of corporate results 
will make for a busy week in 
Europe's best performing 
market over the last quarter, 
as investors continue to assess 
last week's budget in the 
run-up to Sunday's referendum 
on EU membership. 

Nine-month figures are due 


today from Trygg-Hansa and 
SSAB reports tomorrow. 
Electrolux produces third 
quarter details on Wednesday, 
Pharmacia on Thursday and 
Astra and Gambro on Friday. 

Mr Peter Tron at Unibank 
Securities expects a volatile 
week, although he said that 
the week's corporate results 
were unlikely to disappoint. 

However, opinion polls 
suggest that the EU 
referendum may be too close to 
call, although Mr Tron said 
that the markets were 
discounting a “yes" vote. A 
“no” vote, he said, could in the 
short-term lead to a 10-15 per 
cent correction in equities and 
a rise in the long bond yield 
from the current 11.4 per cent 
to around 13 per cent. 


International issues 


Institutional buyers drive 
trend towards global deals 


News that the number of 
overseas listings on the Lon- 
don Stock Exchange so far this 
year doubled during October is 
further evidence of the interna- 
tionalisation of the equity capi- 
tal market. 

Although the numbers are 
small, with the five newcomers 
to London listings raising 
£146m in October, one of them 
was Nippon Telegraph & Tele- 
phone. the Japanese telecom- 
munications giant which, with 
a total capitalisation of $l38bn, 
is the biggest company in the 
world. 

The desire by companies in 
emerging markets to access 
international capital was 
shown by the growth of Indian 
groups listing in London, since 
the regulations for the listing 
of global depositary receipts 
were changed in August. 

New Indian GDRs now listed 
in London include: East India 
Hotels; Shriram Industries, the 
food oils group; J.K. Carp, the 
copier/airmail group: and Bajaj 
Autos, the scooter and motor 
cycle group. 

Overall companies - mainly 
from the emerging markets - 
have raised more than Sllbn 
since the birth of the GDR in 
1990, with S5.5bn of that raised 
so far in 1994. 

While lagging far behind the 
world's bond markets, equity 
markets are rapidly becoming 
more international. 


ZURICH 

Swiss Re's annual press 
conference tomorrow, and a 
subsequent presentation to 
analysts, may provide further 
clues on the insurance group's 
restructuring plans. 

The group decided at the end 
of September to sell all its 
interests in primary insurance 
companies in order to 
concentrate on expanding its 
core business. 

Swiss Re's share price has 
jumped by almost 30 per cent 
since the announcement and, 
along with other financials, it 
has also been a beneficiary of 
switching out of UBS as the 
bank's protracted battle for 
influence with Mr Martin 
Ebner's BK Vision rumbles on. 


A further smalt example of 
this is the vendor placing on 
Friday by Forte, the UK hotel 
group, to pay for Meridien, the 
French hotel group. Forte won 
control of Meridien earlier this 
year, defeating Accor of 
France, and used Forte shares 
to pay for the acquisition. 

Since Forte wanted to 
broaden its global shareholder 
base, it turned to UBS and 
Paribas, the European bank, to 
place the shares internation- 
ally. 

“It is attractive to have our 
equity Id the same place as our 
assets." said Mr Richard Power 
of Forte. 

Two other equity issues 
being prepared for launch also 
highlight the tendency towards 
the globalisation or equity. 
BSkyB, the satellite television 
broadcaster, and TeleWest, the 
UK cable television and tele- 
phony operator that has two 
US parents, are both thought 
to be planning roadshows in 
the UK and US and listings in 
London and New York. 

A report published last Fri- 
day by the McKinsey Global 
Institute, the consultants, 
addresses the same issue. It 
says: “The equity markets 
have been slower to globalise 
than the foreign exchange or 
bond markets. Significant dif- 
ferences in valuation still exist 
across different national equity 
markets even for comparable 


HONG KONG 

The market is set for another 
US-led week, with last Friday's 
non-form payroll and job data 
providing a key signal for the 
direction of trade today, writes 
Louise Lucas. 

Investors will be looking for 
any inflationary sparks which 
could feed through into a 
further rise in interest rates - 
initially in the US. but followed 
through the currency link into 
the colony. 

Domestically, there is little 
on the corporate front this 
week, although China Light 
and Power, the electricity 
utility, reports final results 
today. 

Friday’s signing of the 
long-awaited airport financing 


companies in identical indus- 
tries.” 

While the daily volume of 
global foreign exchange mar- 
kets Is about Sl.OOObn a day 
and that of government bond 
markets $2Q0bn a day. the total 
daily volume of all the world’s 
stock exchanges is only S23bn 
a day, the report says. 

However, globalisation of 
equity markets is now being 
driven by institutional inves- 
tors. who are rapidly increas- 
ing their mix of international 
equities in their portfolios. 

This globalisation is also 
helped by liberalisation of reg- 
ulations, advances in technol- 
ogy. securitisation and the use 
of derivatives, says the report. 

Growth in the global capital 
market will also mean more 
integration. The report says 
financial assets are “beginning 
to act as if they were part of a 
single, integrated market that 
links together the foreign 
exchange markets, money’ mar- 
kets, bond markets and equity 
markets”. 

But for the bankers at UBS 
and Paribas, who shifted £l73m 
of shares within four hours on 
Friday, the global market is 
already here. 

"The Global Capital Market: 
Supply. Demand, Pricing and 
Allocation.” McKinsey Global 
Institute. 

Martin Brice 


deal was received by investors 
with a degree of nonchalance, 
with many analysts believing 
that the deal is already fully 
factored into the market 

TOKYO 

Trading is likely to remain 
thin as caution over yen-dollar 
fluctuation continues and the 
sustained strength of the yen 
prompts fears of lower profits 
for exporters, writes Emiko 
Terazono. 

Developments in the US 
continue to hold sway as 
Investors watch for 
fluctuations in US interest 
rates which could affect the 
Japanese money market 

Compiled by Michael Morgan 




EMERGING MARKETS: This Week 


i- O 


r -• •• 




, -iWrt.’ 

■ \ ^ .1 

- 




: r.’Asrtc 


The Emerging Investor / Sally Bowen 

Peru steps out to woo the investors 


r-i.-. -U .'V — 


■at* 3 - 


-v* 


Strong economic recovery after 
years of recession underpins 
the stock market bocun that is 

making Lima the new darling 

among Latin American emerg- 
ing markets. 

Selected Peruvian, stocks - 
particularly in the mining, 
banking and c ement sectors - 
have featured consistently 
among Baring Securities’ list 
of best performers worldwide 
over the past couple of months. 

Pern Is also making its debut 
in the International capital 
market place. Six weeks ago. 
Banco Wiese became the first 
Peruvian company to'raise cap- 
ital through a level 3 ADR 
issue on the New York stock 
exchange. The offering was 
heavily oversubscribed and 
ititutional investors who 
ight In saw immediate gains 
'of nearly 20 per cent 

Equally significant is that 
^Peruval, the stockbroker, has 
' just succeeded in raising mare 
than $50m of venture capital 
for its newly-constituted com- 
pany, Peru Real Estate. 

“Thifi is Peru’s first venture 
capital deal,” says Mr Lorenzo 
Sousa, joint manag in g director 
of Peruval. “Five Peruvians 
went to New York and raised 
$22m in 48 hours, with PaineW- 
ebber underwriting more than 
$50m. We’ve raised real money 
on nothing but a project. 
That’s unprecedented.” 

Peruval’ s backers are institu- 
tional investors in the US and 
Europe, including George 
Soros 1 Quantum Fund, Lehman 
Brothers and Martin Curry of 


Edinburgh. The project offers 
them a 37 per cent internal 
rate of return over the medium 
term - “more than realistic in 
today’s Peru." says Mr Sousa. 

Three main factors have 
helped spur recent investor 
enthusiasm for Lima. Firstly, 
the realisation that spectacular 
economic growth is solidly 
based; secondly, highly encour- 
aging third-quarter results 
from some leading companies; 
and finally President Fuji- 
mori’s late October visit to 
New York, where he completed 
a busy pregramme of promot- 
ional contacts with investors 
and the business community. 

Lima’s general share index 
registered a rise of 8.7 per cent 
last month, while the selective 
index of 15 blue chips put on 
&5 per cent 

By the end of October, mar- 
ket capitalisation had jumped 
to $&3hn, putting on 3 per cent 
in the month and 64 per cent 
since the start of the year. Vol- 
umes traded in both September 
and October were about $370m, 
some 60 per cent hi gher thaw 
August. The daily average 
traded over the past 12 months 
has been $13.5xn, with foreign 
investors accounting for 
maybe 45 per cent of the total. 

Recent activity, it is true, 
comes after a sluggish period 
from April to July. The index 
put on some 40 per cart in the 
first quarter of the year, on 
domestic economic growth 
prospects and Increased direct 
foreign investment The $2bn 
purchase by Telefonica, the 


Ten best performing stocks 

Stock 

CBoaky 

Frtday Week oa week donee 
4/11/W $ % 

Norte Pacasmayo 

Peru 

4.3376 

0.8707 

25.12 

Aksa Akrikk ve Kinya Sanayi) 

Turkey 

0.7647 

0.1336 

20.53 

Eczacibeei Itac 

Turkey 

0.0991 

0.0146 

17.30 

Lucky Securities 

S.Korsa 

30.4674 

4.3715 

16.74 

MDX 

Thailand 

4.4681 

0.5948 

15.28 

Daewoo Searitfes 

S. Korea 

47.5503 

5.7398 

13.73 

Kta Motors 

S. Korea 

23.4615 

2.7446 

13.25 

Cho Heung Bank 

S.Korea 

18.0666 

1.9953 

12.42 

Korea First Bank 

S.Korea 

17.5648 

1.7536 

11.09 

Koc Holding 

Turkey 

0.6883 

0.0650 

10.42 


Spanish group, of a controlling 
share in formerly stale-owned 
telecommunications companies 
Entel and CPT gave the mar- 
ket a special boost. 

Like all other Latin Ameri- 
can stock markets, however, 
Lima responded negatively to 
the successive rises in US 
interest rates and, in lesser 
measure, to the assassination 
in March of Mr Donaldo Colo- 
sio, the Mexican presidential 
candidate. More than a quarter 
was knocked off values in the 
April to August period. 

“lima isn’t immune to the 
generalised rise and fall of 
world markets," says Mr Jose 
Miguel Gamarra, head of 
research at Baring’s Lima 
office. “But the real difference 
here is Peru's excellent eco- 
nomic performance which is 
not found in other emerging 
markets.” 

Peruvian GDP has grown by 
EL3 per cent in the first nine 
months of the year with the 
fishing and construction sec- 
tors each topping 30 per cent 


&xn» Swing StUiim 

growth. Last year, output rose 
by 6.5 per cent. 

Inflation, meanwhile, seems 
to have been tamed. October 
price rises in Peru - at less 
than 0.3 per cent - were lower 
than in most of the developed 
world. Inflation looks likely to 
end the year below 18 per cent. 

On the back of these achieve- 
ments, large companies are 
turning in sharply improved 
performances. Mr Miguel Palo- 
mino, director of Peru's recent- 
ly-opened Lima office of Smith 
New Court, says thp 24 leading 
Peruvian companies he moni- 
tors closely are expected to 
announce 1994 profits on aver- 
age double last year’s. 

The turn round in companies' 
performance answers the ques- 
tion of whether, with current 
pie's of about 25. Peruvian 
stocks are overvalued. “If you 
are looking backwards, maybe 
yes. but projecting ahead tu 
1995, definitely no,” says Mr 
Palomino. He predicts an aver- 
age p/e of about 15 for the com- 
ing year for market leaders. 


Since current strong growth 
follows years of recession (GDP 
dropped 25 per cent between 
1988 and 1992). Peruvian com- 
panies find themselves with 
installed capacity to spare - at 
present, only about 60 per cent 
is utilised, allowing for rapid 
expansion on minimal invest- 
ment. 

With Peru investing heavily 
in upgrading infrastructure 
and consumer demand picking 
up, local analysts are still tip- 
ping the basics as best local 
bets for growth. 

Mining companies Buen- 
aventura (silver and gold), 
Minsur (tin), SPCO (copper) 
and Milpo (lead and zinc) are 
highly recommended, for their 
management as well as their 
prospects. Cement os Lima, 
newly transferred to the pri- 
vate sectur and Ceuient us 
Norte Pacasmayo, which is 
soon to be privatised; brewers 
Backus and Johnston and 
CNC; and CPT and Tele 2000. 
the telecommunications com- 
panies, are the stocks on every 
broker’s list of recommenda- 
tions. 

Peru's financial sector, too. 
"is going to grow like crazy.” 
says Mr Palomino. The Banco 
de Credito. Peru’s largest bank 
with some 29 per cent of all 
deposits, showed profits of 
$30m in the first nine months, 
while Banco Wiese, the second 
private bank, notched up prof- 
its of $2lra. 

Following the success of 
Banco Wiese's ADR issue there 
should be several more Peru- 


1 >*-• 


Dollar stays focus of market attention 


The .dollar will remain the 
centre of attention, even if 
intervention by the Federal 
Reserve last week effectively 
put a short-term floor under 
the currency. 

g£ The focus of market atten- 
tion. will .how shift to the 
November 15 meeting of the 
Federal Open Market Commit- 
tee, which, is widely expected 

to sanction a further rise in US 
interest rates. 

In the interim, the dollar 
is likely to he protected from 
the foil force of market bear-' 
ishness by the prospect of fttr- 

ther intervention, possibly on a 


co-ordinated basis. 

The dollar Is sure to be a 
subject of discussion when G10 
central bankers meet today in 
Basle. So far, however, there 
has been no indication of Inter- 
vention spreading beyond the 
US and Japan. 

Dollar selling pressure 
among institutional investors 
also appears, limited. “They are 
very aware that the crowd psy- 
chology in the market is mov- 
ing towards a position of 
extreme bearishness,” said 
Mr, Neil MacKinnon, chief 
economist at Citibank in Lon- 
don. 


“They are not really in the 
mood to sell the currency from 
these sorts of levels.” 

With mid-term congressional 
elections this week, and the 
quarterly treasury refunding, 
tiie US authorities have ample 
reason for wanting to stabilise 
the dollar. 

Mr Robin Aspinall, strategist 
at Panmure Gordon, the bro- 
ker, comments: “A stable dol- 
lar may win more votes; It cer- 
tainly makes it easier to sell 
bonds to foreigners." 

The elections are unlikely to 
have much market impact, 
except in the unlikely event of 


the Democrats doing much tet- 
ter than expected, or the 
Republicans making gains on 
traditional Democratic strong- 
holds. 

One event that will distract 
attention from the US is the 
Bundesbank council meeting 
on Thursday. As Mr Hans Tiet- 
meyer, president of the Biuui- 
esbank, has stressed recently. 
German rates can go in either 
direction. 

This is more than can be 
said for many of the other lead 
ing economies, where the 
direction of rates can only be 
up. 


Dollar 

Trade-weighted Iride* 
68. 



irtan issues in coming months. 
The Delgado Parker telecom- 
munications group will launch 
Pantel, and Cementos Lima 
will follow its June interna- 
tional over-the-counter offering 
by registering a number of its 
shares under the ADR mecha- 
nism. 

Prospects for further stock 
market expansion are good. 
The Fujimori administration’s 
aggressive privatisation pro- 
gramme is in full swing and a 
residue of state-held shares 
(the state is initially retaining 
about 30 per cent in privatised 
telecommunications and 
energy sector companies) will 
gradually be released on to the 
local market. 

According to Peruval. these 
initial public offerings could 
boost Lima's market capitalisa- 
tion from its present $8bn to 
about S14bn by late next year 
and $19bn by 1996. 

With general elections com- 
ing up in less than six months, 
the stock market might be 
expected to go through a 
bumpy patch. No serious chal- 
lenger to Mr Fujimori, how- 
ever. shows any desire to devi- 
ate from the firm economic 
lines set by the current admin- 
istration aud analysts expect 
sustained annual growth of at 
least 5 per cent for the next 
three or four years. 



News round-up 



■ Pakistan 

Regent Pacific, the Hong Kong 
based Asian fund management 
and financial services group, 
has formed a joint venture 
with the National Investment 
Trust of Pakistan and Dar-al 
Maal Al-Islami Group of Saudi 
Arabia for an asset 
management and financial 
services company in Karachi. 

The Emerging Investment 
Company, with a paid up 
capital of RplOOm ($3.3m), 
plans to float both closed-end 
and open-end investment 
vehicles in Pakistan, and 
hopes to launch the first 
closed-end fund by the end of 
the year. 

■ South Africa 

The International Finance 
Corporation launched new 
stock indices for South Africa 
from November 1, thereby 
increasing its coverage of 
emerging markets to 26. The 
new indices - global and 
investabie - are weighted by 
market capitalisation. 


South Africa, with a per 
capita GNP of 82,670 at the end 
of 1992 qualifies as an 
emerging market under World 
Bank definitions, and as such 
is the world's largest with a 
total market cap of $21Sbn. 

■ China 

The People's Bank of China is 
understood to be considering 
opening 10 more major cities, 
including Beijing, to foreign 
financial institutions. The 
insurance market in Shanghai 
would also be opened up to 
foreign companies on an 
experimental basis. 

■ India 

The finance ministry has 
announced new rules for 
takeovers saying buyers must 
disclose intentions ahead of 
acquiring large blocks of 
shares in target companies. 

• Edited by John Pitt. Further 
coverage of emerging markets 
appears daily an the World 
Stock Markets page 


BaiingtSecdri 

mmm 

>rging marl 

icets'-'inilii 

cesli * 


„v * r~v’, c 

mm 

Index 

4/U/94 

Week on week movement 
Actual Percent 

Month on month movement 
Actual Percent 

Yew to date movement 
Actual Percent 

Wald (301 ) 

..179.32 

-2.72 

-1.49 

-10.53 

-5.55 

+10.91 

+6.48 

Latin America 

Argentina (20) 

105.37 

+0.86 

+0.82 

-7.53 

-0.67 

-10.01 

-8.68 

Brazil (21) 

218.25 

-7.79 

-3.44 

-41.20 

-15.88 

+78.6Q 

+56.29 

Chile (12) 

222.40 

-3.97 

-1.75 

+10.69 

+5.05 

+74.86 

+50.74 

Mexico (25) 

141.93 

-2.79 

-1.93 

-9.98 

-6.57 

-19.33 

-11.99 

Peru(16) 

943.99 

+17.33 

+1.87 

+26.53 

+2.89 

+367.90 

+63.86 

Latin America (94) .. 

..166.61 

-3.43 

-2.02 

-15.52 

-8.52 

+17.37 

+11.64 

Europe 

Greece (16) 

84.17 

+0.03 

+0.03 

-1.19 

-1.39 

+1.08 

+1-30 

Portugal (18) 

122.01 

-0.31 

-0.25 

+3.64 

+3.08 

+9.89 

+8.82 

Turkey (21) 

76.90 

-0.93 

-1.19 

-10.59 

-12.10 

-84.81 

-52.45 

Europe (55) 

....99.55 

-0.34 

-0.34 

-0.87 

-0.87 

-12.68 

-11.30 

Asia 

Indonesia (26) 

153.73 

+0.67 

+0.44 

+1.57 

+1.03 

-17.31 

-10.12 

Korea (23) 

161.46 

+3.21 

+2.03 

-2.76 

-1.68 

+51.76 

+47.18 

Malaysia (23) 

229.43 

-6.53 

-2.77 

-8.28 

-3.48 

-23.82 

-9.33 

Pakistan (11) 

107.42 

-6.93 

-6.06 

-10.27 

-8.73 

-4.28 

-3.83 

Philippines (12) 

309.92 

+7.47 

+2.47 

+25.34 

+8.90 

-12.56 

-3.89 

Thailand (25| 

280.46 

+2.86 

+1.03 

+13.33 

+4.99 

+16.91 

+6.42 

Taiwan (32) 

T 66.78 

-5.85 

339 

-21.95 

-11.63 

+13.07 

+8.S0 

Asia 1152) 

..225.28 

-2.08 

-0.92 

-3.97 

-1.73 

+3.86 

+1.74 


Al rtdees i id mu. joniury Tih 1992-1 ML Scuos Bar«ig SwsmOaa 


Jan 1994 

Souico. B,ir* 01 England 


Nov 


Emerging routes: 


Vancouver- London. New Dill hi. Tanmlo-Vanccuvcr-Saout. Toronto- (boko* 







FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


NEW YORK 


WORLD BOND MARKETS: This Week 


Richard Waters H LONDON 


P!i:':i. H FRANKFURT 


Andrew Fisher H TOKYO 


Erniko Terazono 


The Treasury bond market 
seems likely to remain in a 
jittery mood this week. With 
the Federal Reserve’s 
policy-making committee due 
to meet eight days from now, 
there seems little immediate 
cause for buyers to come back 
to the market - particularly 
with a wounded dollar and the 
Treasury's quarterly refunding 
this Tuesday and Wednesday. 

At least the chance of 
further price declines this 
week looks limited. A belief 
that the authorities will raise 
the Federal funds rate sharply, 
possibly by more than the SO 
basis points, was already 
largely reflected in bond prices 
by last Friday night. The 
30-year bond ended the week at 
a yield of 8.15 per cent, up from 
735 per cent a week before and 
its highest level for more than 
three years. 

The only significant new 
data will come on Thursday, 
with the publication of the 
producer price index for 
October. (With the market 
closed on Friday for the 


Eurobonds 


Benchmark yield curve (%)* 

Month ago c= 

525 


~AM yWda aro market convwKkm 
Soiree: Menffl Lynch 

Veterans Day holiday, the 
consumer price index follows 
next week.) This is widely 
expected to show only a 
modest increase of 0.2 per cent 
or so, if any at all. after a 0.5 
per cent fall the previous 
month. 

However, last week's jump in 
the National Association of 
Purchasing Management's 
index suggests that producer 
price inflation could feed 
through Into figures later this 
year. 


-The gilts market will start the 
week with just a trace of 
nerves, in case the chancellor 
and the governor did, after all, 
agree to Increase base rates at 
their monthly monetary 
meeting last week. 

If, as most believe, they 
decided to leave rates 
unchanged, there should be 
scope for a rally in the short 
end of the market this week. 

Mr lan Shepberdson, UK 
economist at Midland Global 
Markets, thinks the longer end 
of the market will struggle to 
make progress unless German 
bunds perform well. Ten-year 
gilts yield 120 basis points 
more than 10-year bunds, at 
the lower end of the recent 
spread range. However, Mr 
Shepherdson points out that 
gilts have been remarkably 
resilient In the face of 
weakness in the US market, 
suggesting Europe, not the US, 
is now the dominant influence 
on the UK bond market. 

Mr Simon Briscoe, bond 
analyst at SG Warburg 
Securities, thinks the 


Brazil maintains issue supply 


Banco Votorantim's three-year 
eurobond last week came on 
the heels of several other Bra- 
zilian eurobond offerings and 
suggests that a recent tax 
increase on issuers, while lead- 
ing to some postponements, 
has not choked off supply. 

Prospects are expected to 
improve strongly if the newly 
elected President, Mr Fernando 
Henrique Cardoso, is able to 
consolidate the successes 
achieved by his Real plan. Mr 
Cardoso, whose election was 
welcomed by the business com- 
munity, takes office in Janu- 
ary. 

Last month, the Brazilian 
government increased to 7 per 
cent from 3 per cent the tax on 
money raised by eurobond 
issues in an attempt to limit , 
foreign exchange inflow. Bank- 
ers say the tax may slow down 
growth but will not affect the 
core market. 

Mr Edvaldo Morata. a 
vice-president at Dutch-owned 
ING Bank’s Sao Paulo office, 
noted that the $50m Banco 
Votorantim issue, which ING 
Bank lead-managed, had been 
postponed for about 10 days 
while the issuer recalculated 


its costs following the tax 
increase. 

“They realised that it was 
still worth It as they could lend 
the capital in Brazil at high 
local interest rates.” said Mr 
Morata. 

As well as Banco Votorantim 
there have been issues by 
lochpe-Maxion, a car parts 
company, Riocell, a pulp com- 
pany, and Sophora Comercio, a 
financial management com- 
pany, since the tax increase. 

Nevertheless, Brazilian 
issues, like Latin American 
issues in general, have been 
sharply reduced this year 
because of the turbulence in 
world interest rates. 

According to West Merchant 
Bank in London, Brazilian 
euromarket issues totalled 
$1.8bn in the first three quar- 
ters of tins year compared with 
$4.5bn for the same period last 
year. 

Bankers believe that eco- 
nomic success for the new gov- 
ernment will lead to a narrow- 
ing In the yield spreads paid by 
Brazilian issuers, as well as an 
increase in the demand for cap- 
ital by local companies. Cur- 
rently Brazilian issuers on 


Benchnwk yMd ana (96)' 
4/17/94 — Monftago = 
9.25 ■-=- 



q_25 -/ — 


0 5 years 20 25 

*Ai yWda are maricet convention 
Source: Menu Lynch 


ultra-long end of the market 
may be set to weaken. At the 
moment, there is an inverted 
yield curve at the long end. 
with long gilt yields being 
driven down by the absence of 
supply. 

If, as Mr Briscoe suspects, 
the chancellor announces a 
partial gilt repo facility in the 
Budget on November 29. that 
will make it easier for 
investors to switch from 
ultra-longs into medium-term 
gilts, where yields are higher. 


The German bond market is 
faced by a double uncertainty 
at home and abroad which 
should keep yields high in 
coming weeks. 

The main concern is over the 
timing and extent of rises in 
US interest rates, with anxiety 
heightened by Friday’s lower 
unemployment figures. "The 
Fed's hesitation in lifting 
interest rates in a period of 
dynamic economic growth stirs 
Inflation fears." said Mr JQrgen 
Bokr of BHF Trust. 

Once US rates do go up. he 
added, and the spread between 
US and German 10-year 
government bond yields 
widens a little further, "the 
yield on German long-dated 
bonds may well fall below the 7 
per cent mark again in the first 
quarter of 1995". 

Last week, they were around 
7.6 per cent Before they can 
start drifting down again, the 
market will also have to be 
more relaxed about German 
fiscal and thus monetary 
policy. The reelected Bonn 
government’s slim majority 


average pay 400 to 500 basis 
points above US Treasury 
bonds. This compares with up 
to 250 basis points for Mexican 
issuers. 

Mr Paul Stocking, a 
vice-president at J.P. Morgan’s 
emerging market research in 
New York, is cautiously opti- 
mistic about increased demand 
for Brazilian issues butstressed 
that a further increase in 
demand for Brazilian paper 
depends on economic reforms 
similar to those already imple- 
mented in. Mexico and Argen- 
tina. 

Until then "the international 
market will continue to expect 
a premium from Brazilian issu- 
ers”, he said. 

Some analysts believe that, 
given the size of Brazil's econ- 
omy and the competitiveness 
of its private sector, Brazilian 
eurobond spreads could come 
down by 100 basis points to the 
Argentine level by 1995, provid- 
ing reforms are introduced and 
inflation controlled. 

"The next question is when 
Brazil will overtake Mexico,” 
said one Sao Paulo banker. 

Patrick McCurry 


Government issues 

Australia joins the 
floating-rate club 


Australia’s decision to issue 
floating-rate bonds highlights a 
growing trend among govern- 
ments to avoid selling fixed- 
rate debt at the long end of the 
, yield curve. 

This year's sharp downturn 
in world bond markets has 
pushed long-term yields dra- 
matically higher. As a result, 
several governments, including 
the UK, Germany and Portu- 
gal, have become Increasingly 
reluctant to issue long-dated 
bonds at what they consider to 
be unjustifiably high rates, 
turning instead to floating-rate 
debt at much lower money- 
market rates. 

Australia will join the dub 
today with its first-ever issue 
of floating-rate domestic gov- 
ernment bonds, or Treasury 
adjustable-rate bonds. The 
issue of will consist of ASl^bn 
bonds due March 9 1998 with a 
coupon, of 20 basis points below 
the three-month hank bill rate 
and a re-offer yield 15 basis 
points below the bank bill rate. 

It will be lead-managed by 
Commonwealth Bank of Aus- 


tralia, with National Australia 
Bank, Westpac Banking Corpo- 
ration and Bankers Trust Aus- 
tralia as co-leads. Future TAB 
issues are likely to be sold via 
the usual public tender system. 

According to the Australian 
Treasury: "Issuance of this 
adjustable-rate bond is expec- 
ted to enhance the Common- 
wealth's flexibility to raise 
debt and efficiently manage its 
debt portfolio. Similarly, the 
introduction of an adjustable- 
rate bond will provide inves- 
tors with greater flexibility in 
managing their floating-rate 
exposure while minimising rol- 
lover risk and assisting inter- 
est-rate hedging.” 

The shift to floating-rate 
from fixed-rate debt reflects 
the Australian government's 
reluctance to issue bonds at 
the long end of the yield curve, 
analysts say. On Friday, the 9 
per cent government bond due 
2004 was yielding 10.56 per 
cent, against 6.93 per cent on 
the three-month bank bill rate. 

Conner Middelmann 


Gttnnany 

Benchmark yield curve (66)* 
VIISTm. Month ago *= 

850 ” 


7.50 


5.50 f 

4.60 ^ ' 1 A 

O 10 yra 20 SO 

'AS yields ere market convention 

Source: Memfl Lynch 

has unsettled capital market 
confidence in its commitment 
to rein back spending growth. 

The Bundesbank - whose 
council meets this week, but is 
expected to leave Interest rates 
unchanged - also wants to see 
inflation fall further and M3 
growth to ease substantially - 
"We need a better overview 
before we can decide whether 
our central bank interest rates 
remain appropriate," Mr Hans 
Tietmeyer, the bank’s 
president, said on Friday. 


Trading in cash government 
bonds is expected to remain 
subdued this week- due to 
expectations of higher 
short-term interest rates. 
However, the bond futures 
market is likely to see a 
continued Increase in activity 
as dealers and investors buy 
back the December contract 
ahead of an expected 
change-over In futures 
contracts at the end of the 
week. 

A further rise in futures 
prices could support the cash 
market. However, increasing 
funding needs at banks due to 
the high level of maturing 
certificate of deposits may put 
upward pressure on short-term 
interest rates, which are 
already gradually rising, and. 
weigh on the bond market. 

Some Y10,000bn of 
three-month CDs are expected 
to mature as commercial banks 
are choosing other methods of 
capital raising to avoid a rise 
in three-month CD rates, 
which are the basis for 
short-term prime rates, or 


10-year benchmark bond yields 


• ilsgran' ; ' '• . ■ * * 

Bandmxk yteH . V . 

4/11/94— . (north 4flOr1?!=5f.^ . 

5JQ 

4.00 

2.00 L 

,0, .. 5 yeanr .A?,*--, SO] 

■ -w ytern are- mart**' cwwonbwT J V - - 
Source.’ MenM Lynch •-?. \ 

rates for first-tier 
customers. The banks do not : 
want to have to raise . 
short-term prime rates when 
demand for funds among 
corporations is already tow. 

. Most banks have been 
refraining from issuing CDs . 
since August, resorting to v 
short-term money markets for ; 
funds. At the end of October, ' r 
outstanding CDs totalled^. . 
Yl4 I 980bn. of which W percent 
are expected to mafairetlHs V' 

month. - :-r J . 


Percent 
13 . - 


uk 

t——~ a Gammy . 
■■ ■■■— Ranee 

Spain 

tarty : 




— — 


10 


a -u 


. - ; 1 ’ s ■• - .*f 1 - ; 
«», t | ^.» .-r> • j 







Aug 1994 


Germany 


Source: Datastream 


I W l BRES T RATES ATA OUNCE 


Discount . 400 .- ■ US 

Overnight 4.G& 2LS5 

Three month 5.30 2.31 

One y oat 635 2.-75 

Five yew 7.B9 4.09 

Ten year 7.99 <74 

tlj Fr*nc*4tepc rate. H UK4m ana. Bourn Aariua. 


US TBEASUHY ROND FUTURES (twi) stoaoflo 32rete of WW 

Open • Sattpcfca Change .• ‘Hfrfl. 

Dec 96-27 • 9Q-07 -1M9 • . 97-14 

Mar 9&-06 95-19 - . -049' 86420 

Jurt ■ . 95-20 95-01 " >0-18 . 96-00" 


Sep 

Oct 

•: Nov 

# . • 


’ f ’ A * 

. ■ • ' ■ . 


’ 



. ■tetife"* ■ 
. V: 

France" V 

Half. 

■ * 

. aXOF’: •*' -• 

• 7.50 

• . :. &>» 

5J28 ; ; 


: ,.S»- 

5A6 • ..VI 

.’8.55* 

■ - 

*2s: •• 

9.98 .. . 

- ■ 7-23. 

7.77 •; . 

12J04 . 

8_53 

&26V-V * 




Eatvol • Open infr 

297.105 . 386,691 

1,526 30.486 

534 ' 11,462 



■- ■ .:j\ • 


•orate issues 


EURO DISNEY S.C.A. 


YEAR ON YEAR LOSS BEFORE EXCEPTIONAL^ DOWN 25%; 
PARK ATTENDANCE DOWN 10%; HOTEL OCCUPANCY UP 5 POINTS. 

• •»*• Consolidated Statement of Income as of 
September 30, 1994 (unaudited) 


{In millions of FF) 

Fiscal year , 
1994 | 

Fiscal year 
1993 

Revenues 

Operating revenues 

4,147 

4,874 

Construction sales 

114 

851 


4,261 

5,725 

Operating income before fixed and administrative expenses 

i.186 

1,509 

Loss before exceptional items 

0.282) 

11,713) 

Exceptional items 

(515) 

(3.624) 

Net loss 

(1,797) 

(5,337) 


Operating revenues 


PARK (FF 22 bn) 


OTHER (FF 0.3 bn) 


««*•• Financial restructuring 

The financial restructuring, announced earlier 
this year, has significantly benefited the 
Group's results and financial position. At Sep- 
tember 30, 1994, the Group had net equity of 
approximately FF 5S billion and total bor- 


Chairman Philippe Bourguignon commented: 


* 1 994 was a challenging year for Euro Disney, 
its cast-members, its shareholders and its 
lenders. The financial restructuring and business 
initiatives will leave the Company positioned 
for future success. They afford the Company a 
new beginning. Given the high levels of guest 
satisfaction and that close to 3.5 million British 





HOTELS fFF 1.6 bn) 


rowings of about IT 16 billion, down around 
23% compared to FF 21 billion at Septem- 
ber 30, 1993. The Group has approximately 
FF 1 .2 billion of cash and in addition, has avail- 
able credit facilities iotaJHng FF 1.1 billion. 


have visited Disneyland Paris since the open- 
ing, we are confident that we wifi be able to 
strengthen Disneyland Paris' position as 
Europe's leading short break destination. 
These efforts combined with the financial 
restructuring should significantly improve our 
financial results over the coming years”. 


GrandMet finds preferred US route 


Grand Metropolitan, the UK 
food and drinks group, may 
have started a trend by issuing 
a new kind of undated security 
in tiie US fixed-rate preferred 
market early last week. 

GrandMet issued $500m of 
I so-called "preferred securities" 
on Tuesday, targeting US insti- 
tutional and retail investors, 
with a coupon likely to be in 
the range of 9.25 and 9.325 per 
cent when the paper Is priced 
this week 

The structure of the security, 
jointly lead-managed by Gold- 
man Sachs and Merrill Lynch, 
offers a tax advantage which 
makes it around 300 basis 
points cheaper than a direct 
issue of preferred shares. 

indeed, the offer Is only 
about 50 to 75 basis points 
more expensive than Issuing 
equivalent debt, yet it gives 
GrandMet' s management much 
greater flexibility than new 
borrowing in the debt markets, 
and the comfort of solid rat- 
ings (A2/A+) from the major 
US credit rating agencies. 

Mr Nick Rose, the company’s 
corporate treasurer, says it 
provides an "economic equiva- 
lent of a parent issue of pre- 
ferred stock", will improve 
gearing and interest cover, and 
will lengthen the maturity pro- 
file of the group’s debt 

He also stresses that there 
are wider advantages to be 
gained from access to the US 
fixed-rate preferred market. 
"Preferred stock is a retail 
product which mamas and 
papas will buy. This is a way 
to get GrandMet’s name and 
brand across to a new class of 
investors. It can only be benefi- 
cial" 


UK companies have been 
active players in both the vari- 
able-rate preferred stock mar- 
ket (which is priced off the 
short end of the yield curve) 
and. more recently, in the 
fixed-rate preferred stock mar- 
ket 

However, bankers said the 
GrandMet deal could be a 
model for other UK companies 
seeking to raise capital in the 
US. 

"The transaction opens up 
another means of tapping a 
very significant market which 
can have low-cost financing 
and other strategic benefits." 
says Mr Bruce Macfarlane, a 
managing director with Merrill 
Lynch. 

The tax advantage of the pre- 
ferred security is rooted in the 
creation of a so-called "pass- 
through” subsidiary, located in 
the US state of Delaware for 
tax and legal reasons. 

The subsidiary Issues the 
stock and then on-lends the 
proceeds back to the parent 
and to an operating subsidiary 
(in GrandMet' s case based in 
the US). 

Interest payments on the 
loan are tax deductible. Gold- 
man Sachs, which is also book- 
runner for the Issue, Mniirm the 
instrument, which it calls a UK 
preferred security, "represents 
an attractive and important 
source of ncm-dilutive quasi-eq- 
uity capital, which to date has 
been unavailable to UK corpo- 
rations.” 

Preferred securities offer 
investors no voting or equity 
rights and can be issued in 
convertible form. 

Mr Calum Osborne, execu- 
tive director, capital markets, 


at Goldman Sachs, explains 
that the new product builds on 
a range of initiatives in the US 
fixed interest preferred market 
over the last five years. 

These were originally trig- 
gered by changes In rules gov- 
erning the capitalisation of 
banks, after the report of the 
Basle committee in 1989. 

The ruling of the Basle com- 
mittee that certain types of 
perpetual shares could be 
counted as tier one capital - as 
essentially equivalent to equity 

- for solvency purposes, 
prompted a number of British 
banks to Issue preferred stock. 
UK companies, including the 
banks, have issued almost 
$4.5bn worth since 1989. 

However, restrictions in 
local laws made it impractical 
for most European banks to 
issue preferred stock in either 
the US or in some cases in 
their own domestic markets, 
putting them at a competitive 
disadvantage. 

The solution was to develop 
so-called “pass- through" sub- 
sidiaries located in offshore 
centres such as the Cayman 
Islands and Luxembourg which 
could issue the preferred secu- 
rities and then on-lend the pro- 
ceeds to their parent European 

- mainly French and Spanish 

- companies have issued more 
than $3.58bn in US perpetual 
preferred stock since Septem- 
ber 1991. 

The tax advantages - stem- 
ming from the conversion 
treatments of the inter-com- 
pany loan - were a by-product 
of these developments. 

Bankers such as Goldman 
Sachs and Merrill Lynch have 
worked at ways of bringing 


these same advantages to a 
wider range of companies. 

One breakthrough came late 
last year when Goldman devel- 
oped the idea of monthly 
income preferred securities or 
Mips, allowing domestic US 
companies a tax-efficient entry 
to the preferred market by" 
establishing “pass-through" 
vehicles in the Turks and Cai- 
cos Islands, where local corpo- 
ration law was amended to 
accommodate the new struc- 
tures' last year, or more 
recently in Delaware. 

Since last October. US com- 
panies have issued $5.11bn in 
Mips, with utilities companies 
accounting for 7 0 per cent of 
all issues. 

The new structure 
announced last week builds on 
the Mip idea and gives Grand- 
Met a better agency rating and 
greater certainty about tax 
treatment. 

The preferred security is also 
undated, unlike Mips which 
have a 30 to 50-year mandatory^* 
redemption. 

Goldman lays great stress on 
the favourable response from 
the rating agencies. 

"Standard & Poor’s considers 
the preferred security as supe- 
rior to a direct issue of parent 
preferred due to low cost, 
u n li m ited deferral feature and 
limited investor remedies,” 
says Mr Osborne. 

“There has been an acceler- 
ated evolution of these struc- 
tures,” he points out. “There is 
a general recognition that you 
can achieve lower cost in a 
way which is not destructive to 
agency ratings." 

Richard Lapper 


NEW INTERNATIONAL BOND ISSUES 











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Fed Chairman Alan Greenspan boosted dollar by 
announcing Currency's fell was bad for U.S. economy 

Japanese parliament elected Socialist Party's Wurayama as 
Prime Minister causing markets to move. 

Bundesbank President Hans Tieimeyer hinted at lower rates 
in exclusive RFTV interview, stating money supply growth 
only a problem it expansion resumed. 

U S Treasury Secretary Lloyd Bentsen. in exclusive, live. 
RFTV interview at the IMF conference, said he would be pleased 
to see a slightly stronger dollar. The dollar promptly rose. 


CDs 


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Tietmeyer prompted speculation of future rate cuts when he 
told a Bundesbank news conference ‘here was no need for 
worries about inflation expectations in Germany. 



ivs / \ .' r ■ • Latest -Balas 
icUftsk - ' Contributor Luc 


President Clinton tola G7 news conference in Naples that 
economic growth was his priority, pushing dollar lower. 


Source Deal 


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Bld/fisk Contributor Loc Source 


U.S. Labor Secretary Robert Reich, speaking exclusively to 
RFTV. said there was no evidence of cost-push' inflation, 
warning against over-reaction to non-farm payrolls figure. 


In exclusive interview after Bundesbank press conference 
BUBA board member Otmar Issing warned against expecting 
the magnitude of repo rate cuts to follow recent trend. 


Latest Rates 

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LIVE 



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RON BROWN 
I? US Commerce Secretary 




L. 



LIVE 



LIVE 





U.S. Commerce Secretary Ron Brown pushed dollar down 
with aggressive comments cr the U.S. -Japan trade dispute, 
in exclusive RFTV interview. 


U. 


Commenting exclusively to RFTV. Italy's budget minister 
Giancarlo Ragliarini outlined agenda for long-awaited 
cabinet meeting and gave date for new budget. 


In exclusive Reuter interview. Sweden's central bank 
governor Urban Backstrom attempted to calm markets 
after surprise rate rise, saying crown undervalued. 


U.S. Trade Representative Mickey Kantor discussed 
U.S. strategy in an exclusive RFTV interview. 


r. . Latest Rates 
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Portuguese Finance .Minister Manuel Rinho gave an 
exclusive intervie w to Reusers during the Escudo crisis. 


Fed Chairman Alan Greenspan announcement that strong 
and reliable dc'lar was important to world markets bolstered 
U.S. currency by half a pfennig. 


Bank of France Governor Jean-Claude Trichet forecast 
further falls in French inflation during address in London 
transmitted exclusively to RFTV viewers. 


RFTV transmitted interviews with 5 G7 finance ministers 
including Kenneth Clarke - U.K. 


Get it live. Get the edge. 


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Making the best information work harder 

For further information contact vour local Reuier otlice Or Area Headquarters 


v" ' Ai'A 






















■ f 


26 


FINANCIAL TIMES 


MONPAY NOVEMBER 7 1994 


WORLD STOCK MARKETS 


n- mu w w 


m 


►/- 


♦ I- MlwIlM M 


► /- IWi u»w w 


EUROPE 

ABSnSA(N 0 V 4 /SC^ 


AuoMr 

1,930 

-5 £200 1,750 

20 


BMAuot 

£ 

+20 1270 

780 

1.0 


CradPI 

+1 834 

507 

10 


EAGOI 

£7X6 

-0S4JSO2X30 

00 

— 

EVN 

1039 

— 1,713 1.180 

IX 



Urnsn 

Kbvp4* 


-6 1067 1050 
-8 744 558 

00 


(MM 

374 

-1 1007 

8*5 

10 


PtflZm 

810 

— 1050 

an 

£2 


Radatft 

400 

-6 488 

386 

£6 


SHOD 

VIA TOC 

189 

-3 £58 

171 

30 


1081 

+6 1.180 

874 



VeOHD 

vmSa 

331 

—4 *06 

313 

18 


680 

+3 791 

546 

£4 


Vnl/Ur 

464 

-1 000 

430 

IJ 

|t|| 

vm*9 

3016 

♦26 4040 0X11 

10 

— 


BBJOUUAinBBQUK (NW 4 / FTS.) 


BHnU 

BSnLPl 

Brx^Ha 

Mt 

Befcrt 

csnctm 

CMB 


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GBL 

GBLah 


BanBng 

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rJb/SI/ 

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Sdnc 

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MO 

IMAM 


«.0T5 

7000 

5.010 

4. IBS 

15330 
22.000 
36,725 
2. *20 
23,900 
124500 
2.600 
5380 
1fl3 
7.17D 
1310 
5300 
2,845 
2.485 
3395 
1390 
7328 
7.300 

9.010 
4.450 

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8320 

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1370 

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ZJ*» 
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4840 
4340 
2, ISO 
2.290 

12350 

1340 

14,738 

9.700 

WJ00 

2.7*5 


+6 4,450 3JUS 18 
+10 8890 7350 12 
+30S300 4JWO 
-60 XOTO 1880 4.7 
+301UM1Ua 28 
-100 28^9 22800 10 
+26*287534800 88 
+10 2.650 2.105 13 
-752880020850 1.7 
-1001387511.775 10 
-45 1700 2.190 14 
-20 8800 5880 *8 
-3 215 16* 6.7 
-70 8800 8,100 1.7 
+14 1850 1.196 11 
+80 6820 6.110 78 
+10 1781 2870 4.7 
2870 3880 
+40 4890 1625 10 
... 4870 3850 80 
+4 T.«*> 7800 10 
+10 6.180 7.140 6.1 
+10 10.600 5.720 18 
-> 5890 4,160 28 
-20 1839 2750 82 
— 8800 5810 2.0 
_ 7850 6890 18 
+10 8.400 6800 4.4 
-10 1830 1.350 8.9 

-100 19.750 1(800 — 

+40 10.775 1290 2 9 
+55 1609 2820 4.8 
+3 568 420 17 
+100 RXOO 4,250 48 
+40 5880 4820 4.4 
+50 1635 2,025 13 
+03 1536 2.01b 5.1 
-60 IS. 790 11550 48 
+ 10 18761.450 6.7 
-3501733011750 48 
-SO 11800 9820 4.7 
+275 26.(00 2£SW 14 
+15 1930 2,440 48 


mem 370 
M W 546 
LVMH 811 
uncoo 30480 
Loan* 12980 
Lured 1.107 

Upnf 6820 

374 

47 1 80 
. __ . 23580 
Ma*« 11780 
HMfel 939 
•MEst 119 
Orson 300 
Parra 370 
Pansfl 319 
POGtBT 18680 
PtrfOc 310 

asp ss 

Fram'd 1823 
Man 523 
RtnnC 21080 
RhonPA 13120 
RUeM 501 
SUB EBB 

sbs *e 

STLotf I860 
Senior 38980 
SabSA 580 
Seftns 381.40 
Sirco 416 
SkfatR 2840 
SocGan 605 
SomnrA 1852 
smet 23DJ0 

SuwO 257 
SynM 20540 
TaSB 1000 
ThmCSF 14710 
ToisIS 33840 
UAP 144.40 
IJFBLdc 362 
UrJbd 43S 
Urtnfr 405 
(COM 301 
vane 206.70 
Worms 24080 


— 570 340 9.7 
+3 70S 500 6H 
—7 902 661 11 
+80491-90 377 3.4 
+4801(77010639 — 
-6 1896 1806 08 
_. 7.100 5l 48Q 08 
+31803066021091 __ 
+180 824 . 420 16 
-80 274207.10 18 
+180 13030 8780 6.1 
-1 1846 888 8.3 
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_ 250 164 
+2S2P S2fi 315 48 
-80 53580129 78 
+5.50 234 13850 38 
+680 371 2838} 78 
-6 836 7B2 18 
+161805 7B5 
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+19 60*36110 — 
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+2 752 642 18 
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-003890 2860 18 
-a 734 670 14 
+11 1.789 1.34Q 38 
♦4OT 40000 S&iq 17 
_ 600 472 11 
+80 81030080 78 
+3.10 700 302 78 
.... £470 1.790 ... 
+12 702 523 17 
*7zeao> 1 po 28 
+120 629 232.10 ... 
HIM 37722040 48 
-802378018350 14 
-SO 1120 1261 18 
+120 214 13210 6.1 
+4803645029110 13 
+48022450 IT 
+0 49* 333 38 

_ 650 427 50 80 
-80 800 402 8.1 
+a 306 221 10 
+170 336 MO 3.3 
mlO OSS 227.(0 48 


_ Saipan 1265 +16 4810 2.876 ™ 

_ SPBOtl 8080 S”SS2'2?1] 

_ an 1700 -410 135J0 9 JOT 6.4 
_ EnU® 1.090 +2 2.7M 1 M 

~ tS? 10890 

_ IHw 10800 ... 15700 1056 18 

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-2 333 2SQ 1.1 
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330 22 
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468 0,7 
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413 08 
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W 15JD 
13.70 


-S 154 09 18 

+3 77B 121 18 
+2 106 54 _ 

+.10 4380 3080 18 
-1 233 141 IS 

+ 001740 lit _ 
60 45 1 8 

-18 705 
+1 ISO 
+1 247 
+1 250 

-B 2GB 
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-1 104 59 14 

-SO 102 54.10 IS 
+30 97.90 41 _ 

-.40 120 84.50 1.1 
_ 2OT 173 2S 
-20 31 1450 _ 

-80 2080 12 _. 
129 58 


502 18 
100 0.8 
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200 1J0 
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FRANCE (Nov 4 / Fra.) 


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81+003 357 -4 485 348 

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Cantnt 219 +3.50 290 212 

DUN 414 +1 80039050 I 

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Di Bab 231 +60036650 210 
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ttmrt 300 -0 337 280 

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Kratdt 805 -13 6*9 SIB 

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KHD 12550 +201S150H510 
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320 +2430 418 311 S 

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M 53% 2740 -5 2ST7 2870 £ 

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made 1067 +22152012301 
mrma 277 +50 372 254 ; 
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fenttl 250 -2 31323350 S 

sennq 882 -a im aea i 
SdlA 38750 -050 438 350 1 
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PWBo 3550 
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vnoopfl 40.30 
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+17015048 8002 10 
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+131049 870 — 
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1720 

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1850 

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— 1270 

— 1000 
-03 3.48 
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-.05 IS 
+00 13S0 
+20 1170 
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— 308 

— 428 
+02 500 
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1150 T0 15 
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204 33 — 
2*9 33 .... 
402 S3 ... 
9 IS _. 
11 IJ — 
5.75 00 — 
1140 10 — 
13.10 10 ... 
11* OS — 
116 IX — 
305 1.7 ... 
8X6 25 ... 


90381 BnNea 
138304 BBCTA e 
10416 Bmcer 

«^48 CmpWd 

ESg3« 

481850 OUtar 
34700 Camtaeh 
29076 Csmeco 
173492 CbMITIP 
158899 Cm Oce. 
988171 CMto 
100 CariTV 
1 10542 CenTrA 
8745 CBflUIAa 
iaoo canume 
iioo carder 
4970 cwiTna 
450 CanGen 
5800 Cgn 
67 CNCep 
267650 Qn«Od 
206448 Comncc 
8800 ermwa 
mm arms 
30000 Ceeeon 
69635 OTn „ 
35789 Own* 
800 P arian 
866505 Dodco 
81747 Domt/r 
225961 Demttr 
5385 DufrdA 
14740 DundBA 
GOO Empire 
19323 EcfloB 
1700 BTOO 
BOO FtrNev 
58486 FP1 
4600 FVrtnr 
897000 FOMA 
136* Fares* 
3810 RrNov 
3301 FWmV 
10 000 F tOr* 
107874 Aaan 
13400 Sam 
4ioa Onaas 
8300 awut 

9090 Peace 
26S400 ftuflsA 
242596 Genoa 
30 Gk«r 
36115 &drc 
7000 

27900 HavtKSd 
7126 HMOd 
6400 H+mMC 
2502* KJtnar 

1B304 Hmot 

33050 Hortin 
9T 780 FfcdB Of 
77814 1PL61 
204189 Vnaaco 
77237 ImpOt 
257166 XCD 
100 74Mur 

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5800 IMiatD 
8870 bmt9 
6500 IWCOA 
15*80 JIUBCK 
00 KarAd 
8600 Uaroa 
8000 Laa& 
408686 Laban 
80440 LdmAl 
745346 UBnaBr 
648 LOTA nr 
2D941 Macknz 
1417 t4aMH 
11517 MOSB 
10 7000 Mecocb 
104492 t»acmB 
51760 MamaA 
3500 MpUM 
0212 Item 
34862 UaU 
8300 Mwmlx 


”18 


1B77D MManA 
573880 Moore 

* 40 ?:* 
30623 NeoMp 
2400 Neman 
19*00 NrndaF 


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MONTREAL (Nov 4/ Cm S 
4pm eftm 








9 “ 



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547 

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710 

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705 10X7 9 

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152088 FtecnE* 
538550 Ntnm 
408591 Nova* 
70 ' 


31365 ttanacE 
86300 One* 


TORONTO (Nov 4/ Can S) 
4pm ctee 


AUS77UUA(Nov4/AU5(S) 


1.090 +20 1,290 1.001 1.0 

08 


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. „ 1000 1.130 

+6 816 441 

1.110 7*2 
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915000 +700,1^^ 

1 658 +7 867 S21 

a 586 -4 819 388 

♦291070 990 


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Amcor 0.88 

Ampou 19* 

Arrato 135 

Aditnn 298 

ANZBK 377 

AusGLI 4.29 

AM 1X6 

BMP 19 BB« 
BTH Ny 2.40K 
Bom 900 

Bounce 004 

Brrnbts 1305 


1. 


1.130 +30 107 

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♦TO 1020 1 3 TO 
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-5 10*0 780 
2090 *20 1000 2050 

1.380 -.1,710 755 

300 *0 372 964 

1030 -20 1.700 1.230 

2000 -10 2.570 1.7W 

752 ._ 8S3 856 

70S +5 OQ9 996 

685 + 5 77 3 562 

7OT -a 633 533 
965 _. 990 S75 

782 *121.110 781 
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1.770 +101.8901/ 

4S50 +10 5S10 «J 

1080 *20 1000 1, 

625 -4 744 811 

3.810 +104.320 2000 

411 +1 536 408 

575 -O 779 575 

*28 

466 -* BIO 440 

937 -3 1020 70S 

4 J20 -20 4050 3 J30 

10*0 +10 1.770 1080 

628 +2 EOT 447 

1010 +10 1040 1—30 
643 .... 704 516 

2.470 -30 2060 2.110 

1,400 -10 2.150 1 010 — „. 

2030 +10 2070 1060 .... - 

910 ....1.000 885 — _ 

580 +7 909 415 — „ 

890 +4 1 000 870 

6,480 _ 7080 6050 

5,170 *40 9S4P 4X50 

4.180 ..- 4 SOT 3070 

1070 -2D 1.820 1S80 

1,150 -501.390 1080 

1020 +40 1010 1.120 

984 -9 1,160 366 

1,100 +20 1X90 1080 


Brier] 

BmsPn 

GSR 

CRA 

Cater 

CartHM 

CCAmN 

CotesM 

Cntica 


104 

141 

4.45 

1158 

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150 

4.19 

500 


Comma* 7.3 a 

Cnna iJ9 

DornMno 037 

Eraal * io 

Fntrfil 1.4 O 

Fti Q0M 
Faery 270 

HtCbC 165 

Fostn 1 15 

OnPrTr 2 15yd 
aOAus 203 

1.18 

SananF 121*1 
HUa 2.10 

MJ^4G 1.50 

FVnNkS 1 72 



OCT Hi 
RnsnGn 
RoOimn 
Santos 
anvdftr 598 
SonGaa11.16*d 

stneo £01 


-07 59S 
-04 11.12 
+.64 6.10 
-05 1100 
-04 352 
-05 S72 
- 4.79 
+.02 2S5 
-.12 20.78 
-.01 3S8 
-01 402 
+.03 138 

is 

-05 20.50 

♦ £ IS 

-03 1230 
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.... 500 
-.09 S.ae 
*03 1.32 
._ 058 
.... 602 
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-.04 £80 
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-02 175 
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... 2.02 
._ £62 
-04 HOT 
... *OT 
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♦ 05 10 M 
♦.10 421 

._ 13 08 
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-.15 7.20 
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- £79 
-02 4. IS 
... 532 
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158 00 — 
1*2 3l8 3£9 
308 1 3 ... 
705 38 3£1 
2.60 £7 _ 

173 52 _ 
3 80 5.1 -.. 

1.41 12 4.7 
18 12 31.1 
£30 4S 14 
3.15 11 _ 

164 __ 


32S 5.6 1« 
425 IB II 
15 80 16 
£55 32 
£« £4 
780 £1 
309 40 
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176 14 
0 35 SX .... 
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1 20 — 

008 2S 10 
£44 £B 
£30 4.0 

0. 98 52 

2 07 7 810.7 
£12 19 
110 2 S 2J 

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2 10 60 

1'ss 3 _. .. 

476 £9 *3.1 
£63 80 
1170 40 31.1 
£45 10 
£65 1.7 722 
192 40 210 
£85 4.7 
197 * 7 122 
125 £0 
115 00 S3 
370 18 _ 
100 £6 — 

3 05 „ 

1B0 BS - 
136 — — 
153 - ._ 
£60 40 116 
£49 62 
190 10 
£83 £9 
4.30 13 
1.1S 17 
428 15 
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3.66 7.1 88 
5.90 6.0 .„ 
8.10 4S — 
£85 19 ... 


AM® 

Aort&a 

Arena 

AUBE 

AUNH 

MaiAl 

Am Bar 

AtooG 


56 no 
101630 
50270 
4920 
442017 
588990 
1100 
409/5 
081000 
25753 3 
737938 
981 
3850 
6 

980899 
887311 
23500 
90705 

■ TOKYO - MOST ACTIVE STOCKS: 


RT 

BCE MO 
BOH 


BWontx 

BkNaiiS 

B0WJ& 


*1- t*aO Lea 

171. -*• 618 17N 

in 017 in 

3*3, -%$££> jrj? 
31% -US37>31< 

sev 46N 
♦ 3*2 *2 
-% SIS 144, 
SIN, ION 
-A«S»1| 24% 

214 Ha® 
21% -% 822 21% 


183TB PtonMt 
7B135 F%coP 
2IT6S30 PWA 
7100 PaornA 
29050 PanCnP 


42 

?5l 

n 


75720 

10200 PruCn 
870798 PHtama 
120830 BomCp 
2900 POwrfn 
10100 
7501 

5300 

200 Rodmn 
91075 RngOI 
3081 KOtSl 
42500 BenEn 
1981 SO Repop 

101017 RKW 
15200 RkWo 

806*1 RogCmB 
711272 RavflkC 
114200 ROfONl 
Friday. November 4. 


23% -%»(.£«. 
106 +3 105 105 
9% Wf _!& 

^ +5^ 4OT 
11*4 -*» sills 11^ 
25 -saftrt 23 
173. +** Slrf TTJa 
46% -1% 9^149*4 
13% +*■ 513N 13% 

& 


AFRICA 

saam ahvca (Nw 4 / MiQ 

*/- Wfe M IN M 

.1005 170 4J _ 
„ 29 17.50 £1 _ 

„ 1Z3 81SJ- 2J3 _ 

_ 255 ITS £3 _ 
+ JS 284.50 182.50 10 „ 
-3 506 34* £8 _ 
+6 140 102 08 — 

*03 57 2150 — _ 

31 20.78 £B _ 
_ 60 42 14 _ 

__ 400 3X6 10 _ 
-IS0 12105 95OT OX _ 
—JO 10JS 160 £0 _ 
-SO 7150 48 17 _ 

_ 1126 7J5 30 _ 
_ 35 2200 30 _ 

♦SO 42 30 43 — 

-.23001150 40 _ 
-M SO 53.75 17 _ 
->1178 704 1.0 
+1 130 0700 10 

__ 47 23 JS 

— 2178 1175 7.4 

34 16 IS 

+02 405 £19 10 
+1 10* 56 1.4 

+6 122 78 10 

__64OT03OT 30 
+.78 75 <51 20 

+2 100 75 IX 

♦00 22 1500 _ 

+.75 35 2B- 1.7 

+3 91 SBSO 13 

_ 7.78 4.73 80 
+ JS SBSO 37.80 13 
3176 ZS SO IX 
-09 2150 1600 10 
♦l 128 72 IX 

-08 1300 170 __ 

+JS 20 IS 10 
+300 105 79 IS 

_ 86 2160 1.1 
» 37 27 £3 

_ 164 102 £3 

_ 5B ' 40 IS 
_ 4173 23JS 10 
-9 4« 309 £3 
+J5 7&S0 33 4.0 

-1 230 181 £7 

— 80 44.50 30 




E- 4 ' 


Pt+WXto 300 
Ratotn *4 SO 
RrrtorQ; 2126 
RmbrCn 1128 
Roam 114 
Saffian 12 
SmtftCG 18-23 
SABrmr 10300 
SAMnAin 5700 
SJd 3300 
S8M 125 
TtoOm 4700 
moHlfl 4808 
VBoMa 414 
WAree 77 
MDwp 209 
IMrtdh 63 







(tons- nt« m ok ne* « qmM a, m 
MM uN adwqa rad m MMd 
i n *» 1994. raed Tamu 6 
. t DoMnp aronded ■! & 
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FT FREE ANNUAL RSjORTO SERVICE 

an w*aa* «■ 4, Ran MH M CM 
fTVMBOTfSn 770 0719 ton ailtmmA* 
MdatoE ■ hi an m mb. t « tm ad® ® 
UK. dd +*4 61 779 077D v tb +4* B1 770 3822. 
Roan «• b* aa w M rad mNm d«. aider it 


J 

Stocks 

dosing 

Change 


Stocks 

Closing 

Change 

5 

Traded 

mtoj 

on ctey 


Traded 

mows 

on day 


5.4m 

398 


Sumitomo Chem 

2.6m 

579 

+10 

- H6tachi Zoson 

5.2m 

560 

-3 

Mitsubishi Hvy - 

2.5m 

778 


' Nakabayashi — 

3.9m 

970 

♦05 

PacfflcMtta 

2-5m 

523 

+7 

. Sumnortto Mti 

3-3m 

35S 

-S 

MitsuteWCM. — 

2.3m 

985 

+5 

Toshiba 

3.1m 

744 


NKK — 

2 - 2 m 

297 



t: r -"~ 


' c -~- ‘ 


•CS"< 


MDtCES 


US INDICES/^ 


NW 

4 


Nov 

3 


mm 


low 


(fell 

3 


mm 


Nov 

3 


Nnv 

2 


1994 

Wgh Im 


Skca conwtasai 

mm um 


QanaN (WIV77) 


MOriKMHl/uaq 
M «MnQ(l/1/B0) 
AooMa 

CrwM /WmfSVia&s) 
Traded IMeCYlfll) 


0BJO (1/1/91) 

Brad 

BoMtiacan2S3 


MMf MH*+{1979 
COmpaeBe^ (1975) 
PM**® 

CMo 

FGA GW 01/?2«» 

Damik 

OopartaeanS^/USQ 


tEXGnan«2V>a«9 


SET 250 (3V12AK3 
CAC 40(31/12/87) 
many 

FAZ AMMpl/12/58) 
0 —BWK UIZS^ 
DAX P0fiaH7lT 







Modes 







HOB ) 138 

3807 52 

364558 

3837.13 

3J7£36 

359335 

397838 

4122 

19182.44 1936108 1938550 247040 1S2 

1770850 20/4 

K [Nov 1975 

« 

25*357 

W 

2B8U7 

a /2 

198738 aW 





13101 

l*/*) 

(31/1ftA 

C/7/32) 






mnwiaiii 







Ham Bonds 

M 

94.73 

9489 

19551 

9473 

188.77 

54.99 

\9B9fl 

2009.1 

20107 

2340HI 3/2 

189850 4/11 

CSS 7V2n6sn(En1 S3? 

4301 

437.7 

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«<80 

Tin 

40030 Tin 





I 21 'l| 

O/ltl 

IIB!10ft3) 

11/ 101811 

10463 

10523 

1058.1 

113910 312 

90480 S5 

CBS M SF* (EM 83) 

2757 

2740 

2719 

29458 

31/1 

25700 21ft 

Tansocrt 

149798 

151961 

isiaM 

1862-29 

143850 

15G2.29 

12.33 






Mm ZraMnd 











C/ 2 , 

pvioi 

C C/941 

(9/7/321 

39245 

393.54 

30204 

48000 2/2 

37894 25/10 

a*. 4a gnm 

211323 

2117.43 

210073 

243854 

3ft 

10*551 11/7 

UWUte 

17B 16 

isau 

179.15 

ZZ709 

17595 

259X6 

1050 

104432 

104802 

104337 

122235 1/2 

101138 6 ft 

Ikinny 











Prll 

( 2 Wi 

cn.'va 

18/4021 






oeoSBfriienm 

105052 

J04014 

105365 

1217.70 

28ft 

98031 21/8 

Ol tod. coy's nigh 3*7<LM U8?£46 ) Low 38(0.61 H81405 > iTtworobwF*) 


138350 

1381.28 

1365.44 

15(209 92 

1 33039 7710 

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Coy'S Fngn 38S5.TF (38SJ.62 I 

1 Low MQ7S2 (J6J3.X3 1 iXctuaJ*) 







. 

urtacDcnpctn/BS) 

30965B 

305499 

309055 

330837 

4/1 

250733 9/3 

Standard and Poors 

Carnposne t *6228 

467 91 

46850 

*8200 

*35.92 

48200 

440 

566670 

450800 


6066700 4/11 

unman 3/1 

PortagM 











Oft! 

(4/41 

OHM 

pftfta 






OTA 0977) 

287750 

268170 

28S20Q 

322850 

10 ft 

301200 20ft 

MvmdsV 

51957 

55598 

55*46 

583.10 

51005 

593.10 

162 

40*106 

411309 

4121.78 

437802 2000 

329008 2Q>4 

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can (» 

Cl/4) 

CftlOft*/ 

Oft® 

419850 

422880 

4229i00 

480090 23/3 

388090 24ft 

S£S fOSvmOJUIGl 

57558 

5751S 

Id 

8*101 

4/1 

53329 4/4 

Rnanoai 

*£84 

4134 

*31* 

4854 

*139 

48X0 

864 

3E183 

2041.40 

2040X4 

218209 1 /S 

1860X8 28ft 

Sodk Mrtcn 











114/ft 

14*1 

l28ftft3t 

(1/1Q/74) 






JSEQjU&VTQ 

224 70* 

ZSTD 

20*10 

253400 

7«ft 

174900 T4i2 

HTStCom. 

25*21 

5666 

35 98 

267.71 

2 * 11 * 

287.71 

4.46 

55705 

55985 

5B19.1 

587830 19/10 

39DL2D 4/4 

jsEtaeswo 

67850V 

67380 

66050 

878500 

4/11 

644009 19/1 





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l*M) 

OEM 

(25/4/43 






MKom 







toner L&i vaf 

*52.91 

*5*57 

454.18 

41758 

422.67 

48759 

2931 

33944 

3*0.71 

33900 

418.79 2/2 

380.11 7/10 

KareQnpBW/l/BQ- 

111052 

1117.73 

110574 

111858 

4/11 

8SSJ7 34 





fc-a 

(28ft) 

ftftftft 

wi 2 fta 






Spam 







RA30M Cmp 

76696 

772.10 

77182 

88303 

693 79 

89103 

54 87 

19440 

19509 

19570 

197200 4/2 

1891.10 3ft 

MaWSEpO/12/89 

namq r 

29550 

29334 

35801 

310 

28B58 XfihO 





nan* 

C4/B 

111094) 

OihO/72) 

128157 

1270X5 

125259 

180520 2 12 

122709 25/10 

Sw Atoll 

AnaravanKton n/a/37) 

144190 

1447.30 

1471 10 

160390 

31/1 

133478 6/7 

■ RATIOS 








193105 

1811.13 

1873 GO 

23650S 2C 

UB4XZ 25/10 

Tffintiwl 









Od 28 

on 2 i 

Oct 14 Year ago 






SvrtS Bk M (3in2ftft 

1191.19 

118581 

117105 

1*2134 

3V1 

1138.72 27/10 

Dow Jones tod. Dw. Yield 2 

70 

2.72 

271 

2.77 

78051 

771 JB 

773.79 

96027 18/5 

74204 5/10 

SBC ttoned tl/4/87) 

90517 

902X0 

98208 

109329 

31/1 

BAST 27/10 



Mov 2 

Oct 26 

Od 19 Tear ago 

22190 

218230 

2199.70 

246650 2/S 

211830 6/10 

Mini 







S & P Ind. 

D*v. yield 

2.39 

2 39 

2.35 

2.41 

206756 

205148 

204235 

2271.11 IBS 

19U59 7710 

TfcfthtKffrJSOBffir 

6389.11 

830639 

634256 

7191.13 

30ft 

810453 19ft 

S 4 P Ind. P/E ratio 

20.95 

2002 

21.11 

26.61 


83107 82501 824.72 119458 18/1 

9530X0 9401S6 9*51.78 1280109 471 

W 4304.43 fc) 482B57 12/9 

Marta ttmUlWBa S2059 S2£84 63409 61209 5/1 


iSECtl/lZ/an 
Hong K ®9 
nm Saqcn/7«4) 

tatft 

BSE SmU1979 


SEQ Ogeoapn/BS) 18332* 1B20K 1811-72 2082.16 20/1 

My 

B«a Comm Rai (1979 52930 6230? 625S4 817.17 105 

m Gmm mm ioioo 10100 10120 131 aso 106 


MMal 225 (1G/S/49 
MNW1 300 (1/KV8Q 
Tool* (4/1*5 
2nd Sccttn (4/1*8 


80987 25S 
539944 4S 
345400 5/1 
44972 12/7 
10114 1/7 


ion 

ion 


e®SMASErpoW75) 1S2£» 1528S1 152910 man Vl 


252210 2529092888380 13/1 


laartad CmpAfln 19861 25*500 

MMD 

MSCapUNn/1/ro 6339* 


63*0 6370 64990 2/11 


Biota* lOOptflOSQ 133372 132503 131901 W4919 3V1 
are Ttp-100 B&BW9 118203 1180.17 1199 2* 131101 272 
JCapenvs 01/12/88) U4 33970 33707 39919 sn 

Ba®gs EHWU77VSQ 17902 18979 18105 18109 2 673 

■ CAC-XO STOCK B4DKX FOTUTOS (MAT1F) 


118858 tit 

1298970 24/3 

5BU0 4/4 

1288X8 5/10 
1139*8 SdO 
SB28 21/3 
1410S 21/4 


■ STAMMRD AND POORS 600 INDEX FUTURES SSOO trues Irtctet 


Open Sen pneo Chanoe 
Dae 40600 402.40 -6.40 

IJtir 472.90 465.45 -6 *5 

Jui - 469x0 -6 40 

Open rewa tgurod are tot prevuus aay 

» NEW YORK ACTNI STOCKS 


Hrfjfi Low Eol vo( OpenVit 

471 DO 461.70 67.561 204.975 

473.60 46S00 £81 1 5.021 

477 80 46900 0 3.494 


Storto 

Haded 


Oes Cnange 
once on day 


■ TRAMNQ ACTIVITY 

• Vcturne 

Nov 4 Nor 3 NOV 2 








Open 

Sen Price Change 

HHJti 

LOW 

EsL vol. Opon kn. 

1981158 

IQ 1975055 2168201 13ft 

173G9J4 4H 

Nov 

19150 

1834.0 -170 

19X0.0 

191302 

23.188 

22.598 

20705 

W 

20701 

311JI 13ft 

2BB2Z 4/1 

Dec 

1928 0 

19420 *1770 

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fd 

156858 

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1954.0 

18680 +170 

1962.0 

19540 

109 

6,717 

221803 

80 

220050 

254206 6/7 

187303 4/1 

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M5E CMHU4M/B9 1074*1 106148 


(d 1314X8 sn 


- Sn 03 TO: TWan WMohrM Prto* 8521*7; Korea Comp Ex 100131 Bdt aUt M M n*R are 100 anape AuaUBa At Ordray 
and Hm - GOO: /toawa Traded. BBOT. HEX Gan.. MB ®n_ 8BF250. CAC4Q. Ewe Top-100. BED OvoU; Tomo CanpXiaws a 
Mnerad mtf DAX - al 1.0001 «<S£ Btdd - 2S&7; J5E 28 dduaWda - 3B*A NV3E AG Carenon - SO and Sdndard and Paort, - IQ. 5§ 
UantreaL ♦ Toronto, fcl Ctoaad. M Unawaabia. | BJatMX ato+tan ddaa: Wav 4 - 308809 +11B 


t Ooreetm ■ CrdcuHMd mis® GMT. • 
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atoME wfnresa das 000*1 dsv>» FV^w and t 
(hditiQ me day. (The fl^aes to bracrata are 


Friday 

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Gen Motors 
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BM 
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was Dbnay 
M Game 

EadmS® bonds t todustnol. rdua umtes. FroncX *nd Trampoftibav 
and Ware ore tna Mngo* rd die Ft^wst and lawrsi f»>et» rexned oimq lha am °1 teen 
ws pwpAad By Tetoweto lapaoaam da mdara and ware* v.vum nur ifm matn mo readied 
previous day 1 *) T SUaaci to ottoK re c xta i ha ton 


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19060 

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NAS DAO 

W) 276.691 

330870 

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38*: 

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NYSE 




2066000 

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2085 

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671 

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scr* 

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1.490 

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170 


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<9 








V 


a 

- " 'X 








FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


27 


jn 

rU-i 

» «!r- 

■•-iit-" ??> 

1 is^ Mi* 

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•Tw **B 
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mm 

*£••'• sy£ 

: -V :■«< 


I3j i -*»!l 

3 $ 

m 

lit 

, »*«*• 


CURRENCIES AND MONEY 




Cicsing Chcnge BM.'Wter 
ra^poWan d jy spwjj 


Day's Mid 

high low 


One month Thro* months Ono your Bank of 
Ram %PA Rme ?tPA Rtne *0PA Eng Index 



^jp 
SJ; 



AFRICA 

5560,1 vac*, i 


si 


«S* 

ifsj- 

ttrf: 

*s*, t*;.-- 

"^StJ 


Europe 

Austria 

Belgium 

Denmark 

Finland 

France 

Gemuny 

Greece 

frelana 

Kaiy 

Lunembourg 

NMh0rfc>nd5 

Norway 

Fartugri 

Spain 

Sweden 

Switzerland 

UK 

Ecu 

SDftf 

Americas 

Anjamma 

BnuT 

Canada 


Closing Grunge BW/otfnr 
md-pomi on day spread 


Day's mid 
high low 


Ono month Three months One year J.P Morgan 
Hare SPA Rate %PA Rate *>PA index 


ifiFM 3X4027 
(Dhr) 0.6067 
IFM) 7.5423 

iFFd a-aor 

(DM| 3 4601 
(») 377 335 
||Q 1.0140 

lU 351394 


♦0.G034 CUE - 132 
♦0 0313 325 ■ 519 
•0.CO42 016 * 117 
•0.0003 407 - 514 


7.5620 7 5230 

8 4350 10956 
3.4500 24450 


•021 S11 - 15S 376372 377.079 
■>0 0033 134 - 145 1.0172 1.0114 


lOal 25QOS3 ,ai6l 2S4 - 524 251231360 040 

IPtH 204324 +0.15S 239-403 204.839 203.791 

-0 0235 -123 - C35 H 9367 11.6200 
2.0562 2.0450 


ISFTI 
(Ei 

- t.:-ee7 

- Q.914QGS 


20504 403002 491 - 516 


-0.00C2 961 ■ B7Z 1.2909 1.2853 


172463 

03 

17.2345 

0.4 


- 

11S.4 

AarJria 

fSchl 

10.7270 

♦0.0635 

245 - 295 

10 7495 

10 6720 

10 727 

0.0 

10 7268 

50-3727 

0.7 

50.3027 

0.8 

50.1827 

0.5 

117 1 

Belgium 

iBFrj 

31.3420 

+0^375 

280 - 560 

ir.-iiQu 

31.1700 

Cl 3445 

-0.1 

31.302 

9.6043 

63 

9.619 

_0£ 

9£98C 

o.i 

117.1 

Donmnrk 

(OKf) 

5.9738 

-0.0398 

71Q - 765 

£.3018 

5 3383 

5 9779 

-08 

59863 

- 

- 

- 

- 


- 

BQS 

Ririand 

m 

4 6900 

♦0 0465 

850 - 950 

4.7056 

4 6515 

4.6907 

-02 

4.6875 

84045 

03 

8.3968 

05 

8 32B7 

0.9 

1103 

France 

(FFrJ 

5 2275 

♦0.0327 

255 - 295 

52413 

5 rk~o 

5 .2287 

-03 

5-2264 

2.4485 

0.8 

2.4446 

Oil 

2.4119 

1.8 

126.4 

Gauiuny 

ID) 

15235 

♦0.0089 

230 > 

■ 240 

1.5230 

1.5130 

1.5233 

0.2 

1.5216 

- 

- 

- 

- 

- 

- 

- 

Greece 

(t» 

234.650 

♦1.55 

900 

- 100 

235 106 

."23 700 

2T5.S2 

-1.4 

735.775 

1.0138 

02 

1.0134 

0.2 

1.0153 

-0.1 

105£ 

heund 

OQ 

1 5680 

-0.0144 

855 - 865 

1 6C21 

1.5612 

1.586 

a.o 

1.686 

2519.54 

-2.7 

2530.94 

-2.7 

2581.44 

-2.7 

74.4 

holy 

a) 

1563 25 

♦8 75 

300 • 350 

155*5.00 

1557.61 

1 567.5 

-3.3 

1575JS 

50.3727 

0.7 

50.3027 

0.8 

50.1827 

0.5 

117.1 

Uaornbourg 

OLFtl 

31.3420 

♦0J37S 

200 - 560 

31 4100 

31.1700 

313445 

-01 

31 £02 

2.748C 

0.0 

2.7442 

DJB 

2.7097 

15 

121.0 

Netherlands 

(FI) 

1 7101 

♦0.0114 

096 - 103 

1 7122 

1.6931 

1 7102 

00 

1.7081 

10.691 

0.0 

10.8927 

-0.1 

10.8918 

0.0 

88.4 

Norway 

(NKi) 

6 6480 

♦0 0405 

465 - 495 

6 6635 

-j 6147 

66507 

-0.5 

6.6635 

252.110 

-B£ 

255 299 

-7 8 

- 

- 

- 

Portugal 

t&« 

155.700 

♦1 

650 - 750 

155 500 

155.100 

156.325 

-4£ 

157 45 

204 654 

-1.9 

209509 

-105 

207.934 

-1.8 

05 3 

Spain 

(M 

127.055 

•083 

030 ■ 080 

127.170 

126 200 

127.355 

-11 

12805 

110710 

-1£ 

11.8144 

-2.1 

12.0589 

-1.7 

75^ 

Sweden 

ISKr) 

7.3705 

♦0.0281 

655 • 

765 

7 Jb9G 

7.3370 

73852 

-2.J 

7.4 US 

2.0473 

1.0 

2.0398 

21 

1.9975 

2.6 

122.4 

SwftrtrfckYd 

ISF0 

112750 

♦0.0075 

745 ■ 

755 

1 2770 

1 26S5 

T.2738 

1.2 

1-2637 

- 

- 

- 

- 


- 

60.6 

UK 

fQ 

1.8062 

-0 0093 

078 - OSS 

1.6199 

1 6035 

1 £075 

0£ 

1.607 

1.2869 

OO 

1.287 

-O.l 

1 2908 

0.5 

- 

Feu 

- 

1.2499 

-0 0071 

-196 - SOI 

1-2572 

12467 

1.2493 

0.8 

1.2489 


0.2 

0.1 

0.5 


Pawl 1.6078 
l») 1 3573 

ICS) 2.1819 
Mexico I Mew Peso) 

USA rSi 

Padflc/MdcHe Eact/Airtca 

(AS) 3.1469 -0.0288 477 ■ 501 

Hong Kong (HKS) 12 4314 -0.0706 283 - 345 

<Fts| 50.5040 -OJH55 843 - 230 50 8540 504290 


'0.0068 073 ■ 092 
-a 0037 554 . 592 
-0.0164 BIO - B27 

S $138 -0 0442 093 - IBS 

1 6032 -0.0093 078 ■ C85 


10186 141047 

1 3871 1.3550 

2 .1995 2.1B11 

5.5667 5 3592 
1.0198 1.6055 

21813 2.1445 


APIA 


A-.;;.' 

S??‘N 

u» S» 

Cfj:m 

CfiA^ 

Ltp:- 

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'rer. 
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‘ 5 ?? 11 

■ ■' '5 *' 

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'■r ;^il 

* 3" 

: : *h iv 

* r ”4 ? nr- 

- 33. it. - 

Kaj.' 


Japan 
Malaysia 
New Zealand 
RnUpptno-j 
Saudi Ambta 
Singapore 


1Y) 157 278 


HAS 4.1225 -00173 208 - 242 4 1475 4.1173 

INZSi 2 6016 -a 0251 991 - 044 20309 2.5977 

Peso) 30.5605 -0 5530 715 - 495 39.7043 39.4700 

(SRj 6.0325 - 0.0346 309 - 340 6.0755 6.0227 

-0.0101 &13 . 669 


CSS) 2,3656 

S Africa IComj |H) 5.6503 -0 0183 538 - 587 

S Africa (Fin.) (H) * 6.5532 -00705 357 - 707 

Sourti Korea (Won) isai 73 
Taiwan 
Thailand 


2-3795 2.3633 
5.6855 5 6473 
66402 6.5343 
-729 142 - 214 1290 82 1279.74 

rrsi 41^023 -02273 711-034 42.1642 410152 
(@1| 40.1314 -01929 066 - 562 408820 40.0810 
TSW » ai« lar *w 4. B-ti/oSn Tproads w Bw Pawm Scot tobra iltw ctWv u»> tax mroa dnotrad pCoceo. Fonuad tutas ae not dncily vaxed In Ow manor 
2* ""Pwifl W «1B» elaara rm Eterfay) nta calcultuea by sw Bonk a* EnglanL Bom average lees ■ iDaBkt Ollet am Mid-tam n both mis and 
™ 0°“ Ep« lohtoa OWiMd tfori WE Wit REUTERS CLOSING SPOr RATES. Borne rawoa an rounded by ms F.T 


0.0 10 652 0.7 

03 31.202 0.4 

-0.0 60246 -0.9 
4.684 01 

5-2143 OJ 
151 0.9 

-14 238.025 -1.3 
00 1S73 0.8 

-3.1 1615.75 -3.4 
OS 31.232 04 
05 16365 OB 

-09 6.6956 -0’ 
-4.5 161.95 -4.0 

-3.1 130.665 -2.8 
-2.4 7.5545 -2.5 

1.7 I2EC8 1.9 

0 3 1.6003 0.5 

03 12471 02 


104.5 

106.1 

1055 

63.0 
1066 
107-3 

68.4 

74.7 

106.1 

105.8 
36.6 

95.1 
80.9 

ear 

107.9 

893 


Americas 

Argentina 

Brazil 


(Peso) 

IW) 


09998 

0.8440 


♦0.0003 997 
-00005 430 


■>:ia 

450 


0 WJ 0‘J*i.iS 
0 6450 0 6440 


2.181 

0.5 

2.1792 

0.5 

2.1759 

0.3 

88,6 

Canxb 

(CS) 

1.3560 

-0.0023 

565 ■ 

570 

1.3600 

11565 

1.3666 

01 

1 3571 

-a: 

- 

- 

- 


- 


- 

Monica (New Peso* 

3.4205 

-0.0075 

260 - 

310 

3 4331 

J lilO 

3 439S 

-0 4 

3 4313 

-0.3 

16075 

0£ 

1.607 

0£ 

1 6003 

0.5 

61.6 

USA 

PecMcfMkfdla 

IS1 

East/Africa 

■ 






- 

- 

- 

2.1S1 

-1.2 

2.IS37 

-0.9 

2.1070 

-as 

- 

Austral In 

(AS) 

1 3363 

-00101 

358 - 

367 

t 3:81 

1 333-i 

1 *366 

-02 

1.3373 

-0.3 

12.4248 

ao 

12.4189 

0.4 

12.3493 

0.7 

- 

Hang Kong 

(HKS) 

7.7303 

♦ooau 

300 - 

MS 

7 7305 

7 7195 

7.7233 

0 l 

7.7289 

0.1 

- 

- 

- 

- 



- 

India 

fHs) 

31.4050 

♦0.005 

0OO ■ 

100 

31.4150 41 4030 

31 4-3 

-32 

31.636 

-2 9 

150828 

3.4 

155 813 

3.7 

150.570 

4.3 

189.6 

Japan 

m 

97.8000 

♦0.195 

S00 ■ 

500 

■43.0700 ■37.i.tyn 

■37 67 

28 

96 97 

3.4 

- 





- 

- 

MuklysU 

(MS) 

2.5635 

♦aoo3q 

630 ■ 

640 

2 5640 

2 55-30 

2.5543 

4.3 

2643 

22 

2.6065 

-2.1 

2 6157 

-2.1 

2.63S8 

-1.3 

- 

New Zealand 

(NZS) 

1.6179 

-0.0062 

166 - 

192 

T dJv) 

1 6166 

1 6188 

-a? 

1.6207 

-0 7 


1363 -OS 
3s 1367 -03 


PtiiippnM 

Saudi Anoia (SR) 

Smgapore ISS) 

S Africa (Com.) |R) 

S Africa (Ri\i (R) 

South Koma (Won) 797.050 

Taiwan (TS) 26.0438 

Thailand {Bt} 24.9550 

1 50R Mlu to Mo* 4 Qid/olEn mni-ida 
bul wo vrpHnd by cuinm iwni rate!). 


(Paso) 24.6000 
3 7512 
1.4710 
3.5173 
4.0750 


1 3446 -06 
7 7338 -0.1 

94245 38 

2J5165 -2.1 
I 626 -0 5 


93.4 

95.0 


88.4 


149.9 



** 4 jiff * 

WEBKSS^FU 



MONEY RATES 

Nonrembre 4 Over 

regm 

One 

month 

Three 

mow 

Six 

mtns 

One 

yew 

Lamb. 

refer. 

Do. 

rate 

Repo 

rate 

Gkfaiwn 

43k 

43 

57. 

55 

S4 

7.40 

4£0 

- 

week ago 

43b 

43 

5Vi 

55 

64 

7.40 

4.50 

- 

Franca 

5; 

Si 

544 

53 

64 

5.00 

- 

8.75 

week ago 

s £ 

54 

s* 

53 

6i 

5.00 

- 

6.75 

Germany 

4.90 

4.95 

5.15 

5^5 

5.60 

600 

4.S0 

4£5 

week ago 

4.78 

4 -05 

515 

5.30 

5.65 

6.00 

4.50 

4.85 

Ireland 

Si 

5W 

5=fe 

54 

74 

- 

- 

625 

week 090 

Si 

6U 

Si 

B'.i 

7!vi 

- 

- 

6.25 

Italy 

an 

aifr 

au 

94 

104 

- 

7£0 

8^0 

weak ago 

3'- 

836 

83 

94 

107a 

- 

7.50 

820 

Netherlands 

4.84 

6.06 

524 

5.36 

5.78 

- 

525 

- 

weak ago 

4.84 

5.06 

520 

5J4 

5.74 

- 

5.25 

- 

Switzerland 

3% 

as 

44 

4M 

JW 

6.626 

3£0 

- 

week ago 

3i 

33 

■*A 

41*4 

4*b 

6.625 

3£0 

- 

US 

All 

5!fr 

sy 

6 

6% 

- 

4.00 

- 

week ago 

Ai 

5'.1* 

S’r. 

53 

6’- 

- 

4.00 

- 

Japan 

2’-* 

2'.r 

24 

24 

2* 

- 

1.75 

- 

week ago 

24 

2''r 

24 

24 

2b 

- 

1.75 

- 

■ S LEBOR FT London 








Intertank Filling 

- 

5i 

541 

54 

63 

- 

- 

- 

week ago 

- 

Si 

53 

6 

64 

- 

- 

- 

US DoOar CDs 

- 

6.06 

5.45 

5.03 

fi.47 

- 

- 

- 

week ago 

_ 

5.08 

5J5 

5.71 

6-31 

- 


* 

Linked Eta 

- 

3S 

34 

JK 

4 

- 

- 

- 

week ago 

- 

3H 

34 

3K 

4 

- 

- 

- 


ECU LWwd De mid rota*.- 1 nufi- S’3, 3 mths 53; 5 toha. Si. I year ffU. S LIBOR Interbank bang 
rases are offered race for SIQm aimed la die martu* by tour referen ce bonks or l lam each working 
day. The ujnto an Bonkm Trust. Bank of Tokyo. Bodays aid Nattotia UMnnicr. 

Mid raw ora stxnxi tor rfw doreowc Monoy Ratos. US S CDs and Son urmed Deposits IDs). 


-0.2 500 - 600 
♦0 0001 510 • 5lJ 
♦0 0023 706 - 715 
♦0.009 155 ■ 1M 
-0 02 660 ■ H60 

♦ai 000 - too 

•0 01 425-460 
♦0 025 450 - 650 


24 6600 24.5500 
3.7513 3 7510 
1.4715 1 4605 

3 5 tea 3 5105 


3 7556 -0 6 1 7752 -0.6 

1 4678 0.9 1 461 0.7 


4.1000 

797.300 


JOf-iO 

'970CO 


26 0450 2c 0530 
24 9650 24 3403 


<1 ins Mv Spot utm 'Jrv. jv . tuy nv. i.i»> n 

Uli, hiton 4 ecu w m i.>5 r.'juvne 


3 7525 -0.4 
I 4697 T.1 

3 5328 -5 3 3.5611 -5.0 3 E37B -3.4 

4 1087 -9.9 4.1675 -9.1 - 

800.05 -4 5 80335 -3 3 822.05 -3.1 

250638 -0 9 26 1039 -09 - - 

25 0275 -3.5 25.155 -3 2 25.635 -2.7 

™> ore nul places For*. .vd tr+i ora nr G-i&eSf suctod "o me marker 
J P. k'et ^sn rvan-tul .r.i 'tar 4. Ban s.erege ’ ^■O-'CO 


EURO CURRENCY INTEREST RATES 

Nov 4 Snort 7 days Ona Three 


Set 

months 


Ona 

yaar 


EXCHANGE CROSS RATES 


j t fm i’ royiH ' y. ' i ’ . ' pywe ; 


Nov 4 


BFr 

DKr 

FFr 

DM 

K 

L 

FI 

NKr 

Ea 

Pin 

SKr 

SFr 

£ 

CS 

S 

Y 

Ecu 

EMgfum 

(BFrj 

100 

14.06 

16.68 

4.861 

2012 

4988 

5.456 

21.21 

496.8 

405.4 

23.51 

4.067 

1.984 

4.329 

3.190 

312.1 

3554 

Danmark 

(DKr) 

52.47 

10 

arsi 

2.550 

T.056 

2617 

2.863 

11.13 

260.7 

212.7 

12.34 

2.134 

1.041 

2.271 

1.C74 

163.0 

T.340 

France 

PTil 

59.96 

11.43 

10 

2815 

1.206 

2991 

3.271 

12.72 

297.9 

243.0 

14.10 

2.439 

1.190 

2 596 

1.913 

187.1 

1 531 

Qcrmany 

(Dkfl 

20.57 

3.921 

3.431 

1 

0A1A 

1026 

1.122 

4£63 

102J 

83.39 

4.837 

0.837 

0.408 

0.891 

0 856 

64.20 

0 525 

Ireland 

IP) 

49.70 

9.473 

8.290 

2.416 

1 

2479 

2.712 

10.54 

246.9 

£01£ 

11.69 

2.022 

o.aec 

2.152 

1.586 

1551 

1.269 

Holy 

(M 

2.005 

0382 

0.334 

Q097 

0.040 

100. 

0.109 

0.425 

9.960 

0.126 

0.471 

0.082 

0.040 

0.087 

0.064 

6.257 

0.051 

NottioHands 

(FI) 

18 33 

3493 

3.057 

0.891 

0£69 

914.2 

1 

3.807 

91.05 

74^9 

4.309 

0.745 

0.384 

0.793 

0.585 

57.20 

0.468 

Norway 

(MO) 

47.15 

8.986 

7.083 

2292 

0.949 

2352 

2.572 

10 

234^ 

191.1 

11.09 

1.918 

0£35 

2.041 

1.504 

147.1 

1.204 

Portugal 

(ES) 

20.13 

3 836 

3.357 

0978 

0.405 

1004 

1.088 

4.269 

100. 

8159 

4.732 

0.019 

0.399 

£871 

0.842 

62 82 

0.514 

Spain 

(Ptaj 

24.67 

4.702 

4.115 

1.199 

0.496 

1231 

1J346 

6J?33 

122.8 

100. 

&6O0 

1.003 

0.489 

1.068 

0.7-87 

78.99 

a630 

Swodnr 

(SKi) 

42.53 

8.106 

7.094 

2.068 

Q£56 

2122 

2.321 

9.021 

211.3 

172.4 

10 

1.730 

(X844 

1.841 

1.357 

132.7 

1.066 

Switzerland 

(SFf) 

24.59 

4.686 

0100 

1.195 

0.495 

1228 

1.341 

5.215 

122.1 

99.86 

£780 

1 

0.488 

1.084 

0.784 

76.73 

0.628 

UK 

« 

50.40 

9.606 

0.406 

2.450 

14)14 

2514 

2.750 

10.69 

250.4 

204£ 

11.85 

2.050 

1 

2.182 

1.808 

157 3 

1.287 

Canada 

. (CS) 

23.10 

4.402 

3£52 

1.123 

0.485 

1152 

1.260 

4889 

114.8 

93.63 

£431 

0.940 

0.468 

1 

£737 

72.09 

0.590 

US 

(5) 

31.34 

S£74 

5.228 

1.624 

0.831 

1663 

1.710 

8.8.18 

155.7 

127.1 

7.369 

1.275 

0.622 

1.357 

l 

97.82 

0.800 

Japan 

(V) 

32-04 

6.107 

EL344 

i£sa 

0.645 

1598 

1.748 

6.790 

158.2 

129.9 

7.533 

1-303 

0.638 

1£B7 

1.022 

100. 

0.010 

Ecu 


39.16 

7.484 

6 £31 

1.904 

0.788 

1953 

2.137 

8£08 

194.6 

150,7 

9.207 

1.593 

0.777 

1695 

1249 

1222 

1 


Danish Krona. French Franc, Norwepan Krona, and Swwtsn Kronor per 1ft Belgian Franc, Yan, Esordo, Lira and Panto par 10ft 


- • 1 : n 

= :v nr. -a-r- r 


■ D-MARK FUTURES (I MM) DM 128,000 per DM 




• Open 

Sett price 

Change 

High 

LOW 

EsLvoi 

Open inL 

■ -Pound In Now Yovk 


Dec 

0.6580 

08800 

♦0.0007 

0.6810 

£6545 

44,771 

84.742 

Nov 4 

— -0(380 - 

■ Pnw. dine - 

Mar 

0.6606 

0.6613 

+0.0007 

0£815 

0.65 65 

522 

5 £92 

Cspol 

1.8160 

16175 

Jun 

£6605 

0.6633 

♦0.0009 

0.6830 

0.6600 

2 

1,256 

I nah 

1-8153 

16187 









3 mtii 

1.6151 

1.6160 









lyr 

16087 

16082 

■ suns FRANC niTURBS (IMM) SFr 125J00 per SFr 






Dae 

0.7895 

£7901 

_ 

£7919 

£7842 

22,752 

38,681 




Mar 

0.7905 

0.7935 

♦4X0001 

0.7950 

0.7877 

178 

2,113 




Jun 


0.7900 

+0.0004 


0.7940 

e 

178 

1 UK INTEREST RATES + 


FT GUIDE to WORLD CURRENCIES 

The FT Glide to World Currencies 
table can be found on ihe Companies 
0 Finance page In today's otStton 


Slocks Closins fc 


JAPAHRSR YEW FUTtlRgS (1MM) Yen 12Jb per Yen 100 


7r2£^a Pr.cw :: 


Open 

Sell price 

Change 

Hgh 

Low 

E81-VO( 

Open InL 

1 : f i?a 

Dec 

1.0288 

1JB290 

+aooi7 

1.0293 

1.0293 

32,247 

82,308 

: 

Mar 

1.0338 

1JH77 

+0.0018 

1.0380 

1.0325 

429 

7,722 

> i' iZ? 

Jun 


.161103 

♦0.0021, 

1.0470 

1.0455 

13 

786 


LONDON MONEY RATES 

Now 4 Over- 7 days 

night notice 


One 

month 


Three 

months 


Six 

months 


One 

year 


:-?5 


■ OTEELIMQ HITURCa(IMM) 952^00 per £ 


j lace 


m m 


are prices from 


*.-«re ’255 5 •**, Hsng 

JK seek 


Y* C-2SS 




pon 


below cr ca» 


-or =;:s5= 


ES 

F 

MM 





r e ■ 

5HL- 




Deo 

Mar 

Jun 


1 ill 88 
1.6068 


1.8144 4X0022 
1X138 -0.0018 
14114 4X0014 


1.8198 1.8040 

1£146 1.6030 

1.6040 


13,758 44^82 

81 851 

1 17 


irriaibank Sterling 

Bia -4 

5% -5% 

fill - S« 

6^-6 

a« 2 - 6>i 

7J« -7<4 

Surfing CDs 

- 

- 

5k -5*8 

6-51J 

6.'. ■ 8^5 

7>4 • 7»» 

Treasury BNs 

- 

- 

54-Sla 

51! - 513 

- 


Bank BOa 

• 

- 

SB -51! 

6 - 

6ft ■ aft 


Local authority daps. 

5ft - 5ft 

5ft ■ 5ft 

5^, • 5H 

fi»e -6 

eft - 6ft 

7ft ■ 7ft 

Dtaootrrt Merkel deps 

Blf-SU 

SSw - s^z 

• 

- 

- 


UK during bank base lending rata 53« per cere from September 12, 1994 

Up 10 1 1-3 3-6 6-9 

momh month mctrehs mornhs 

9-12 

months 


■ PHIUUIHJ'HU SB CSS OPTIONS £31,250 [cents per pound) 


Strike .. • 
Price 

Nov 

- CALLS - 
Dec 

Jan 

NOV 

— PUTS — 
Dec 

Jan 

1£50 

£33 

£54 

£83 

- 

D£2 

0.5S 

1£76 

£87 

4.45 

4.91 

0.Q2 

061 

1.10 

1.S00 

1.70 

2.70 

323 

023 

1£5 

1£8 

1J325 

0£5 

1.49 

2.10 

1.36 

2.53 

£14 

1.060 

0.03 

0.72 

1^4 

£46 

4J24 

4.75 

1£7S 

- 

0^9 

0.87 

£90 

023 

£66 


Cans of Tax dep. (£100J)00) l'a 4 34» 3?i 3b 

OanaofTaxdix>.undaC10ftOODia1>2<)c. Depnsxs withdrawn to cash lipe 
. Ave. tonder rate of daooiail M342pc. ECOD lead rate Sag. Enpon Finance. Make up rfcrv On 31. 

* 1BB4. Agreed raw tor period Nov 2ft IBS4 In Dec 25. 1994, Schemes 1 4 Of 7j?3pc. Reference rata tot 
period OCT 1, IBM Id Old 31, IBM. Schemed Ilf B. V SiMSpc. Ftoencn htouse Base RalaGoc Iran Ntov 
1, ISM 


BANK OF ENGLAND TREASURY BILL TENDER 

Nw 4 Oct 28 Nov 4 


QU 28 


Previous day's voL, -Calls 57^37 Puts 13, ISO . Pnw. rto/a open ht, Odto «Z871 Pus42ftSlO 


BANK RETURN 

BANKWG DEPARTMENT 


BBa an offer 
Total of amUcaOops 
TnH atocaUd 
MU. accepted bU 

MMbvUMdl St mki ‘----a 

RBOBrani 41 IW. BW 


£500m 
El 84301 
E350n 
EdUHO 
67% 


ESOOm 
£21 59m 
E500m 
£88.645 
94% 


Top BOeptal rate 55763% 6.4349% 

Ana rate at dxount 5 5304% 5 4342% 
Awrage yum 5.6077% 5.5088% 

Offer M rw» lender nsom CiOOm 

Un, accept H) 182 days 


Wednesday (ncreese or 

Nwonttw 2, 1994 decrease for week 


CepK al . 

Pubfcdapoate • 

Bankers deposits 
Resew and other accounts 


£ £ 
14,553,000 

1.151^71.770 +163,727,758 

1 .649.703L266 -2,786^04 

3,074,471 ,120 -1 7SJ83 475 


Government securities 
Advance and other aocouvs 
Premise, eouipment end other i 
Now 
Cofri 


5^X899.156 

1,448,489.788 

3^67528^46 

1.170,802,481 

5^98,643 

178^88 


-16,021,620 

+345^24999 

-188,638,166 

-173,886.774 

+1.748.727 

+8,693 


* 


IS8UE DEPARTMENT 

5 £90 ,090.1 50 

-15,021.620 

1 IrthMTIae 

18,194,101 £57 

+8£51£73 

Notes In Banking Department - 

££98,643 

+1.748,727 


1 £200,000,000 

+1 £000.000 


9£70.147£38 

-1£9S,158£12 

Other Securities 

8£29£52,162 

+1,305.158£12 


.18^00,000^100 


+10^000.000 


BASE LENDING RATES 


Adam&ConBeny — 5.76 

AIM Trust Bark .£.75 

MB Bank -£76 

•Henry Ansbochar 5.75 

BankofBamda 5.75 

Banco Bfcao VtzEsysu573 

Banket Cyprus _&75 

Bank of Ireland _...5.7S 

Bankolinda 5.75 

BonkolScodand _&75 

Bardeys Bank _A7S 

MtBtalMdEast 573 

•BnwrS^ey&C&IJd. &T6 
CL Bank Nederland ..Are 

rater* NA 5.7S 

Ctydeedeie Bank _5.75 

The CooperaOve Bank 6.75 

couts&co are 

CradttLyomWs 5.75 

Cypnw Popiier Bonk . 8.75 


OlTOin Ltmrfn 5.75 

Breier Bank Lsnaad ...8.75 

Financial 4 Gen Ba* _65 

•Roben Fleming & Co .. 5.75 

GWtenk .5.75 

•Giinness Mahon 5.75 

Hehb Bank AG Zurich 5.75 

•Hamms Bank 5.75 

HeisaUe & Gen tnv Bk. 5.75 

mm Samuel 5.75 

C.Hoero&Oo £.75 

Hongkong K ShanghaJ. 5.75 
JJan Hodge Bank . . .. 5.76 
•Leopold J0»ph& Sons 575 

Lloyds Bonk 6.75 

Me^ve( Boik Ud £.75 

Midland Bar* £.75 

■Mount Banking 6 

NaiWBstm na ter 575 

•ReaBraVws £.75 


* Rokbo^w Bank Ltd W 
no longer anhortsed as 

a banking msttudon. 8 
Royai Bk of ScoDand. £76 
•SrrMh 8 W*mn Secs £.75 

TSB 575 

•Unfed Bk of Kuwad ... .£.75 
Unify Trust Bank Pic .£.75 

Western Tiud 57b 

Whfeanoy LakHaw . 5 75 

Yorkshire Berk 6.7S 

• Members ol London 
tnvedmenl BorV-ng 
Asaodaeon 

* haOmstreyi 


1 UK GILTS PRICES 






- • • : 1 

- •' - « J 

w%% Aeinl 
Hutofl Price £ W- . On 

mad 

du 

Last 

Ml Bn 

vrt% flaw Murat 

Nobs Price E *f- On dee 

Last Oy 
id km 


Wk% Amni HIM L*a env 

Metre Price E +/- tm due ,d m» 


-SSSMS^W. 

12pc 1995 181^ 

Ettumawisao-as— . ' a® 
mxiBss ?®«f 

Trma 12 Vpc 1BS5» — 1W2 

14pc 1996 HBA 

is^pcitoett lilt* 

EKku^icisae^ — 108*2)6 
CrnrmSon lUpe 1M6 _ IC^mI 
Trees OwTpe i987tt — ■ BBA 

rra«isidJci98W-_ noli 

fart KUaiC 1897 lOMi 

Ih»8Vpcl997tt 101 A 

BNh lSK 1997 H7* 

Muse 1998 103H 

Tim 7^80 iseott 86)3 

TtoHtt* 199MB#- 
14pc 198B-1 11 


1^00 Myirttfi? 
L350 JB25J125 
214 MyT wn 


02 ZSOD 


T)en tSljpe '96# — 

Pun Uk 1906.. 111 Art 

Tms 9^2001899(4 1WJ1 

Beht24$ps 1*9- — — *13 A 

' Den fflijpe 18» 107*6 

Tress Bpei 999 ' ! W« 


_ B40 MylG 

0.1 770 Ja22Jf22 

0.1 1,150 J4y3Mu3 

» 800 My1fiN*15 

03 5409 Myl5 NnlS 

02 T2B9*8FB6 

OS 1JZ90 JKZ^22 
OS 3,760 W21IW1 
0.3 0550 UrlSal 
.03. 830 W70CZT 

03 OSSO Je19JHB 
0 l 5 8,150 lUOEeSO 

05 1^00 Myl ton 
03 aro MfZCIh22 

03 835 M30SB90 

02 3£Q9Uy20W20 

04 1£00 Jt15Jyi5 

03 3JW0WSS82B 
04- 1^52 ttyiB IW8 

06 5£00 ftlOAalQ 


IL10 1346 
2061294 
209 1271 
1481254 
10101292 
1581305 
2731309 
10101268 
10.10 two 
308 - 

1581302 
1SJ1253 
20713*1 
206.1269 
1161273 
243 - 

2091331 
17.101308 
2431308 
17.10 1259 
OB 1347 
2231284 
17.101288 
4.7 - 


Ftadhg3i2pe 1: 
QsMRian 9tsie 2004 _ 
Tare Btpe 2004#.— - 

BizpcOOOS 

Ctn*9 J zpc2(W5 

Tran Uiapc 200W — 

7Mpc3xm 

BpcZOOMtti 

Trw 11 ^pc 2003-7 — 
Trra* Sljpc 7007 14 — - 

U’HcaiM-a 

Trees 9pc 2006 ft 

Trees Bps 2D03™~ 


73)1 

06 

B43 JiHJyl* 

7.61274 

105 

04 

3.412 Ap250E25 

19.9 1246 

87 Ad 

a4 

£500 MySeiWZB 

20104460 

08* 

04 

£000 J*70*7 

- 

KHH 

04 

<M2 Aprs Dell? 

izsrw 

121 id 

03 

£200 My21H*21 

17.10 12B5 

93*1 

04 

3,900 1*0598 

26 - 

M’« 

-A 

1006 Ap6Qc5 

1.9)334 

I1SJJ 

02 

3.150 Ja22J|2S 

156 1203 

98A 

04 

7,137 JBiejyie 

061339 

127!! 

03 

1 J2S0 K2B8e28 

2261301 

103ft 

OB 

0321 A0130C13 

661343 

95ft 

05 

3,100 Ur25Se25 

1961330 


20c '96-.- 


200 
1071s 
»65 * 


♦%*: -fiarr . — 11359 

2'jpCOl I7B.31 

2 ‘WHO T7BJ1 16 1 (Id 

4fe>Cltt# (135.8) 1 OB, a 

2pC06 (6*5) 188,1 

Z^PCCB (78 B) 152,',* 

24PBH ’S75g 

2‘jpc'13 092) 129(1 

iljpc'IB 481. a 138 A 

2*200 TO (83-09 13212 

2*20024 # ^97 7) 110'* 

4’sPC'30t* (13511 109V 

(b) Figures In perenlheses show BP) base tor indewng (to 8 
months prior fa Issue) end have been adjusted lo reflect lebaaing 
of RPUo 100 In Januoy 1067 CwworJon Lidor 3.9*5 HPI fr.« 
January 1994: 141£ and for August !»»: 14J 7. 


0.1 

I -TOO 

MMfiSelB 

10*1313 

-.1 

800 

Ap27 0c27 

209 - 

02 

1.500 

IM4 Sa24 

18 H 1316 

02 

1600 

MyJOHvM 

17101317 

04 

1.000 

Ap2l DcTI 

14 9 - 

04 

>650 

J|19 Jyifi 

1361)14 

03 

1650 

MyTOteOO 

17 10 I31B 

as 

2.100 

F#J3Aj23 

iar mi 

04 

2600 

FelOAuifl 

1171330 

05 

2.700 

tiCKtfX 

20 6 1321 

05 

2750 

4p16 0ci6 

9 3132? 

06 

2100 

Jai7 Jyl7 

1061323 

06 

1,300 

Jai6Jys 

i56 - 


OwRMWiTMn' 

Tims u«e 201Q 

Cm apcli mitt — 

Tmepcantt* 

TtwaSttfc 2008-1 2tt- 

Tmflpcmatt 

. 7J,po20t2S15tt 

Trees W«» 201 ?#__ 
BC612S8 20W-17 


8111 

as 

4,750 

1010 - 

in® 

a< 

5673 JH2Jyi2 

1101245 

104ft 

a« 

5,151 MiM 

306)701 

74ft 

06 

1£00 WTOSBTO 

461330 

S5A 

04 

OZM U27SS27 

226 - 

aft 

-6 

800 JeSAJpa 

2061332 

TOK 

04 

7,150 FWSAU26 

19.71082 

no* 

03 

1600 JB12D612 

051250 


?! ■ Other Fixed Interest 


ArefeRlhaiTeere 
.comertoH tCtpciaas- ire 
■frmRlBMBlBBS 
*e2BB 


toepaJOOOtt^-. 
Ttore .1^*2000 -- 

10k 2001 

-• ?K 2001 tt 

««*«—— 
" acanmft--:. — 

10PC20D3 1— 

trewiliUK 2001-4 


03 1,796 My22 »f22 17.101240 

2,500- mJaSoft) 2.11 - 

fi. 06 -Z500.\Jt?De7 - - 

imS M s» -mm- »««•_ 

11BB (M 3,171 *14*14 7£ ae QmdlB4|ie 

21 aS WrleoaM 1 

,sss S 5 SiXSrww.^ 5 --"*— 

■K JJ - 1 S*! 3 BKrr 

112A 03 1.62Q MriSSeiS 1181290 Tm-SSspc. 



-J 

390 

AlAul 

2761239 

41W 

as 

1608 

JfilDel 

25.101352 

5® 

21 

119 

AplOci 

266126 

W 

-16 

U 

ApS 0t5 

161324 

29ft 

02 

275 EJMpJjtt 

191236 

26U 

-*7 

475 

Apt Oel 

2661316 


05 1260 Otonl^ePSlSIO.— 
Intend Cop file'll) — 

0KC2P19K 

13pC97-2 

HydnOudw iSpcZOII- 
Leeds 13^ 2008 

UngnoOtokifll. — 


4I4K 52024 


HW. 

its 

SB’s 
100 
7D8U 
741 *e 
125 
38'e 
32 
lllli 
B7'j 
1311. 

I2S 

135'j 


100 1*24 Sfi24 

*5 Myi5t*»i5 
303 ApKkl 
725 Ja30 Jv30 
315 AplOci 
40 MfJtNOO 
40 AplS« 

5 lJaAjueOc 

26 ueJeSeOe 
e AsS0c25 
25 frklSrl 
60 JSWhM 
50 

50 I*' Si-l 


J'BJ - 
4 93 lfl'17 
- 1465 

If S3 14.T 
iers3 - 

T933i4e 
ff93 - 
ffB3 

3-33 J275 
ff«3361 

raws 

."91 

«n - 


• ■jfe' tux*. $t' Tax-free to- notH*ddani» tan appSeaton, E AitEben berif. *1 B« <9*<tovL Ooang art *»to»n to pounds. Weekly percentage cftsnpe on calculated on .1 Frrfay :o Fo.», euv» 

STOCK INDICES ; 

Mi(-4 MwVwwa Pet 31 lorn Htfi Urn ‘ 


Nov 4 Now 3 Nw 2 Now 1 


~~ mx 

Oct 31 Ugh Low 


Ste 

Htoti 


FT.® «n- - - . " aeaTB 3104.* 30613 30003 30974 38203 Z8706 

FrliSffll -^8 35308 3522.0 3S24J 35109 4W2£ 33634 «1SM 

ff«Ud Miffs '35343 K303 3522J 3523A 3814.1 41HX7 33624 41807 

SSaSb -Su-’IBH 1845,4 1891 .4 1540 17783 145U 17703 

FT«Sniaai - -1781.73178023 177838 177078 178001 2«4« 177134 20BUH 

FT« SKXi fii ff« - 175060174937 174134 174038 174081 206072 174168 2DRU2 
■ 1»UK 154002 153032 1S9051 153031 1784.11 144635 1764.11 


0863 FT-SE BfOBSEk 100 
13714 FT-SE Ewflreck 200 
13713 FT Onfinry 
6643 FT Govt Securities 
138179 FT Rxsd Interest 
13EL78 FT OKI W« 

6132 ftsdeceasarGoMMnn 


133172 1325.53 
1 39053 139166 
2371.7 23773 
9159 91.45 
107.84 107.62 
2127.50 212433 
267.3 2655 


131001 133133 
138257139130 
2355.4 23600 
0089 91-08 
10758 10754 
212S. 45 2135.27 
264 4 2611 


1337.14 154019 
140054 1007.10 
23510 27135 
9154 10754 
107.74 13357 
215551 2387.4 
2719 2935 


1286 4* 154019 
1335 961807.10 
2256fl 27135 
69.54 127.40 
10650 13357 
1762 CU 238750 
1850 mi 


DHE|L 

Low 
900 45 
93862 
*9 4 
41.18 
5051 
922 16 
415 



Mm 

4 

% dig 
Sttl 

11/12793 

Nov 1 
1 

UktCap 

Sbn 

Pi of 
Goto 
Mtaes 

Bren dl* 
field K 

52 «Htok 

Hinfi Low 

GeM Mtaei indo* (34) 

2127.50 

-4.7 

212463 

5168 

10060 

2JM 

2387^0 178262 

■ Re9tocm indices 
Alnca (1GI 

?5D3 m A 

+&S 

24B2.2S 

1862 

34.73 

360 

3711 87 2304 45 

AuaroLBi* (7) 

2715 30 

*1 9 

2728.83 

876 

1361 

1 32 

3013 89 217166 

((anti Amend in) 

1637 10 

-12.4 

163)63 

27.11 

52J6 

082 

203965 1468.11 


Belgian Franc 

4J1 - 4? a 

4ft- 4* 

5 - 4ft 

5*4 - 5ft 

5.1 - 5,; 

8 A - s.‘* 

Damsh Krona 

5>2 - 5 l « 

5^8 -5ft 

512 - 5ft 

6ft - 6ft 

«!i - 6ii 

7.1 - 7ft 

D-Mak 

4}! ■ 4S2 

4il - *!i 

5 - 4ft 

5ft - 5ft 

5ft -5ft 

5K - sa 

Dutch Guilder 

5 - 4?g 

S-4l 

5 -4ft 

5ft - Sft 

Sft ■ 5ft 

Sft -5ft 

French Franc 

57s - S>4 

5ft - 5ft 

5ft - 5ft 

5ft -5ft 

512 - 5fi 

eft ■ oft 

Portuguese Esc. 

9>4 - 9 

9 - eft 

8% - 9ft 

10ft - 10 

10ft - 10ft I Oft - 10ft 

Spaneh Peseu 

7»‘ - 77a 

7H - 7ft 

7ft -7ft 

8-712 

sft - aft 

Oft - 9 

Stertng 

57„ - 5ft 

5ft - Slj 

5}J - 5« 

Sft -6 

aft -a.'. 

7ft -7ft 

Swfas Franc 

3 12 - 311 

3.7 - 311 

3 -ft - 3% 

■4ft - 31* 

4ft - Aft 

4ft - Aft 

Can. Doflar 

4% - 4ft 

5 ft - 4ft 

5ft - 5ft 

5ft - 5ft 

6A - *h 

7,’. - as 

US Doaor 

+ft - 4ij 

412 - 4ft 

Sft - Sft 

S’ 4 - 5ft 

Sift - 5*2 

Att -8A 

Kalian Lira 

9-7h 

aft - aft 

8ft -8ft 

8ft - 0ft 

9ft -9ft 

10ft - 10 

Yen 

2ft • 2U 

2ft - 2ft 

2U - 2ft 

2ft - 2ft 

2ft ■ 2,; 

2{J-2ft 

Aeon SSng 

2* -2ft 

2ft -2ft 

3 - 2ft 

3ft ■ 3ft 

3ft -3ft 

Aft -4 

Snon imn raws aa oM to iha 113 Dollar and Yen. omaro- 

mo diyi 1 ngcica. 



MONTH EURODOLLAR |lk04) Sim points of 100% 


Copyughi. The Fvuto.al T.n'.i.-5 bm:od lTOt. 

Fujwih .n bmeknn -Jkj. n -I cornpamM. Bxe US Ddtoro. Bam VaLsea 100000 3T/12’92. 
PiMivnse Ooia Uim Iri in. No, a 26! X aock's dung« -12.1 ponti: v-.ir ago: 235JL 


LONDON RECENT ISSUES: EQUITIES 

Issue Amt MtL Close 

pn« (u<1 car:- 1994 price 

p up (Cm.) High Low Stack p 


♦/- 


Net Dnr. On P.E 
dhi. cov. yfd net 



Open 

Sen price 

Change 

High 

Low 

EsL vol 

Open inL 

Dec 

93.96 

93.90 

-0.06 

94.03 

8369 

108,650 

410.107 

Mar 

93 45 

93.40 

-0 07 

93.53 

93.38 

122£45 

400663 

Jun 

82 £9 

92£1 

-0.08 

93.00 

9269 

70.420 

295 £43 

■ US TREASURY KLL FUTURKS 0MM) Si m per 100% 



Dec 

9466 

94.50 

-0.05 

9469 

94 49 

1£38 

17£04 

Mar 

94.04 

9£96 

-0.07 

94.06 

83.95 

243 

10631 

Jun 


93.48 

-£08 

93.61 

8348 

72 

5.929 


FP 

FP. 

FP. 

F.P 

F.P, 


052 

175 

2.32 

11.2 

10-1 


6*3 
97 1; 
63 


166 160 
75 63 


4 APTA Wmes. 

70 Abtrust Latin Am 
55 Do Warrants 
■fiAdare Pmlg 
Arteson Ears. 


6 -3j 
87’j 
56 

165 +5 
75 +2 


026% 8.1 1.4 108 


KM 

FJ> 

175 0 

93 

65ft B2W CommoditMG 

67ft 

♦ft 

_ 

_ 

. 

. 

. 

F.P. 

16.4 

47 

39 Do. Wris 

41 


- 

- 

- 

- 

- 

FJ> 

406 

92 

65 vCituna 

90 


- 

- 

- 

- 

280 

FJ>. 

303 

287 

280 Churchffl China 

265 


RMCUffi 

2£ 

4£ 

13.0 

63 

F.P. 

122 

6 b 

65 Ennemtic 

67 


RN0.71 

S£ 

13 

a a 

. 

FP. 

56.7 

140 

106 FStronk: Ctek 

135 

+1 

RML75 

2.0 

0.7 

ASA 

115 

FP. 

37.6 

126 

115 Gaines Woriishop 

121 

42 

RN4£ 

S£ 

4£ 

114 

- 

FP. 

2.00 

35 

24 Group Ov Cap Wts 

24 


- 

- 

- 

- 

_ 

F.P. 

296 

52 

59 Harotxos Sm Asan 

58 


- 

— 

- 

• 

_ 

F.P. 

2.70 

30 

27 Do Warrants 

27 


- 

- 

- 

- 

180 

F.P. 

1075 

223 

205 tosh Permanent 

220 

♦3 

uN&O 

4.0 

3.4 

7.7 


FJ>. 

3409 

490 

475 Pratfic Inc. 

407 


- 

- 

- 

- 

135 

F.P. 

576 

149 

136 Srevisa* 

144 


FtN3.fi 

1£ 

33 

234 

- 

F.P. 

826 

62 

57 Whkchuroh 

62 


»H^5 

3.0 

£5 

13£ 


AI Open torereat ngs. are to prevtous day 


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Nl 

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16pm 

5 

Nd 

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CITY 

INDEX 


rt H E C t -T-Y'S BOOK M.A.4fe 


A 


lie- liL-iici LcxX'i-i ■■■ +inil kvtliib- - FiiunuJ and Spi-fis For a 
I q.. ..mi re end an fee- -uni applmu-sn I'cim tall 071 2SJ JM 1 
*u.'nm - aie nuiiiullv upenrt wilful. 77 hinns 
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Erewp+wM 488787*3 



nnca lor nkMcvt duannnaj lac tm 
pupOM «l •» ewcMcBy pwing aid 


W Enatand aid HUM 

naacrw nu u unenVh 
n»*rv a M.HA4 on O. HUM 


0030 

0100 

0130 

0200 

np n ) 

0300 

0330 

0*00 

0430 

0500 

0530 

0800 

own 

0700 

0730 

0800 

0830 

0000 

0030 

1000 

1030 

1100 

1130 

1200 

1230 

1300 

1330 

1400 

1430 

1600 

1530 

1000 

1630 

1700 

1730 

1000 

1830 

*000 

l«tn 

2000 

3030 

2100 

2130 

2200 

2230 

2300 

2330 

2400 


nw* 

puchis* 

Orta* 

HAIWl 

932 

WJ8 

3546 

3030 

fl-BI 

826 

8.10 

8.12 

808 

BJJ7 

800 

BJM 

8.08 

858 

%08 

aoa 

6.10 

613 

923 

940 

22.82 

27.88 

38.68 

3682 

38.92 

»se 

3092 
26.30 
26 JO 
923 
922 
823 
3323 
WL96 
4728 
4728 
4748 
3630 
3S24 

sun 

32.B5 

32^3 

3223 

3067 

2463 

990 

622 

416 


luuwn 

032 

9.40 

9.86 

1000 

040 

9.40 

845 

9-60 

9.40 

9.40 

aes 

0.85 

90S 

954 

8.95 

1000 

I7AI 

1759 

17.70 

17.71 
17.71 
1827 
1837 
3249 
32.49 
32.56 
32.49 
*830 
*038 
17.71 
1050 
1050 
1050 
1060 
ir.n 

1836 

1030 

4256 

5120 

5120 

5120 

5120 

20.18 

1030 

1007 

1007 

17.06 

9.00 


bwwn 

952 

940 

085 

mm 

12.36 

1236 

945 

940 

9.40 

940 

005 

085 

945 

954 

005 

10.00 

2037 

2055 

mas 

2047 
20-67 
P1J3 
21.33 
35.44 
3544 
3554 
3044 
2131 
2131 
2047 
1050 
1050 
1050 
10.00 
20.87 
21.31 
2131 
45.92 
54.18 
54.18 
54 >8 
54.18 
31.11 
2131 
21.03 
2133 
2045 
940 


Mcas are drNund tat awry Ih+ngii In nain 

n*ny4ax now MM Pttcm an n peuadi o* 

nayamtau, nunOM is nw oocsnM ptaan. To 

ca m * Mcm lo panoa pm Mtaa M enaur n o a d WI 

m VuU m mH era pm n ns ibr. cq 
HtMATWh Mcnma uneiisomi PKJ«obn tar tna 
drannauaon or pool ataaa a nos n ns Pcoans 

and SawoiroM rymnm wMcti gonm no 

mwtan ol M rtacmcvv pod In Enttond aru ***«. 

His Itaal PuitaM Prio* a nw mots or no na|a<** al 

ouimma inocta to oanarators in MWI -4 ■taeaTLe, 

MM Drouiyi vw pool Iha (MaiMwi ol pod oren 
a o >Vy eo-rara waeoa n pradua ol Mtcti n 
swyoci v m won or taiociS a i im*> »wr auras cwyor 

■ f nraacrai non cum pool poran on. mumriani 

appnufeHCory twenry-fsor dayi afrar uia dry al 

todno. Mxadnft. Mum u c raiAl y or ns* 

raraian aadiar osmoosn. ns nan iwiiaa os 

pucw i*iOn powod poet pm tat anreto pane 

no aan b ire* pool pnna lor n c*cr. *w Pod 

(Mco* m pea cwm <4 p nam ppd Siting Fnce 

a tan pan ata oy pusnww of ■tauna.ii iron *n 

pool tavang rrmnsanann. ■ ta twi lit icon IM 

On 'orm motion ol Pool Pincnow Poeo. Finltior 

wPanwDon on poet wtan* w wnadM m barm* of am 

Poet t it Enorgy O erwur M nf WwunBoii Bonkss 

UttMa Anrsna Moftsig to nestis s 

‘ J-TM7BD him 


PliOM Mr atackn+y womMiM la II* 
pupoaw of n rtartnoi y using md 
nmuoMt ipngHwu 
h tiHpmo m Utawn. 
tanasPtr tor MWnbUg 
WngonV.ltN oa VU45T 


Pool 


Pool 

parr am 

era* 


0030 

R23 

9-66 

■LEG 

0100 

9-00 

9.60 

9.00 

0130 

040 

1040 

iaoa 

0200 

0 J» 

17.09 

1008 

gen 

MO 

i7.as 

1008 

hum 

0 J0 

17.00 

1088 

0330 

325 

1720 

1080 

0400 

0.16 

*aoo 

1090 

0430 

aia 

040 

090 

0500 

8.18 

055 

055 

0530 

0.18 

022 

992 

0800 

0.10 

927 

097 

0030 

0 J£ 

1003 

1003 

0700 

29.78 

1071 

1050 

0730 

3043 

2865 

3047 

0000 

31 JB 

3077 

4090 

0830 

31.74 

■SO 60 

4290 

0000 

3&S0 

4041 

4293 

0030 

3842 

3006 

4195 

1000 

38.64 

3007 

4197 

IOJO 

3055 

39J» 

4006 

1100 

3045 

3097 

*096 

1130 

38-66 

3004 

4090 

1200 

6047 

3050 

3044 

1230 

50.46 

3033 

32.25 

1300 

66.44 

3023 

32.10 

1330 

3&51 

3043 

3190 

1400 

31.70 

2007 

2040 

1430 

31.70 

2064 

2044 

1900 

31.76 

2095 

31.75 

1530 

31.70 

2643 

2042 

1000 

32.18 

2064 

2044 

1630 

58.71 

2071 

sas* 

1700 

9220 

30.10 

3195 

1730 

11441 

32.17 

3494 

1 B0Q 

10025 

32.37 

3491 

1830 

7* 21 

43.00 

4010 

1000 

44 in 

4050 

5072 

1030 

42.17 

4020 

ea*a 

2000 

41.33 

4325 

4018 

2030 

31.70 

32.01 

33.62 

2100 

5630 

21.78 

23 97 

2130 

5030 

1097 

21.06 

2200 

31.74 

10.10 

2090 

MM 

3083 

16 70 

*049 

2300 

27-59 

1070 

1099 

2330 

tan 

1070 

1040 

2400 

1020 

10.00 

1000 


tw m r, kxn mi pnnna. Pncao am n gontr p m 

magnMIHww, nundM la two aadme plaraa Ta 

co n n ePcm ro panes no iJSjirai+ow on trcinnl 

pod man on moves on* poca to M M. eg 

naeawn Mean lAHHKwn. Pravtoan b an 

MewTrtnatwo of pad pnon m naefe *i n ftawag 

*>t 9nwrM AgreeaMMa aMcn gown na 

<4 i w jim ot Sis dscnaey pent n D i tfa » l nri Wdan 

Tha Pool Purrano Pocn m Via twata c4 cn mottrr, d 

mnaa uaun lo ga w s n m neM al M s iAtS r 

mao nrougn On pooL n» baton of pool pneae 

■ ■ rtofe wuH . w ail m oats ol amen a 

nutyncr ca nnulQn or onandtan ' 


rarabi onVor cnnMnM*i«krca dwud oa 

(*ko<i isxa woraional poor press b aw W nng 

n n* p*a w« Of cuotiam or racwory unanr sis 





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Springfield Raid Mgmt (Gibraltart ltd 

GtoUl UqMOIv Fa U8 I 510288 I Ull 


^tw3 a „ Gra '! rtfi ^{ nd 


m 

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iawi J * m 

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&1I« I 


Alien Dunbar mtmunlonal Fwd Mngra [I6a])F SA Emu OUnSana SA 

«SE»»yijflMN 0S«*7l -l«5W Nrovo-tv Mahom W,&. 

FBI / Sm*s fiiandsl Senriees 


I - I 457*1 


«.« . 

Cl Ml I 7*8 

. . ...... Cbon CM 

FuDoaflm Tnc . . (***4 487 b 

GaaRuffMBfW asar 2.407 

iMO t i dai a U«|1 «727 

araM Ifeown . L2 4I9 7 7JK 

MauoM . . r*£a 8.105 

IfeHav. 1344b 2675 

rtoiw Amman r?3?a v«ao 

MW |)IB JR» 

Piooeirr,— . L2.-KJ 3418 

SfeBB 1 .-.- Iffl 

OMM . JOBJM II.M7 

Ctaui Eawtt — . - - 81 122 l ■* - 
EuntiHo Aamraoca Group 
EwoMHN mujomu. tCIUWT 
SHitng ENBMna FO . M3 
MV liHitnlM. . I mo 

btunomry luna 1 istl 


Alpha Fund BUeagameM Lid 


SjSI 

cCa. 
iioK'SMSr. ' 
■lawtstoM 
**-lN'4^5(8 
ilWMbgK 
_t0HN 5to 58 . 
PCBMiuinokiva*!’ 

IdnailotoNti. 

inSktiMaltajlaiU 

UMMUjStU 



MJliNiiaSNlU 

inoFnniui 11 
•oraLUOas JO 


m in 

11* H7 
Im 09 


vgu gMapw*<MsniJd .1 ai#UD 

S£v FdirtwnfeGIgOai capital Rmo Ltd 

JTOM PUVAuall . I 5S1M314 I 

Ferral Matugamaiu Lid 

sa= I 


sas 1 an lb i 

«ss fen £ sa.“ tt r , J«oSf^ e «! 


Pw-adahaijt-LaBet: I 

fWetty Inveatmoits 


A'+jTO 

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M.T* 9 

4 

W7J 

SaJflCei 

4ia?4 

»sa 

4*a. r 7 


Hnaodm Att» 

UB3 Fimx 
1 3 KlO 


I - 1 5-324 


VK-lviia-cMN’t 

Ada PacWc Capital StretoBes Fund 

UtVtkIJI I Vl 57 I - I 5*08 

Asia Pacdlc SecwUu C«p Ltd 
hm 3*i*Jk> Cm fa Lu I SI083 I - I 

AfWarest Conadtants Ltd 

4NiEi*«bi:i I SI* 61 -SJ- I - I 6-SB1 

Adan CouvcrtMsa A Incane Fd (Cayman) 

j HM Un 5 I SIC 03 I 

1 4*KU Atlantic investmant Raid Ltd 

QtHftSBtMUUAqlll &1CU 1 
Aurum Funds 
UU«^F<M im u? au 
bon hnf lu *n> lu . 
inodo F« m Sn TO 
B£A A ss oc I s tes 


1009 

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-inol 


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fflLkniiPiNMiMi 
Bacon 14 wt i Ut 5cg JU 
Unco mum 
uneg Dai "j«n 
5m Anvro r*Av On c ’ 

DZW In vestmont Management (HK) LU 

I J'J-’S! 

I iia 


Sinn 77 

*102 70 
*1104 
575:76 

Kd? 


51750 o — 1 > — 

5375' SVOS 7T 

63762 
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53764 


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JuSus Beer Bank & Treat Co Ltd 

i«ntKnr 1*3297 3298 1 - I **-£« 

UNfuSnleand . I tor* I - I 502C6 

Bank Von Ernst A Cle AG 

- r 45212 Omaonln Emm . Iwi ic aoil 

- 46313 OFlimMI ... I5F-U07 4C47 

- I 46714 enme. Fa HI Annvl . I56B5U 8107 1 

Bsnqw de Geabos Prtm, Parts 

Coin ^ I FTi56T «■ 

lime* F«U* FFM46I 

Milium I FFtimas 

Mwm ■ - - FTliit 48 

Bqua Ft Sanr & Cr/Europ hw Rfgt Ltd 



E,SSj 

MnOmBM 

Barclays nm«sfHBd I 


*17.13 


■ft. 

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0 



- I MU07 
-I - 


- I 4J4TO 

- ■ 63H04 


FFf- 

Ff>— 

- - FFr. 

. « - . I J- 

Ffreokd Capital Managonent 

iTwnaa un wu 5a 10 I |i«9 

Hist bneatments Ltd 

irSR2% r !SuN-.l^ 2SS2I : \zm 

Hist Mmdco Income Raid 

fl<9Hnc«incOa2b I 5-407 I - 1 *4447 

Formosa Fund 

UH la. 4 BTO5 1 X CT |.*£'W U 

Formosa Growth Fund Limited 
ri*v 1 mu I 

Franca Option Fund 

Fnmcr iVMn _ lfVi:ii.*:::iual 

GBC Assat ManagameM 

rac Nnamnouiiaic* I CS5to 

*on<“ uBS t«* . ... I Ute 

■Dnoftt irvaerivFowie 

GM Rind Managemani (Bermuda 

OMttdkWU) F(J l_Tn l 5T1 tn 

VMnF"4FoLin .. I s-.’Ti 

"Kn Fv l-d I *4 

ufl I >in ix 

'4-ui mm .1 Jr .j *0 

Tim GP TMnati Index Fund 
NAUNn.' .1 SI 07 

GT CMIe Growth Fund LU 

HM0C126 I *4111 

GT Management Pic 

'i; I'-ttiiiajid'FS'iTt".. 

of Lucon Fu« u-i .. 

•ji 6usa 5mj» Com... . 

.T i-vmiwnr feo 
ilfjitiljfi 

■•I -Kw*v inq i > FO . 
i.IwyyinatiifB . 

M T mtiri Fd 1 71 

bT us Small Co. 1:1 .. .. 

mm Gale Ciertmcy Funds 

4U57 rod Hsdw • 


(Histnorj a* rr tKK a ca actwi 

"rWdMBEMdrMJ 

-left!* Johnaon Fry Securttiea Lid 

BSS&g&S&l TO 

Juptter Tyodtf (Bermuda LU 

ummiv Icsroaa nrsl guNsere 

n Asia Pscuc Fund LW 
raawPscBc.. . — Ijnsa iz.07l 
Ktagata GUnl Pieal lid 

UHl iFkoD Sm 30 — I S32J7 

KUgdon Offshore H.V. 

MVOdZe —I SIB 1 3 

Korea Kina Super Fund Ud 

WWSaJO 1 SI0S2 

Korea hU tawstmeni Fwl 

MV 00 31 ...I *213*4 

Korea Invostmon] Treat Co LU 

Kero InS Tiud HJB7 | 576-3 

Saou m Inal MV, I ftZb- 

HUS ^vT^aliu: I 
Ciewona Tusl -..I UJ.u£ 

Lehman Brameit Oporto Growth I 


- 1 44M5 

- I 47950 

- I JW*1 

- I *2654 

- I «V>* 

oosImw? 


532 '12 


nAVOct 15 1 

UppoAaloLU 

jnQFdicwyvUtum , .... 

fir* 

Lloyd George Management 

4ntenru FO Ud Od CS 

&Sia?S c iS l £L 

Lijmaoa^... _ 

LbJatxap iui-.n. 

LGM/aa ... — - 

Lloyds Bank Government Bonds 

w.-.-— J m 

Uoyrls Bank lirtw national (Bahamwd Ud 
i iniiii ninunrmen , 

BSanoH MM Dak 1*443 984/ 

Leaden Portfolio Services Group 

tSSaSS’z:.i;zl « 

Hfit Unit Treat Managers LMted 



34265 
-I 642*0 


- I*38W 


ssSSs&ibl 

RapuMc Funds 

SSSSSSeSKr 


STOW 

50269 

GBto 

50271 


- I 53S53 


.1744) 

.17 03 
16 76 
.15 76 
1535 
I6J6 

Fund 

Ptnfil49iSbO I 

Baring Interna Burial Group 
llAVOd 31 I 

sgefiKf. 

Ewg euh Iurmi Oct 3i I 
The Batavia RmdLU 

Mvoare I 

Bear, Stoma Inter na tkmal Ltd 
OweM — rmWUrt . Il7«3 7J87 1 
Bermuda Capital Company Ltd 

NAV bop 26 I 839 W I 

Bernuda hU Nwront Mgmnt LU 

ndsusrf isss ftssi '“ijjffi 

^642,5 42M 
UJ4 9B4 
Sll64 1394 
Tfniass iim 

„JBSP:pS n. 

us Doan iv on 28 lu 

8anuMM Seio^aj 

nira*onii6caiS>2 
uenn Aasncan how 2 - - 
JuanWr! ...~ 

fmpaon Vm 2. 

IJ, PnafcBtoi Nor 2 

Bloiroiore HsWngs Inc 
cotta SCa-eMiy 
anion 

HAV Oct Jl -I 

Banter Funds LW 

Fcraata BiAvNor 4 ... I SM45 

Bridge Management Ud 

m»c»i F4 Is-ODJI 106221 

Bu chan a n Fund lid 


ass wgSESa 

Ewmntaaca'Oaai 

■ Em taNMr m Abai wan 
ButterfieM Hanagopent Co Ltd 

BuennAM — 

Sutton CanM.-- . 
aunm Can Aixr Ba .. 

Buna'' 

Button 

Bunion namconw _ 

BttnmMonnUM-.. 

CA Secirfltes IrtvestOK 
Hia« GM Den Ota 1<- ' 

CDC Interna Uoaal 

CT 57lDrt Tuitjt Ool 21 - 
fiH Lung Tann 

Canrco Inwstmarrt M an agement LU 
SusNftaan-UGEFBI — ISIlBb 12281 

*13632 I 

Camay Ctamente (Hokkigt) Limited 

mv s« 30 I HXS7.7* I - I 4 w,ij 

Chanuteon Raids Limited 

StaSH * Co LtaSM - IK memnadn 

UXEnuny Fund 1 1738.13 1)7891 


ItfUa IVO CiTTtC-e ■ 

- | «« Gam umru . 

Garantia Debt Fund 

SltnaVXiMteiv I. ..I 5-074175 I 14.591 62662 

Garantia Equity Fund 

SlureUiua Sop 8 . . I SI30 6M855 I 2U2 1 640*2 

6areare« Sector Arntysia PorttoBo NV 


rJfr-JS 


NM . I 

Gsneate Fund Manai 

aueFONAUlkl 


ns Fund Managere LU 
0HAVaat4. I *s:ai 
■Matn-uca)' I {17*7 

Gertrud SA 



HBSWRIECeSO 
Taipei Fund 

aAVM7S2284.1S88Mias>i| 

Temptetoa Gafereith A Harahorgor Ltd 

cwra taenw3 lsr« ajsl -I 

The Egerton European Eqidty Find Ltd 

MAH Now 3 1 QM1DJZ3 I - I 


BWOttM 7 »I27 I — I *8323 

The TM Prime Ftaid Ueifled 

KAV032B I 527 £2 I - 1 *7484 

TheThaBaed Fund 

man 3 ear 289843625 n on ussnvss 3a 
The Tltatotd GrawBi Pnd 

WOUSS5202Q3SS 

The I haHand am FtaidUd 

MVOaS'"' I *40 14 I - I «M*0 

Thames Curacy Rente 

ossssfisnawvte f %% 

Thornton tmedmeet Ham ILU 



Trww (BohM t mate r u te 
BtamadllmanlteM 

Done avn kAioaa Fe .ISTQOM KTMl 

Triumph Oohal " " 


„ „ .i Hedge Ud 

NAVOaai _ T 804108 I - I 51950 

Ultra Cerberus Raid LU 

ftw8 A ttteniaiSM>3P. I *122040 i -I {am 

UtraCMniFhnd 

Fum Aatmui sap »- 1 saesaa I - I - 
IKtra Futures Fold LU 

Fund Attuui Bap 20. 1 SI 141013 I - I 50381 

Ultra Sector Fuad Ltd 

Am AOWUOH LU 5«l 30 . I 8113*64 I - I 50303 

UHra Tatooom Fond LU 

FuadAMBnlM-taelO.I 587*27 I - 1*2007 

rare vote Raid Ud 

Baiaas8?iss.l im I ~-\m 

Kate Partaera ’A* Fund 

MAVUeti I 51538 I - ItIBfil 

Vate-Trae Im m ahu a i it Ma r j a g a rn a n t LU 


:l: 


1 - 1 - 


I 44053 
I - 1 44881 


I 45008 


W - 


1 nm 

MM 

MenrD Lynch Asset Mana ge me nt 

jasssrasiz- ““ 

■antl.lmta 


lyw 

; 



pig 

11^ 

m 

liaio 

Iw 

'4 

SI 4.18 



■ PWOc Onn 
Gtabal Adc Inc 

NAV id 12 

Global Govenanont Ptas Fund 

eJO PivtaKM-eacnr 5*™ "« 

WNJi4WiauSSUD»35 

Gtetal mvestmeflt Fuad LU 
NAV Ecu 30 .. . I *7*481 

Global Leveraged Futires Fund 


$1514 04 I - 161870 


m l --l»ss 

Ijwta A n utai k ym i ig p» Fonryo , KWfl 

m s^^rmr i -hb* 

.-ibis 

Ei^TTtn :|S!S 


MerriB Lynch Duerreey 
mmmu Cup Naw On 78 1 51434 
iForntanrataiOnn 
SBreiWn* biteroadonal LU 

— I 64024 MVN0V3 1 *11*06 

Momentum Asset Uamt 


- I 49614 

Chescor Indian Imnstmaet Company LU 
cwPMkOtira I ro07 l 

The CMaa Fond 

NAV fct 28 I *1035 I 


I £8*51 I 


SIS The Chte I mite A Oev nl o p m c nl Fd Ltd 

NAtflfavl I 51007 I -M4035 

CUxens Imrestmont Traat Mgt Co Ltd 
non* amt- re aw b. saasa I - I suu 

luma I960 T9 NAV B B.S - 5£?2 

5w4Aianfe>iaK»i3_ I 6u* I - 1 49620 
Cote Aaeat Managamant Corporation 
Ma Mane nan i Lta I ?11 5*3-0 - I uew 

cam Annum ua I Si*n7Jse I - I 51902 

Coh imb ita Aaaet Managatnem LU 

S I Am 


NAVOa Jl 
Goldman Sachs 

j *«» Owmncy if 

sssssssr.. . 


Green Way Guaranteed Ltd 

NAVAuflll I £ail34)*7 I 

Greystom Interna Dona I 

_.»cFund 
1 Fund 




I - I 47938 


- I 50334 


I S 

Seahawfc Intomattanal Inc 
E— A >tt- md ai n Inr. I 52210970 I 
Scgespar Secwttiea, (Bermuda) LU 
GiHOtaRrLtaNWSM30 1 *1006105 I 
SeychUlot Raxl Ud 

NAV Juu 30 .1 *657.7620 I 

Stitezmt hnmtaieetMn^nt (Barra 
Jama Odd* HAV Del 31 I *16314 I 
Stetia Fund Ltd 

MWAtora I 8157B I 

SUane RoMnson kweetmeot Mngmt Ltd 

SJLUMMttt 

mms* i 



- 52048 

: ^8 


Montgomery Emerging Martlets 

HAV Od 31 I *150)38 

Moore Global Inve s tm en t 

■11241 -1604 



:|S?a 


Morgan Stanley Emerging Market, Fktnd 

EmnMMNta Da M . . I .527_3a_ I 44581 

SLaro im xtvm ca 71 1 5-23970 I - I 50310 

- I 44876 Morgan Stanley Japanese Warrant Fund HV 

NAV . I 42-6865 I - I 4ZI42 

National liwe a bnart Trust Company Ltd 

12308 I - I 47737 


CariSpasngtarKAB 

Lung Im tome Tam NAV i 17000* I - I40S3S 


l 1 

The Vietnam Frantfur Fund 
ttmiMtetttaMti 
-vs (pun, p»» 3*o ai I s*» 

The Vietnam Fkmd Lknftad 

IMA Own tad Itawi (Bnmtt) Ut, 

WV Rdf Fau on 31 -71 S10S7 I 

WWCopttal Growth Fund 

NAV0O31 I *09637 

WMOngfon Fd Itagra (Bomda) 

feta* Gantti Fd— I *1081 1705 

WoDs Forgo ILS. IT Rmd 

sassssssarrl m 

WoridMda Lhnltad 
WAV Gap 30 , 1 SO602 I - I 

Mphfaw lat o n w Bonal lmtennmt Fd Ud , 
MJi-l _W3S_ I - 


YatnatcW Capital Management (Guenney) LU 
TMImFod I *2233 I -148485 


MANAGED FUNDS NOTES 
Fftor* «■ ta omn ute* OBtaivM tadalaif md MM 
aMtaMH • wan bo mth nttr • u* am 
nita w tar M h*tao dvdMN. 

Pitas Otanadi ndar unm 8oM 18m motud ta 
mow gam win rdat 

O Hmm i*« SB racuMtaM. Hu ngMny wiwiaH 
ta mm im n 

Suaitay - Ftancte Sdntan Omotai 
tatani - ConHM BbM> at IrataM 
IttMHBtel - FttBB MmiMH CtaWOMtel 
Jn*7 - FMtncu Maw DeameS 
uawieam - reoait MrntOM mtt tt ww m 

■Oil amp* - Dana mtatanataltf uttl 

Sadngpiu - BU m iwtampden pita. 

Buytofl fra - Ottar a bu pBat. 

Ha* ■ Hu dm* wnni Mate* ta tad i n ri 
■anw a n mat a n tan tauta- pdH Man 
tadtaww or on at ta tadMNig wuOta 
(81 - 0001 B 1100 Inn 
M - HOI w 1400 Inn 
m - 1401 B 1700 inn 
W - 1701 B MHOH 
E - Ew anna m n* at «■» 

C - Hnaari pataK aargg dsauctad OnB npta 
H ■ Mounc pnttB 7 - Fbrwttd iilttlg 
k - hnta 4m or UK tan. 
a - Ptnode emetau hum p4a» 

» - Mata prwdun fenndCd 

DHttBtad n 0 uots MtattMag* ta MocUw 


BlWMdkM. 

'■ p lWail 4W1 Uta 
H - CwilBd) foN 
♦ - Vtai Mm Jan? tax. 


xd-EndwUOM 


cp) 1 


- I 49623 


itaid 

Group One Limited 

Mnfl Lfocd M * Ca rttaX 

U6S»P500 4<or.S« I tSJTOBW -I 0 001 45155 

snsssrr* -1 -I*™ 

iflWfv VMW Trua 6 1*81846 -I 8801*9681 

Group One bilematkmal Tst 

■talBlfrct 


1*681 14727 
,275*7 131311 
■ in I10JD 

88 996 37 

tnt!Awa(Mgmt(HK)LU 

OAM-4 . 

TunTn'|Jii*0 1*09 

3084 

2405 
20K' 

PI^Ti 


4656b 

4.TQ8 

4ft3i5 


i:n n « 

lF* e 8l 

SsOJMD 0990 

(Bermuda) LU 

LH I *17 420 

Ltd 

51 1724 
4101 14 

LU 


USoamCAiusiiiWt 
Rnl «n» tamo Sow 
Fini taitai Bora 6n* 

Guardian Global Asset Management Ltd 

IIAU Botui Fmni I JtlM *41 

mbm I tioSts? 

HSflC Asset Management (Bahamas) Ltd 

" a a .if? 


II10 NmTmM F|»m uo I *142308 
Newport Investment Management Ltd 

§L25? ( : 1^3 

Nomura Warrant Fund IBM Ltd 

NAV l £012 I - I 43801 

North Atlantic Management Co LU 

ConmaES 1*10.64 10851 - I 64168 

North Star Real Managers (CaynuH) Ltd 

k-M hwl - 

imtafini - 

Hon tan Fund 


(K-3160 316.0 


44619 Bono Fun 


___ HU4MlFa .. 

HI Kb-TpS &K5™ii» 

Bum Fa iCov-nui. — 


umimo 

OW1JO.O 1410 


asrssffiff™ 
i?Ss asss w * ,m,i 
53S 


Be T _ .... 

SMB 
51 79 


tssl HasenWchter Asset Managemani 

50244 CpnwnofliOm AQ Nn> I I 58825 
50793 CWlId CMBAN Wf 1 £1 34 W4 

sms. 

Iteusamann HMgs NV Curacao 

- 1 J47W. Uinm be- 31 1 5631 09 642 94 


I 6-2- TO 



45SB2 

GmbH 

- I 60312 

- I «7D8 

- I 50313 

- I 50314 


12 7 

14 90 

Utll30 -330 
niwd. lagan 


Is SSSStt" 

Pbmmm 

tell ftMC - - 

Frmcli Franc -- 
Swuedliffi ffromr 

Odoy Asset Manageromt LU 

how Eurrwaww 

MnEUDOtalUSS - - 


_ tensoji lSj o 

... lsF-134 D (360 


Holt Capital Corpn 

| - j 53PJ8 -ta (W-U» be- 1 3 


IAA Umtted 

ra»«i Shun NAV 


Old Ironsides btfenational LU 

OM n-UKM 5n )o ... I I 

Omega Overseas Partners LU 
Ora Oran Mm U1 I *151 OIOS i 
Opportunity Fund 


SnCtasATDOaZl . '57684 7b 

Bes. F. Wertpaplerep 

_73 »87‘ 
3611 11045 
-74 99*6 
1*6 31 79 

Trustee LU 


APT—, 

API Juan l*|15» 9106*1 - - 471*1 

lnU Capital Managonont (HK) ud 

9004 0 
6356 33 
AUK 
0174 IT 

Capital Mngt 

Eottw I I SI0422.SS 

Dahn Japanese Eqiity Wanted Rind , 

Jtt> Eata ant Nw 1 -.II314J3 3SD.76I -I 42072 

Delta UOfd Bank Fund Management 

ra Cera. I 0870980 I Dlrtluna 

■Trust 


88*1 

A Swtoca Asset Management 

BIS. ) 512194 64 
tO» i *20*6 *2 

Ud 

si.. I 


J4660 NAV 

wSs H5S Oversees Rmd LM 

54 M3 NAV Dc- 20 lilWOll iJOOOl 

SWM EagteG-7 Mexico Find lid 

NAHGdOH I I'B 1 

US East Asia tenon Asset Mngt LU t 

. 162623 HJ*I 


l$ID1*79 109117 1 


Ltd-Cayman 


WtraxteHS 


hnestmentCoLld 

*1000 I - I MM 



1 0047^8 **| : [Egg jantos Remlng hw Mngt Ud 


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FINANCIAL TIMES 
Ma^tzines 









30 


FINANCIAL TIMES MONDAY NOVEMBER 7 1994 


LONDON SHARE SERVICE 


BANKS 


CHEMICALS 


ELECTRQNK & ELECTRICAL EQPT - Cent EXTRACTIVE INDUSTRIES 


“i 


ai2 


- AGASCr. 

- Am Fi- 


lm on a* OMdaw lbs 

Kota Piles tttnge rat era. paid A 

ABN Amo H □ £21% 1.7 001% * Sep mat ffSJ 

ANZAS 174 1-2 IBBe 07 JaaJd 

Attn Mb* .ttC -T.2 1M 

mrfkWic — a+ic 257 260 b%« 

Anglo SHI E JDCI 96 -3.401746 

AteMY n 968% -28 014% 

Banco bivzpb a no* 3 ^ 0 * 72 * 

Banco SMPU E27S -XSQ38K 

BkSSnl^ |Q 2tB 0.7002% 22 . . 

Bw* Scottnd f +63 207* 14 Ml 12 JdDra 17.10 1742 BMHiVtS 


WML DN ON OMMBJs La a 
Main Pries ch'ngs rat car. mM si 


s 




0« 154 8411 AtadQoddfc WO 

15.8 1354 Antohd N 

. 69 1358 BA8FDM 

Dec 12*83 9048 BOG -ftO 

TBS - BfP ftO 

14 - BayorDM — ~ 


3.7Q2ESS 24 
-I4WW 14 
1.1 2* 24 
204 21 

-25SOPK - 


... 23 212 

283 -1-3 10-8 


idaav. 

OeuaobeOM. . 

fwrtoSwco n 

Ad Nat Ho Id 


aapeOrfl- 

TkG»PT„ 

W“ 



05 9%% 

02 &%% 

14 

14 DISK 
-1.0 Q»K - May 

-112 060c X2 Jen 


I 1085 14 


u .1 aaa Jia 

21 Hay Del 
27 Del Mm 

1.7 JnM 

4 in Dec 

&&S& 

2 JdDac 
4 JODM 

-KaiNM 17.10 MB Cmfetdgr !»*__* « • — , - - 

- Mb Nov 1 7.10 1008 CmdMlW — _**□ 1SZM 7J9 08 

4 Oat Hay 194 1764 CPncnbOB--- QH 64 -i.B 27 08 


583 


47 IBM G?^ 
583 - 


593 - FM Tecn._ft«5 44d 075 X3Maytau 34 10 ZR3 AnUamsn taK.„nO 13% 

4.7 1551 F^fcuY KO 083*3 -3 018% 04 to Dac 883 1086 Answer 8% 

— - ' 7 HarOd 1X7 2B78 AngAmCoalR 1 *31*3 

ter an AiytoAnw» 


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Mn MCI etfage net eor. paid ft ine 


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GUIDE TO LONDON SHARE SERVICE 

Prices for trie Lonoon snare Sertca dwherad by Extd FteexmeL i 
stamper d Dw Rnarrdel Jtoea Group 

Company awdta fl n ni are baud co dim imd tar dh FT SE Actuaries 
Stare MceL 

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148 
19 
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231 
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188 
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345 
134 
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280 


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190 1784 PeMtand 

1 4 Jan Me* 26.9 1606 pnarts AtNG 

3 5 Jmto 0b 4536 toxics M - MG 

01 fob Od 2£8 1846 Rsanora .. . -.-At* 

02 Jmto 31.10 1864 towds .A 

£0 Feb Aug G 6 1878 <HT 

- to SH 1904 jj wl At* 

2.7 Janto Jl ID 1 96S shewn* Grp fie 

0 5 Ftt to 20 6 2020 aSZ— I ...H 

■b Apr Ho* 1010 20» s*»w JC 

17 Fab Sep 88 2464 ^^ RQ 

20 Oet Hay 190 2132 aitoCn JO 

'99 2* rogifttrer .«MG 


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77 -36 
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Anc Jan 206 
42 iifto* 10B 
14 Dee to 31.10 23S3 

- - N92 2301 

1.1 tab Aug <7 <798 

di Jan May 139 2581 
4> Feb Sep 00 2810 

- - 6^3 2525 

1.4 Mar Aug 4.7 2632 

J May Mr 209 2681 
to* Apr 19.9 2801 
- - 3011 2BBB 

1.1 JdDee 24 10 28GB 
1* Aug Jan 165 2884 
05 Af* Oct 00 2908 
30 Jin May Id-3 2918 

- - 9T93 1501 

15 Apr Dd 220 3810 
84 toftol 110 3035 
12 Onto- 150 3057 
10 Unto 260 3124 
£3 JdDtC 2410 3125 
11 Janto 06 3147 
12 Oet Apr 00 3158 
¥ On 47 31GB 


nS □ Wfcatra the aedwiy laded dorta. TW* fotedea UK noda 

uhira transacihm anri prices «e pddteed ctntenously Bnugh on 
BttcX Excnmoe Aminami Ouotetui system (5EAQ and r*xH> 
tiicte flnwgh *» SEA0 btonattand systam. 

Wena atraa Wcreaaao or traraneo 
train tinea reduced, pawed or defined 
Roues or report awattad 

Rdr 2.1 PPM Oveneas hcarpantsd camm ltt listed on an epprayed 


J Fre* anuHAterbn report amaUa. aea datafc Orth. 

USM: not IsM on Such Excnange and nanpany not subjected m 
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? Bute 4 a®) IK A R& taenrpanded nan-Brtd coaipsles 
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to pmtaa chiMcnd is- fenom 
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§ Forecast rtridBad; cam based hi earnlfiQi ipdeted by nest Interim 


a Umgutabsi coiedhe kwemaent schema: 




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160 
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199 1017 
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UhgM 200 3788 
1.7 Jm Oct 220 <118 

15 May 11.4 4128 
1.9 Dec Jm 693 4250 

- - ^-41 4255 

1.4 toDee 2410 4222 
10 No* Apr Zm 006 
£7 May 203 4406 
12 to to* 110 
1.9 Feb Oat 100 
14 to Dae 31.10 


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MY 


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; a cgnldB 04. SmgBtii toUadu SIM Sanfeo 


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206 3782 WactfmtoftU)...- 
3*83 3770 WHmoughi 

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59 3259 Houtf Ol Fi3Ml 
B52 4819 HosbralJ vTNl. 

- 4320 Jlnuflmer 0 

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23 to. to fib 2499 TOBACCO 

£2 Janto fib »XI 

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45 Onicr 196 2799 Metes Price tfiTroa w car. prt * Una 

- - 5*9£ 2033 BAT Mi AflC *3** -UBS* IStoJm 88 1TT7 

T.8 Jul Jm 109 1250 13VpcLn-03A» E11BV . aiDUVV 204 Jun Dac 25.4 

IbtoDm 06 2594 RoOimans bnitJC - NG 415 -2 0105 IJ Del 4.7 3883 
4 2 Aug Dec 31 10 3578 
£6 Mar Hr 10 10 2740 

22 Dec 31 10 4304 
I 7 Janto* 310 2816 
£2 Dee 310 3584 
21 Janto 24 10 2932 

23 toto* 198 4538 .. .. - 

3B Apr 4.1 nw SLSyffjlz- a«p 
Q 4 May No* 269 3K4 
13 Jan Dec 24.10 3T72 ^ aBi ™ rt5 - 9t ^= 

-Npr Hay i£9 3173 -*=; 

2D Fab On 59 2824 - ^ 

1 7 Hay Od 5.9 »74 • H = 

23 Jan Aire fi.fi 3292 BrtlSi ABuraff. 
li ito Ott 109 3339 OB' 9VPX jtt „ 

30 Jun Dee 31 10 3424 CanrayPKWS - ▼= 

£4 to Jan ifij 3489 QrtwwWl *IC 

1.6 May Dd 199 - R* 1 -' -- 

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S S SSSLir-aS 

10 to Ok 17.10 2DW WTt S . - 

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19 to 59 3388 'iiHUiMd ( 

1 9 Oct May 396 1175 Goode Durant _ < 

16 Decto 17 id 3970 bto CortteentW... .-t- 

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a^torhtdml SroK 

h Assuned (Hdend 19S4-95. 1994. 

rata, ami based on on teas anal a a serp toue 

^TtaAcr li^tobatom 


FT Share Service 

The fallowing changes have been made to the FT Share 
Information Service: AddDom: Madde hit! (Eng). Conti 
Foods Wrts and Man ED & F (Food Manul). BaBUe 
CWfonJ Japan Wrtf end BaDBe GWord Stan Mppon 
Wrta 8 Do Wrts 2005 (In* Trusts], Deletions: MalvyTach 
(Americana) and Altken Humo tOther Fnd). 

FT Free Annual Reports Service 

You can oblate the currant anmrt/lmerfcn report o f any 
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FT3973. Ring 051-770 0770 (open 24 hours inducting 
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FT Cityline 

FOr up- lo- tee- second sham prices c*1 FT Cttylteo an 
0338 43 or 0891 43 loHowed by the taur-aigit code toted 
aher me share prtca. Calls ehoiged at 30p par minute 
cheap reta and 49p per minute at to other bmee. 

An tetemationd sendee b auaflafcie for caReis outdde the 
UK, tmnud stfascripoon 1250 stg. 

Can 071-873 4378 (+44 71 973 487* IntarmSonal) far 
mpro W omiafien on FT dtyflne. 







FTNANCIAL TIMES MONDAY NOVEMBER 7 ;IW. 


4 pmckmltam&r 4 


NEW YORK STOCK EXCHANGE COMPOSITE PRICES 


ABF 

MG 

UK 

m 

Ml 


Bk 

BH 

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9 

Bn 

DM 

Op 

EM 

HP 

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tm. n i 
x e ta 


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17% 12% AAR * 
la 12% ALLBta A 
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72% <8% AMR 

56%aS«A 

15% n%AMMPr 
23% 17% A8MM 

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7 ACM GuOpp 080 11 .2 163 

7AOIGttSp 086 115 228 

8% ACM OKI St 1.09128 554 

7% ACM Man 1X113 187 

B ACM Managd 0.72 8.8 89 

8% AcwCbi 044 3.4 15 160 

28% 23 Anita am 22 w to 
13% 5% Aetna 085 38 21881 
18% 11%Aoaoo 138 1332 

18% 18% Adme Ear 0*8 2S 0 110 


11 % 

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0.18 1.1 39 18 17 16% 18% 

188 22 261518 75% 75% 75% 
32 2843 54 32% ' 

13 333 4 3% 

280 42 31 185 48% “ 

0.78 25 IB 7242 31% 

080 38 11 55 13% 

052 26 68 20% 

31 270 17 

044 28 28 510 22% 



64 461] A01 ... 
31% 16% AdtMc 

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20 ISAdmhc 
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10% 9% 10% 

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380 5.4 558 66% 95% 55% 

30011.5 ii 8149 26% 

0.16 31 B 52 5% 5 

0.10 0.6119 319 18 1 

1.47 34 13 8 62 81 

2.7B 58 61598 47% 

0.48 1.3 141071 35% ... . . 
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180 1.7 41 1522 56% 


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22% 14 Ms* 010 05115 212 
24% 17 ABX* Li* 

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28 ZOMaw 
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27% 17% Aim Cq 
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29% 24 AM Dp 

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025 3J 25 


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25% 19% AmcastM 
52% 44 Awtata 

9% 8% Am Ai| R x 
31 20% Am Burt* 

37% 29% AmflrWx 
25% 19% Am Bob PIP 090 38 13 
8 6% Am Cap Inc 055 9.7 
20% 15% Am Cai Bd 
23% 18% Am CBp CV 
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27% 19% Am m Pi x 280118 7 


1 2609 13% 18% 18% 
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052 25 13 71 20% 

080 1.3 63 1674 48% 

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1.05 1 9 57 61490100% 99% 100 *1' 

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347 6 d5% 5% 

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7% 7% -% 

6 % 6 % -% 
20 % 20 % 

47% 47% -1% 

9 % 9 % ' 


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11% 6%Am0ppkK 
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22% 17% Anwar 9*. xl.25 69 
32% 26AmWdrx 188 48 11 188 
43% 38% Amt* 1.92 10 13 3276 
43% 32ABamtac4 128 17 5 


065 19 10 260 17% 17% 17% 
390 4.7 13 8030 64% 63 63% 

07528.5 0 Z 2% 2% 2% 
046 05 16 2859 B5% 94 94 


IX 14 J 
088 13 
040 19 
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11% AmebK 
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38% 23%Anatoo 
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419 7 dB% 7 

232 26% 2S% 26% 

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220 39 17 5B35 62% 62% 

010 19 5 32 8% 

012 22134 425 u5% 

140 49 9 689 29% 29% 

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341154 35 34% 

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1.60 32 23 2373 

22 276 3) . 

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128 40 7 836 32% 

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10% 8% Apex Mm F 071 89 349 6% «% 

24% 14% APH 40 1Z7B 23% 23% 

7% 3% AppU Mag 1 126 3% 3% 3% 

25% 16%AppiPirAx 012 05 39 64 25 24% 24% 

29%21%An*0nx 015 05 19 6200 28% 27% 27% _ 

51 43% Area Chart x 250 03 21 180 47% 47% 47% +2% 

51% 45%Armco4SP 490 99 2 48% 48% 46% -% 

7% 4% Araco 32673 7% 6% 7 

29 22% ArncoZIP 2.10 9.1 2 23% 23% 23% 

57% 39% AmrsMfx 128 3.1 31 799 42% 41% 41% 

15 1863 38% 37% 37% 

1 102 4% 04% 4% 

07B 39 14 267 25% 25 25% 

040 12 92 871 30 29% 29% 

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1.10 10 131984 37% 36% 37% 

027 19 64 17% 17% 17% 

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012 03 25 Z7B7 38% 30 38 

1-32 29 14266 64% 53% 53% 

290 11 2255% 255% 255% 

2.08 69 13 97 32% 32 32 

028 4.1 7 2 

194 Ol 8 308 



45% 33% Antra Bee 
7% 4% Area Grp 
33% 23 Anti kid 
34% 21% Amo x 

31% 22%AtNdCHf 
44% 33% AtftOI 
25% 16 %AbMRbF 



1 Asset tOT 
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9% 6% AMaSu 

21% 16AMcEgr 

112% 92% AVt* 

10 3% Adas 

20% 13% Atmos Engy 089 10 8 78 17% 17% 17% 
12% B% Atteds ACR 034 17 10 499 9% 9% 9% 

24% 1?%Auptx 016 09 24 361 20% 20 20% 

12% 8 Ambit Fd 0.10 IS 27B 8% 8% 8% 

: 47%AUDarn 090 1.1 25 1022 57% 56% 57% 

044 29 11 12 15% 15% 15% 

004 04 4 527 10% 9% 10 

OBO 19 20 469 38% 37% 37% 
290 13 17 1055 62% 61% 61% 
9 19 10% 10% 10% 
2Z 547 6% 6% 6% 


jj 

A 


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690 59181 2249 107% 105% 105% -1% 
2 24 3% 3% 3% 

- ‘ ' 4% 


20% 12% Mom 
19 7% AsM 
45 3Q% Asnat 
83% 48% Arndb 

'S ’aiS 10 " 


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38% 31% BCE 
9% 8% BET ADR 
5% 3 Befcnco 

17% 1S% Bator Feet 
22% i7tt*eiUx 
27% 2l%8afc»Ec 
30% 24% BrtCp 
15% 8% BUM 
9% 6% Bed, 

25% 20% SAGE 
20% 13% MBnkcp 
38 26% BncOna 
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M% 38% Ba*Am 
96 81% Bark Bast 
20% 22% Buflofc* 
49% 44 Bk Baton P 

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22% 19%Bdl HCT ^ 


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268 79228 804 34% 
091 29 29 54 7% 

020 5.0 6 126 4 

040 25 288 16% 

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040 19 25 92 26% 

080 11 73 1115 2B% 
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BE 

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GUEST. 


C ON R A D 


When you stay with us 

in ISTANBUL 

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with your complimentary copy of the 


FINANCIAL TIMES 

tuaotrt ■U»lNC{lNEWV»flI 


48% 34% BetinO 
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21 13% Delta 

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10% 16% Buidaan Be 


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“% jg 

647 47% 
40% 40% 
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35% 22% CO 
72% 50% CBS 
29 19% CMS BIX 
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31 is% cis con> 


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24% 17% Cttta&VKn 064 39 18 1806 18% 19% 


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15% ia%Cat9n0m 
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15% 9% CM Fed 
26% 17% CXfcaf Cc 
42% 34% DBMS 
(1 % ftmpMRS 
18% 14% Catfac 
85% 60% QapCI 
14% 1fi%CtHtai98 
37% 18% CftSld 16 


12 2131 50% 

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0.19 09459 158 18% 

887 1009 20% 

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17 218 17k 
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ISO 4.7 9 4S4g 25% 253 

098 21487 5014 
012 09 150 1: 

032 £1 S332E 1! 

098 59 33 59 

22 15 Ii 

075 29 16 SS5 Z7_ _ _ ... 

OW 13 14 80 15% 15% 15% 

8 533 19% 19 19 

1.6D AO 11 1733 40% 39% X% 

1.1814.1 10 698 8% ' 

05B11S 5 282 5 


16% 11% Oanirlim 
19 12% 


! Cowry D 


18 i5%CouanPr 
12% lO%Crta 
28% 24% Cram 
17 I4%cn«dan]« 
33% 17% DoyRl 
49% 39%Cmnix 
12 B% CrtU 
6% 4% CHUqFta 



24% 13% QompUdltx 048 11 15 2185 


41% 33% CrnaCS 
13% 9%CRSS<r 
8% B% CGFaB * 
9% 7% CSFBaStr. 
35% 25 CUC M 

17% 12% C08n 
57% £%CuamiEn 
13% 10% Currant ti 


18 2116 
012 1.1 31 97 1 

072 107 43 

081 103 345 

43 63 31 
OX 5.8 54 22 1 

1.00 £2 8 850 
092 18 12 50 li 



area 

M» TM. w a* am Aar. 

m Lon Suck Db % E lia to UM Onh (ton 

37 32% CrtAlfr ISO 2B122 2 X% 35% 35% +% 

11% 8%CVRrt 1.08 11.7 7 11 9% 9% 9% 

13% 7%ftcaraSp 10 B1 12% 13% 12% 

22% 13%CflXSm 102 5178 2% 21% 21% -1 

33% 2S%CjpAm* 060 1